Verona Pharma plc (AIM:VRP) (Nasdaq:VRNA) (Verona Pharma), a
clinical-stage biopharmaceutical company focused on developing and
commercializing innovative therapies for respiratory diseases,
announces its audited results for the full year ended December 31,
2017.
OPERATIONAL AND DEVELOPMENT HIGHLIGHTS
- Initiated four clinical studies, two of which have been
successfully completed ahead of schedule: •
Reported in September 2017 positive top-line data from a
Phase 2a clinical trial in COPD with RPL554 when dosed in addition
to tiotropium (Spiriva®), compared to placebo:
• Demonstrated statistical significance across
all primary and secondary efficacy outcome measures, as well as a
clear dose response; •
Achieved significant and clinically meaningful additional
improvement in peak lung function when added to tiotropium, a
widely used drug to treat COPD; •
Produced a marked reduction in Functional Residual Capacity
and in Residual Volume (both measures of trapped air in the lung)
as compared to tiotropium alone; •
Achieved faster onset-of-action when added to tiotropium;
and • Confirmed that both
study doses of RPL554 were well tolerated as add-on treatments to
tiotropium; adverse reactions were consistent with previous studies
with RPL554 and tiotropium. No cardiovascular-related or
gastrointestinal related adverse reactions were reported;
• Positive top-line data from U.S.
pharmacokinetic (“PK”) trial demonstrated that inhalation of
nebulized RPL554 provides optimal delivery of a clinical dose to
the lungs of patients: •
Completed IND-opening study in US;
• Confirmed inhaled RPL554 is an appropriate route of
administration for patients with chronic COPD and other respiratory
disorders; • Demonstrated
absorption occurs primarily in the lungs following inhaled
administration, consistent with inhalation being the optimal form
of delivery of medications for the treatment of COPD and asthma;
and • Low oral
bioavailability of swallowed medication and low blood levels of
RPL554 after inhalation, suggest limited contribution to systemic
effects by inhaled RPL554; • Provided
update related to ongoing 4-week, Phase 2b dose-ranging clinical
trial in Europe in approximately 400 patients to investigate the
efficacy, safety, and dose-response of nebulized RPL554 for the
maintenance treatment of COPD: •
Announced that study enrollment progressed ahead of
expectations and completed patient enrollment, as announced on
February 13, 2018 (after the year end);
• Expect to report top-line data early in the
second quarter of 2018, earlier than previous guidance of mid-2018
and original guidance of second-half of 2018; •
Provided update related to ongoing Phase 2a clinical study to
evaluate the PK and pharmacodynamic (“PD”) profile and tolerability
of RPL554 in up to 10 CF patients as well as examine the effect on
lung function: • Expect to
report top-line data in late first quarter of 2018, earlier than
previous guidance of the first half of 2018;
- Initiated development of RPL554 as dry powder inhaler (“DPI”)
and pressurized metered dose inhaler (“pMDI”) formulations for
maintenance treatment of COPD;
- Strengthened the management team through the addition of
Richard Hennings as Commercial Director and Dr Desiree Luthman as
VP Regulatory Affairs; and
- Entered into a global strategic services agreement with IQVIA
(formerly known as QuintilesIMS), in which IQVIA agreed to serve as
sole provider of core clinical trial services for Verona Pharma's
RPL554 clinical development programs.
FULL YEAR FINANCIAL HIGHLIGHTS
- Successfully raised £70 million ($90 million) gross, through a
global offering comprising an initial public offering (“IPO”) on
the Nasdaq Global Market (“Nasdaq”), and a concurrent European
private placement, together with a shareholder private
placement;
- Verona Pharma American Depositary Shares (“ADSs”) now listed on
Nasdaq under the symbol VRNA; each ADS represents 8 Verona Pharma
ordinary shares;
- Reported operating loss for the year ended December 31,
2017 of £29.8 million (full year 2016: £7.0 million) and reported
loss after tax of £20.5 million (full year 2016: loss after tax of
£5.0 million), reflecting the preparation and initiation of
clinical trials and pre-clinical activities;
- Reported loss per share of 23.4 pence for the year ended
December 31, 2017 (full year 2016: loss per share 15.0
pence);
- Net cash used in operating activities for the year ended
December 31, 2017 of £20.7 million (full year 2016: £5.6
million);
- Cash, cash equivalents and short-term investments at
December 31, 2017 amounted to £80.3 million (December 31,
2016: £39.8 million);
POST PERIOD
- Plan to conduct a further Phase 2a clinical trial in Europe to
evaluate RPL554 when dosed in addition to LAMA/LABA therapy,
compared to placebo: • Anticipate
commencing in the second half of 2018, with top-line data expected
in 2019.
Jan-Anders Karlsson, PhD, CEO of Verona Pharma, commented: “2017
brought another very successful year with further highly
encouraging clinical data for RPL554 together with additional
strengthening of our cash resources through our Nasdaq IPO.
We look forward to reporting top-line data from the CF and COPD
trials in the coming weeks. In the second half of 2018, we plan to
commence a Phase 2a clinical trial in Europe to evaluate RPL554
when dosed in addition to LAMA/LABA therapy.”
For further information, please contact:
Verona Pharma plc |
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Tel: +44 (0)20 3283
4200 |
Jan-Anders Karlsson,
Chief Executive Officer |
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info@veronapharma.com |
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Stifel Nicolaus Europe
Limited (Nominated Adviser and UK Broker) |
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Tel: +44 (0) 20 7710
7600 |
Stewart Wallace /
Jonathan Senior / Ben Maddison |
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SNELVeronaPharma@stifel.com |
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FTI Consulting (UK
Media and Investor enquiries) |
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Tel: +44 (0)20 3727
1000 |
Simon Conway / Natalie
Garland-Collins |
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veronapharma@fticonsulting.com |
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ICR, Inc. (US Media and
Investor enquiries) |
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James Heins |
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Tel: +1
203-682-8251 |
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James.Heins@icrinc.com |
Stephanie
Carrington |
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Tel. +1
646-277-1282 |
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Stephanie.Carrington@icrinc.com |
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An electronic copy of the annual report and accounts will be
made available today on the Company's website
(http://www.veronapharma.com). A copy of the Form 20-F will be
filed with the SEC as soon as possible. This press release does not
constitute an offer to sell or the solicitation of an offer to buy
securities, and shall not constitute an offer, solicitation or sale
in any jurisdiction in which such offer, solicitation or sale would
be unlawful prior to registration or qualification under the
securities laws of that jurisdiction.
About Verona Pharma plc
Verona Pharma is a clinical-stage biopharmaceutical company
focused on developing and commercializing innovative therapies for
the treatment of respiratory diseases with significant unmet
medical needs. Verona Pharma’s product candidate, RPL554, is a
first-in-class, inhaled, dual inhibitor of the enzymes
phosphodiesterase 3 and 4 that acts as both a bronchodilator and an
anti-inflammatory agent in a single compound. In clinical trials,
treatment with RPL554 has been observed to result in statistically
significant improvements in lung function as compared to placebo,
and has shown clinically meaningful and statistically significant
improvements in lung function when administered in addition to
frequently used short- and long-acting bronchodilators as compared
to such bronchodilators administered as a single agent. Verona
Pharma is developing RPL554 for the treatment of chronic
obstructive pulmonary disease (COPD), cystic fibrosis (CF), and
potentially asthma.
Forward-Looking Statements
This press release contains forward-looking statements. All
statements contained in this press release that do not relate to
matters of historical fact should be considered forward-looking
statements, including, but not limited to, statements regarding the
design of the Phase 2b clinical trial of RPL554, the importance of
the Phase 2b clinical trial to our development plans for RPL554,
the potential of RPL554 as a promising first-in-class treatment
option for COPD, and the value of the data and insights that may be
gathered from the Phase 2b clinical trial.
These forward-looking statements are based on management's
current expectations. These statements are neither promises nor
guarantees, but involve known and unknown risks, uncertainties and
other important factors that may cause our actual results,
performance or achievements to be materially different from our
expectations expressed or implied by the forward-looking
statements, including, but not limited to, the following: our
limited operating history; our need for additional funding to
complete development and commercialization of RPL554, which may not
be available and which may force us to delay, reduce or eliminate
our development or commercialization efforts; the reliance of our
business on the success of RPL554, our only product candidate under
development; economic, political, regulatory and other risks
involved with international operations; the lengthy and expensive
process of clinical drug development, which has an uncertain
outcome; serious adverse, undesirable or unacceptable side effects
associated with RPL554, which could adversely affect our ability to
develop or commercialize RPL554; potential delays in enrolling
patients, which could adversely affect our research and development
efforts; we may not be successful in developing RPL554 for multiple
indications; our ability to obtain approval for and commercialize
RPL554 in multiple major pharmaceutical markets; misconduct or
other improper activities by our employees, consultants, principal
investigators, and third-party service providers; delays in
analyzing our top-line data; material differences between our
top-line data and final data; our reliance on third parties,
including clinical investigators, manufacturers and suppliers, and
the risks related to these parties’ ability to successfully develop
and commercialize RPL554; and lawsuits related to patents covering
RPL554 and the potential for our patents to be found invalid or
unenforceable. These and other important factors under the caption
“Risk Factors” in our final prospectus filed with the Securities
and Exchange Commission (“SEC”) on April 28, 2017 relating to our
Registration Statement on Form F-1, and our other reports filed
with the SEC, could cause actual results to differ materially from
those indicated by the forward-looking statements made in this
press release. Any such forward-looking statements represent
management's estimates as of the date of this press release. While
we may elect to update such forward-looking statements at some
point in the future, we disclaim any obligation to do so, even if
subsequent events cause our views to change. These forward-looking
statements should not be relied upon as representing our views as
of any date subsequent to the date of this press release.
CHAIRMAN AND CHIEF EXECUTIVE OFFICER'S JOINT
STATEMENT
OVERVIEW
We are a clinical-stage biopharmaceutical company focused on
developing and commercializing innovative therapeutics for the
treatment of respiratory diseases with significant unmet medical
needs. Our product candidate, RPL554, is a first-in-class, inhaled,
dual inhibitor of the enzymes phosphodiesterase 3 and 4, or PDE3
and PDE4, that acts as both a bronchodilator and an
anti-inflammatory agent in a single compound. We are not aware of
any therapy in a single compound in clinical development or
approved by the U.S. Food and Drug Administration, or FDA, or the
European Medicines Agency, or EMA, for the treatment of respiratory
diseases that acts as both a bronchodilator and anti-inflammatory
agent. We believe RPL554 has the potential to be the first novel
class of bronchodilator in over 40 years. We have clinically
completed twelve Phase 1 and 2 clinical trials for RPL554 with over
700 subjects enrolled; ten of these studies have been reported, one
study is expected to report late in the first quarter of 2018 and
one study is expected to report early in the second quarter of
2018. In our clinical trials, treatment with RPL554 has been
observed to result in statistically significant improvements in
lung function as compared to placebo. Statistically significant
means that there is a low statistical probability, typically less
than 5%, that the observed results occurred by chance alone. Our
clinical trials also have shown clinically meaningful and
statistically significant improvements in lung function when RPL554
is added to commonly used short- and long-acting bronchodilators as
compared to either bronchodilator administered as a single agent.
RPL554 also has shown anti-inflammatory effects and been well
tolerated in our clinical trials, and has not been observed to
result in the gastrointestinal or other side effects commonly
associated with roflumilast, the only PDE4 inhibitor currently on
the market for the treatment of chronic obstructive pulmonary
disease, or COPD. We are developing RPL554 for the treatment of
patients with COPD and for the treatment of patients with cystic
fibrosis, or CF.
We believe there is an urgent and unmet medical need for new and
more effective treatments for COPD to reduce the number and burden
of symptoms, reduce acute periods of worsening symptoms, or
exacerbations, and establish a consistent and durable response to
treatment. In addition, in CF, a fatal inherited disease, we
believe the bronchodilatory and anti-inflammatory effects of RPL554
may be beneficial. We believe RPL554, if approved, has the
potential to become an important and novel treatment and standard
of care for COPD and CF patients. We may also explore, alone or
with a collaborator, the development of RPL554 to treat asthma and
other respiratory diseases.
According to the World Health Organization (WHO), over one
billion people suffer from chronic respiratory diseases. Among the
most common of these afflictions is COPD, which is a progressive
respiratory disease for which there is no cure. COPD damages the
airways and the lungs and leads to shortness of breath, impacting a
person's ability to perform daily activities. Chronic inflammation
plays a central role in the pathology of the disease, and is
particularly prominent in the airways of COPD patients. COPD
includes chronic bronchitis, which refers to the inflammation of
the lung and airways that results in coughing and sputum
production, and emphysema, which refers to a destruction of distal
lung tissue, or air sacs. In some cases, patients with COPD
experience exacerbations, which are estimated to cause
approximately 1.5 million emergency department visits, 687,000
hospitalizations and 129,000 deaths per year in the United States
alone. According to the WHO, COPD is expected to become the third
leading cause of death globally by 2030, with 210 million
people worldwide suffering from the disease. It is estimated that
there are 24 million people with COPD in the United States,
only half of whom have been diagnosed. Of those diagnosed with COPD
in the United States, more than 2 million suffer from severe
or very severe forms of the disease. Total annual medical costs
relating to COPD in the United States were estimated to be
$32 billion in 2010 and are projected to rise to
$49 billion in 2020. Whereas the number of patients diagnosed
with COPD in the US continues to increase annually, the growth in
numbers in more developing countries, like China, is significantly
higher. The prevalence of COPD in China is expected to be
about 8% of patients over 40 years of age and is expected to
increase in coming years. Global sales of drugs currently indicated
for COPD in major markets were approximately $15 billion in
2015 and are expected to grow to $20 billion by 2025.
COPD patients are commonly treated with bronchodilators, which
seek to relieve airway constriction and make it easier to breathe,
and inhaled corticosteroids, which seek to reduce lung
inflammation. For patients with more severe disease who experience
recurrent exacerbations, and for whom inhaled corticosteroids are
not effective, an oral formulation of a PDE4 inhibitor, which is an
anti-inflammatory agent, may also be used as treatment. Despite the
wide availability of these therapies, many COPD patients continue
to suffer exacerbations and have continued respiratory symptoms,
which limit their daily activities. Furthermore, current therapies
have not demonstrated an ability to change the progressive decline
in lung function or reduce the mortality associated with COPD. We
believe there is an urgent and unmet medical need for new and more
effective treatments for COPD to reduce the number and burden of
symptoms, reduce exacerbations and establish a consistent and
durable treatment response.
CF is the most common fatal inherited disease in the United
States and Europe. CF causes impaired lung function and is commonly
associated with repeat and persistent lung infections due to the
inability to clear thickened phlegm, or mucus, from the lung. This
condition often results in frequent exacerbations and
hospitalizations. There is no cure for CF and although current
therapies are leading to longer lifespans the median age of death
for CF patients is still only around 40 years. CF is
considered a rare, or orphan, disease by both the FDA and the EMA.
According to the Cystic Fibrosis Foundation, more than 30,000
people in the United States and more than 70,000 people worldwide
are living with CF and approximately 1,000 new cases of CF are
diagnosed each year. The FDA and the EMA provide incentives for
sponsors to develop products for orphan diseases, and we plan to
seek orphan drug designation for RPL554 from both regulators in
treating CF. CF patients require lifelong treatment with multiple
daily medications, frequent hospitalizations and, ultimately, lung
transplants in some end-stage patients. The quality of life for CF
patients is compromised as a result of spending significant time on
self-care every day and frequent outpatient doctor visits and
hospitalizations. CF patients take an average of seven medications
daily. In the 12-month period ended June 30, 2016, global
sales of drugs currently indicated for CF totaled
$4.1 billion. The global market for CF drugs is expected to
increase to $7.0 billion by 2020.
RPL554 is a first-in-class, inhaled, dual inhibitor of PDE3 and
PDE4. Phosphodiesterases, or PDEs, are well known and validated
therapeutic targets, and many PDE inhibitors, with different
specificities, are currently available in the market for other
indications. PDE3 is present in airways and the lung, and
inhibition of this enzyme is primarily responsible for the
bronchodilatory action of RPL554. PDE4 is found in inflammatory and
epithelial cells, and inhibition of this enzyme contributes to
RPL554's anti-inflammatory activity. PDEs metabolize the critical
signaling molecules, cyclic adenosine monophosphate, or cAMP, and
cyclic guanosine monophosphate, or cGMP. By inhibiting PDE3 and
PDE4, RPL554 increases the levels of cAMP and cGMP, resulting in
bronchodilator and anti-inflammatory effects. RPL554 also
stimulates the cystic fibrosis transmembrane conductance regulator,
or CFTR, which is an ion channel in the epithelial cells lining the
airways. Mutations in the CFTR protein result in poorly or
non-functioning ion channels, which cause CF and are potentially
important in COPD. CFTR stimulation leads to improved electrolyte
balance in the lung and thinning of the mucus, which facilitates
mucociliary clearance and leads to improved lung function and
potentially a reduction in lung infections. Dual inhibition of PDE3
and PDE4 has been observed to be more effective than inhibition of
either PDE alone at relaxing airway smooth muscle cells and
suppressing the activation and functions of pro-inflammatory cells
residing in the lung, both of which are commonly understood to play
a significant role in COPD and CF.
CLINICAL DEVELOPMENT IN 2017
COPD - nebulized formulation
We are developing RPL554 in a nebulized formulation for the
maintenance treatment of COPD patients. We also are developing
RPL554 in a nebulized formulation as an add-on therapy to short
acting bronchodilators and other commonly used therapies for the
treatment of hospitalized patients with acute exacerbations of
COPD.
To evaluate RPL554 in a nebulized formulation for COPD, we
commenced four clinical trials in 2017, with two completed during
the year and two ongoing. Our completed studies included our
IND-opening study in the US.
In September 2017, we reported positive data from a Phase 2a
clinical trial evaluating RPL554 compared to placebo in
approximately 30 patients with COPD as an add-on therapy to
tiotropium, a commonly used long acting bronchodilator:
- RPL554 demonstrated a significant and clinically meaningful
additional improvement in peak lung function when added to
tiotropium, a widely used drug to treat COPD;
- RPL554 achieved a faster onset-of-action when added to
tiotropium vs tiotropium alone;
- RPL554 opened peripheral airways as measured by improvements in
airway resistance and compliance, suggesting that RPL554 treatment
may reduce dyspnea (shortness of breath), a major debilitating
symptom of COPD; and
- RPL554 demonstrated statistical significance across all primary
and secondary efficacy outcome measures, as well as a clear dose
response at 6 mg dose compared to 1.5 mg dose.
Also in September 2017, we reported positive data from a Phase 1
single-dose pharmacokinetic, or PK, trial in 12 healthy volunteers.
A PK trial involves the study of the process of bodily absorption,
distribution, metabolism and excretion of a drug. Our IND-opening
study, conducted in the United States, confirmed that:
- RPL554 absorption occurs primarily via the lungs following
inhaled administration, consistent with optimal inhaled delivery of
medications for the treatment of COPD and asthma; and
- Low oral bioavailability and blood levels following inhalation
of RPL554 suggest that swallowed medication contributes little to
systemic effects of RPL554.
On February 13, 2018, we provided an update on enrollment in our
four-week Phase 2b dose ranging clinical trial in approximately 400
patients, for which dosing is now completed, with data now
anticipated early in the second quarter of 2018, which is earlier
than previous guidance of mid-2018.
COPD - pMDI and DPI formulations
In addition to our nebulized formulation of RPL554, we are
developing RPL554 in both pressurized metered dose inhaler, or
pMDI, and dry powder inhaler, or DPI, formulations for the
maintenance treatment of COPD. We plan to select a pMDI and a DPI
formulation as part of an expansion to the RPL554 clinical
development program to the treatment of patients with moderate to
severe chronic obstructive pulmonary disease (COPD). It is
estimated that, in the United States, approximately 4.5 million
patients with moderate to severe COPD use inhalers for maintenance
therapy.
Delivery of orally inhaled drugs by pMDI or DPI is a mainstay of
maintenance treatment for patients with moderate to severe COPD.
Successful development of a pMDI or DPI formulation of RPL554 for
moderate disease would greatly expand the addressable market for
the drug and represents a multi-billion dollar potential
opportunity. We believe that over 90% of patients with diagnosed
COPD use inhalers, such as a pMDI or DPI, rather than a nebulizer,
to administer treatment.
We plan to commence pre‑clinical studies for RPL554 in these
formulations in 2018, followed by the first clinical trials in
healthy subjects or patients with COPD.
We may also explore the development of RPL554 in pMDI and/or DPI
formulations for the treatment of asthma and other respiratory
diseases.
Cystic Fibrosis
In April 2017, we announced the commencement of a Phase 2a
single dose PK and pharmacodynamics, or PD, trial evaluating RPL554
in approximately ten CF patients. A PD trial involves the study of
the biochemical and pharmacological effects of a drug and its
mechanism of action, including the correlation of the drug’s
actions and effects with its mechanism of action.
On February 13, 2018, we provided an update on enrollment in
this Phase 2a PK and PD trial, with data now anticipated in late
first quarter of 2018, which is earlier than previous guidance of
first half of 2018.
PREVIOUS STUDIES WITH RPL554
In our clinical trials, RPL554 has shown rapid onset and durable
bronchodilation in healthy subjects and patients with COPD or
asthma when inhaled from a nebulizer. In addition, RPL554 has been
observed to be complementary and additive when administered as an
add-on therapy to other currently marketed bronchodilators. In 2017
we announced the results of a Phase 2a clinical trial of RPL554 in
30 patients with COPD. Our primary objective in this clinical trial
was to evaluate the improvement in lung function, as measured by
the maximal volume of air a person can forcefully exhale in one
minute, FEV1, and the duration of action of RPL554. We evaluated
RPL554 administered as an add-on therapy to a commonly used
bronchodilator tiotropium, marketed as Spiriva. We observed
clinically meaningful and statistically significant improvement in
lung function, as measured by FEV1, when RPL554 was administered as
an add-on therapy to a standard dose of tiotropium as compared to a
standard dose of tiotropium alone. In this clinical trial, we
observed the effect size, or peak improvement was 127 ml and 104 ml
for 1.5mg and 6mg doses respectively over tiotropium alone. P-value
is a conventional statistical method for measuring the statistical
significance of clinical results. A p-value of 0.05 or less
represents statistical significance, meaning that there is a less
than 1-in-20 likelihood that the observed results occurred by
chance. In addition, RPL554 administered as an add-on therapy to
tiotropium resulted in a statistically significant reduction in
time of onset of bronchodilation as compared to tiotropium alone.
The data from this study was highly consistent with the results of
a previous Phase 2a clinical trial we announced in 2016 of RPL554
in 36 patients with COPD. Our primary objective in that clinical
trial was to evaluate the improvement in lung function, as measured
by the maximal volume of air a person can forcefully exhale in one
minute, FEV1, and the duration of action of RPL554. We evaluated
RPL554 administered as a single agent as compared to placebo and
two commonly used bronchodilators, albuterol, also known as
salbutamol and marketed as Ventolin, and ipratropium, marketed as
Atrovent. We also evaluated RPL554 administered as an add-on
therapy to either albuterol or ipratropium, in each case as
compared to albuterol or ipratropium alone. We observed that RPL554
administered as a single agent produced statistically significant
improvements in lung function, as measured by FEV1, as compared to
placebo, with a p-value of less than 0.001. P-value is a
conventional statistical method for measuring the statistical
significance of clinical results. We also observed clinically
meaningful and statistically significant improvement in lung
function, as measured by FEV1, when RPL554 was administered as an
add-on therapy to standard doses of albuterol and ipratropium as
compared to standard doses of either bronchodilator alone. In this
clinical trial, we observed the effect size, or peak improvement
minus placebo improvement, was 51% higher for the add-on-therapy of
RPL554 with albuterol as compared to albuterol alone, and 66%
higher for the add-on-therapy of RPL554 with ipratropium as
compared to ipratropium alone. In addition, RPL554 administered as
an add-on therapy to either albuterol or ipratropium resulted in a
statistically significant reduction in time of onset of
bronchodilation as compared to albuterol or ipratropium alone.
CORPORATE
RPL554 is protected by granted and pending patents. We believe
that medicinal products containing RPL554 are protected by our IP
beyond 2035. We have worldwide commercialization rights for
RPL554.
We raised £70m in gross proceeds from investors from our April
2017 global offering comprising an initial public offering (“IPO”)
on the NASDAQ Global Market (“Nasdaq”), and a concurrent European
private placement, together with a shareholder private
placement.
Members of our management team, which we have strengthened and
expanded during the year, and our board of directors have extensive
experience in large pharmaceutical and biotechnology companies,
particularly in respiratory product development from drug discovery
through commercialization and have played important roles in the
development and commercialization of several approved respiratory
treatments, including Symbicort, Daliresp/Daxas, Spiriva and
Flutiform.
FINANCIALS
The operating loss for the year ended
December 31, 2017 was £29.8 million (2016: £7.0 million) and
the loss after tax for the year ended December 31, 2017 was
£20.5 million (2016: £5.0 million).
Research and Development Costs
Research and development costs were £23.7 million for the year
ended December 31, 2017, as compared to £4.5 million for the
year ended December 31, 2016, an increase of £19.2 million.
The increase was attributable to a £12.3 million increase in
clinical trial expenses related to the initiation of four, and
completion of two, Phase 2 clinical trials of RPL554. In
addition, we increased spending on contract manufacturing and other
formulation work by £2.7 million and toxicology and other
pre-clinical development by £1.2m. Our salary costs increased
by £0.3m and our share-based payment charge rose by £1.2 million as
we expanded our team and initiated a new long term incentive plan
to drive development of RPL 554. Furthermore, our spend on
third party consultants increased by £0.8 million and patent and
other costs by £0.3 million.
General and Administrative Costs
General and administrative costs were £6.0 million for the year
ended December 31, 2017, as compared to £2.5 million for the
year ended December 31, 2016, an increase of £3.5 million. The
increase was attributable to £0.8 million increase in our salary
costs and a £1.1 million increase in our share-based payment charge
as we built the team to support the activities of the Group.
There was an increase of £1.3 million of costs in preparation for
and relating to the Global Offering, as well as ongoing compliance
and other costs due to listing our ADSs on the NASDAQ stock
market. We also incurred costs of £0.4 million developing our
commercial strategy for RPL 554.
Finance Income and Expense
Finance income was £7.0 million for the year ended
December 31, 2017 and £1.8 million for the year ended
December 31, 2016. The increase in finance income was
primarily due to a decrease in the fair value of the warrant
liability of £6.6 million caused by changes in the underlying
assumptions for measuring the liability of the warrants issued in
the July 2016 Placement, including the price and volatility of our
ordinary shares and the unwinding of the expected life of the
warrants.
Finance expense was £2.5 million for the year ended
December 31, 2017 as compared to £0.8 million for the year
ended December 31, 2016. The increase was primarily due to the
foreign exchange loss on translation of foreign currency
denominated cash and cash equivalents and short term
investments.
Taxation
Taxation for the year ended December 31, 2017 amounted to a
credit of £4.7 million as compared to a credit of £1.0 million for
the year ended December 31, 2016, an increase in the credit
amount of £3.7 million. The credits are obtained at a rate of 14.5%
of 230% of our qualifying research and development expenditure, and
the increase in the credit amount was primarily attributable to our
increased expenditure on research and development.
Cash Flows
The decrease in net cash used in operating activities to £20.7
million for the year ended December 31, 2017 from £5.6 million
for the year ended December 31, 2016 was primarily due to an
increase in loss before taxation driven by higher research and
development costs.
The increase in net cash used in investing activities to £49.5
million for the year ended December 31, 2017 from £41 thousand
for the year ended December 31, 2016 was due to placing funds
raised in the Global Offering on term deposits with maturities of
more than three months at inception.
The net cash of £63.2 million received from financing activities
to for the year ended December 31, 2017 was the cash raised
from the Global Offering. The £41.2 million received for the year
ended December 31, 2016 was the cash received from the sale of
our equity securities and warrants in connection with the July 2016
Placement.
Cash, cash equivalents and short-term investments
Net cash, cash equivalents and short-term investments at
December 31, 2017 increased to £80.3 million from £39.8
million at December 31, 2016 primarily due to the global offering
offset by cash spent on research and development activities.
Net assets
Net assets increased to £79.9 million at the year ended December
31, 2017 from £34.5 million at the year ended December 31, 2016.
This increase was primarily due to the net cash of £63.2 million
raised from the issue of shares, offset by the increased
expenditure from research and development costs.
OUTLOOK AND STRATEGY
We intend to become a leading biopharmaceutical company focused
on the treatment of respiratory diseases with significant unmet
medical needs. The key elements of our strategy to achieve this
goal include:
- Rapidly advance the development of nebulized RPL554 for the
maintenance treatment of COPD in moderate and severe patients.
- For the maintenance treatment of severe COPD patients, we are
progressing the development of RPL554 in a nebulized formulation.
We are currently conducting a four-week Phase 2b dose ranging
clinical trial in approximately 400 patients; data from this study
is now expected early in the second quarter of 2018.
- Following completion of this ongoing 4-week Phase 2b clinical
trial, we will evaluate and possibly adjust the overall and
near-term development plans for RPL554. Depending on the data from
all clinical trials conducted with RPL554 to date, future
interactions with regulatory authorities and our commercial
assessment of different development options for RPL554, we will
consider any opportunity to focus and accelerate our development
plans for RPL554, including proceeding more rapidly towards Phase 3
clinical trials, particularly with nebulized RPL554 for the
maintenance treatment of COPD.
- For the maintenance treatment of severe COPD patients, we also
plan to conduct a further Phase 2a clinical trial in Europe to
evaluate RPL554 when dosed in addition to LAMA/LABA therapy,
compared to placebo. We expect to commence this study late in the
second half of 2018, with top-line data expected in 2019.
- RPL554 for nebulized administration is currently presented in a
glass vial with a flip, tear-up cap. This format is adequate for
clinical trials but patient acceptance in a commercial setting is
expected to be improved by a switch to presenting the suspension
formulation of RPL554 in plastic ampules. We will investigate the
feasibility to manufacture and supply RPL554 nebulized suspension
formulation in plastic ampules. In addition to patient acceptance,
switching to plastic ampules may also be more cost-effective for
manufacturing in larger volumes. A decision on presentation form
will be made before the start of Phase 3 clinical trials; during
this evaluation process we will also review and optimize the
nebulized suspension formulation as part of a quality by design
program.
- For the treatment of COPD patients who may prefer the more
convenient administration of an inhaler device, we are developing
RPL554 in inhaler formulations. We plan to commence pre‑clinical
studies for RPL554 in these formulations in 2018, followed by the
first clinical trials in healthy subjects or patients with
COPD.
- Proceeding more rapidly towards Phase 3 clinical trials with
nebulized RPL554 for the maintenance treatment of COPD may require
us to focus our financial and other resources on maintenance
treatment of COPD with nebulized and inhaled formulations of RPL554
in the short term, which may alter our timing to commence further
trials using RPL554 in other indications.
- Advance the development of nebulized RPL554 for the treatment
of acute exacerbations of COPD. We are developing RPL554 as
an add-on therapy to short acting bronchodilators and other
commonly used therapies for the treatment of hospitalized patients
with acute exacerbations of COPD. The timing for future studies in
this indication may be dependent on any decision to move more
rapidly towards Phase 3 clinical trials with nebulized RPL554 for
the maintenance treatment of COPD.
- Develop RPL554 for the treatment of CF. The timing for future
studies in this indication may be dependent on any decision to move
more rapidly towards Phase 3 clinical trials with nebulized RPL554
for the maintenance treatment of COPD.
- Pursue development of RPL554 in other forms of respiratory
disease. We believe that RPL554’s properties as an inhaled,
dual inhibitor of PDE3 and PDE4 give it broad potential
applicability in the treatment of other respiratory diseases. We
may explore development of RPL554 to treat other forms of
respiratory disease following development of RPL554 for the
treatment of COPD and CF.
- Seek strategic collaborative relationships. We may seek
strategic collaborations with market leading biopharmaceutical
companies to develop and commercialize RPL554. We believe these
collaborations could provide significant funding to advance the
development of RPL554 while allowing us to benefit from the
development or commercialization expertise of our
collaborators.
- Acquire or in-license product candidates for the treatment of
respiratory diseases. We plan to leverage our respiratory
disease expertise to identify and in-license or acquire additional
clinical stage product candidates that we believe have the
potential to become novel treatments for respiratory diseases with
significant unmet medical needs.
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 |
February 27,
2018 |
|
|
|
|
|
|
|
|
|
February 27,
2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
VERONA PHARMA PLCCONSOLIDATED STATEMENT OF
COMPREHENSIVE INCOMEFOR THE YEAR ENDED
DECEMBER 31, 2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes |
|
Year ended December31, 2016 |
|
Year ended December31, 2017 |
|
|
|
£'000s |
|
£'000s |
Research and
development costs |
|
|
(4,522 |
) |
|
(23,717 |
) |
General and
administrative costs |
|
|
(2,498 |
) |
|
(6,039 |
) |
Operating
loss |
7 |
|
(7,020 |
) |
|
(29,756 |
) |
Finance income |
9 |
|
1,841 |
|
|
7,018 |
|
Finance expense |
9 |
|
(794 |
) |
|
(2,465 |
) |
Loss before
taxation |
|
|
(5,973 |
) |
|
(25,203 |
) |
Taxation —
credit |
10 |
|
954 |
|
|
4,706 |
|
Loss for the
year |
|
|
(5,019 |
) |
|
(20,497 |
) |
Other
comprehensive income / (loss): |
|
|
|
|
|
Items that
might be subsequently reclassified to profit or loss |
|
|
|
|
|
Exchange differences on
translating foreign operations |
|
|
43 |
|
|
(29 |
) |
Total
comprehensive loss attributable to owners of the
Company |
|
|
(4,976 |
) |
|
(20,526 |
) |
Loss per ordinary
share — basic and diluted (pence) |
5 |
|
(15.0 |
) |
|
(23.4 |
) |
|
|
|
|
|
|
|
|
The accompanying notes form an integral part of these
consolidated financial statements.
|
|
|
|
|
|
|
|
|
|
|
|
VERONA PHARMA PLCCONSOLIDATED STATEMENT OF
FINANCIAL POSITIONAS OF DECEMBER 31,
2017 |
|
|
|
|
|
|
|
|
Notes |
|
As of December31, 2016 |
|
As of December31, 2017 |
|
|
|
£'000s |
|
£'000s |
ASSETS |
|
|
|
|
|
Non-current
assets: |
|
|
|
|
|
Goodwill |
11 |
|
441 |
|
|
441 |
|
Intangible assets |
12 |
|
1,877 |
|
|
1,969 |
|
Property, plant and
equipment |
13 |
|
14 |
|
|
16 |
|
Total
non-current assets |
|
|
2,332 |
|
|
2,426 |
|
|
|
|
|
|
|
Current
assets: |
|
|
|
|
|
Prepayments and other
receivables |
14 |
|
2,959 |
|
|
1,810 |
|
Current tax
receivable |
|
|
1,067 |
|
|
5,006 |
|
Short term
investments |
3 |
|
— |
|
|
48,819 |
|
Cash and cash
equivalents |
|
|
39,785 |
|
|
31,443 |
|
Total current
assets |
|
|
43,811 |
|
|
87,078 |
|
Total
assets |
|
|
46,143 |
|
|
89,504 |
|
|
|
|
|
|
|
EQUITY AND
LIABILITIES |
|
|
|
|
|
Capital and
reserves attributable to equity holders: |
|
|
|
|
|
Share capital |
16 |
|
2,568 |
|
|
5,251 |
|
Share premium |
|
|
58,526 |
|
|
118,862 |
|
Share-based payment
reserve |
|
|
2,103 |
|
|
5,022 |
|
Accumulated loss |
|
|
(28,728 |
) |
|
(49,254 |
) |
Total
equity |
|
|
34,469 |
|
|
79,881 |
|
|
|
|
|
|
|
Current
liabilities: |
|
|
|
|
|
Derivative financial
instrument |
20 |
|
7,923 |
|
|
1,273 |
|
Trade and other
payables |
18 |
|
2,823 |
|
|
7,154 |
|
Tax payable—U.S.
Operations |
|
|
126 |
|
|
169 |
|
Total current
liabilities |
|
|
10,872 |
|
|
8,596 |
|
|
|
|
|
|
|
Non-current
liabilities: |
|
|
|
|
|
Assumed contingent
obligation |
19 |
|
802 |
|
|
875 |
|
Deferred income |
|
|
— |
|
|
152 |
|
Total
non-current liabilities |
|
|
802 |
|
|
1,027 |
|
Total equity
and liabilities |
|
|
46,143 |
|
|
89,504 |
|
|
|
|
|
|
|
|
|
The financial statements were approved by the Company's board of
directors on February 27, 2018 and signed on its behalf
by Dr. Jan-Anders Karlsson, Chief Executive Officer of the
Company. The accompanying notes form an integral part of these
consolidated financial statements.
Dr. Jan-Anders KarlssonChief Executive Officer of the Company.
Company number: 05375156
|
|
|
|
|
|
|
|
|
|
|
|
VERONA PHARMA PLCCOMPANY STATEMENT OF
FINANCIAL POSITIONAS OF DECEMBER 31,
2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes |
|
As of December 31,2016 |
|
As of December 31,2017 |
|
|
|
£'000s |
|
£'000s |
ASSETS |
|
|
|
|
|
Non-current
assets: |
|
|
|
|
|
Goodwill |
11 |
|
441 |
|
|
441 |
|
Intangible assets |
12 |
|
1,877 |
|
|
1,969 |
|
Property, plant and
equipment |
13 |
|
14 |
|
|
16 |
|
Investments |
15 |
|
243 |
|
|
877 |
|
Total
non-current assets |
|
|
2,575 |
|
|
3,303 |
|
|
|
|
|
|
|
Current
assets: |
|
|
|
|
|
Prepayments and other
receivables |
14 |
|
2,953 |
|
|
1,970 |
|
Current tax
receivable |
|
|
1,067 |
|
|
5,006 |
|
Short term
investments |
3 |
|
— |
|
|
48,819 |
|
Cash and cash
equivalents |
|
|
39,734 |
|
|
31,313 |
|
Total current
assets |
|
|
43,754 |
|
|
87,108 |
|
Total
assets |
|
|
46,329 |
|
|
90,411 |
|
|
|
|
|
|
|
EQUITY AND
LIABILITIES |
|
|
|
|
|
Capital and
reserves attributable to equity holders: |
|
|
|
|
|
Share capital |
16 |
|
2,568 |
|
|
5,251 |
|
Share premium |
|
|
58,526 |
|
|
118,862 |
|
Share-based payment
reserve |
|
|
2,103 |
|
|
5,022 |
|
Accumulated loss |
|
|
(28,743 |
) |
|
(49,084 |
) |
Total
equity |
|
|
34,454 |
|
|
80,051 |
|
|
|
|
|
|
|
Current
liabilities: |
|
|
|
|
|
Derivative financial
instrument |
20 |
|
7,923 |
|
|
1,273 |
|
Trade and other
payables |
18 |
|
3,150 |
|
|
8,060 |
|
Total current
liabilities |
|
|
11,073 |
|
|
9,333 |
|
|
|
|
|
|
|
Non-current
liabilities: |
|
|
|
|
|
Assumed contingent
obligation |
19 |
|
802 |
|
|
875 |
|
Deferred income |
|
|
— |
|
|
152 |
|
Total
non-current liabilities |
|
|
802 |
|
|
1,027 |
|
Total equity
and liabilities |
|
|
46,329 |
|
|
90,411 |
|
The Parent Company 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 £20.3m (2016: loss of £5.0m), which has been included in
the Group’s income statement.
The financial statements on were approved by the Company's board
of directors on February 27, 2018 and signed on its
behalf by Dr. Jan-Anders Karlsson, Chief Executive Officer of
the Company.
Dr. Jan-Anders KarlssonChief Executive Officer of the
Company.Company number: 05375156
|
|
|
|
|
|
|
|
VERONA PHARMA PLCCONSOLIDATED STATEMENT OF
CASH FLOWSFOR THE YEAR ENDED DECEMBER 31,
2017 |
|
|
|
|
|
|
|
|
|
Year ended December31, 2016 |
|
Year ended December31, 2017 |
|
£'000s |
|
£'000s |
Cash used in
operating activities: |
|
|
|
Loss before
taxation |
(5,973 |
) |
|
(25,203 |
) |
Finance income |
(1,841 |
) |
|
(7,018 |
) |
Finance expense |
794 |
|
|
2,465 |
|
Share-based payment
charge |
577 |
|
|
2,919 |
|
Increase in prepayments
and other receivables |
(1,809 |
) |
|
(161 |
) |
Increase in trade and
other payables |
1,068 |
|
|
5,363 |
|
Depreciation of
property, plant and equipment |
10 |
|
|
7 |
|
Loss on disposal of
property, plant and equipment |
3 |
|
|
— |
|
Amortization of
intangible assets |
52 |
|
|
116 |
|
Cash used in operating
activities |
(7,119 |
) |
|
(21,512 |
) |
Cash inflow from
taxation |
1,533 |
|
|
816 |
|
Net cash used
in operating activities |
(5,586 |
) |
|
(20,696 |
) |
Cash flow from
investing activities: |
|
|
|
Interest received |
87 |
|
|
128 |
|
Purchase of plant and
equipment |
(13 |
) |
|
(9 |
) |
Payment for patents and
computer software |
(115 |
) |
|
(208 |
) |
Transfer to short term
investments |
— |
|
|
(54,465 |
) |
Maturity of short term
investments |
— |
|
|
5,085 |
|
Net cash used
in investing activities |
(41 |
) |
|
(49,469 |
) |
Cash flow from
financing activities: |
|
|
|
Gross proceeds from
issue of shares and warrants |
44,750 |
|
|
— |
|
Gross proceeds from the
April 2017 Global Offering |
— |
|
|
70,032 |
|
Transaction costs on
issue of shares and warrants |
(2,910 |
) |
|
— |
|
Transaction costs on
April 2017 Global Offering |
(636 |
) |
|
(6,786 |
) |
Net cash
generated from financing activities |
41,204 |
|
|
63,246 |
|
Net increase /
(decrease) in cash and cash equivalents |
35,577 |
|
|
(6,919 |
) |
Cash and cash
equivalents at the beginning of the year |
3,524 |
|
|
39,785 |
|
Effect of exchange
rates on cash and cash equivalents |
684 |
|
|
(1,423 |
) |
Cash and cash
equivalents at the end of the period |
39,785 |
|
|
31,443 |
|
|
|
|
|
|
|
The accompanying notes form an integral part of these
consolidated financial statements.
|
|
|
|
|
|
|
|
VERONA PHARMA PLCCOMPANY STATEMENT OF CASH
FLOWSFOR THE YEAR ENDED DECEMBER 31,
2017 |
|
|
|
|
|
|
|
|
|
Year ended December 31,2016 |
|
Year ended December 31,2017 |
|
£'000s |
|
£'000s |
Cash used in
operating activities: |
|
|
|
Loss before
taxation |
(6,048 |
) |
|
(25,357 |
) |
Finance income |
(1,841 |
) |
|
(7,018 |
) |
Finance expense |
794 |
|
|
2,465 |
|
Share-based payment
charge |
414 |
|
|
2,285 |
|
Increase in prepayments
and other receivables |
(1,803 |
) |
|
(327 |
) |
Increase in trade and
other payables |
1,231 |
|
|
5,953 |
|
Depreciation of
property, plant and equipment |
10 |
|
|
7 |
|
Loss on disposal of
property, plant and equipment |
3 |
|
|
— |
|
Amortization of
intangible assets |
52 |
|
|
116 |
|
Cash used in operating
activities |
(7,188 |
) |
|
(21,876 |
) |
Cash inflow from
taxation |
1,551 |
|
|
1,078 |
|
Net cash used
in operating activities |
(5,637 |
) |
|
(20,798 |
) |
Cash flow from
investing activities: |
|
|
|
Interest received |
87 |
|
|
151 |
|
Purchase of plant and
equipment |
(13 |
) |
|
(9 |
) |
Payment for patents and
computer software |
(115 |
) |
|
(208 |
) |
Transfer to short term
investments |
— |
|
|
(54,465 |
) |
Maturity of short term
investments |
— |
|
|
5,085 |
|
Net cash used
in investing activities |
(41 |
) |
|
(49,446 |
) |
Cash flow from
financing activities: |
|
|
|
Gross proceeds from
issue of shares and warrants |
44,750 |
|
|
— |
|
Gross proceeds from the
April 2017 Global Offering |
— |
|
|
70,032 |
|
Transaction costs on
issue of shares and warrants |
(2,910 |
) |
|
— |
|
Transaction costs on
April 2017 Global Offering |
(636 |
) |
|
(6,786 |
) |
Net cash
generated from financing activities |
41,204 |
|
|
63,246 |
|
Net increase /
(decrease) in cash and cash equivalents |
35,526 |
|
|
(6,998 |
) |
Cash and cash
equivalents at the beginning of the year |
3,523 |
|
|
39,734 |
|
Effect of exchange
rates on cash and cash equivalents |
685 |
|
|
(1,423 |
) |
Cash and cash
equivalents at the end of the period |
39,734 |
|
|
31,313 |
|
The accompanying notes form an integral part of these
consolidated financial statements.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
VERONA PHARMA PLCCONSOLIDATED STATEMENT OF
CHANGES IN EQUITYFOR THE YEAR ENDED DECEMBER 31,
2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share Capital |
|
Share Premium |
|
Share-based Expenses |
|
Total AccumulatedLosses |
|
Total Equity |
|
£'000s |
|
£'000s |
|
£'000s |
|
£'000s |
|
£'000s |
Balance at
January 1, 2016 |
1,010 |
|
|
26,650 |
|
|
1,526 |
|
|
(23,752 |
) |
|
5,434 |
|
Loss for the year |
— |
|
|
— |
|
|
— |
|
|
(5,019 |
) |
|
(5,019 |
) |
Other comprehensive
income for the year: |
|
|
|
|
|
|
|
|
|
Exchange differences on
translating foreign operations |
— |
|
|
— |
|
|
— |
|
|
43 |
|
|
43 |
|
Total comprehensive
loss for the period |
— |
|
|
— |
|
|
— |
|
|
(4,976 |
) |
|
(4,976 |
) |
New share capital
issued |
1,556 |
|
|
34,151 |
|
|
— |
|
|
— |
|
|
35,707 |
|
Transaction costs on
share capital issued |
— |
|
|
(2,325 |
) |
|
— |
|
|
— |
|
|
(2,325 |
) |
Share options exercised
during the period |
2 |
|
|
50 |
|
|
— |
|
|
— |
|
|
52 |
|
Share-based
payments |
— |
|
|
— |
|
|
577 |
|
|
— |
|
|
577 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at
December 31, 2016 |
2,568 |
|
|
58,526 |
|
|
2,103 |
|
|
(28,728 |
) |
|
34,469 |
|
Balance at
January 1, 2017 |
2,568 |
|
|
58,526 |
|
|
2,103 |
|
|
(28,728 |
) |
|
34,469 |
|
Loss for the year |
— |
|
|
— |
|
|
— |
|
|
(20,497 |
) |
|
(20,497 |
) |
Other comprehensive
loss for the year: |
|
|
|
|
|
|
|
|
|
Exchange differences on
translating foreign operations |
— |
|
|
— |
|
|
— |
|
|
(29 |
) |
|
(29 |
) |
Total comprehensive
loss for the period |
— |
|
|
— |
|
|
— |
|
|
(20,526 |
) |
|
(20,526 |
) |
New share capital
issued |
2,677 |
|
|
67,648 |
|
|
— |
|
|
— |
|
|
70,325 |
|
Transaction costs on
share capital issued |
— |
|
|
(7,453 |
) |
|
— |
|
|
— |
|
|
(7,453 |
) |
Share options exercised
during the period |
6 |
|
|
141 |
|
|
— |
|
|
— |
|
|
147 |
|
Share-based
payments |
— |
|
|
— |
|
|
2,919 |
|
|
— |
|
|
2,919 |
|
Balance at
December 31, 2017 |
5,251 |
|
|
118,862 |
|
|
5,022 |
|
|
(49,254 |
) |
|
79,881 |
|
The currency translation reserve for 2016 and 2017 is not
considered material and as such is not presented in a separate
reserve but is included in the total accumulated losses
reserve.
The accompanying notes form an integral part of these
consolidated financial statements.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
VERONA PHARMA PLCCOMPANY STATEMENT OF
CHANGES IN EQUITYFOR THE YEAR ENDED DECEMBER 31,
2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share Capital |
|
Share Premium |
|
Share-based Expenses |
|
Total AccumulatedLosses |
|
Total Equity |
|
£'000s |
|
£'000s |
|
£'000s |
|
£'000s |
|
£'000s |
Balance at
January 1, 2016 |
1,010 |
|
|
|
26,650 |
|
|
|
1,526 |
|
|
|
(23,779 |
) |
|
|
5,407 |
|
Loss for the year |
— |
|
|
— |
|
|
— |
|
|
(4,964 |
) |
|
(4,964 |
) |
Other comprehensive
income for the year: |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Total comprehensive
loss for the period |
— |
|
|
— |
|
|
|
— |
|
|
|
(4,964 |
) |
|
(4,964 |
) |
New share capital
issued |
1,556 |
|
|
34,151 |
|
|
|
— |
|
|
|
— |
|
|
35,707 |
|
Transaction costs on
share capital issued |
— |
|
|
(2,325 |
) |
|
|
— |
|
|
|
— |
|
|
(2,325 |
) |
Share options exercised
during the period |
2 |
|
|
50 |
|
|
|
— |
|
|
|
— |
|
|
52 |
|
Share-based payments
recognized as an expense |
— |
|
|
— |
|
|
|
414 |
|
|
|
— |
|
|
414 |
|
Share-based payments
recognized as an investment |
— |
|
|
— |
|
|
163 |
|
|
— |
|
|
163 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at
December 31, 2016 |
2,568 |
|
|
58,526 |
|
|
|
2,103 |
|
|
|
(28,743 |
) |
|
34,454 |
|
Balance at
January 1, 2017 |
2,568 |
|
|
58,526 |
|
|
|
2,103 |
|
|
|
(28,743 |
) |
|
34,454 |
|
Loss for the year |
— |
|
|
— |
|
|
— |
|
|
(20,341 |
) |
|
(20,341 |
) |
Other comprehensive
income for the year: |
|
|
|
|
|
|
|
|
|
Total comprehensive
loss for the period |
— |
|
|
— |
|
|
— |
|
|
(20,341 |
) |
|
(20,341 |
) |
New share capital
issued |
2,677 |
|
|
67,648 |
|
|
— |
|
|
— |
|
|
70,325 |
|
Transaction costs on
share capital issued |
— |
|
|
(7,453 |
) |
|
— |
|
|
— |
|
|
(7,453 |
) |
Share options exercised
during the period |
6 |
|
|
141 |
|
|
— |
|
|
— |
|
|
147 |
|
Share-based payments
recognized as an expense |
— |
|
|
— |
|
|
2,285 |
|
|
— |
|
|
2,285 |
|
Share-based payments
recognized as an investment |
— |
|
|
— |
|
|
634 |
|
|
— |
|
|
634 |
|
Balance at
December 31, 2017 |
5,251 |
|
|
118,862 |
|
|
5,022 |
|
|
(49,084 |
) |
|
80,051 |
|
The accompanying notes form an integral part of these
consolidated financial statements.
VERONA PHARMA PLCNOTES TO THE
FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER
31, 2017
1. General information
Verona Pharma plc (the "Company") and its subsidiaries
(together, the "Group") are a clinical-stage biopharmaceutical
group focused on developing and commercializing innovative
therapeutics for the treatment of respiratory diseases with
significant unmet medical needs.
The Company is a public limited company, which is dual listed on
the Alternative Investment Market of the London Stock Exchange and
on April 27, 2017, American Depositary Shares began trading on
NASDAQ Global Market. The company is incorporated and domiciled in
the United Kingdom. The address of the registered office is 1
Central Square, Cardiff, CF10 1FS, United Kingdom.
The Company has two subsidiaries, Verona Pharma, Inc. and
Rhinopharma Limited ("Rhinopharma"), both of which are wholly
owned.
On February 10, 2017 the Company effected a 50-for-1
consolidation of its shares. All references to ordinary shares,
options and warrants, as well as share, per share and related
information in these consolidated financial statements have been
adjusted to reflect the consolidation as if it had occurred at the
beginning of the earliest period presented.
On April 26, 2017, the Company announced the closing of its
global offering of an aggregate of 47,399,001 new ordinary shares,
consisting of the initial public offering in the United States of
5,768,000 American Depositary Shares (“ADSs”) at a price of $13.50
per ADS and the private placement in Europe of 1,255,001 ordinary
shares at a price of £1.32 per ordinary share, for gross proceeds
of $80 million (the “Global Offering”). Each ADS offered represents
eight ordinary shares of the Company. The ordinary shares offered
were allotted and issued in a concurrent private placement in
Europe and other countries outside of the United States and
Canada.
In addition, the Chairman of Verona Pharma’s board of directors,
Dr David Ebsworth, and an existing shareholder agreed to subscribe
for 254,099 new ordinary shares at a price of £1.32 per ordinary
share in a shareholder private placement separate from the Global
Offering (the “Shareholder Private Placement”), contingent on and
concurrent with the Global Offering and generating additional gross
proceeds of £0.3 million.
On May 15 and May 23, 2017, pursuant to the Global
Offering, the underwriters purchased an additional 733,738 ADSs,
representing 5,869,904 ordinary shares, at a price of $13.50 per
ADS, for additional gross proceeds of $9.9 million bringing the
total gross proceeds in the Global Offering to $89.9 million (£70.0
million). Including the Shareholder Private Placement, the total
gross proceeds of the capital raising amounted to $90.3 million
(£70.3 million).
The ADSs began trading on the NASDAQ Global Market under the
ticker symbol “VRNA” on April 27, 2017. Verona Pharma’s
ordinary shares continue to trade on the AIM market of the London
Stock Exchange (“AIM”) under the symbol “VRP”.
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 the Group and the
financial statements of the Company have been prepared in
accordance with International Financial Reporting Standards
("IFRSs") as issued 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, with the exception of derivative financial instruments
which have been measured at fair value.
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 and Company’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 4.
Going concern
During the year ended December 31, 2017, the Group had a loss of
£20.5 million (2016: £5.0 million). As of December 31, 2017,
the Group had net assets of £79.9 million (2016: £34.5 million) of
which £80.3 million (2016: £39.8 million) was cash and cash
equivalents and short term investments.
The operation of the Group is currently being financed from
funds that the Company raised from share placings. On May 2nd,
2017, the company raised $89.9 million (£70 million) from the
initial public offering in the United States. On July 29,
2016, the Company raised gross proceeds of £44.7 million from a
placing, subscription and open offer (the "July 2016 Placement").
These funds are expected to be used primarily to support the
development of RPL554 in chronic obstructive pulmonary disease
("COPD"), other chronic respiratory diseases as well as corporate
and general administrative expenditures.
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
commitments for at least 12 months from the end of the
reporting period and, accordingly, are satisfied that the going
concern basis remains appropriate for the preparation of these
consolidated financial statements.
Business combination
The Group applies the acquisition method to account for business
combinations. The consideration transferred for the acquisition of
a subsidiary is the fair value of the assets transferred, the
liabilities incurred to the former owners of the acquiree and the
equity interests issued by the Group. The consideration transferred
includes the fair value of any asset or liability resulting from a
contingent consideration arrangement and the fair value of any
pre-existing equity interest in the subsidiary. 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 capitalized and is subject to
an impairment review, both annually and when there are
indications that the carrying value may not be recoverable.
Identifiable assets acquired and liabilities and contingent
liabilities assumed in a business combination are measured
initially at their fair values at the acquisition date.
Acquisition-related costs are expensed as incurred and included in
administrative expenses.
Basis of consolidation
These consolidated financial statements include the accounts of
Verona Pharma plc and its wholly owned subsidiaries Verona
Pharma, Inc. and Rhinopharma. The acquisition method of
accounting was used to account for the acquisition of
Rhinopharma.
Inter-company transactions, balances and unrealized gains on
transactions between Group companies are eliminated.
Verona Pharma Inc. and Rhinopharma adopt the same
accounting policies as the Company.
2.2 Foreign currency translation
Items included in the Group's consolidated financial statements
are measured using the currency of the primary economic environment
in which the Entity operates ("the functional currency"). The
consolidated financial statements are presented in pounds sterling
("£"), 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 Consolidated
Statement of Comprehensive Income. Non-monetary items that are
measured in terms of historical cost in a foreign currency are
translated using the exchange rates 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 pounds 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 exchange differences arising on
translation for consolidation are recognized in Other Comprehensive
Income.
2.3 Cash and cash equivalents
Cash and cash equivalents includes cash in hand, deposits held
at call with banks and other short-term highly liquid investments
with original maturities of three months or less.
2.4 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 consolidated
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 realized or the deferred liability is
settled.
Deferred tax assets are recognized to the extent that it is
probable that the future taxable profit will be available against
which the temporary differences can be utilized.
2.5 Research and development costs
Capitalization 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
capitalized to date, given the early stage of the Group's product
candidate development.
Expenditure on research and development activities that do not
meet the above criteria is charged to the Consolidated Statement of
Comprehensive Income as incurred.
2.6 Property, 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 |
Office equipment |
|
|
|
|
|
|
|
5 years |
|
|
|
|
|
|
|
|
|
2.7 Intangible assets and goodwill
(a) Goodwill
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 capitalized and amortized on a
straight-line basis over the estimated useful lives of the patents
of ten years.
(c) Computer software
Amortization is calculated so as to write off the cost less
estimated residual values, on a straight-line basis over the
expected useful economic life of two years.
(d) In-process research & development
("IPR&D")
IP R&D assets acquired through business combinations which,
at the time of acquisition, have not reached technical feasibility
are recognized at fair value. The amounts are capitalized and are
not amortized but are subject to impairment testing until
completion, abandonment of the projects or when the research
findings are commercialized through a revenue generating project.
The Group determines whether intangible assets (including goodwill)
are impaired on an annual basis and this requires the estimation of
the higher of fair value less costs of disposal and value in use.
Upon successful completion or commercialization of the relevant
project, IP R&D will be reclassified to developed technology.
The Group will make a determination as to the then useful life of
the developed technology, generally determined by the period in
which the substantial majority of the cash flows are expected to be
generated, and begin amortization. In case of abandonment the asset
will be impaired.
2.8 Impairment of intangible assets, goodwill and
non-financial assets
Goodwill and intangible assets that have an indefinite useful
life and intangible assets not ready to use are not subject to
amortization. These assets are tested annually for impairment or
more frequently if impairment indicators exist. Non-financial
assets that are subject to amortization are reviewed for impairment
whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable. An impairment loss is
recognized 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.
For the purpose of assessing impairment, assets are grouped at
the lowest levels for which there are separately identifiable cash
flows, which are largely independent of the cash flows from other
assets or group of assets (cash generating units "CGUs").
Goodwill is allocated to CGUs for the purpose of impairment
testing. The allocation is made to those CGUs or groups of CGUs
that are expected to benefit from the business combination in which
the goodwill arose. The units or group of units are identified at
the lowest level at which goodwill is monitored for internal
management purposes, being the operating segments.
The Group is a single cash generating unit. Goodwill that arose
on the acquisition of Rhinopharma has been thus allocated to this
single CGU. IP R&D is tested for impairment at this level as
well, since it is the lowest level at which independent cash flows
can be identified.
Non-financial assets, other than goodwill, that have been
previously impaired are reviewed for possible reversal of the
impairment at each subsequent reporting date.
2.9 Employee Benefits
(a) Pension
The Group operates a defined contribution pension scheme for UK
employees. Contributions payable for the year are charged to the
Consolidated Statement of Comprehensive Income. The contributions
are recognized as employee benefit expense when they are due.
Differences between contributions payable in the year and
contributions actually paid are shown as either accruals or
prepayments in the Consolidated Statement of Financial Position.
The Group has no further payment obligation once the contributions
have been paid.
(b) Bonus plans
The Company recognizes a liability and an expense for bonus
plans if contractually obligated or if there is a past practice
that has created a constructive obligation.
2.10 Share-based payments
The Group operates a number of equity-settled, share-based
compensation schemes. 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.
Where equity settled transactions are entered into with third
party service providers, fair value is determined by reference to
the value of the services provided in lieu of payment. The expense
is measured based on the services received at the date of receipt
of those services and is charged to the Consolidated Statement of
Comprehensive Income over the period for which the services are
received and a corresponding credit is made to reserves. For other
equity-settled transactions fair value is determined using the
Black-Scholes model and requires several assumptions and estimates
as disclosed in note 17.
2.11 Provisions
Provisions are recognized when the Group has a present legal or
constructive obligation as a result of past events, it is probable
that an outflow of resources will be required to settle the
obligation, and the amount can be reliably estimated. Provisions
are measured at the present value of the expenditures expected to
be required to settle the obligation using a pre-tax rate that
reflects current market assessments of the time value of money and
the risks specific to the obligation.
2.12 Assumed contingent obligation related to the
business combinations
On September 19, 2006, the Group acquired Rhinopharma for a
total consideration of £1.52 million payable in ordinary shares. In
addition, the Group assumed certain contingent obligations owed by
Rhinopharma to Vernalis under an assignment and license agreement
(the "assumed contingent consideration") following the sale of IP
by Vernalis to Rhinopharma. Pursuant to the agreement Vernalis
(i) assigned to the Company all of its rights to certain
patents and patent applications relating to RPL554 and related
compounds (the "Vernalis Patents") and (ii) granted to the
Company an exclusive, worldwide, royalty-bearing license under
certain Vernalis know-how to develop, manufacture and commercialize
products (the "Licensed Products") developed using Vernalis
Patents, Vernalis know-how and the physical stock of certain
compounds.
The assumed contingent obligation comprises (a) a milestone
payment on obtaining the first approval of any regulatory authority
for the commercialization of a Licensed Product; (b) low to mid
single digit royalties based on the future sales performance of all
Licensed Products; and (c) a portion equal to a mid twenty percent
of any consideration received from any sub-licensees for the
Vernalis Patents and for Vernalis know-how. On the date of
acquisition, the fair value of the assumed contingent obligation
was estimated as the expected value of the milestone payment,
royalty payments and sub-license payments, based on an assessment
of the probability of success using standard market probabilities
for respiratory drug development. The risk-weighted value of the
assumed contingent arrangement was then discounted back to its net
present value applying an effective interest rate of 12%. The
initial fair value of the assumed contingent obligation as of
December 31, 2006 was deemed to be insignificant at the date of the
acquisition, so it was not recorded.
The amount of royalties payable under the agreement is based on
the future sales performance of certain products, and so the total
amount payable is unlimited. The level of sales that may be
achieved under the agreement is difficult to predict and
subject to estimate, which is inherently uncertain. The value of
this assumed contingent obligation is measured at amortized cost
using the effective interest rate method, and is re-measured for
changes in estimated cash flows, when the probability of success
changes. The assumed contingent obligation is accounted for as a
liability, and any adjustments made to the value of the liability
will be recognized in the Consolidated Statement of Comprehensive
Income for the period.
2.13 Government and other grants
The Group may receive government, regional or charitable grants
to support its research efforts in defined projects where these
grants provide for reimbursement of approved costs incurred as
defined in the respective grants. Income in respect of such grants
would include contributions towards the costs of research and
development. Income would be recognized when costs under each grant
are incurred in accordance with the terms and conditions of the
grant and the collectability of the receivable is reasonably
assured. Government, regional and charitable grants relating to
costs would be deferred and recognized in the Consolidated
Statement of Comprehensive Income over the period necessary to
match them with the costs they are intended to compensate. When the
cash in relation to recognized government, regional or charitable
grants is not yet received the amount is included as a receivable
on the Consolidated Statement of Financial Position.
Where the grant income is directly related to the specific items
of expenditure incurred, the income would be netted against such
expenditure. Where the grant income is not a specific reimbursement
of expenditure incurred, the Group would include such income under
"Other income" in the Consolidated Statement of Comprehensive
Income. Grants or investment credits may be repayable if the Group
successfully commercializes a relevant program that was funded in
whole or in part by the grant or investment credit within a
particular timeframe. Prior to successful commercialization, the
Group would not make any provision for repayment.
2.14 Financial instruments — initial
recognition and subsequent measurement
The Company classifies a financial instrument, or its component
parts, as a financial liability, a financial asset or an equity
instrument in accordance with the substance of the contractual
arrangement and the definitions of a financial liability, a
financial asset and an equity instrument.
The Company evaluates the terms of the financial instrument to
determine whether it contains an asset, a liability or an equity
component. Such components shall be classified separately as
financial assets, financial liabilities or equity instruments.
A financial instrument is any contract that gives rise to a
financial asset of one entity and a financial liability or equity
instrument of another entity.
(a) Financial assets, initial recognition and
measurement and subsequent measurement
All financial assets not recorded at fair value through profit
or loss, such as receivables and deposits, are recognized initially
at fair value plus transaction costs. Financial assets carried at
fair value through profit or loss are initially recognized at fair
value, and transaction costs are expensed in the income
statement.
The measurement of financial assets depends on their
classification. Financial assets such as receivables and
deposits are subsequently measured at amortized cost. The Company
does not hold any financial assets at fair value through profit or
loss or available for sale financial assets.
(b) Financial liabilities, initial recognition and
measurement and subsequent measurement
Financial liabilities are classified, at initial recognition, as
financial liabilities at fair value through profit or loss, loans
and borrowings, or payables, as appropriate. All financial
liabilities are recognized initially at fair value and, in the case
of loans and borrowings and payables, net of directly attributable
transaction costs.
The measurement of financial assets and financial liabilities
depends on their classification. Financial liabilities at fair
value through profit or loss include financial liabilities held for
trading and financial liabilities designated upon initial
recognition as at fair value through profit or loss. These are
subsequently measured at fair value with any gains or losses
recognized in profit or loss. All other financial liabilities are
measured at amortized cost using the effective interest method.
The Company's financial liabilities include trade and other
payables and derivative financial instruments.
(c) Derivative financial instruments
Derivatives are initially recognized at fair value on the date a
derivative contract is entered into and are subsequently
re-measured at fair value at the end of each reporting date. The
Company holds only one type of derivative financial instrument, the
warrants, as explained in Note 2.15.
The full fair value of the derivative is classified as a
non-current liability when the warrants are exercisable in more
than 12 months and as a current liability when the warrants
are exercisable in less than 12 months.
Changes in fair value of a derivative financial liability when
related to a financing arrangement are recognized in the
Consolidated Statement of Comprehensive Income within Finance
income or Finance expense. Fair value gains or losses on
derivatives used for non-financing arrangements are recognized in
other operating income or expense.
2.15 Warrants
Warrants issued by the Company to investors as part of a share
subscription are compound financial instruments where the warrant
meets the definition of a financial liability.
The financial liability component is initially measured at fair
value in the Consolidated Statement of Financial Position. Equity
is measured at the residual between the subscription price for the
entire instrument and the liability component. The financial
liability component is remeasured depending on its classification.
Equity is not remeasured.
2.16 Short Term Investments
Short term investments include fixed term deposits held at banks
with original maturities of more than three months but less than a
year. They are classified as loans and receivables and are measured
at amortized cost using the effective interest method.
2.17 Transaction costs
Qualifying transaction costs might be incurred in anticipation
of an issuance of equity instruments and may cross reporting
periods. The entity defers these costs on the balance sheet until
the equity instrument is recognized. Deferred costs are
subsequently reclassified as a deduction from equity when the
equity instruments are recognized, as the costs are directly
attributable to the equity transaction. If the equity instruments
are not subsequently issued, the transaction costs are expensed.
Any costs not directly attributable to the equity transaction are
expensed.
Transaction costs that relate to the issue of a compound
financial instrument are allocated to the liability and equity
components of the instrument in proportion to the allocation of
proceeds. Where the liability component is held at fair value
through profit or loss, the transaction costs are expensed to the
Consolidated Statement of Comprehensive Income. For liabilities
held at amortized cost, transaction costs are deducted from the
liability and subsequently amortized. The amount of transaction
costs accounted for as a deduction from equity in the period is
disclosed separately in accordance with IAS 1.
2.18 Investments in subsidiaries
Investments in subsidiaries are shown at cost less any provision
for impairment.
2.19 New standards, amendments and interpretations
adopted by the Group
The following amendments have been adopted by the Group for the
first time for the financial year beginning on or after 1 January,
2017. It did not materially impact the Group’s results:
- Annual Improvements to IFRS Standards 2014-2016 Cycle,
- Disclosure initiative - amendments to IAS 7, and
- Recognition of Deferred Tax Assets for Unrealized Losses -
Amendments to IAS 12.
The amendments to IAS 7 require disclosure of changes in
liabilities arising from financing activities, see note 3.3.
2.20 New standards, amendments and interpretations
issued but not effective for the financial year beginning
January 1, 2017 and not early adopted
A number of new standards and amendments to standards and
interpretations have been issued but are not yet effective for
annual periods beginning after January 1, 2017 (noted below),
and have not been adopted in preparing these consolidated financial
statements.
- IFRS 9 "Financial instruments" (effective for annual
periods beginning on or after January 1, 2018)
- IFRS 15 "Revenue from contracts with customers" (effective
for annual periods beginning on or after January 1, 2018)
- IFRS 16 "Leases" (effective for annual periods beginning
on or after January 1, 2019)
IFRS 9 will have no material impact on the accounting or
measurement of any of the financial instruments the group or
company currently holds.
IFRS 15 will have no impact on the financial statements of
the Group or company as they are not currently revenue
generating.
IFRS 16 is effective for accounting periods beginning on or
after 1 January 2019 and will replace IAS 17 'leases'. It will
eliminate the classification of leases as either operating leases
or finance leases and, instead, introduce a single lessee
accounting model. The adoption of IFRS 16 will result in the Group
and Company recognizing lease liabilities and corresponding 'right
to use' assets for agreements that are currently classified as
operating leases. See note 21 for further details on operating
leases held.
3. Financial Instruments
3.1 Financial Risk Factors
The Company's activities have exposed it to a variety of
financial risks: market risk (including currency risk and interest
rate risk), credit risk, and liquidity risk. The Company's overall
risk management program is focused on preservation of capital and
the unpredictability of financial markets and has sought to
minimize potential adverse effects on the Company's financial
performance and position.
(a) 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.
The summary quantitative date about the Group's exposure to
currency risk is as follows. Figures are the sterling values of
balances in each currency:
|
|
|
|
|
|
|
|
|
Year Ended December31, 2016 |
|
|
|
Year Ended December31, 2017 |
|
|
USD |
|
EUR |
|
|
|
USD |
|
EUR |
|
|
£'000s |
|
£'000s |
|
|
|
£'000s |
|
£'000s |
Cash and cash
equivalents |
|
10,631 |
|
|
242 |
|
|
|
|
16,806 |
|
|
301 |
|
Short term
Investments |
|
— |
|
|
— |
|
|
|
|
19,718 |
|
|
— |
|
Trade and other
payables |
|
305 |
|
|
180 |
|
|
|
|
276 |
|
|
403 |
|
Sensitivity Analysis
A reasonably possible strengthening (weakening) of the Euro, US
dollar, or Sterling against all other currencies at 31 December
would have affected the measurement of the financial instruments
denominated in a foreign currency and affected equity and profit
and loss by the amounts shown below. This analysis assumes that all
other variables remain constant.
|
|
|
|
|
Profit or loss and equity |
|
Strengthening |
|
Weakening |
December 31,
2017 |
£'000s |
|
£'000s |
EUR (5% movement) |
35 |
|
|
(35 |
) |
USD (5% Movement) |
1,840 |
|
|
(1,840 |
) |
December 31,
2016 |
£'000s |
|
£'000s |
EUR (5% movement) |
21 |
|
|
(21 |
) |
USD (5% Movement) |
547 |
|
|
(547 |
) |
Foreign currency denominated trade payables are short term in
nature (generally 30 to 45 days). The Group has a U.S. operation,
the net assets of which are exposed to foreign currency translation
risk.
(b) Credit risk
Credit risk reflects the risk that the Group may be unable to
recover contractual receivables. As the Group is still in the
development stage no policies are currently required to mitigate
this risk.
For banks and financial institutions, only independently rated
parties with a minimum rating of "B+" are accepted. The Directors
recognize 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.
As of December 31, 2017, and December 31, 2016, cash
and cash equivalents and short term investments were placed at the
following banks:
|
|
|
|
|
|
|
|
|
|
Cash and Cash
Equivalents |
Year endedDecember31, 2016 |
|
Creditrating |
|
Year endedDecember31, 2017 |
|
Creditrating |
|
£'000 |
|
|
|
£'000 |
|
|
Banks |
|
|
|
|
|
|
|
Royal Bank of
Scotland |
11,287 |
|
|
A3 |
|
16,623 |
|
|
A2 |
Lloyds Bank |
28,447 |
|
|
A1 |
|
13,448 |
|
|
Aa3 |
Standard Chartered |
— |
|
|
— |
|
1,242 |
|
|
A1 |
Wells Fargo |
51 |
|
|
Aa1 |
|
130 |
|
|
Aa1 |
Total |
39,785 |
|
|
|
|
31,443 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short Term Investments |
Year endedDecember31,
2016 |
|
Credit |
|
Year endedDecember31,
2017 |
|
Credit |
rating |
rating |
|
£'000 |
|
|
|
£'000 |
|
|
Banks |
|
|
|
|
|
|
|
Royal Bank of
Scotland |
— |
|
|
— |
|
15,316 |
|
|
A2 |
Lloyds Bank |
— |
|
|
— |
|
11,036 |
|
|
Aa3 |
Standard Chartered |
— |
|
|
— |
|
22,467 |
|
|
A1 |
Wells Fargo |
— |
|
|
— |
|
— |
|
|
Aa1 |
Total |
— |
|
|
|
|
48,819 |
|
|
|
|
(c) 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 the research
activities are progressing in line with expectations, costs are
controlled and unused funds are placed on deposit to conserve
resources and increase returns on surplus cash held.
(d) Interest rate risk
As of December 31, 2017, the Group had cash deposits of
£31.4 million (2016: £39.8 million) and short term investments of
£48.8 million (2016: nil). The rates of interest received during
2017 ranged between 0.0% and 1.73%. A 0.25% increase in interest
rates would not have a material impact on finance income. The
Group's exposure to interest rate risk, which is the risk that the
interest received will fluctuate as a result of changes in market
interest rates on classes of financial assets and financial
liabilities, was as follows:
|
|
|
|
|
December 31, 2016 |
|
December 31, 2017 |
|
Floatinginterestrate |
|
FixedInterestrate |
|
Floatinginterestrate |
|
FixedInterestrate |
|
£'000s |
|
£'000s |
|
£'000s |
|
£'000s |
Financial
asset |
|
|
|
|
|
|
|
Cash deposits |
11,338 |
|
|
28,447 |
|
|
25,720 |
|
|
5,723 |
|
Short Term
Investments |
— |
|
|
— |
|
|
— |
|
|
48,819 |
|
Total |
11,338 |
|
|
28,447 |
|
|
25,720 |
|
|
54,542 |
|
|
|
|
|
|
|
|
|
|
|
|
|
(e)
Liquidity risk
The Group prepares periodic working capital forecasts for the
foreseeable future, allowing an assessment of the cash requirements
of the Group, to manage liquidity risk. The following table
provides an analysis of the Group's financial liabilities. The
carrying value of all balances is equal to their fair value. The
Group's maturity analysis for the derivative financial instrument
from the issue of warrants is given in note 20.
|
LESS THAN1 YEAR |
|
BETWEEN1 AND
2YEARS |
|
BETWEEN2 AND
5YEARS |
|
OVER5 YEARS(1) |
|
£'000s |
|
£'000s |
|
£'000s |
|
£'000s |
At December 31,
2016 |
|
|
|
|
|
|
|
Trade payables |
719 |
|
|
— |
|
|
— |
|
|
— |
|
Other payables |
54 |
|
|
— |
|
|
— |
|
|
— |
|
Accruals |
2,050 |
|
|
— |
|
|
— |
|
|
— |
|
Contingent
obligation |
— |
|
|
— |
|
|
— |
|
|
1,807 |
|
Total |
2,823 |
|
|
— |
|
|
— |
|
|
1,807 |
|
(1) This table includes the undiscounted amount of
the assumed contingent obligation. See note 19.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LESS THAN1 YEAR |
|
BETWEEN1 AND
2YEARS |
|
BETWEEN2 AND
5YEARS |
|
OVER5
YEARS(1) |
|
£'000s |
|
£'000s |
|
£'000s |
|
£'000s |
At December 31,
2017 |
|
|
|
|
|
|
|
Trade payables |
1,214 |
|
|
— |
|
|
— |
|
|
— |
|
Other payables |
74 |
|
|
— |
|
|
— |
|
|
— |
|
Accruals |
5,866 |
|
|
— |
|
|
— |
|
|
— |
|
Contingent
obligation |
— |
|
|
— |
|
|
— |
|
|
1,807 |
|
Total |
7,154 |
|
|
— |
|
|
— |
|
|
1,807 |
|
(1) This table includes the undiscounted amount of
the assumed contingent obligation. See note 19.
3.2 Fair value estimation
The carrying amounts of cash and cash equivalents, receivables,
accounts payable and accrued liabilities approximate to fair value
due to their short-term nature. The carrying amount of the assumed
contingent liability approximates to fair value as the underlying
assumptions are currently similar.
For financial instruments that are measured in the Consolidated
Statement of Financial Position at fair value, IFRS 7 requires
disclosure of fair value measurements by level of the following
fair value measurement hierarchy:
- Quoted prices (unadjusted) in active markets for identical
assets or liabilities (level 1);
- Inputs other than quoted prices included within level 1
that are observable for the asset or liability, either directly or
indirectly (level 2); and
- Inputs for the asset or liability that are not based on
observable market data (level 3).
For the year ended December 31, 2017, and 2016, fair value
adjustments to financial instruments through profit and loss
resulted in the recognition of finance income of £6.7 million and
£1.1 million respectively.
The fair value of financial instruments that are not traded in
an active market is determined by using valuation techniques. These
valuation techniques maximize the use of observable market data
where it is available and rely as little as possible on entity
specific estimates. If all significant inputs required to ascertain
the fair value of an instrument are observable, the instrument is
included in level 2. If one or more of the significant inputs
are not based on observable market data, the instrument is included
in level 3.
|
Level 3 |
|
Total |
|
£'000s |
|
£'000s |
At December 31,
2017 |
|
|
|
Derivative financial
instrument |
1,273 |
|
|
1,273 |
|
Total |
1,273 |
|
|
1,273 |
|
|
|
|
|
|
|
Movements in Level 3 items during the years ended December
31, 2016, and 2017 are as follows:
Derivative
financial instrument |
2016 |
|
2017 |
|
£'000s |
|
£'000s |
At January
1 |
— |
|
|
7,923 |
|
Initial recognition of
derivative financial instrument |
8,991 |
|
|
— |
|
Fair value adjustments
recognized in profit and loss |
(1,068 |
) |
|
(6,650 |
) |
At December
31 |
7,923 |
|
|
1,273 |
|
|
|
|
|
|
|
Further details relating to the derivative financial instrument
are set out in notes 4 and 19 of these financial
statements.
In determining the fair value of the derivative financial
instrument, the Company applied the Black Scholes model; key inputs
include the share price at reporting date, estimations on
timelines, volatility and risk-free rates. These assumptions and
the impact of changes in these assumptions, where material, are
disclosed in note 20.
3.3 Change in liabilities arising from financing
activities
The group has provided a reconciliation so that changes in
liabilities arising from financing activities, including both
changes arising from cash flows and non-cash changes can be
evaluated.
|
December31, 2017 |
|
|
|
Derivativefinancialinstrument |
|
£'000s |
At January 1 |
7,923 |
|
|
|
|
Fair value adjustments
– non-cash |
(6,650 |
) |
|
|
|
At December 31 |
1,273 |
|
|
|
|
See note 20 for information relating to the derivative financial
instrument.
4. Critical accounting estimates and
judgments
The preparation of financial statements in conformity with IFRS
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. IFRS
also requires management to exercise its judgment in the process of
applying the Group's accounting policies.
The areas involving a higher degree of judgment or complexity,
or areas where assumptions and estimates are significant to the
consolidated financial statements are as follows:
(a) Assumed contingent obligationThe Group has a
material obligation for the future payment of royalties and
milestones associated with contractual obligations on RPL554, a
development product acquired as part of the acquisition
of Rhinopharma. The estimation of the fair value of the
assumed contingent obligation on acquisition requires the selection
of an appropriate valuation model, consideration as to the inputs
necessary for the valuation model chosen, the estimation of the
likelihood that the regulatory approval milestone will be achieved
and estimates of the future cash flows and their timing (for
further detail see note 19). The estimates for the assumed
contingent obligation are based on a discounted cash flow model.
Key assessments and judgments included in the fair value
calculation of deferred consideration are:
- development, regulatory and marketing risks associated with
progressing the product to market approval in key target
territories;
- market size and product acceptance by clinicians, patients and
reimbursement bodies;
- gross and net selling price;
- costs of manufacturing, product distribution and marketing
support;
- launch of competitive products; and
- discount rate and time to crystallization of contingent
consideration.
In accordance with IAS 39 ("Financial Instruments Recognition
and Measurement" (para AG8)), when there is a change in the
expected cash flows, the assumed contingent obligation is
re-measured with the change in value going through the Consolidated
Statement of Comprehensive Income. Cash flow estimates are revised
when the probability of success changes. The assumed contingent
obligation is measured at amortized cost with the discount
unwinding in the Consolidated Statement of Comprehensive Income
throughout the year. Actual outcomes could differ significantly
from the estimates made.
The value of the assumed contingent obligation as of December
31, 2017 amounts to £0.9 million. (2016: £0.8 million). The
increase in value of the assumed contingent obligation during 2017
amounted to £0.1 million (2016: £0.2 million) and the movement
relates to unwinding the discount on the liability and
retranslating for changes in US$ exchange rates. The increase was
recorded in finance expense. There was no change in the year to the
probability of success and consequently cash flow estimates were
not revised. The discount percentage applied is 12%.
(b) Valuation of the July 2016 warrants
Pursuant to the July 2016 Placement, the Company issued
31,115,926 units to new and existing investors at the placing price
of £1.4365 per unit. Each unit comprises one ordinary share and one
warrant. The warrants entitle the investors to subscribe for in
aggregate a maximum of 12,446,370 ordinary shares.
In accordance with IAS 32 and Group accounting policy, as
disclosed in note 2.15, the Group classified the warrants as a
derivative financial liability to be presented on the Group's
Consolidated Statement of Financial Position.
The fair value of these warrants is determined by applying the
Black-Scholes model. Assumptions are made on inputs such as time to
maturity, the share price, volatility and risk free rate in order
to determine the fair value per warrant. For further details see
note 20.
Transaction costs arising on the issues of these shares and
warrants are allocated to the equity and warrant liability
components in proportion to the allocation of proceeds.
(c) Recognition of research and development
expenditure
The Group incurs research and development expenditure from third
parties. The Group recognizes this expenditure in line with the
management’s best estimation of the stage of completion of each
research and development project. This includes the calculation of
accrued costs at each period end to account for expenditure that
has been incurred. This requires management to estimate full costs
to complete for each project and also to estimate its current stage
of completion. The costs related to these expenses in the year was
£18.5 million. The related accruals and prepayments were £4.6
million and £0.5 million respectively.
(d) Transaction costs related the Global
Offering
The Group incurred various transaction costs relating to the
Global Offering, including commissions, professional advisor fees,
financial advice, listing fees and other costs. When
management judged them to be incremental costs directly
attributable to the transaction they were accounted for as a
deduction from equity. Otherwise the costs were expensed to
the consolidated income statement as incurred.
5. Earnings per share
Basic loss per ordinary share of 23.4p (2016: 15.0p) for the
Group is calculated by dividing the loss for the year ended
December 31, 2017 by the weighted average number of ordinary shares
in issue of 87,748,031 as of December 31, 2017 (2016:
33,499,413). Potential ordinary shares are not treated as dilutive
as the entity is loss making and such shares would be
anti-dilutive.
6. Segmental reporting
The Group’s activities are covered by one operating and
reporting segment: Drug Development. There have been no changes to
management’s assessment of the operating and reporting segment of
the Group during the period.
All non-current assets are based in the United Kingdom.
7. Operating loss
Group
|
Year endedDecember31, 2016 |
|
Year endedDecember31, 2017 |
|
£'000s |
|
£'000s |
Operating Loss
is stated after charging: |
|
|
|
Research and
development costs: |
|
|
|
Employee benefits
(note 8) |
2,037 |
|
|
3,435 |
|
Amortization of patents
(note 12) |
51 |
|
|
111 |
|
Legal, professional
consulting and listing fees |
— |
|
|
331 |
|
Other research and
development expenses |
2,434 |
|
|
19,840 |
|
Total research and
development costs |
4,522 |
|
|
23,717 |
|
General and
administrative costs: |
|
|
|
Employee benefits
(note 8) |
865 |
|
|
2,857 |
|
Legal, professional
consulting and listing fees |
884 |
|
|
2,045 |
|
Amortization of
computer software (note 12) |
1 |
|
|
5 |
|
Loss on disposal of
property, plant and equipment (note 13) |
3 |
|
|
— |
|
Depreciation of
property, plant and equipment (note 13) |
10 |
|
|
7 |
|
Operating lease
charge — land and buildings |
169 |
|
|
294 |
|
Loss on variations in
foreign exchange rate |
139 |
|
|
36 |
|
Other general and
administrative expenses |
427 |
|
|
795 |
|
Total general and
administrative costs |
2,498 |
|
|
6,039 |
|
Operating loss |
7,020 |
|
|
29,756 |
|
During the periods indicated, the Group obtained the services
from and paid the fees of the Group's auditors and their associates
as detailed below:
|
Year endedDecember31, 2016 |
|
Year endedDecember31, 2017 |
|
|
£'000s |
|
£'000s |
|
Audit of Verona
Pharma plc and consolidated financial statements |
80 |
|
|
117 |
|
Audit related
services |
525 |
|
|
333 |
|
Other services |
— |
|
|
150 |
|
Total |
605 |
|
|
600 |
|
|
|
|
|
|
|
For the year ended December 31, 2017, audit related
services include fees for quarterly interim reviews and assurance
on information included in the Company's U.S. registration
statement for the April 2017 Global Offering. For the year ended
December 31, 2017 an amount of £256 thousand in relation to
these services was offset against share premium on completion of
the Global Offering. For the year ended December 31, 2017,
other services related to advice on compliance with Sarbanes-Oxley
legislation.
For the year ended December 31, 2016, audit related
services include assurance reporting on historical financial
information included in the Company's U.S. registration statement
for Global Offering. As at December 31, 2016 an amount of £466
thousand in relation to these services was booked in deferred IPO
costs that was offset against share premium on completion of the
Global Offering.
8. Directors' emoluments and staff costs
Group
|
YearendedDecember31, 2016 |
|
Year endedDecember31, 2017 |
The average number of
employees (excluding directors) of the Group during the year: |
|
|
|
|
|
|
|
Research and
Development |
5 |
|
|
|
7 |
|
|
General and
Administrative |
2 |
|
|
|
5 |
|
|
Total |
7 |
|
|
|
12 |
|
|
|
|
|
|
|
|
|
|
|
YearendedDecember31, 2016 |
|
|
|
Year endedDecember31, 2017 |
|
|
|
£'000s |
|
|
|
£'000s |
|
|
Aggregate
emoluments of directors: |
|
|
|
|
|
|
|
Salaries and other
short-term employee benefits |
951 |
|
|
|
897 |
|
|
Social security
costs |
118 |
|
|
|
103 |
|
|
Incremental payment for
additional services |
44 |
|
|
|
— |
|
|
Other pension
costs |
19 |
|
|
|
17 |
|
|
Total directors'
emoluments |
1,132 |
|
|
|
1,017 |
|
|
Share-based payment
charge |
257 |
|
|
|
1,037 |
|
|
Directors' emoluments
including share-based payment charge |
1,389 |
|
|
|
2,054 |
|
|
|
|
|
|
|
|
|
|
|
YearendedDecember31, 2016 |
|
|
|
Year endedDecember31, 2017 |
|
|
|
£'000s |
|
|
|
£'000s |
|
|
Aggregate other
staff costs: |
|
|
|
|
|
|
|
Wages and salaries |
1,027 |
|
|
|
2,136 |
|
|
Social security
costs |
98 |
|
|
|
182 |
|
|
Incremental payment for
additional services |
58 |
|
|
|
— |
|
|
Share-based payment
charge |
319 |
|
|
|
1,882 |
|
|
Other pension
costs |
11 |
|
|
|
38 |
|
|
Total other staff
costs |
1,513 |
|
|
|
4,238 |
|
|
|
|
|
|
|
|
|
|
The Group operates a defined contribution pension scheme for
U.K. employees and executive directors. The total pension cost
during the year ended December 31, 2017 was £55 thousand
(2016: £30 thousand). There were no prepaid or accrued
contributions to the scheme at December 31, 2017(2016:
£nil).
Company
|
Year endedDecember31, 2016 |
|
Year endedDecember31, 2017 |
The average number of
employees (excluding directors) of the Company during the
year: |
|
|
|
|
|
|
|
Research and
Development |
2 |
|
|
|
4 |
|
|
General and
Administrative |
2 |
|
|
|
4 |
|
|
Total |
4 |
|
|
|
8 |
|
|
|
|
Year endedDecember31, 2016 |
|
|
|
Year endedDecember31, 2017 |
|
|
|
£'000s |
|
|
|
£'000s |
|
|
Aggregate
emoluments of directors: |
|
|
|
|
|
|
|
Salaries and other
short-term employee benefits |
951 |
|
|
|
897 |
|
|
Social security
costs |
118 |
|
|
|
103 |
|
|
Incremental payment for
additional services |
44 |
|
|
|
— |
|
|
Other pension
costs |
19 |
|
|
|
17 |
|
|
Total directors'
emoluments |
1,132 |
|
|
|
1,017 |
|
|
Share-based payment
charge |
257 |
|
|
|
1,037 |
|
|
Directors' emoluments
including share-based payment charge |
1,389 |
|
|
|
2,054 |
|
|
|
|
Year endedDecember31, 2016 |
|
|
|
Year endedDecember31, 2017 |
|
|
|
£'000s |
|
|
|
£'000s |
|
|
Aggregate other
staff costs: |
|
|
|
|
|
|
|
Wages and salaries |
493 |
|
|
|
1,273 |
|
|
Social security
costs |
61 |
|
|
|
162 |
|
|
Incremental payment for
additional services |
58 |
|
|
|
— |
|
|
Share-based payment
charge |
156 |
|
|
|
1,248 |
|
|
Other pension
costs |
11 |
|
|
|
38 |
|
|
Total other staff
costs |
779 |
|
|
|
2,721 |
|
|
|
|
|
|
|
|
|
|
The Company operates a defined contribution pension scheme for
U.K. employees and executive directors. The total pension cost
during the year ended December 31, 2017 was £55 thousand
(2016: £30 thousand). There were no prepaid or accrued
contributions to the scheme at December 31, 2017 (2016:
£nil).
In respect of Directors’ remuneration, the Company has taken
advantage of the permission in Paragraph 6(2) of Statutory
Instrument 2008/410 to omit aggregate information that is capable
of being ascertained from the detailed disclosures in the audited
section of the Directors’ Remuneration Report which form part of
these Consolidated Financial Statements.
9. Finance income and expense
Group
|
Year endedDecember31, 2016 |
|
Year endedDecember31, 2017 |
|
£'000s |
|
£'000s |
Finance
income: |
|
|
|
Interest received on
cash balances |
86 |
|
345 |
Foreign exchange gain
on translating foreign currency denominated bank balances |
687 |
|
— |
Fair value adjustment
on derivative financial instruments (note 20) |
1,068 |
|
6,650 |
Other Income |
— |
|
23 |
Total finance
income |
1,841 |
|
7,018 |
|
|
|
|
|
Year endedDecember31, 2016 |
|
Year endedDecember31, 2017 |
|
£'000s |
|
£'000s |
Finance
expense: |
|
|
|
Transaction costs
allocated to the issue of warrants (note 20) |
586 |
|
— |
Foreign exchange loss
on translating foreign currency denominated balances |
— |
|
2,392 |
Remeasurement of
assumed contingent arrangement (note 19) |
122 |
|
— |
Unwinding of discount
factor and foreign exchange movements related to the assumed
contingent arrangement (note 19) |
86 |
|
73 |
Total finance
expense |
794 |
|
2,465 |
|
|
|
|
10. Taxation
Group
|
Year endedDecember31, 2016 |
|
Year endedDecember31, 2017 |
|
£'000s |
|
£'000s |
Analysis of tax
credit for the year |
|
|
|
Current tax: |
|
|
|
UK tax credit |
(1,067 |
) |
|
(5,006 |
) |
US tax charge |
129 |
|
|
306 |
|
Adjustment in respect
of prior periods |
(16 |
) |
|
(6 |
) |
Total tax
credit |
(954 |
) |
|
(4,706 |
) |
Factors
affecting the tax charge for the year |
|
|
|
Loss on ordinary
activities |
(5,973 |
) |
|
(25,203 |
) |
Multiplied by standard
rate of corporation tax of 19.25% (2016: 20%) |
(1,195 |
) |
|
(4,852 |
) |
Effects of: |
|
|
|
Non-deductible
expenses |
292 |
|
|
675 |
|
Fair value adjustment
on derivative financial instruments |
(214 |
) |
|
(1,280 |
) |
Research and
development incentive |
(427 |
) |
|
(2,116 |
) |
Temporary differences
not recognized |
(4 |
) |
|
(2 |
) |
Difference in overseas
tax rates |
56 |
|
|
136 |
|
Tax losses carried
forward not recognized |
554 |
|
|
2,739 |
|
Adjustment in respect
of prior periods |
(16 |
) |
|
(6 |
) |
Total tax
credit |
(954 |
) |
|
(4,706 |
) |
|
|
|
|
|
|
UK corporation tax is charged at 19.25% (2016: 20.00%) and U.S.
federal tax at 35% (2016: 35%).
The following tables represent deferred tax balances recognized
in the Consolidated Statement of Financial Position. There were no
movements in either the deferred tax asset or the deferred tax
liability.
|
|
|
|
|
|
|
Year endedDecember31, 2016 |
|
Year endedDecember31, 2017 |
|
£'000s |
|
£'000s |
Deferred tax
assets |
250 |
|
|
250 |
|
Deferred tax
liabilities |
(250 |
) |
|
(250 |
) |
Net balances |
— |
|
|
— |
|
The deferred tax liability relates to the difference between the
accounting and tax bases of the IP R&D intangible asset.
A deferred tax asset relating to UK tax losses has been recognized
and offset against the liability.
Factors that may affect future tax charges
The Group has UK tax losses available for offset against future
profits in the UK. However an additional deferred tax asset has not
been recognized in respect of such items due to uncertainty of
future profit streams. As of December 31, 2017, the
unrecognized deferred tax asset at 17% is estimated to be £5.43
million (2016: £3.15 million at 17%).
11. Goodwill
Group and company
|
As ofDecember 31,2016 |
|
As ofDecember 31,2017 |
|
£'000s |
|
£'000s |
Goodwill at
January 1 and December 31 |
441 |
|
441 |
|
|
|
|
Goodwill represents the excess of the purchase price over the
fair value of the net assets acquired in connection with the
acquisition of Rhinopharma in September 2006. Goodwill is not
amortized, but is tested annually for impairment. Annual impairment
testing is performed by comparing the expected recoverable amount
of the CGU to the carrying amount of the CGU to which goodwill has
been allocated to the carrying amount of the CGU. See note 2.8
to the consolidated financial statements.
12. Intangible assets
Group and Company
|
IP R&D |
|
Computersoftware |
|
Patents |
|
Total |
|
£'000s |
|
£'000s |
|
£'000s |
|
£'000s |
Cost |
|
|
|
|
|
|
|
At January 1, 2016 |
1,469 |
|
|
25 |
|
|
482 |
|
|
1,976 |
|
Additions |
— |
|
|
5 |
|
|
110 |
|
|
115 |
|
Disposals |
— |
|
|
(24 |
) |
|
— |
|
|
(24 |
) |
At December 31,
2016 |
1,469 |
|
|
6 |
|
|
592 |
|
|
2,067 |
|
Accumulated
amortization |
|
|
|
|
|
|
|
At January 1, 2016 |
— |
|
|
24 |
|
|
138 |
|
|
162 |
|
Charge for year |
— |
|
|
1 |
|
|
51 |
|
|
52 |
|
Disposals |
— |
|
|
(24 |
) |
|
— |
|
|
(24 |
) |
At December 31,
2016 |
— |
|
|
1 |
|
|
189 |
|
|
190 |
|
Net book
value |
|
|
|
|
|
|
|
At December 31,
2016 |
1,469 |
|
|
5 |
|
|
403 |
|
|
1,877 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
IP R&D |
|
Computersoftware |
|
Patents |
|
Total |
|
£'000s |
|
£'000s |
|
£'000s |
|
£'000s |
Cost |
|
|
|
|
|
|
|
At January 1, 2017 |
1,469 |
|
|
6 |
|
|
592 |
|
|
2,067 |
|
Additions |
— |
|
|
5 |
|
|
203 |
|
|
208 |
|
Disposals |
— |
|
|
— |
|
|
(68 |
) |
|
(68 |
) |
At December 31,
2017 |
1,469 |
|
|
11 |
|
|
727 |
|
|
2,207 |
|
Accumulated
amortization |
|
|
|
|
|
|
|
At January 1, 2017 |
— |
|
|
1 |
|
|
189 |
|
|
190 |
|
Charge for year |
— |
|
|
5 |
|
|
111 |
|
|
116 |
|
Disposals |
— |
|
|
— |
|
|
(68 |
) |
|
(68 |
) |
At December 31,
2017 |
— |
|
|
6 |
|
|
232 |
|
|
238 |
|
Net book
value |
|
|
|
|
|
|
|
At December 31,
2017 |
1,469 |
|
|
5 |
|
|
495 |
|
|
1,969 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangible assets comprise patents, computer software and an IP
R&D asset that arose on the acquisition of Rhinopharma and
investment in patents to protect RPL554.
IP R&D is currently not amortized and is reviewed for
impairment on an annual basis or where there is an indication that
the assets might be impaired until the asset is brought into use.
Patents are amortized 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 2.8.
Recognizing that the Group is still in its pre-revenue phase and
that the research projects are not yet ready for commercial use,
the Group assesses the recoverable amount of the CGU containing the
IP R&D with reference to the Group's market capitalization as
of December 31, 2017, the date of testing of goodwill
impairment. The market capitalization of the Group was
approximately £109.7 million as of December 31, 2017, (2016: £80.0
million) compared to the Group's net assets of £79.9 million (2016:
£34.5 million). Therefore, no impairment was recognized.
The business within Rhinopharma was hived up to the Company
immediately after the acquisition of Rhinopharma by the group. The
hive up was accounted for in the Company's separate financial
statements using the acquisition values for Rhinopharma.
13. Property, plant and equipment
Group and Company
|
Computerhardware |
|
Officeequipment |
|
Total |
|
£'000s |
|
£'000s |
|
£'000s |
Cost |
|
|
|
|
|
At January 1, 2016 |
43 |
|
|
36 |
|
|
79 |
|
Additions |
13 |
|
|
— |
|
|
13 |
|
Disposals |
(39 |
) |
|
(36 |
) |
|
(75 |
) |
At December 31,
2016 |
17 |
|
|
— |
|
|
17 |
|
Accumulated
depreciation |
|
|
|
|
|
At January 1, 2016 |
39 |
|
|
27 |
|
|
66 |
|
Charge for the
year |
3 |
|
|
7 |
|
|
10 |
|
Disposals |
(39 |
) |
|
(34 |
) |
|
(73 |
) |
At December 31,
2016 |
3 |
|
|
— |
|
|
3 |
|
Net book
value |
|
|
|
|
|
At December 31,
2016 |
14 |
|
|
— |
|
|
14 |
|
|
Computerhardware |
|
Officeequipment |
|
Total |
|
£'000s |
|
£'000s |
|
£'000s |
Cost |
|
|
|
|
|
At January 1, 2017 |
17 |
|
|
— |
|
|
17 |
|
Additions |
9 |
|
|
— |
|
|
9 |
|
At December 31,
2017 |
26 |
|
|
— |
|
|
26 |
|
Accumulated
depreciation |
|
|
|
|
|
At January 1, 2017 |
3 |
|
|
— |
|
|
3 |
|
Charge for the
year |
7 |
|
|
— |
|
|
7 |
|
At December 31,
2017 |
10 |
|
|
— |
|
|
10 |
|
Net book
value |
|
|
|
|
|
At December 31,
2017 |
16 |
|
|
— |
|
|
16 |
|
|
|
|
|
|
|
|
|
|
14. Prepayments and other receivables
Group
|
As ofDecember 31,2016 |
|
As ofDecember 31,2017 |
|
£'000s |
|
£'000s |
Prepayments |
1,361 |
|
1,138 |
Deferred IPO costs |
1,527 |
|
— |
Other receivables |
71 |
|
672 |
Total prepayments and
other receivables |
2,959 |
|
1,810 |
|
|
|
|
Deferred IPO costs related to the Global Offering. These costs
were offset against share premium in 2017 when the Global Offering
was completed.
The prepayments balance includes prepayments for insurance and
clinical activities.
There are no impaired assets within prepayments and other
receivables.
Company
|
As ofDecember 31,2016 |
|
As ofDecember 31,2017 |
|
£'000s |
|
£'000s |
Prepayments |
1,354 |
|
1,135 |
Deferred IPO costs |
1,527 |
|
— |
Other receivables |
71 |
|
663 |
Amounts due from group
undertakings |
1 |
|
172 |
Total prepayments and
other receivables |
2,953 |
|
1,970 |
|
|
|
|
Deferred IPO costs relate to the Global Offering. These costs
were offset against share premium in 2017 when the Global Offering
completed. Amounts due from subsidiary undertakings are unsecured,
interest free and repayable on demand. The prepayments balance
includes prepayments for insurance and clinical activities. There
are no impaired assets within prepayments and other
receivables.
15. Investment in
subsidiaries
Company
The Company has two wholly owned subsidiaries, Rhinopharma
Limited and Verona Pharma Inc.
|
As of December31, 2016 |
|
As of December31, 2017 |
|
£'000s |
|
£'000s |
Net book value: |
|
|
|
At the start of the
year |
80 |
|
243 |
Capital contribution
arising from share-based payments |
163 |
|
634 |
Net book amount at the
end of year |
243 |
|
877 |
|
|
|
|
A capital contribution arises where share-based payments are
provided to employees of the subsidiary undertaking, Verona Pharma
Inc, settled with equity to be issued by the Company.
The Company’s investments comprise interests 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 and has its registered
office at 2711 Centerville Road, Suite 400, City of Wilmington
19808, County of New Castle, Delaware, United States of
America.
Rhinopharma Limited is incorporated under the laws of the
Province of British Columbia, Canada and has its registered office
at Suite 700, 625 Howe Street, Vancouver, British Columbia, Canada
V6C 2T6. 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 September 18, 2006.
16. Share Capital
Group and Company
On February 8, 2017, the board of the Company approved a
share consolidation where every 50 existing ordinary shares of
£0.001 were consolidated into one ordinary share of £0.05.
The movements in the Company's share capital are summarized
below:
Date |
|
Description |
|
Number ofshares |
|
Share Capitalamounts
in£'000 |
January 1,
2016 |
|
|
|
20,198,469 |
|
1,010 |
July 29, 2016 |
|
Issuance of shares |
|
31,115,926 |
|
1,556 |
September 12, 2016 |
|
Exercise of options |
|
3,334 |
|
— |
October 24, 2016 |
|
Exercise of options |
|
3,334 |
|
— |
December 28, 2016 |
|
Exercise of options |
|
40,000 |
|
2 |
As at December
31, 2016 |
|
|
|
51,361,063 |
|
2,568 |
May 2, 2017 |
|
Issuance of shares |
|
47,653,100 |
|
2,383 |
May 18, 2017 |
|
Issuance of shares |
|
5,539,080 |
|
277 |
May 26, 2017 |
|
Issuance of shares |
|
330,824 |
|
17 |
September 13,
2017 |
|
Exercise of options |
|
133,333 |
|
6 |
December 31,
2017 |
|
|
|
105,017,400 |
|
5,251 |
|
|
|
|
|
|
|
The total number of authorized ordinary shares, with a nominal
value of £0.05 each, is 200,000,000 (share capital of £10,000,000).
All 105,017,400 ordinary shares at December 31, 2017 are
allotted, unrestricted, called up and fully paid.
On April 26, 2017, the Company announced the closing of its
Global Offering of an aggregate of 47,399,001 new ordinary shares,
comprising 5,768,000 American Depositary Shares (“ADSs”) at a price
of $13.50 per ADS and 1,255,001 ordinary shares at a price of £1.32
per ordinary share. During May 2017 the underwriters purchased
an additional 733,738 ADSs, representing 5,869,904 ordinary shares,
at a price of $13.50 per ADS. The total gross proceeds in the
Global Offering amounted to $89.9 million (£70.0million).
In addition, the Chairman of Verona Pharma’s board of directors,
Dr David Ebsworth, and an existing shareholder agreed to subscribe
for 254,099 new ordinary shares at a price of £1.32 per ordinary
share in the Shareholder Private Placement, contingent on and
concurrent with the Global Offering and generating gross proceeds
of £0.3m.
Where there is a time and foreign exchange difference between
proceeds from a share issue becoming due and being received, the
movement is taken to Finance income or Finance expense as
appropriate. In respect of the Global Offering and Shareholder
Private Placement, the Company recorded a finance expense of £439
thousand arising from movements in exchange rates on funds
receivable, offset by a saving on commission payable of £31
thousand, for a net finance expense of £408 thousand.
On September 13, 2017, the company issued 133,333 new
shares upon exercise of share options at 110p per share, resulting
in proceeds of £147 thousand to the Company.
On July 29, 2016, the Company issued 31,115,926 units to
new and existing investors at the placing price of £1.4365 per
unit. Each unit comprises one ordinary share and one warrant (see
note 20).
During 2016, the Company issued 46,668 ordinary shares upon
exercise of employee share options.
As at December 31, 2017, the number of ordinary shares in issue
was 105,017,400. All new ordinary shares rank pari passu with
existing ordinary shares.
17. Share-based payments charge
Group and Company
In accordance with IFRS 2 "Share Based Payments," the cost
of equity-settled transactions is measured by reference to their
fair value at the date at which they are granted. Where
equity-settled transactions were entered into with third party
service providers, fair value is determined by reference to the
value of the services provided. For other equity-settled
transactions fair value is determined using the Black-Scholes
model. The cost of equity-settled transactions is recognized over
the period until the award vests. No expense is recognized for
awards that do not ultimately vest. At each reporting date, the
cumulative expense recognized for equity-based transactions
reflects the extent to which the vesting period has expired and the
number of awards that, in the opinion of the Directors at that
date, will ultimately vest.
The costs of equity-settled share-based payments to employees
are recognized in the Statement of Comprehensive Income, together
with a corresponding increase in equity during the vesting period.
During the twelve months ended December 31, 2017, the Group
recognized a share-based payment expense of £2.92 million (2016:
£0.58 million). The charge is included within both general and
administrative costs as well as in research and development costs
and represents the current year's allocation of the expense for
relevant share options.
The Group grants share options under an Unapproved Share Option
Scheme (the "Unapproved Scheme"). Under the Unapproved Scheme,
options are granted to employees, directors and consultants to
acquire shares at a price to be determined by the Directors. In
general, options granted prior to December 31, 2016 were granted at
a premium to the share price at the date of grant and vested over a
period of three years from the date of grant, one third vesting on
the first anniversary of grant, a further third vesting on the
second anniversary of grant and the remainder vesting on the third
anniversary of grant.
Options granted since January 1, 2017 generally vest over three
or four years from the date of the grant using two different
methods. The first method is one third vesting over one year, the
second third vesting over two years and the final third vesting
over three years. The second method is one quarter vesting over one
year, the second quarter vesting over two years, the third quarter
vesting over three years and the final quarter vesting over four
years. The vesting period is defined as the period between the date
of grant and the date when the options become exercisable. The
options are exercisable during a period ending ten years after the
date of grant.
Options are also issued to advisors under the Unapproved Scheme.
Such options generally vest immediately and are exercisable between
one and two years after grant.
In 2016 the Group issued options under its tax efficient EMI
Option Scheme (the "EMI Scheme"). Under the EMI Scheme, options
were granted to employees and directors who are contracted to work
at least 25 hours a week for the Group or for at least 75% of
their working time. The options granted under the EMI Scheme are
exercisable at a price that is above the share price at the date of
the grant and in accordance with a vesting schedule determined by
the Directors at the time of grant and have an exercise period of
ten years from the date of grant.
The Group grants Restricted Stock Units to employees and
directors. The RSUs vest over a period of three or four years from
the date of the grant using 2 different methods. The first method
is one third vesting over one year, the second third vesting over
two years and the final third vesting over three years. The second
method is one quarter vesting over one year, the second quarter
vesting over two years, the third quarter vesting over three years
and the final quarter vesting over four years.
In the year ended December 31, 2017, the Group granted 4,656,828
(2016: 1,670,000) share options, nil (2016: 32,000) share options
under the EMI Scheme and 1,052,236 Restricted Stock Units (“RSUs”)
(2016: nil). The total fair values of the Options and RSUs
were estimated using the Black-Scholes option-pricing model for
equity-settled transactions and amounted to £5.33 million (2016:
£1.93 million). The cost is amortized over the vesting period of
the options on a straight-line basis.
Prior to the July 2016 Placement in 2016, management determined
to take an option's contractual maximum life as an input into the
Black-Scholes option-pricing model. Starting from the July 2016
Placement and in line with the continued development of the Group's
clinical trials, the Group determined the time to maturity to be
used in the valuation model to be better represented by the
weighted-average life of the options granted.
The following assumptions were used for the Black-Scholes
valuation of share options granted in 2016 and 2017. For the
options granted under the Unapproved Scheme the table indicates the
ranges used in determining the fair-market values, aligning with
the various dates of the underlying grants. The volatility is
calculated using historic weekly averages of the Group's share
price over a period that is in line with the expected life of the
options.
|
|
|
|
|
|
|
|
Issued in 2016 |
EMI Scheme |
|
Unapproved Scheme |
Options granted |
32,000 |
|
|
|
1,670,000 |
|
|
Risk-free interest
rate |
1.42% |
|
|
|
0.23% -
1.42% |
|
|
Expected life of
options |
10
years |
|
|
|
5.5 - 10 years |
|
|
Annualized
volatility |
88.0% |
|
|
|
74.3% - 88.0% |
|
|
Dividend rate |
0.00% |
|
|
|
0.00% |
|
|
Vesting period |
3
years |
|
|
|
3
years |
|
|
|
|
|
|
|
|
|
|
Issued in 2017 |
Unapproved Scheme |
|
|
|
Restricted StockUnits |
|
|
Options granted |
4,656,828 |
|
|
|
1,052,236 |
|
|
Risk-free interest
rate |
0.29% -
0.62% |
|
|
|
0.42% -
0.62% |
|
|
Expected life of
options |
5.5 -
7.0 years |
|
|
|
5.5 -
7.0 years |
|
|
Annualized
volatility |
71.3% -
73.3% |
|
|
|
71.3% -
73.3% |
|
|
Dividend rate |
0.00% |
|
|
|
0.00% |
|
|
Vesting period |
3 and 4
years |
|
|
|
3 and 4
years |
|
|
|
|
|
|
|
|
|
|
The Group had the following share options movements in the year
ended December 31, 2017:
Year of issue |
|
Exercise price (£) |
|
At January1, 2017 |
|
Optionsgranted |
|
Optionsexercised |
|
Optionsforfeited |
|
Optionsexpired |
|
At December31, 2017 |
|
Expiry date |
|
2012 |
|
2.50 - 7.50 |
|
|
100,000 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
100,000 |
|
|
June 1,
2022 |
|
2013 |
|
2.00 |
|
|
100,000 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
100,000 |
|
|
April
15, 2023 |
|
2013 |
|
2.00 |
|
|
20,000 |
|
|
— |
|
|
— |
|
|
— |
|
|
(20,000 |
) |
|
— |
|
|
June 1,
2023 |
* |
2013 |
|
2.00 |
|
|
160,000 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
160,000 |
|
|
July
29, 2023 |
|
2014 |
|
1.75 |
|
|
110,000 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
110,000 |
|
|
May 15,
2024 |
|
2014 |
|
1.75 |
|
|
63,333 |
|
|
— |
|
|
— |
|
|
— |
|
|
(13,333 |
) |
|
50,000 |
|
|
May 15,
2024 |
* |
2014 |
|
1.10 - 1.75 |
|
|
200,000 |
|
|
— |
|
|
(133,333 |
) |
|
— |
|
|
— |
|
|
66,667 |
|
|
August
6, 2018 |
** |
2015 |
|
1.25 |
|
|
82,000 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
82,000 |
|
|
January
29, 2025 |
* |
2015 |
|
1.25 |
|
|
510,000 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
510,000 |
|
|
January
29, 2025 |
|
2016 |
|
2.00 |
|
|
260,000 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
260,000 |
|
|
February 2, 2026 |
|
2016 |
|
2.00 |
|
|
22,000 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
22,000 |
|
|
February 2, 2026 |
* |
2016 |
|
1.80 |
|
|
810,000 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
810,000 |
|
|
August
3, 2026 |
|
2016 |
|
1.89 |
|
|
300,000 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
300,000 |
|
|
September 13, 2026 |
|
2016 |
|
2.04 |
|
|
300,000 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
300,000 |
|
|
September 16, 2026 |
|
2017 |
|
1.32 -
1.525 |
|
|
— |
|
|
4,656,828 |
|
|
— |
|
|
— |
|
|
— |
|
|
4,656,828 |
|
|
April
26, 2027 |
|
Total |
|
|
|
3,037,333 |
|
|
4,656,828 |
|
|
(133,333 |
) |
|
— |
|
|
(33,333 |
) |
|
7,527,495 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
Options granted under the EMI Scheme. |
**
Valued based on fair value of services received. |
|
The Group had the following Restricted Share Units movements in
the year ended December 31, 2017:
Year of issue |
|
Exercise price (£) |
|
At January1, 2017 |
|
Units granted |
|
Units exercised |
|
Units forfeited |
|
Units expired |
|
At December31, 2017 |
|
Expiry date |
2017 |
|
|
|
— |
|
|
1,052,236 |
|
|
— |
|
|
— |
|
|
— |
|
|
1,052,236 |
|
|
April
26, 2027 |
Total |
|
|
|
— |
|
|
1,052,236 |
|
|
— |
|
|
— |
|
|
— |
|
|
1,052,236 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The average fair value at grant date, by year of grant and plan,
of the exercisable options as per December 31, 2017 is
presented in the below table.
Year of issue |
EMI Scheme (£) |
|
|
Unapproved Scheme (£) |
|
|
RSU (£) |
2012 |
0.63 - 1.20 |
|
|
|
— |
|
|
|
— |
|
2013 |
0.83 |
|
|
|
0.79 - 0.95 |
|
|
|
|
|
2014 |
0.76 |
|
|
|
0.23 - 0.76 |
|
|
|
|
|
2015 |
0.57 |
|
|
|
0.57 |
|
|
|
|
|
2016 |
1.35 |
|
|
|
0.93 - 1.35 |
|
|
|
|
|
2017 |
— |
|
|
|
0.84 |
|
|
|
1.33 |
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding and exercisable share options by scheme as of
December 31, 2017:
Plan |
Outstanding |
|
Exercisable |
|
Weightedaverage exerciseprice in £
forOutstanding |
|
Weightedaverage exerciseprice in £
forExercisable |
Unapproved |
7,313,473 |
|
|
|
|
773,333 |
|
|
|
|
1.50 |
|
|
|
|
1.64 |
|
|
EMI |
213,984 |
|
|
|
|
185,333 |
|
|
|
|
3.06 |
|
|
|
|
3.28 |
|
|
Total |
7,527,457 |
|
|
|
|
958,666 |
|
|
|
|
1.54 |
|
|
|
|
1.95 |
|
|
As at December 31, 2017 there were no restricted share
options exercisable (2016: nil) and there is no exercise price for
restricted share options.
The options outstanding at December 31, 2017 had a weighted
average remaining contractual life of 8.6 years (2016: 8.2 years).
For 2016 and 2017, the number of options granted and expired and
the weighted average exercise price of options were as follows:
|
|
|
|
|
|
|
Number ofoptions |
|
Weighted averageexercise
price(£) |
At January 1,
2016 |
|
1,792,000 |
|
|
1.78 |
|
Options
granted in 2016: |
|
|
|
|
Employees |
|
1,002,000 |
|
|
1.92 |
|
Directors |
|
700,000 |
|
|
2.05 |
|
Options
exercised in the year |
|
(46,666 |
) |
|
1.12 |
|
Options
forfeited in the year |
|
(150,001 |
) |
|
1.24 |
|
Options
expired in the year |
|
(260,000 |
) |
|
2.46 |
|
At December 31,
2016 |
|
3,037,333 |
|
|
1.87 |
|
Exercisable at
December 31, 2016 |
|
846,667 |
|
|
2.25 |
|
|
|
Number ofoptions |
|
Weighted averageexercise
price(£) |
At January 1,
2017 |
|
3,037,333 |
|
|
1.87 |
|
Options
granted in 2017: |
|
|
|
|
Employees |
|
3,150,846 |
|
|
1.32 |
|
Directors |
|
1,505,982 |
|
|
1.32 |
|
Options
exercised in the year |
|
(133,333 |
) |
|
1.10 |
|
Options
forfeited in the year |
|
— |
|
|
— |
|
Options
expired in the year |
|
(33,333 |
) |
|
1.90 |
|
At December 31,
2017 |
|
7,527,495 |
|
|
1.53 |
|
Exercisable at
December 31, 2017 |
|
797,333 |
|
|
2.04 |
|
|
|
|
|
|
|
|
The following table shows the number of RSUs issued in
2017. No RSUs were granted in 2016 and none of the RSUs
granted in 2017 were forfeited, cancelled or vested in the
year. The fair value of each unvested RSU at grant date was
£1.32.
|
|
Number of RSUs |
At January 1,
2017 |
|
— |
|
Granted: |
|
|
Employees |
|
705,841 |
|
Directors |
|
346,395 |
|
At December 31,
2017 |
|
1,052,236 |
|
|
|
|
|
The cost is amortized over the vesting period of the options on
a straight-line basis. The expense for the Group during 2017
amounted to £2.3m and the balance of £0.6m is in relation to Verona
Pharma Inc. and is held as an investment.
18. Trade and other payables
Group
|
As ofDecember 31,2016 |
|
As ofDecember 31,2017 |
|
£'000s |
|
£'000s |
Trade payables |
719 |
|
|
1,214 |
|
Other payables |
54 |
|
|
74 |
|
Accruals |
2,050 |
|
|
5,866 |
|
Total trade and other
payables |
2,823 |
|
|
7,154 |
|
|
|
|
|
|
|
As of December 31, 2016, accruals included £0.89 million
related to expenses associated with the Global Offering which was
fully paid during the year ended December 31, 2017.
Company
|
|
|
|
|
As ofDecember 31,2016 |
|
As ofDecember 31,2017 |
|
£'000s |
|
£'000s |
Trade payables |
719 |
|
|
1,213 |
|
Other payables |
54 |
|
|
74 |
|
Amount due to group
undertakings |
461 |
|
|
1,044 |
|
Accruals |
1,916 |
|
|
5,729 |
|
Total trade and other
payables |
3,150 |
|
|
8,060 |
|
|
|
|
|
|
|
As of December 31, 2016, accruals included £0.89 million
related to expenses associated with the Global Offering.
These were fully paid in 2017. Amounts due to subsidiary
undertakings are unsecured, interest free and repayable on
demand.
19. Assumed contingent obligation related to the
business combination
Group and Company
The value of the assumed contingent obligation as of December
31, 2017 amounts to £875 thousand (2016: £802 thousand). The
increase in value of the assumed contingent obligation during 2017
amounted to £73 thousand (2016: £208 thousand) and was recorded in
finance expense as it related to the unwind of the discount on the
liability and retranslation for changes in US$ exchange rates.
Periodic re-measurement is triggered by changes in the probability
of success. In 2016 the re-measurement was triggered by the success
of the Company's Phase 2a clinical trial, presented in March 2016.
The discount percentage applied is 12%. In 2017 there were no
events that triggered re-measurement.
|
|
|
|
|
2016 |
|
2017 |
|
£'000s |
|
£'000s |
January 1 |
594 |
|
|
802 |
|
Re-measurement of
assumed contingent obligation |
86 |
|
|
— |
|
Impact of changes in
foreign exchange rates |
37 |
|
|
(23 |
) |
Unwinding of discount
factor |
85 |
|
|
96 |
|
December 31 |
802 |
|
|
875 |
|
|
|
|
|
|
|
The table below describes the reported change to the value of
the liability during 2017 of £73 thousand (2016: £208 thousand)
compared to what this number would be following the presented
variations to the underlying assumptions (assuming the probability
of success does not change):
|
2016 |
|
2017 |
|
£'000s |
|
£'000s |
Change in value of the
assumed contingent obligation |
208 |
|
|
73 |
|
10% lower revenue
assumption |
202 |
|
|
72 |
|
10% higher revenue
assumption |
215 |
|
|
73 |
|
1% lower risk
assumption |
205 |
|
|
69 |
|
1% higher risk
assumption |
211 |
|
|
76 |
|
|
|
|
|
|
|
20. Warrants
Group and Company
Pursuant to the July 2016 Placement, on July 29, 2016 the
Company issued 31,115,926 units to new and existing investors at
the placing price of £1.4365 per unit. Each unit comprises one
ordinary share and one warrant.
The warrant holders can subscribe for 0.4 of an ordinary share
at a per share exercise price of 120% of the placing price or
£1.7238. The warrant holders can opt for a cashless exercise of
their warrants, whereby the warrant holders can choose to exchange
the warrants held for reduced number of warrants exercisable at nil
consideration. The reduced number of warrants is calculated based
on a formula considering the share price and the exercise price of
the warrants. The warrants are therefore classified as a derivative
financial liability, since their exercise could result in a
variable number of shares to be issued.
The warrants entitled the investors to subscribe for in
aggregate a maximum of 12,446,370 shares. The warrants can be
exercised on the earlier of the consummation of the Global Offering
(being April 26, 2017) or the first anniversary of the grant, and
the exercise period shall end on the fifth anniversary of the date
of grant (being July 29, 2021).
The ordinary shares and warrants were accounted for as a
compound financial instrument. The warrants component of the
instrument issued at the July 2016 Placement was classified as a
derivative financial liability and was initially measured at fair
value of £9.0 million. The residual amount of proceeds totaling
£35.7 million was recognized within equity. Subsequently the
financial liability was re-measured at the reporting date at fair
value through profit or loss.
The total of transaction costs the Company incurred for the
above transactions amounted to £2.9 million of which £0.6 million
was allocated to the warrants and the remaining £2.3 million was
presented as a reduction to share premium, by reference to the
proceeds allocated to each component. The amount assigned to the
financial liability of the warrants was subsequently presented as
finance expense in the Consolidated Statement of Comprehensive
Income.
In the year ended 31 December 2017 warrants over 45,108 shares
were forfeited (2016: nil).
The table below presents the assumptions in applying the
Black-Scholes model to determine the fair value of the
warrants.
|
As ofDecember 31,2016 |
|
As of December 31,2017 |
Shares available to be
issued under warrants |
|
12,446,370 |
|
|
|
12,401,262 |
|
Exercise price |
£ |
1.7238 |
|
|
£ |
1.7238 |
|
Risk-free interest
rate |
|
0.088 |
% |
|
|
0.420 |
% |
Expected term to
exercise |
|
2.43
years |
|
|
|
1.79
years |
|
Annualized
volatility |
|
73.53 |
% |
|
|
47.35 |
% |
Dividend rate |
|
0.00 |
% |
|
|
0.00 |
% |
|
|
|
|
|
|
|
|
The figures disclosed above relating to the issue of the shares
and warrants have been retrospectively adjusted to reflect the
50-for-1 share consolidation as described in note 1. The
original number of units issued to new and existing investors was
1,555,796,345 units at a placing price of 2.873 pence per unit
and an exercise price of 3.4476 pence per share. This entitled
the investors to subscribe for in aggregate a maximum of
622,318,538 shares.
As per the reporting date the Company updated the underlying
assumptions and calculated a fair value of these warrants amounting
to £1.3 million. The variance of £6.7 million is recorded as
finance income in the Consolidated Statement of Comprehensive
Income.
|
|
|
|
|
Derivativefinancialinstrument |
|
Derivativefinancialinstrument |
|
2016 |
|
2017 |
|
£'000s |
|
£'000s |
At January
1 |
— |
|
|
7,923 |
|
On issuance of
shares |
8,991 |
|
|
— |
|
Fair value adjustments
recognized in profit or loss |
(1,068 |
) |
|
(6,650 |
) |
At December
31 |
7,923 |
|
|
1,273 |
|
|
|
|
|
|
|
For the amount recognized at December 31, 2017, the effect
when some of these underlying parameters would deviate up or down
is presented in the below table.
|
Volatility(up /
down10% pts) |
|
Time
tomaturity(up /
down6 months) |
|
£’000s |
|
£’000s |
Variable up |
1,921 |
|
|
1,677 |
|
Base case,
reported fair value |
1,273 |
|
|
1,273 |
|
Variable down |
694 |
|
|
843 |
|
|
|
|
|
|
|
21. Financial commitments
Group
As of December 31, 2017, the Group was committed to making
the following payments under non-cancellable operating leases
related to its facilities.
|
|
|
|
|
Land andBuildings |
|
Land andBuildings |
|
2016 |
|
2017 |
|
£'000s |
|
£'000s |
Operating lease
obligations: |
|
|
|
Within one year |
270 |
|
|
291 |
|
Between one and five
years |
— |
|
|
277 |
|
Total |
270 |
|
|
568 |
|
|
|
|
|
|
|
Company
As of December 31, 2017, the Company was committed to
making the following payments under non-cancellable operating
leases related to its facilities.
|
|
|
|
|
Land andBuildings |
|
Land andBuildings |
|
2016 |
|
2017 |
|
£'000s |
|
£'000s |
Operating lease
obligations: |
|
|
|
Within one year |
249 |
|
|
263 |
|
Between one and five
years |
— |
|
|
277 |
|
Total |
249 |
|
|
540 |
|
|
|
|
|
|
|
22. Related parties transactions and other shareholder
matters
(i) Related party transactions
The Directors have authority and responsibility for planning,
directing and controlling the activities of the Group. Remuneration
of Directors is disclosed in the Directors' Remuneration
Report.
(ii) Other shareholder matters
The Company has entered into the following arrangements with
parties who are significant shareholders of the Company, though
they are not classed as related parties.
The Company entered into relationship agreements with Vivo
Capital Fund VIII ("Vivo Capital"), OrbiMed Private Investments
VI L.P. ("OrbiMed"), Abingworth Bioventures VI L.P.
("Abingworth"), and Arix Bioscience plc ("Arix") and Arthurian
Life Sciences SPV GP Limited, ("Arthurian"). As agreed in
these relationship agreements, the above parties invested in the
Company as part of the July 2016 Placement, and the Company agreed
to appoint representatives designated by Vivo Capital, OrbiMed,
Abingworth, and Arix and Arthurian, to the board of directors, who
are Dr. Mahendra Shah, Mr. Rishi Gupta, Dr. Andrew
Sinclair and Dr. Ken Cunningham respectively.
The appointment rights within the relationship agreement with
Arix and Arthurian terminated on closing of the Global Offering on
April 26, 2017. Dr Cunningham has agreed to continue to serve
on the Company's board of directors as an independent director. The
respective appointment rights under the remaining relationship
agreements will automatically terminate upon (i) Vivo Capital,
OrbiMed or Abingworth (or any of their associates), as applicable,
ceasing to beneficially hold 6.5% of the issued ordinary shares, or
(ii) the ordinary shares ceasing to be admitted to AIM.
The Company also entered into management rights agreements with
Novo A/S and Aisling Capital under which Novo A/S and Aisling
Capital were entitled to appoint an observer to the Board. The
appointment rights within the management rights agreements
terminated on closing of the Global Offering on April 26, 2017.
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