TIDMVRP
Verona Pharma plc
("Verona Pharma" or the "Company")
Financial results for the year ended 31 December 2015
A year of significant clinical progress
03 June 2016, Cardiff - Verona Pharma plc (AIM: VRP.L), the drug development
company focused on first-in-class medicines to treat respiratory diseases,
today announces its audited results for the twelve months ended 31 December
2015.
2015 OPERATIONAL HIGHLIGHTS
· Completed a series of successful clinical trials with a novel
proprietary suspension formulation for nebulisation of RPL554
o a Phase I/IIa Single Ascending Dose/Multiple Ascending Dose (SAD/MAD) study
in 80 healthy subjects and in 32 COPD patients (study 007)
o a Phase IIa dose-finding study in 29 asthma patients (study 008)
o a Phase IIa study examining the effect of adding RPL554 to standard doses of
common bronchodilator drugs in 30 COPD patients (study 009)
· New clinical data obtained in >170 subjects with the new suspension
formulation of RPL554 strongly supports its continued development
o Studies continue to demonstrate the excellent bronchodilator properties of
RPL554
o Formulation is much better tolerated than the earlier solution formulation
prototype, with no maximum tolerated dose observed even at 16 times the active
bronchodilator dose
o New formulation is suitable for twice daily dosing
o Formulation provides for a longer pulmonary residence time, lower peak
plasma exposure and longer half-life in blood than the earlier formulation
suggesting a more pronounced effect locally in the lung and comparatively less
effects in other organs in the body
· Data published at the North America Cystic Fibrosis Conference and in a
peer-reviewed scientific journal demonstrates that RPL554 enhances CFTR1
activation, suggesting its potential use in cystic fibrosis patients
· Filed multiple patents on RPL554 to extend IP coverage beyond 2030
· Appointed Dr Ken Newman as Chief Medical Officer, and Dr Ken Cunningham
and Dr Anders Ullman as Non-Executive Directors of the Board
2015 FINANCIAL HIGHLIGHTS
· Loss after tax of GBP7.42m (2014: GBP2.76m) broadly in line with market
expectations, reflecting tight cost control despite the planned increase in R&D
spend especially on clinical studies
· Loss per share of 0.73 pence (2014: 0.32 pence)
· Net cash outflows from operating activities during the year of GBP6.35m
(2014: GBP3.54m) reflecting clinical progress, with cash and cash equivalents as
at 31 December 2015 of GBP3.52m (2014: GBP9.97m)
POST PERIOD
· Positive headline data from RPL554 Phase IIa dose-finding study in
asthma patients demonstrates substantial bronchodilator effect and excellent
tolerability at broad range of doses
o Data suggests drug could be meaningful new addition, alone or in
combination, for the treatment of COPD
· Positive headline data from RPL554 Phase IIa add-on study demonstrates a
highly significant and clinically meaningful additional bronchodilator effect
when RPL554 is administered on top of standard doses of the commonly used
bronchodilators salbutamol and ipratropium bromide
o The combination of RPL554 with salbutamol or ipratropium bromide caused a
significant reduction in trapped air in the lung (residual volume) as compared
to salbutamol or ipratropium bromide alone
§ Suggesting that RPL554 treatment may reduce dyspnea, a major
debilitating symptom of COPD
o Consistent with previous studies, RPL554 was well tolerated both alone and
in combination
§ No effect on vital signs or ECG parameters
§ No gastro-intestinal adverse events recorded
Dr. Jan-Anders Karlsson, CEO of Verona Pharma, commented:
"During the year Verona Pharma made substantial clinical progress with its lead
compound, RPL554, further highlighting its potential to be an important novel
and complementary treatment option for patients with COPD and other respiratory
diseases. To date, over 275 subjects have been included in clinical trials with
RPL554, which have consistently shown that the drug is well tolerated,
generating highly significant and clinically meaningful data.
COPD affects over 300 million people worldwide and to date there has been
limited true innovation in developing better medicines for this debilitating
and progressive disease. The Board continues to believe that RPL554, with its
novel mode of action, represents a very attractive commercial opportunity for
generating significant value for shareholders."
1 Cystic fibrosis transmembrane conductance regulator (CFTR) is the membrane
protein and chloride ion channel which is dysfunctional in cystic fibrosis
patients and responsible for their respiratory symptoms
-S-
About Verona Pharma
Verona Pharma's lead drug, RPL554, is a first-in-class drug currently in Phase
II trials as a nebulised treatment for acute exacerbations of COPD in the
hospital setting. The drug is a dual phosphodiesterase (PDE) 3/4 inhibitor and
therefore has both bronchodilator and anti-inflammatory effects, which are
essential to the improvement of patients with COPD and asthma.
Verona Pharma is also building a broader portfolio of RPL554-containing
products to maximise its benefit to patients and its value. This includes the
very significant markets for COPD and asthma maintenance therapy. In addition,
the Company is exploring the potential of the drug in different diseases, such
as cystic fibrosis, where it is in pre-clinical testing and has received a
Venture and Innovation Award from the UK Cystic Fibrosis Trust.
For further information, please contact:
Verona Pharma plc Tel: +44 (0)20 3283 4200
Jan-Anders Karlsson, CEO
N+1 Singer Tel: +44 (0)20 7496 3000
Aubrey Powell / Jen Boorer
FTI Consulting Tel: +44 (0)20 3727 1000
Simon Conway / Stephanie Cuthbert /
Natalie Garland-Collins
CHAIRMAN AND CHIEF EXECUTIVE OFFICER'S JOINT STATEMENT
INTRODUCTION
Verona Pharma is a specialist pharma company developing first-in-class drugs
for patients with chronic, debilitating respiratory diseases that are not
adequately treated by existing medicines. The Company's strategy is to
accelerate shareholder value creation, by focusing its resources on its lead
programme RPL554, an innovative inhaled, dual phosphodiesterase (PDE) 3 and 4
inhibitor, as a nebulised treatment for patients in hospital with acute
exacerbations of chronic obstructive pulmonary disease (COPD) to facilitate and
speed up recovery and reduce the risk of early recurrence of symptoms and
re-hospitalisation after discharge from hospital. Many of these patients become
hospitalised as a result of an acute worsening of their disease that cannot be
prevented or properly treated by their current medications and they are
therefore in need of more intensive care and treatment. RPL554's unique and
very attractive properties, being both an effective bronchodilator and
anti-inflammatory agent in the same compound, should be beneficial to these
patients. In addition, the Company is exploring the use of nebulised RPL554 in
maintenance treatment of COPD patients with moderate to severe disease.
RPL554's unique properties could also translate into activity in other
respiratory disorders including cystic fibrosis and asthma.
The Company is also currently exploring the potential of the drug in cystic
fibrosis, where it is in pre-clinical testing. Cystic fibrosis is a genetic
disease with a shortened lifespan in need of new and effective treatments. In
addition, RPL554 delivered in a Dry Powder Inhaler (DPI) or Metered Dose
Inhaler (MDI) device could be beneficial as a chronic maintenance treatment for
patients with COPD and subsequently in asthma, although such development is
longer and more costly compared to that required for the development of a
nebulised formulation and would therefore ultimately require a collaboration
with a larger partner to complete the required larger scale clinical trials and
subsequent commercialisation.
RPL554 provides an opportunity to treat patients with respiratory diseases that
are not optimally treated with currently available drugs. The Board believes
there is no other compound which demonstrates RPL554's unique mechanism of
action, or any other novel type of bronchodilator currently in clinical
development. The yearly market for nebulised bronchodilators in the US is about
$1 billion1 providing a very attractive commercial opportunity. Additionally,
the cystic fibrosis market (expected to grow to > $5billion in 2018; GlobalData
July 2014) and the market for maintenance treatment of COPD patients (worldwide
COPD market to reach >$13bn by 2020; Evaluate Pharma Sept 2015) with a DPI/MDI
are very large and provide significant upside sales potential for RPL554.
2015 YEAR IN REVIEW
During 2015, the Company completed a series of clinical trials with the new
proprietary suspension formulation of RPL554 for use in a nebuliser. The first
Phase I/IIa clinical trials with the new formulation of RPL554 started in
December 2014 at Medicines Evaluation Unit, Manchester, UK and completed around
mid-year. Based on the positive data from the initial Single Ascending Dose
(SAD) part of this study, the Board decided to accelerate development of
RPL554. Consequently, two additional Phase IIa trials completed their clinical
phases before year end 2015. Top-line data from the asthma study was reported
in March 2016 and the data from the second study in COPD patients was reported
in May 2016. Both studies met their primary endpoints and reported very
positive efficacy data together with the observation that RPL554 was well
tolerated in both studies.
Verona Pharma strengthened its senior management team with a new CMO, Dr
Kenneth Newman from January 2015. Two Non-Executive Directors, Dr Ken
Cunningham and Dr Anders Ullman, two physicians highly experienced in the
development of respiratory medicines, were appointed to the Company's Board of
Directors in September 2015. Verona Pharma also listed its shares on the
Frankfurt Xetra exchange (part of Deutsche Börse in Germany) to facilitate
trading for investors located outside of UK.
Verona Pharma continued to investigate RPL554 in pre-clinical models of cystic
fibrosis, providing further evidence for RPL554 activating the ion channel
(CFTR, cystic fibrosis transmembrane conductance regulator) that is
dysfunctional in cystic fibrosis patients and responsible for their respiratory
symptoms. Improving the functioning of this ion channel may enhance mucociliary
clearance in the airways of these patients and improve their lung function.
This work was supported by an Award from the Cystic Fibrosis Trust, UK. The new
data in cystic fibrosis was presented in Phoenix, US, in October, and published
in a peer-reviewed manuscript in American Journal of Physiology in November
2015, further enhancing the profile of RPL554.
Additionally, the Company filed a number of patent applications on RPL554,
including a patent on the new suspension formulation, to further strengthen the
patent portfolio and extend the patent life of the compound beyond 2030.
1 IMS Consulting Group market research 2014
RPL554
RPL554 is a novel inhaled dual PDE3/PDE4 inhibitor that was selected for
clinical development following pre-clinical studies that demonstrated both
potent bronchodilator and anti-inflammatory properties. To these properties a
potential effect directly on mucociliary clearance can also be added. RPL554 is
currently being developed as a very promising first-in-class treatment for
patients with chronic respiratory diseases such as COPD and potentially cystic
fibrosis as both diseases are characterised by obstructed airways, chronic
inflammation of the lung and impaired mucociliary clearance. Future studies may
also indicate a potential role in the treatment of asthmatics.
With the original proof-of-concept solution formulation for nebulisation, the
Company successfully completed a number of early Phase I and II clinical
studies with RPL554 in over 100 subjects. Data demonstrated that the compound
is a potent bronchodilator in human subjects. As the bronchodilator response is
rapid in onset, cost-effective single-dose studies could be performed.
Anti-inflammatory effects of RPL554 in a human model of COPD-like inflammation
were examined after six days of treatment with the original solution
formulation of the compound before subjects were challenged on the last day by
an irritant agent that provokes a COPD-like inflammatory response in their
airways. RPL554 significantly reduced the number of neutrophils (an
inflammatory cell type recognised for its central role in COPD, cystic fibrosis
and severe asthma) together with all other cell types such as eosinophils,
lymphocytes and macrophages in the sputum. These data indicate that RPL554 has
anti-inflammatory properties, most likely due to inhibition of PDE4 (or perhaps
the combined inhibition of PDE3 and PDE4; Lancet Resp Med 2013*).
To date, RPL554 has been used in different formulations in clinical trials
involving >275 human subjects, over 170 of which have received the novel,
proprietary suspension formulation. These single and multiple dose studies
suggest that RPL554, when inhaled across a range of doses, is an effective
bronchodilator and anti-inflammatory agent and is an excellent candidate for
further development.
· Studies continue to demonstrate the excellent bronchodilator properties
of RPL554 indicating that it is able to produce large improvements in lung
function in healthy subjects as well as patents with mild, moderate or severe
lung disease
· Data from the asthma study indicate that RPL554 can produce an
improvement in lung function at least as large as the most commonly used rescue
bronchodilator, salbutamol
· The Company is strongly encouraged by the observation that RPL554 is
consistently well tolerated in these studies. The new suspension formulation is
much better tolerated than the earlier solution formulation prototype, with no
maximum tolerated dose observed even at 16 times the active bronchodilator dose
· New formulation is suitable for twice daily dosing, which is convenient
for patients
· Formulation provides for a longer pulmonary residence time, lower peak
plasma exposure and longer half-life in blood than the earlier formulation,
suggesting a more pronounced effect locally in the lung and comparatively less
effects in other organs in the body
The suspension formulation of RPL554 has been developed for use in nebulisers
and this formulation will be used in the further clinical development of the
compound. The manufacture of this new formulation is scalable and shows
stability suitable for commercialisation. The first Phase I/IIa clinical trial
with the new formulation of RPL554 started in December 2014 at MEU, Manchester,
UK.
SAD/MAD Phase I/II study in healthy volunteers and COPD patients
The first SAD/MAD study enrolled 80 healthy subjects and 32 COPD patients.
Increasing dose levels were tested in both the single dose SAD and the multiple
dose (MAD, treatment twice daily for 5.5 days) parts of the study with the
pre-specified highest dose being approximately 16 times greater than the dose
used in earlier reported clinical studies, using the previous formulation of
RPL554. The drug was well tolerated across all doses and no maximum tolerated
dose could be reached. Importantly, there were no cardiovascular events of
concern and a lack of PDE4-inhibitor-like adverse events. Pharmacokinetic data
showed lower peak plasma levels and a significantly longer half-life of the
drug in plasma, than that observed with the previous formulation. This
suggests that the new suspension formulation results in a longer residence time
for RPL554 in the lung and slower release into the blood stream, suggesting
that twice-daily dosing may be appropriate.
Dose-finding Phase IIa study in asthma patients
A Phase IIa dose-finding study was conducted in 29 patients with moderate
asthma in UK and Sweden. The study met its primary objective, with nebulised
RPL554 demonstrating a dose-dependent bronchodilator response in asthma
patients. RPL554 pharmacokinetics was linear across the whole dose range. At
the highest doses of both compounds, RPL554 produced the same maximum
bronchodilator effect as that by a supramaximal dose of nebulised salbutamol
(7.5 mg, a dosed occasionally used in the hospital emergency room). Even the
lowest RPL554 dose of 0.4mg was significantly superior (p<0.0001) to placebo as
a bronchodilator. All doses of RPL554 were found to be well tolerated and the
data supports the use of RPL554 in a twice daily dosing regimen. There were no
reports of serious adverse events and fewer adverse events were seen with
RPL554 than with salbutamol. Salbutamol produced well-acknowledged adverse
events for this drug including tremor, tachycardia, palpitations, and a
reduction in blood potassium levels. The large dosing range (60 fold) of RPL554
suggests a potentially large therapeutic index.
Phase IIa study in COPD patients
A Phase IIa add-on bronchodilator study was conducted in 30 patients with
moderate to severe COPD in UK. The primary objectives of the study were met:
RPL554 when used in combination with other common bronchodilators was as well
tolerated as the individual drugs given alone. Furthermore, nebulised RPL554
produced a significantly (p<0.0001) larger bronchodilator response when added
on-top-of a standard dose of either salbutamol (a beta2 agonist) or ipratropium
(an anti-muscarinic drug) than either of the individual drugs alone.
Importantly, the combination with the anti-muscarinic drug seemed to be more
effective in peripheral airways, in keeping with earlier in vitro data showing
a synergistic effect between RPL554 and anti-muscarinic drugs in human large
and small airways. The combination with the beta2 agonist seemed to be
additive, as observed in earlier pre-clinical studies. These data suggest that
RPL554 could be both a stand-alone treatment as well as a very attractive
combination partner to existing treatments for COPD.
The Company is highly encouraged by the results demonstrated with this new
suspension formulation of RPL554 and is preparing plans to progress this
formulation into a Phase IIb clinical programme to investigate treatment of
acute exacerbations in COPD and maintenance treatment of COPD patients with a
nebuliser.
Cystic fibrosis
Further experiments were performed in cells obtained from the airways of cystic
fibrosis patients to demonstrate that RPL554 is an activator of CFTR, the ion
channel that is dysfunctional and causes the respiratory problems in patients
with cystic fibrosis. These data were presented at the North America Cystic
Fibrosis conference in Phoenix, US, in October 2015 and in a peer-reviewed
manuscript in the American Journal of Physiology published in November 2015.
This work continues with the support of a Venture and Innovation Award from the
UK Cystic Fibrosis Trust, the first to be granted to a biotech company by the
Trust. Cystic fibrosis is a rare, orphan disease, and therefore provides a very
attractive development and market opportunity for the Company. The Company
plans to commence clinical work for this indication in 2017.
FINANCIALS
The loss from operations for the year ended 31 December 2015 was GBP7.42m (2014:
GBP2.76m). Research and development expenditure amounted to GBP7.27m (2014: GBP2.63m)
and reflected an increase in expenditures on the RPL554 programme by GBP4.88m to
GBP7.15m (2014: GBP2.27m). The increase in expenditure on the RPL554 programme was
primarily due to a planned acceleration of the development of the new nebulised
formulation programme.
Administrative expenses for the year were GBP1.71m (2014: GBP1.16m). R&D costs are
expected to be offset by R&D tax credits of approximately GBP1.53m receivable in
2016.
As at 31 December 2015, the Company had approximately GBP3.52 million in cash and
cash equivalents.
MANAGEMENT AND STAFF
In January 2015, the Company appointed Dr Kenneth Newman as Chief Medical
Officer. Dr Newman is an experienced pharmaceutical and biotechnology industry
executive with extensive experience in clinical development, particularly for
the treatment of respiratory disease. Prior to joining Verona Pharma, Dr Newman
was Chief Development Officer at Mesoblast Inc. Previously, Dr Newman held the
positions of Chief Medical Officer at Acton Pharmaceuticals, VP, Medical
Affairs at Boehringer Ingelheim and several positions at Forest Laboratories
(now Allergan). Dr Newman began his professional career at the National Jewish
Medical and Research Center, Denver, Colorado.
The Company also significantly strengthened the Board of Directors during the
year. Dr Anders Ullman, who joined the Board in September 2015, was previously
EVP R&D at Nycomed (now Takeda) and was responsible for the development and
approval of roflumilast (Daxas®) for the treatment of COPD. He also oversaw the
initiation of a post-approval Phase IV study (the REACT study) which was
published in the Lancet in February 2015. This study demonstrated that
treatment with the PDE4 inhibitor roflumilast leads to a 24% reduction in
severe COPD exacerbations even in the presence of "double" or "triple" therapy.
Subsequently AstraZeneca purchased the commercial rights to roflumilast from
Takeda.
Dr Ken Cunningham, who also joined the Board in September, was the CEO of
Arakis, a respiratory company sold to Sosei. He was also a former CEO of
Skyepharma plc, which developed the orally inhaled drug Flutiform®, which is
approved in Europe and Japan for the treatment of asthma and licensed to
Mundipharma. Ken was also chairman of Prosonix, an inhalation development
company, purchased by Circassia in 2015.
By adding Dr Ullman and Dr Cunningham to the Board, we have significantly
expanded the expertise on the Board both in terms of respiratory medicine and
significant transaction experience.
Post period end, Biresh Roy, Chief Financial Officer, stepped down from the
Board with immediate effect but remains with Verona Pharma for up to six months
to allow time for a suitable successor to be appointed and for an orderly
handover. The Board has commenced a search for his successor and a further
announcement will be made in due course. The Board thanks Biresh for his many
contributions to the Company at what has been a formative time for Verona
Pharma, as it has delivered on important operational and clinical goals it set
at the time of the 2014 financing, on or ahead of budget in a timely manner.
OUTLOOK
The US has about 12 million patients diagnosed with COPD, and it is expected
that there are almost as many again that remain undiagnosed. About 9% of COPD
patients prefer to use a nebuliser over other types of inhalation devices, so
they are comfortable that they have actually received the medication. This is
potentially a large market for RPL554.
The Board believes that RPL554, with its unique bronchodilator,
anti-inflammatory and CFTR activator properties, is capable of addressing
specific patient groups that are currently under-treated and for which there is
limited competition in the form of new types of drugs with both bronchodilator
and anti-inflammatory properties, such as patients with COPD, cystic fibrosis
and possibly asthma. The Board believes that RPL554 therefore presents a very
attractive commercial opportunity for generating significant value for
shareholders.
We have made considerable clinical progress with RPL554 since the March 2014
fundraising. The complete set of Phase IIa data is expected by end Q2 2016
after which the Company will prepare the compound for Phase IIb studies. The
completion of these studies represents the next significant value inflection
point for the Company.
The Directors are currently considering all options for further funding of such
studies. As part of this process, and as previously stated, the Board
recognises that an experienced and resourceful commercial partner could bring
significant value to the development of a DPI/MDI formulation of RPL554 for
chronic maintenance treatment in COPD and potentially other respiratory
diseases. The Company therefore continues to be involved in business
development discussions around the RPL554 programme and may undertake some
limited additional clinical work to enhance to prospects of an attractive
partnership. The Company intends to partner its drug candidates only when it
can extract a commercially attractive return for the Company and its
shareholders.
The Company will continue to operate with a strong focus and financial
discipline, and remains very positive about its progress to date and the
opportunities for its lead drug development programme in COPD.
We would like to thank the staff and Board members for all their contributions
and shareholders for their continued support during a successful year.
Dr. David Ebsworth Dr. Jan-Anders Karlsson
Chairman Chief Executive Officer
2 June 2016 2 June 2016
GROUP STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEARED 31 DECEMBER 2015
Notes Year ended Year ended
31 December 31 December
2015 2014
GBP GBP
Research and development costs (7,265,063) (2,634,848)
General and administrative (1,705,944) (1,157,925)
costs
Operating loss 5 (8,971,007) (3,792,773)
Finance income 7 44,791 29,978
Loss before taxation (8,926,216) (3,762,795)
Taxation - credit 8 1,509,448 1,004,065
Loss and total comprehensive (7,416,768) (2,758,730)
loss for the year
Loss and total comprehensive (7,416,768) (2,758,730)
loss attributable to equity
owners of the Company
Loss per ordinary share - 3 (0.73)p (0.32)p
basic and diluted (pence)
GROUP STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2015
Notes 31 December 31 December
2015 2014
GBP GBP
ASSETS
Non-current assets
Plant and equipment 13 13,822 21,847
Intangible assets - patents 14 343,985 380,540
Goodwill 15 1,469,112 1,469,112
1,826,919 1,871,499
Current assets
Trade and other receivables 10 2,048,088 1,287,535
Cash and cash equivalents 11 3,524,387 9,969,759
5,572,475 11,257,294
Total assets 7,399,394 13,128,793
EQUITY AND LIABILITIES
Capital and reserves attributable to
equity holders
Share capital 16 1,009,923 1,009,923
Share premium 26,650,098 26,650,098
Share-based payment reserve 1,022,440 677,946
Retained losses (23,095,806) (15,733,487)
Total equity 5,586,655 12,604,480
Current liabilities
Trade and other payables 12 1,812,739 524,313
Total liabilities 1,812,739 524,313
Total equity and liabilities 7,399,394 13,128,793
The financial statements were approved by the Board of Directors on 2 June 2016
and signed on its behalf by:
Dr. Jan-Anders Karlsson Biresh Roy
Chief Executive Chief Financial Officer
Company Number: 05375156
COMPANY STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2015
Notes 31 December 31 December
2015 2014
GBP GBP
ASSETS
Non-current assets
Plant and equipment 13 13,822 21,847
Intangible assets - patents 14 343,985 380,540
Goodwill 15 1,453,569 1,453,569
Investment 9 79,593 2
1,890,969 1,855,958
Current assets
Trade and other receivables 10 2,048,617 1,287,535
Cash and cash equivalents 11 3,523,140 9,968,483
5,571,757 11,256,018
Total assets 7,462,726 13,111,976
EQUITY AND LIABILITIES
Capital and reserves attributable to
equity holders
Called up share capital 16 1,009,923 1,009,923
Share premium account 26,650,098 26,650,098
Share-based payment reserve 1,022,440 677,946
Retained losses (23,137,641) (15,750,305)
Total equity 5,544,820 12,587,662
Current liabilities
Trade and other payables 12 1,917,906 524,314
Total liabilities 1,917,906 524,314
Total equity and liabilities 7,462,726 13,111,976
The financial statements were approved by the Board of Directors on 2 June 2016
and signed on its behalf by:
Dr. Jan-Anders Karlsson Biresh Roy
Chief Executive Chief Financial Officer
Company Number: 05375156
GROUP STATEMENT OF CASH FLOWS
FOR THE YEARED 31 DECEMBER 2015
Notes Year ended Year ended
31 December 2015 31 December
2014
GBP GBP
Cash flows from operating activities
Cash used in operating activities 17 (7,052,412) (3,833,926)
Income tax credit received 699,519 293,263
Net cash used in operating activities (6,352,893) (3,540,663)
Cash flow from investing activities
Interest received 50,591 24,178
Purchase of plant and equipment (1,830) (4,882)
Payment for patents (141,240) (215,676)
Net cash used in investing activities (92,479) (196,380)
Cash flow from financing activities
Net proceeds from issue of shares - 13,103,011
Net cash generated from financing - 13,103,011
activities
Net (decrease)/increase in cash and cash (6,445,372) 9,365,968
equivalents
Cash and cash equivalents at the 9,969,759 603,791
beginning of the year
Cash and cash equivalents at the end of 11 3,524,387 9,969,759
the year
COMPANY STATEMENT OF CASH FLOWS
FOR THE YEARED 31 DECEMBER 2015
Notes Year ended Year ended
31 December 31 December 2014
2015
GBP GBP
Cash flows from operating activities
Cash used in operating activities 17 (7,052,383) (3,833,914)
Income tax credit received 699,519 293,263
Net cash used in operating activities (6,352,864) (3,540,651)
Cash flow from investing activities
Interest received 50,591 24,178
Purchase of plant and equipment (1,830) (4,882)
Payments for patents (141,240) (215,676)
Net cash used in investing activities (92,479) (196,380)
Cash flow from financing activities
Net proceeds from issue of shares - 13,103,011
Net cash generated from financing - 13,103,011
activities
Net (decrease)/increase in cash and cash (6,445,343) 9,365,980
equivalents
Cash and cash equivalents at the 9,968,483 602,503
beginning of the year
Cash and cash equivalents at the end of 11 3,523,140 9,968,483
the year
GROUP STATEMENT OF CHANGES IN EQUITY
FOR THE YEARED 31 DECEMBER 2015
Share Share Option Retained Total
capital premium reserve losses
GBP GBP GBP GBP GBP
Balance at 1 January 372,598 14,184,412 640,579 (13,129,576) 2,068,013
2014
Loss for the year - - - (2,758,730) (2,758,730)
Other comprehensive - - - - -
income
Total comprehensive loss
for the year - - - (2,758,730) (2,758,730)
Issue of shares 637,325 13,383,821 - - 14,021,146
Share issue costs - (918,135) - - (918,135)
Share-based payments - - 192,186 - 192,186
Transfer of previously
expensed share based
payment
charge upon lapse of - - (154,819) 154,819 -
options
Balance at 31 December 1,009,923 26,650,098 677,946 (15,733,487) 12,604,480
2014
Balance at 1 January 1,009,923 26,650,098 677,946 (15,733,487) 12,604,480
2015
Loss for the year - - - (7,416,768) (7,416,768)
Other comprehensive - - - - -
income
Total comprehensive loss
for the year - - - (7,416,768) (7,416,768)
Issue of shares - - - - -
Share issue costs - - - - -
Share-based payments - - 398,943 - 398,943
Transfer of previously
expensed share based
payment
charge upon lapse of - - (54,449) 54,449 -
options
Balance at 31 December 1,009,923 26,650,098 1,022,440 (23,095,806) 5,586,655
2015
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEARED 31 DECEMBER 2015
Share Share Option Retained Total
capital premium reserve losses
GBP GBP GBP GBP GBP
Balance at 1 January 372,598 14,184,412 640,579 (13,147,128) 2,050,461
2014
Loss for the year - - - (2,757,996) (2,757,996)
Other comprehensive - - - - -
income
Total comprehensive loss
for the year - - - (2,757,996) (2,757,996)
Issue of shares 637,325 13,383,821 - - 14,021,146
Share issue costs - (918,135) - - (918,135)
Share-based payments - - 192,186 - 192,186
Transfer of previously
expensed share based
payment
charge upon lapse of - - (154,819) 154,819 -
options
Balance at 31 December 1,009,923 26,650,098 677,946 (15,750,305) 12,587,662
2014
Balance at 1 January 1,009,923 26,650,098 677,946 (15,750,305) 12,587,662
2015
Loss for the year - - - (7,441,785) (7,441,785)
Other comprehensive - - - - -
income
Total comprehensive loss
for the year - - - (7,441,785) (7,441,785)
Issue of shares - - - - -
Share issue costs - - - - -
Share-based payments
recognised as expense - - 319,352 - 319,352
Share-based payments
recognised as investment
in subsidiary - - 79,591 - 79,591
Transfer of previously
expensed share based
payment
charge upon lapse of - - (54,449) 54,449 -
options
Balance at 31 December 1,009,923 26,650,098 1,022,440 (23,137,641) 5,544,820
2015
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARED 31 DECEMBER 2015
1. General information
Verona Pharma plc ("the company") and its subsidiaries (together "the group")
develop innovative prescription medicines to treat respiratory diseases.
The company is a public limited company, which is listed on the Alternative
Investment Market (AIM) and incorporated and domiciled in the UK.
2. Accounting policies
A summary of the principal accounting policies, all of which have been applied
consistently throughout the year, is set out below.
2.1. Basis of preparation
The consolidated financial statements of Verona Pharma plc have been prepared
in accordance with International Financial Reporting Standards (IFRS) and IFRS
Interpretations Committee (IFRS IC) interpretations as adopted by the European
Union and the Companies Act 2006 applicable to companies reporting under IFRS.
The consolidated financial statements have been prepared under the historical
cost convention.
The preparation of financial statements in conformity with IFRS requires the
use of certain critical accounting estimates. It also requires management to
exercise its judgement in the process of applying the group's accounting
policies. The areas involving a higher degree of judgement or complexity, or
areas where assumptions and estimates are significant to the consolidated
financial statements are disclosed in note 2.14.
2.2. Going concern
During the year ended 31 December 2015 the Group made a loss of GBP7,416,768
(2014: a loss of GBP2,758,730). At the year-end date the Group had net assets of
GBP5,586,655 (2014: GBP12,604,480) of which GBP3,524,387 was cash and cash
equivalents.
The operation of the Group is currently being financed from funds that the
Company raised from share placings. On 24 March 2014 the Company announced that
it had raised GBP14.0 million in gross proceeds from a placing, subscription and
open offer.
These funds have been used primarily to support the development of RPL554 in
moderate and severe COPD as well as corporate and general administrative
expenditures.
The Group's capital management policy is to only raise sufficient funding to
finance the Group's near term objectives of its clinical development
programmes. Based on considerable clinical progress with RPL554 since the March
2014 fundraising, the next significant value inflection point is expected to be
completion of phase 2b studies (which will require funding). The Directors are
currently considering all options for further funding of such studies. As part
of this process, and as previously stated, the Company recognises that the
right commercial partner could bring significant value to the development of
RPL554 for chronic maintenance treatment in COPD and perhaps asthma. The
Company therefore continues to be involved in business development discussions
around RPL554.
The Directors believe that the Group has sufficient funds to complete the
current clinical trials, to cover corporate and general administration costs
and for it to comply with all its current and foreseeable commitments and,
accordingly, are satisfied that the going concern basis remains appropriate for
the preparation of these financial statements.
2.3. Basis of consolidation
These group financial statements include the accounts of Verona Pharma plc and
its wholly-owned subsidiaries Rhinopharma Limited and Verona Pharma Inc. The
purchase method of accounting is used to account for the acquisition of
Rhinopharma Limited.
The cost of an acquisition is measured as the fair value of the assets given,
equity instruments issued and liabilities incurred or assumed at the date of
exchange, plus costs directly attributable to the acquisition. Identifiable
assets acquired and liabilities and contingent liabilities assumed in a
business combination are measured initially at their fair values at the
acquisition date, irrespective of the extent of any minority interest. The
excess of the cost of acquisition over the fair value of the Group's share of
the identifiable net assets acquired is recorded as goodwill. Goodwill arising
on acquisitions is capitalised and subject to an impairment review, both
annually and when there are indications that the carrying value may not be
recoverable.
Inter-company transactions, balances and unrealised gains on transactions
between group companies are eliminated.
Rhinopharma Limited and Verona Pharma Inc. adopt the same accounting policies
as the Company.
2.4. Foreign currency translation
Items included in the Group's financial statements are measured using the
currency of the primary economic environment in which the Group operates ("the
functional currency"). The financial statements are presented in pounds
sterling ("GBP"), which is the functional and presentational currency of the
Company and the presentational currency of the Group.
Transactions in foreign currencies are recorded using the rate of exchange
ruling at the date of the transaction. Monetary assets and liabilities
denominated in foreign currencies are translated using the rate of exchange
ruling at the balance sheet date and the gains or losses on translation are
included in the profit and loss account. Non-monetary items that are measured
in terms of historical cost in a foreign currency are translated using the
exchange rates as at the dates of the original transactions. Non-monetary
items measured at fair value in a foreign currency are translated using the
exchange rates at the date when the fair value was determined.
The assets and liabilities of foreign operations are translated into sterling
at the rate of exchange ruling at the balance sheet date. Income and expenses
are translated at weighted average exchange rates for the period. The
resulting exchange differences are recognised in other comprehensive income.
2.5. Cash and cash equivalents
In the consolidated statement of cash flows, cash and cash equivalents includes
cash in hand, deposits held at call with banks, other short-term highly liquid
investments with original maturities of three months or less.
2.6. Deferred Taxation
Deferred tax is provided in full, using the liability method, on temporary
differences arising between the tax bases of assets and liabilities and their
carrying amounts in the financial statements. Deferred tax is determined using
tax rates (and laws) that have been enacted or substantially enacted by the
balance sheet date and expected to apply when the related deferred tax is
realised or the deferred liability is settled.
Deferred tax assets are recognised to the extent that it is probable that the
future taxable profit will be available against which the temporary differences
can be utilised.
2.7. Research and development costs
Capitalisation of expenditure on product development commences from the point
at which technical feasibility and commercial viability of the product can be
demonstrated and the Group is satisfied that it is probable that future
economic benefits will result from the product once completed. No such costs
have been capitalised to date, given the early stage of the Group's product
development
Expenditure on research and development activities that do not meet the above
criteria is charged to the Statement of Comprehensive Income as incurred.
2.8. Plant and equipment
Property, plant and equipment are stated at cost, net of depreciation and any
provision for impairment. Cost includes the original purchase price of the
asset and the costs attributable to bringing the asset to its working condition
for its intended use. Depreciation is calculated so as to write off the cost
less their estimated residual values, on a straight-line basis over the
expected useful economic lives of the assets concerned. The principal annual
periods used for this purpose are:
Computer hardware 3 years
Computer software 2 years
Office furniture and equipment 5 years
2.9. Intangible assets and goodwill
(a) Group Goodwill
Group Goodwill arises on the acquisition of subsidiaries and represents the
excess of the consideration transferred over the fair value of the identifiable
net assets acquired.
(b) Patents
Patent costs associated with the preparation, filing, and obtaining of patents
are capitalised and amortised on a straight-line basis over the estimated
useful lives of the patents of ten years.
2.10. Impairment of intangible assets and goodwill
Intangible assets that have an indefinite useful life or intangible assets not
ready to use are not subject to amortisation and are tested annually for
impairment. Assets that are subject to amortisation are reviewed for
impairment whenever events of changes in circumstances indicate that the
carrying amount may not be recoverable. An impairment loss is recognised for
the amount by which the asset's carrying amount exceeds its recoverable
amount. The recoverable amount is the higher of an asset's fair value (less
costs of disposal) and value in use.
2.11. Pension
The Group operates a defined contribution pension scheme. Contributions
payable for the year are charged to the Statement of Comprehensive Income.
Differences between contributions payable in the year and contributions
actually paid are shown as either accruals or prepayments in the Statement of
Financial Position. The Group has no further payment obligation once the
contributions have been paid.
2.12. Share based payments
The Group operates a number of equity-settled, share-based compensation plans.
The fair value of share-based payments under such schemes is expensed on a
straight-line basis over the vesting period, based on the Group's estimate of
shares that will eventually vest.
The fair value calculation of share-based payments requires several assumptions
and estimates as disclosed in note 19. The calculation uses the Black-Scholes
model.
For equity-settled share-based payments where employees of subsidiary
undertakings are rewarded with shares issued by the Parent Company, a capital
contribution is recorded in the subsidiary, with a corresponding increase in
the investment in the Parent Company.
Where warrants have been issued to external parties as recompense for services
supplied, the fair value of warrants is charged to the Statement of
Comprehensive Income over the period of services are received and a
corresponding credit is made to reserves.
2.13. Investments in subsidiaries
Investments in subsidiaries are shown at cost less any provision for
impairment.
2.14. Critical accounting judgements and estimates
The preparation of financial statements in conformity with International
Financial Reporting Standards requires the use of accounting estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of income and
expenses during the reporting period. Although these estimates are based on
management's best knowledge of current events and actions, actual results
ultimately may differ from those estimates. IFRSs also require management to
exercise its judgement in the process of applying the Group's accounting
policies.
The areas involving a higher degree of judgement or complexity, or areas where
assumptions and estimates are significant to the financial statements are as
follows:
(a) Going Concern
The financial statements have been prepared on a going concern basis, which
assumes that sufficient funds will be available for the Company and Group to
continue in operational existence for the foreseeable future. More details are
set out in note 2.2.
(b) Impairment of intangible assets
Determining whether an intangible asset is impaired requires an estimation of
whether there are any indications that its carrying value is not recoverable.
At each reporting date, the Group reviews the carrying value of its tangible
and intangible assets to determine whether there is any indication that those
assets have been impaired. If such an indication exists, the recoverable amount
of the asset, being the higher of the asset's fair value less costs to sell and
value in use, is compared to the asset's carrying value. Any excess of the
asset's carrying value over its recoverable amount is expensed to the income
statement.
Details of the Group's assessment of the carrying value of goodwill are
disclosed in note 15.
(c) Share based payments
The Group records charges for share based payments. For option based share
based payments management estimate certain factors used in the option pricing
model, including volatility, vesting date of options and number of options
likely to vest. If these estimates vary from actual occurrence, this will
impact on the value of the equity carried in the reserves. Further details of
the Group's estimation of share based payments are disclosed in note 19.
2.15. New standards, amendments and interpretations adopted by the Group
The following standards have been adopted by the Group for the first time for
the financial year beginning on or after 1 January 2015. They do not
materially impact on the Group results:
· Annual improvements 2011 - 2013
2.16. New standards, amendments and interpretations issued but not effective
for the financial year beginning 1 January 2015 and not early adopted
A number of new standards and amendments to standards and interpretations have
been endorsed for annual periods beginning after 1 January 2015 (noted below),
and have not been early adopted in preparing these consolidated financial
statements. None of these are expected to have a significant effect on the
consolidated financial statements of the group.
· Annual improvements 2014 (2012-2014 cycle)
· Amendment to IFRS 11, 'Joint arrangements' on acquisition of an interest
in a joint operation
· Amendments to IAS 16, 'Property, plant and equipment'
· Amendments to IAS 27, 'Separate financial statements' on the equity
method
· Amendment to IAS 1, 'Presentation of financial statements' on the
disclosure initiative
· Amendment to IFRS 10, 11 and 12 on transition guidance
· Amendments to IAS 32 and IFRS 7 Financial instruments on asset and
liability offsetting
· IAS 28 (revised), 'Investments in associates and joint ventures'
· IFRS 13, 'Fair value measurement'
· Amendment to IAS 12,'Income taxes' on deferred tax
· Amendment to IAS 16, 'Property, plant and equipment' and IAS
38,'Intangible assets', on depreciation and amortisation
· Amendment to IAS 36, 'Impairment of assets' on recoverable amount
disclosures.
A number of new standards and amendments to standards and interpretations have
been issued but are not yet endorsed for annual periods beginning after 1
January 2015 (noted below), and have not been adopted in preparing these
consolidated financial statements. None of these are expected to have a
significant effect on the consolidated financial statements of the Group.
· IFRS 15 Revenue from contracts with customers (effective for annual
periods beginning on or after 1 January 2018)
· IFRS 9 Financial instruments (effective for annual periods beginning on
or after 1 January 2018)
3. Earnings per share
Basic loss per share of 0.73p (2014: loss of 0.32p) for the Group is calculated
by dividing the loss for the period by the weighted average number of ordinary
shares in issue of 1,009,923,481 (2014: 866,743,656).
Potential ordinary shares are not treated as dilutive as the entity is loss
making.
4. Segmental information
The Group has determined that its operating segments be reported on a product
pipeline basis as this best reflects the Group's activity cycle. Operating
segments are reported in a manner consistent with the internal reporting
provided to the chief operating decision-maker. The chief operating
decision-maker has been identified as the Board of Directors.
The Group's product pipeline is dedicated to the research, discovery and
development of new therapeutic drugs for the treatment of acute and chronic
respiratory diseases. Two products had reached the clinical stage: RPL554 and
VRP700. However VRP700 was abandoned in 2015 in order to concentrate on
RPL554. The basic research figures are for NAIPs, which were also abandoned in
2015.
Segment information by operating segment is as follows:
Basic Basic
Clinical Clinical research research
2015 2014 2015 2014
GBP GBP GBP GBP
Income statement
information
Research and development (7,087,269) (2,634,848) - -
Amortisation of patents (42,983) (38,046) (279) (4,233)
Write-off of patents (108,707) - (25,825) -
Segment loss (7,238,959) (2,672,894) (26,104) (4,233)
Assets information
Patent 343,985 356,244 - 24,296
Goodwill 1,469,112 1,469,112 - -
Segment intangible 1,813,097 1,825,356 - 24,296
assets
2015 2014
GBP GBP
Reconciliation of segment result
Loss per reportable segment - Clinical (7,238,959) (2,672,894)
Loss per segment - Basic research (26,104) (4,233)
Total loss for reportable segments (7,265,063) (2,677,127)
Depreciation of non-segment assets (9,855) (10,683)
Unallocated general and administrative costs (1,696,089) (1,104,963)
Group operating loss (8,971,007) (3,792,773)
At the end of the financial year, the Group was still in the early development
stage and therefore had no turnover in either 2014 or 2015.
Reconciliation of segment assets
Assets per reportable segment - Clinical 1,813,097 1,825,356
Assets per reportable segment - Basic research - 24,296
Total assets for reportable segments 1,813,097 1,849,652
Unallocated non-current assets 13,822 21,847
Unallocated current assets 5,572,475 11,257,294
Group total assets 7,399,394 13,128,793
Segment information by geographical segment for 2015 is as follows:
Geographical segment (Group) United North America Total
Kingdom
GBP GBP GBP
Research and development costs (6,833,830) (431,233) (7,265,063)
General and administrative costs (1,704,856) (1,088) (1,705,944)
Finance income 44,791 - 44,791
Loss before taxation (8,493,895) (432,321) (8,926,216)
Tangible assets 13,822 - 13,822
Intangible assets 343,985 - 343,985
Trade and other receivables 2,048,088 - 2,048,088
Cash and cash equivalents 3,523,140 1,247 3,524,387
Goodwill 1,469,112 - 1,469,112
Trade and other payables (1,782,006) (30,733) (1,812,739)
Net assets 5,616,141 (29,486) 5,586,655
Segment information by geographical segment for 2014 is as follows:
Geographical segment (Group) United North America Total
Kingdom
GBP GBP GBP
Research and development costs (2,634,848) - (2,634,848)
General and administrative costs (1,157,191) (734) (1,157,925)
Finance income 29,978 - 29,978
Loss before taxation (3,762,061) (734) (3,762,795)
Tangible assets 21,847 - 21,847
Intangible assets 380,540 - 380,540
Trade and other receivables 1,287,535 1 1,287,536
Cash and cash equivalents 9,968,483 1,276 9,969,759
Goodwill 1,469,112 - 1,469,112
Trade and other payables (524,314) - (524,314)
Net assets 12,603,203 1,277 12,604,480
5. Operating expenses
2015 2014
Group GBP GBP
Loss before income tax is stated after charging:
Research and development costs:
Employee benefits (note 6) 1,322,109 678,147
Amortisation of patents 43,262 42,280
Write-off of patents 134,532 -
Other expenses 5,765,160 1,914,421
Total research and developments costs 7,265,063 2,634,848
General and administrative costs:
Employee benefits (note 6) 624,821 369,791
Legal and professional fees 608,447 394,316
Depreciation of plant and equipment 9,855 10,683
Operating lease charge 156,632 70,085
Other expenses 306,189 313,050
Total general and administrative costs 1,705,944 1,157,925
Total research and development and general 8,971,007 3,792,773
administrative costs
During the year the Group obtained services from the Group's auditors and its
associates as detailed below:-
2015 2014
Services provided by the Group's auditors GBP GBP
Fees payable to the Group's auditors
For the audit of Parent Company and consolidated 25,000 22,750
financial statements
IT services review 9,972 -
Taxation consultancy - 2,500
Total 34,972 25,250
6. Directors' emoluments and staff
costs
2015 2014
Number Number
Group
The average number of persons (including
members of the Board) during the year was: 13 11
2015 2014
GBP GBP
Aggregate emoluments of directors:
Salaries and other short-term employee 854,012 526,582
benefits
Consulting fee 89,051 99,500
Pension contributions 37,989 -
981,052 626,082
Share-based payment charge 231,790 121,602
Directors' emoluments including
share-based payment charge 1,212,842 747,684
2015 2014
GBP GBP
Aggregate other staff costs:
Wages and salaries 539,802 254,935
Social security costs 41,966 28,582
Share-based payment charge 137,393 16,737
Pension costs 14,927 -
734,088 300,254
The Group operates a defined contribution pension scheme for UK employees and
executive directors. The total pension cost during the year was GBP52,916 (2014:
GBPnil). There are no prepaid or accrued contributions to the scheme at the
year-end (2014: GBPnil).
7. Finance income 2015 2014
GBP GBP
Group
Bank interest 44,791 29,978
8. Taxation
2015 2014
GBP GBP
Analysis of tax credit for the year
Current tax:
UK corporation tax at 20.25% (2014: 21.5%) (1,520,732) (641,652)
Prior year adjustment 11,284 (362,413)
Current tax credit (1,509,448) (1,004,065)
Factors affecting the tax charge for the
year
Loss on ordinary activities before (8,926,216) (3,762,795)
taxation
Multiplied by standard rate of corporation
tax of 20.25% (2014: 21.5%) (1,807,559) (809,001)
Effects of:
Non-deductible expenses 113,529 2,194
Research and Development Incentive (599,368) (201,938)
Timing differences not recognised (1,880) 38,026
Tax losses carried forward 774,546 329,067
Prior year adjustment 11,284 (362,413)
Current tax credit (1,509,448) (1,004,065)
Factors that may affect future tax charges
At the year-end date the Group has unused United Kingdom tax losses available
for offset against suitable future profits in the United Kingdom. A deferred
tax asset has not been recognised in respect of such losses due to uncertainty
of future profit streams. The contingent deferred tax asset at 18% (2014: 20%)
is estimated to be GBP2,244,221 (2014: GBP2,464,229).
9. Investments in subsidiaries
The Company currently has two wholly owned subsidiaries, Rhinopharma Limited
and Verona Pharma Inc.
2015 2014
Company GBP GBP
Net book amount:
At the start of the year 2 1
Investment in subsidiary - 1
Capital contribution arising from 79,591 -
share-based payments
Net book amount at the end of year 79,593 2
A capital contribution arises where share-based payments are provided to
employees of subsidiary undertakings settled with equity to be issued by the
Company.
The Company's investments comprise interest in Group undertakings, details of
which are shown below:
Name of undertaking Verona Pharma Inc Rhinopharma Limited
.
Country of incorporation Delaware British Columbia
USA Canada
Description of shares held $0.001 Without Par Value
Common stock Common shares
Proportion of shares held by the Company 100% 100%
Verona Pharma Inc. was incorporated on the 12 December 2014 under the laws of
the State of Delaware, USA. Rhinopharma Limited is incorporated under the laws
of the Province of British Columbia, Canada. Rhinopharma Limited was a drug
discovery and development company focused on developing proprietary drugs to
treat allergic rhinitis and other respiratory diseases prior to its acquisition
by the Company on 18 September 2006.
10. Trade and other receivables 2015 2014
GBP GBP
Group
Other receivables 1,851,775 922,934
Prepayments and accrued income 196,313 364,601
2,048,088 1,287,535
Company
Other receivables 1,851,775 922,934
Prepayments and accrued income 196,313 364,601
Amounts due from Group undertakings 529 -
2,048,617 1,287,535
The classes within trade and other receivables do not include impaired assets.
Amounts due from Group undertakings are unsecured, interest free, have no fixed
date of repayment and are repayable on demand.
11. Cash and cash equivalents 2015 2014
GBP GBP
Group
Cash at bank and in hand 3,524,387 9,969,759
Company
Cash at bank and in hand 3,523,140 9,968,483
12. Trade and other payables 2015 2014
GBP GBP
Group
Trade payables 1,281,946 366,626
Other payables 54,964 31,493
Accruals 475,829 126,194
1,812,739 524,313
Company
Trade payables 1,281,946 366,626
Other payables 32,328 31,494
Amounts due to Group undertakings 135,900 -
Accruals 467,732 126,194
1,917,906 524,314
Amounts due to Group undertakings are not interest bearing and have no fixed
repayment date.
13. Plant and equipment
Group and Company Computer Computer Office Total
hardware software equipment
GBP GBP GBP GBP
Cost
At 1 January 2014 36,670 23,684 36,461 96,815
Additions 4,632 250 - 4,882
At 31 December 2014 41,302 23,934 36,461 101,697
Depreciation
At 1 January 2014 34,245 21,732 13,191 69,168
Charge for the year 1,645 2,014 7,023 10,682
At 31 December 2014 35,890 23,746 20,214 79,850
Net book value
At 31 December 2014
5,412 188 16,247 21,847
Net book value
At 31 December 2013
2,425 1,952 23,270 27,647
Group and Company Computer Computer Office Total
hardware software equipment
GBP GBP GBP GBP
Cost
At 1 January 2015 41,302 23,934 36,461 101,697
Additions 1,193 637 - 1,830
At 31 December 2015 42,495 24,571 36,461 103,527
Depreciation
At 1 January 2015 35,890 23,746 20,214 79,850
Charge for the year 2,664 166 7,025 9,855
At 31 December 2015 38,554 23,912 27,239 89,705
Net book value
At 31 December 2015
3,941 659 9,222 13,822
Net book value
At 31 December 2014
5,412 188 16,247 21,847
14. Intangible assets
Group and Company Patents
GBP
Cost
At 1 January 2014 299,893
Additions 215,676
At 31 December 2014 515,569
Amortisation
At 1 January 2014 92,749
Charge for the year 42,280
At 31 December 2014 135,029
Net book value
At 31 December 2014 380,540
Net book value
At 31 December 2013 207,144
Group and Company Patents
GBP
Cost
At 1 January 2015 515,569
Additions 141,239
Impairment (174,944)
At 31 December 2015 481,864
Amortisation
At 1 January 2015 135,029
Charge for the year 43,262
Impairment (40,412)
At 31 December 2015 137,879
Net book value
At 31 December 2015 343,985
Net book value
At 31 December 2014 380,540
Intangible assets comprise the Group's investment in patents to protect RPL554.
Patents are amortised over a period of ten years and are regularly reviewed for
impairment to ensure the carrying amount exceeds the recoverable amount in
accordance with note 2.10.
15. Goodwill 2015 2014
GBP GBP
Group
Goodwill 1,469,112 1,469,112
Company
Goodwill 1,453,569 1,453,569
Goodwill represents the excess of the purchase price over the fair value of the
net assets acquired in connection with the acquisition of Rhinopharma Limited
in September 2006. Goodwill is capitalised and allocated to appropriate
research projects, in Verona's case RPL554. They are deemed to have indefinite
useful life and so are not amortised. Annual impairment test of the research
projects ('RPs') is performed by comparing the expected recoverable amount of
the RPs to the carrying amount of the RPs.
Recognising that the Group is still in pre-revenue phase and that the research
projects are not yet ready for commercial use, management assesses the
recoverable amount of such goodwill with reference to Verona's market
capitalisation. As at 31 December 2015 this was several times the carrying
value of goodwill. Accordingly management believe it is appropriate to carry
goodwill at full historical value.
16. Called up share capital
The movements in the share capital are summarised below:
Number of GBP
shares
Authorised:
10,000,000,000 Ordinary shares of 0.1p 10,000,000,000 10,000,000
each
Allotted, called up and fully paid:
Ordinary shares as at 1 January 2014 372,598,650 372,598
Ordinary shares issued from share 298,750,000 298,750
placement
Ordinary shares issued from share 292,000,000 292,000
subscription
Ordinary shares issued from share open 46,574,831 46,575
offer
As at 31 December 2014 1,009,923,481 1,009,923
As at 31 December 2015
1,009,923,481 1,009,923
17. Cash used in operating activities
2015 2014
GBP GBP
Group
Operating loss (8,971,007) (3,792,773)
Share-based payment charge 398,943 192,186
Decrease / (increase) in trade and other 57,633 (321,294)
receivables
Increase in trade and other payables 1,274,370 34,993
Depreciation of plant and equipment 9,854 10,682
Write-off of intangible assets 134,533 -
Amortisation of intangible assets 43,262 42,280
Cash used in operating activities (7,052,412) (3,833,926)
Company
Operating loss (9,010,081) (3,792,039)
Share-based payment charge 319,352 192,186
Decrease / (increase) in trade and 57,104 (322,016)
other receivables
Increase in trade and other payables 1,393,593 34,993
Depreciation of plant and equipment 9,854 10,682
Write-off of intangible asset 134,533 -
Amortisation of intangible assets 43,262 42,280
Cash used in operating activities (7,052,383) (3,833,914)
18. Related parties transactions
The Company was charged GBP2,375,898 by Simbec-Orion, a group of which Prof.
Trevor Jones is a Director. At the year end, the Company owed GBP172,955 to this
related party (2014: GBPNil).
Arthurian Life Sciences Limited is also a company of which Prof. Trevor Jones
is a Director. At the year end, the Company owed GBPnil to this related party
(2014: GBP23,040). The GBP23,040 owed as at the end of 2014 was settled in early
2015. This was the only transaction with Arthurian Life Sciences Limited in
2015.
Arthurian Life Sciences Limited acts as General Partner for the Wales Life
Sciences Investment Fund, which itself is a substantial shareholder in the
Company.
The Directors of the Company have authority and responsibility for planning,
directing and controlling the activities of the Group and they therefore
comprise key management personnel as defined by IAS 24, Related Party
Disclosures. Remuneration of Directors is disclosed in the Directors'
emoluments report on page 15.
19. Share-based payments charge
Included within general and administrative costs is a share-based payment
charge of GBP398,943 (2014: GBP192,187). The share based payment charge represents
the current year's allocation of the expense for relevant share options between
2012 and 2015. All options issued prior to 2012 are fully expensed. The
Company grants share options under an unapproved share option plan (the
'Unapproved Plan') and under tax efficient Enterprise Management Incentive
arrangements (the 'EMI Plan'). Under the Unapproved Plan, options are granted
to employees, directors and consultants to acquire shares at a price to be
determined by the Board. In general, options are granted at a premium to the
share price at the date of grant, vest over three years and are exercisable
during a period ending ten years after the date of grant. Options are also
issued to advisors under the Unapproved Plan: such options generally vest
immediately and are exercisable between one and two years after grant. Under
the EMI Plan, options are granted to employees and directors who are contracted
to work at least 25 hours a week for the Company or for at least 75% of their
working time. The options granted under the EMI Plan will be exercisable at a
price and in accordance with a vesting schedule determined by the Board at the
time of grant and will have an exercise period of 10 years from the date of
grant.
The Company granted 5,100,000 (2014: 9,500,000) share options under the EMI
Plan and 27,500,000 (2014: 15,500,000) share options under the Unapproved Plan
during the current year with total fair values estimated using the
Black-Scholes option-pricing model of GBP370,542 (2014: GBP240,163). The cost is
amortised over the vesting period of the options on a straight-line basis and GBP
173,131 is included in the charge to general and administrative costs noted
above. The following assumptions were used for the Black-Scholes valuation of
share options granted in 2015, 2014, 2013, and 2012.
EMI Plan Unapproved Plan
Issued in 2015 Issued in 2015
Year/Type Employees Employees U.S. Employee
Options granted 5,100,000 15,000,000 12,500,000
Risk-free interest 1.42% 1.42% 1.42%
rate
Expected life of 10 years 10 years 10 years
options
Annualised volatility 76.5% 76.5% 76.5%
Dividend rate 0.00% 0.00% 0.00%
EMI Plan Unapproved Plan
Issued in 2014 Issued in 2014
Year/Type Employees Employees Advisors
Options granted 9,500,000 5,500,000 10,000,000
Risk-free interest 2.46-2.53% 2.53% 1.71%
rate
Expected life of 10 years 10 years 4 years
options
Annualised volatility 70.6-78.9% 70.6% 89.5%
Dividend rate 0.00% 0.00% 0.00%
EMI Plan Unapproved Plan
Issued in 2013 Issued in 2013
Year/Type Employees Employees Advisors
Options granted 2,500,000 13,000,000 5,655,717
Risk-free interest 2.0-2.8% 1.7-2.3% 0.4-0.5%
rate
Expected life of 10 years 10 years 2 -3years
options
Annualised volatility 53.3-72.4% 80.0-81.9% 70.5-122.1%
Dividend rate 0.00% 0.00% 0.00%
EMI Plan Unapproved Plan
Issued in 2012 Issued in 2012
Year/Type Employees Employees Consultants
Options granted 5,000,000 300,000 300,000
Risk-free interest 0.97% 0.97% 0.97%
rate
Expected life of 10 years 10 years 5 years
options
Annualised volatility 75.56% 82.36% 82.36%
Dividend rate 0.00% 0.00% 0.00%
The Company had the following share options movements in the year:
Number of options
Year of Exercise At 1 Options Options Options At 31 Expiry date
issue price January granted exercised lapsed December
(pence) 2015 2015
2006 5 10,000,000 - - (2,000,000) 8,000,000 18 September
2016*
2010 9 500,000 - - (500,000) - 15 June 2015
2012 5-15 5,000,000 - - - 5,000,000 1 June 2022**
*
- - - 5,000,000 31 January
2013 4.8 5,000,000 2016**
655,717 - - (655,717) - 31 January
2013 4 2015**
5,000,000 - - - 5,000,000 15 April
2013 4 2023
1,000,000 - - - 1,000,000 1 June
2013 4 2023***
8,000,000 - - - 8,000,000 29 July 2023
2013 4
5,500,000 - - - 5,500,000 15 May 2024
2014 3.5
3,500,000 - - - 3,500,000 15 May 2024**
2014 3.5 *
6,000,000 - - - 6,000,000 26 September
2014 2.2 2024***
10,000,000 - - - 10,000,000 6 August 2018
2014 2.2-3.5
- 5,100,000 - - 5,100,000 29 January
2015 2.5 2025***
- 27,500,000 - - 27,500,000 29 January
2015 2.5 2025
Total 60,155,717 32,600,000 - (3,155,717) 89,600,000
*10,000,000 directors' options with expiry date on 18 September 2011 were
extended for five years to 18 September 2016.
**options granted to agents upon closing of a Placing or financing facility.
***options granted under the EMI Plan.
Outstanding and exercisable share options by Plans at 31 December 2015:
Plan Outstanding Exercisable WAEP (pence)
Unapproved 69,000,000 33,500,003 3.3
EMI 20,600,000 8,833,335 4.3
Total 89,600,000 42,333,338 3.6
The weighted average exercise price (WAEP) of options at the year-end is as
follows:
Number of Weighted average
options exercise price
(pence)
As at 1 January 2014 38,755,717 5.5
Options granted in 2014:
Employees and consultants 3,500,000 3.5
Directors 11,500,000 2.8
Placing agent 10,000,000 2.6
Options lapsed in the year (3,600,000) 8.3
As at 31 December 2014 60,155,717 4.2
Options granted in 2015:
Employees 3,100,000 2.5
Directors 17,000,000 2.5
U.S. Employee 12,500,000 2.5
Options lapsed in the year (3,155,717) 5.4
As at 31 December 2015 89,600,000 3.6
Exercisable at 31 December 2015 42,333,338 4.5
20. Loss of the parent company
The Parent has taken advantage of the exemption permitted by Section 408 of the
Companies Act 2006 not to present an income statement for the year. The Parent
Company's loss for the year was GBP7,441,785 (2014: loss of GBP2,757,996), which
has been included in the Group's income statement.
21. Control
The Company is not under the control of any individual or group of connected
parties.
22. Financial commitments
As at 31 December 2015 the Group and Company were committed to making the
following payments under non-cancellable operating leases in the year to 31
December 2016.
Land and Buildings
2015 2014
Operating leases which expire: GBP GBP
Within one year 151,240 151,248
23. Financial instruments
(a) Fair values
The carrying amounts of cash and cash equivalents, short-term investments,
receivables, and accounts payable and accrued liabilities, approximate to fair
value due to their short-term nature.
(b) Credit risk
Credit risk reflects the risk that the Group may be unable to recover
contractual receivables. The Group is still in the development stage;
therefore, no policies are required at this time to mitigate this risk.
(c) Currency risk
Foreign currency risk reflects the risk that the Group's net assets will be
negatively impacted due to fluctuations in exchange rates. The Group has not
entered into foreign exchange contracts to hedge against gains or losses from
foreign exchange fluctuations. At 31 December 2015, cash and cash equivalents
include EUR3,503, US$8,315, CAD$1,463, SEK4,299 and accounts payable and accrued
liabilities include balances of EUR276,981, US$98,654 and SEK2,218,684.
(d) Financial risk management
The Directors recognise that this is an area in which they may need to develop
specific policies should the Group become exposed to further financial risks as
the business develops.
(e) Management of capital
The Group considers capital to be its equity reserves. At the current stage of
the Group's life cycle the Group's objective in managing its capital is to
ensure funds raised meet the research and operating requirements until the next
development stage of the Group's suite of projects.
The Group ensures it is meeting its objectives by reviewing its Key Performance
Indicators ("KPIs") to ensure its research activities are progressing in line
with expectations, controlling costs and placing unused funds on deposit to
conserve resources and increase returns on surplus cash held.
(f) Interest rate risk
At 31 December 2015, the Group had cash deposits of GBP3,524,387 (2014: GBP
9,969,759). The Group's exposure to interest rate risk, which is the risk that
a financial instrument's value will fluctuate as a result of changes in market
interest rates on classes of financial assets and financial liabilities, was as
follows:
Financial Asset Floating Fixed Floating Fixed
interest rate interest rate interest rate interest rate
2015 2015 2014 2014
GBP GBP GBP GBP
Cash deposits 64,516 3,459,871 101,508 9,868,251
END
(END) Dow Jones Newswires
June 03, 2016 02:00 ET (06:00 GMT)
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