Hemogenyx Pharmaceuticals plc
(“Hemogenyx Pharmaceuticals” or the “Company”)
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF ARTICLE 7 OF REGULATION 2014/596/EU AS IT FORMS PART OF LAW IN THE UNITED KINGDOM BY VIRTUE OF THE EUROPEAN UNION (WITHDRAWAL) ACT 2018. UPON THE PUBLICATION OF THIS ANNOUNCEMENT, THIS INSIDE INFORMATION IS NOW CONSIDERED TO BE IN THE PUBLIC DOMAIN.
Final Results for the Year Ended 31 December 2020
Hemogenyx Pharmaceuticals plc (LSE: HEMO), the biopharmaceutical group developing new therapies and treatments for deadly blood diseases, announces its results for the year ended 31 December 2020.
Key Highlights
- Demonstrated that HEMO-CAR-T cells are effective against Acute Myloid Leukemia in vitro and in vivo
- Developed a novel cell-based platform technology, referred to as “CBR,” for the treatment of emerging viral diseases, including COVID-19, as well as certain types of cancer
- Entered into an agreement with Eli Lilly and Company for the development of new treatments of autoimmume diseases
- Entered into Sponsored Research Agreement with the University of Pennsylvania to advance the Company’s HEMO-CAR-T product candidate toward clinical trials
Post-Period End Highlights
- Entered into a Master Translational Agreement with the University of Pennsylvania to advance the Company’s HEMO-CAR-T product candidate through clinical trials
- The development phase of the Company’s collaboration with a leading global pharmaceutical company for the development of its CDX antibody product candidate resulted in the selection of a clone of the antibody that is ready for investigational new drug (“IND”) application-enabling studies, a significant step toward clinical trials
Dr Vladislav Sandler, CEO of Hemogenyx, said: “2020 was an exceptionally productive year for Hemogenyx Pharmaceuticals, both scientifically and commercially. Not only did we achieve significant progress with our existing product candidates, we were also able to leverage our proprietary technologies and expertise to further broaden and diversify our product pipeline. We entered into a collaboration with the University of Pennsylvania, thereby advancing HEMO-CAR-T toward clinical trials, completed the developmental stage of our collaboration with GlobalCo by choosing a CDX antibody to be developed into clinical trials, and established a novel platform technology, CBR, for the treatment of a range of conditions including viral infections, in particular COVID-19, as well as certain types of cancer.”
Cautionary Note Regarding Forward-Looking Statements
Certain statements in this news release contain forward-looking information. These statements address future events and conditions and, as such, involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the statements. Such factors include without limitation the completion of planned expenditures, the ability to complete exploration programs on schedule and the success of exploration programs. Readers are cautioned not to place undue reliance on the forward-looking information, which speak only as of the date of this news release.
Enquiries:
| Hemogenyx Pharmaceuticals plc | https://hemogenyx.com |
| Dr Vladislav Sandler, Chief Executive Officer & Co-Founder | headquarters@hemogenyx.com |
| Peter Redmond, Director | peter.redmond@hemogenyx.com |
| SP Angel Corporate Finance LLP | Tel: +44 (0)20 3470 0470 |
| Matthew Johnson, Vadim Alexandre, Adam Cowl | |
| Peterhouse Capital Limited | Tel: +44 (0)20 7469 0930 |
| Lucy Williams, Duncan Vasey, Charles Goodfellow |
About Hemogenyx Pharmaceuticals plc
Hemogenyx Pharmaceuticals is a publicly traded company (LSE: HEMO) headquartered in London, with its US operating subsidiaries, Hemogenyx Pharmaceuticals LLC and Immugenyx LLC, located in New York City at its state-of-the-art research facility.
The Company is a pre-clinical stage biopharmaceutical group developing new medicines and treatments to treat blood and autoimmune disease and to bring the curative power of bone marrow transplantation to a greater number of patients suffering from otherwise incurable life-threatening diseases. Hemogenyx Pharmaceuticals is developing several distinct and complementary product candidates, as well as platform technologies that it uses as engines for novel product development.
For more than 50 years, bone marrow transplantation has been used to save the lives of patients suffering from blood diseases. The risks of toxicity and death that are associated with bone marrow transplantation, however, have meant that the procedure is restricted to use only as a last resort. The Company’s technology has the potential to enable many more patients suffering from devastating blood diseases such as leukaemia and lymphoma, as well as severe autoimmune diseases such as multiple sclerosis, aplastic anaemia and systemic lupus erythematosus (Lupus), to benefit from bone marrow transplantation.
Chairman’s Statement
It is my pleasure to report that over the past year there was further significant development for Hemogenyx Pharmaceuticals. The period saw further growth and acceleration of the development of the Company’s pipeline. This was marked by the creation of additional technologies and product candidates, strengthened intellectual property protection, partnerships with yet more internationally renowned institutions, and – despite the challenges posed by the coronavirus pandemic – continued material steps toward the important transition from a pre-clinical to a clinical study-stage business.
The Company’s principal business is the development of new treatments for serious blood diseases such as blood cancers and severe autoimmune diseases, while also focusing on the multi-billion dollar bone marrow/hematopoietic stem cell transplant market. Our products address large and growing needs, and could enable a much wider range of patients to be treated than is presently the case since they should be more suitable for patients who are currently deemed unfit for bone marrow transplants or for whom there is a lack of suitable donors.
The Company’s subsidiary, Immugenyx LLC, continues work on Advanced Hematopoietic Chimeras – mice with uniquely humanised blood/immune systems – as a platform for creating models of various diseases and for discovering treatments and developing new drugs. The last year has also seen the establishment of an exciting and flexible new platform technology that may be applied to create treatments for some forms of cancer and also for viruses such as SARS-CoV-2, the virus responsible for COVID-19. As a result, the pipeline has grown to a roster of six product candidates, compared to two when the Company first listed on the London Stock Exchange in 2017. This number is unusual for such a small company as Hemogenyx Pharmaceuticals.
The Company’s six product candidates are:
- CDX antibody – a bispecific antibody targeting a majority of forms of relapsed/refractory acute myeloid leukaemia (“R/R AML”), subset of acute lymphoblastic leukaemia (“ALL”), nd myelodysplastic syndrome (myelodysplasia or “MDS”) – conditioning bone marrow transplants to substitute traditional chemotherapy and/or radiation.
- CAR-T cell therapy – chimeric antigen receptor T-cells that are engineered for use in immunotherapy, also targeting R/R AML and being developed as a potential alternative conditioning regimen for bone marrow transplants.
- Hu-PHEC stem cell therapy – Human Post-natal Hemogenic Endothelial Cells are a type of cell and associated cell therapy that generate cancer-free hematopoietic stem cells for use in transplants to treat blood disorders.
- Humanised mice – Advanced peripheral blood Hematopoietic Chimera mice are a novel type of humanised mice that serve as a platform technology to model a wide variety of diseases for drug discovery and target validation.
- Undisclosed – the Company’s early-stage programme designed for the discovery and validation of novel targets and therapeutic-like molecules for the treatment of Lupus and/or other autoimmune diseases, in collaboration with the global biopharmaceutical company Eli Lilly.
- CBR platform – a recently developed platform whose first application is the programming of immune cells for targeting viral pathogens including SARS-CoV-2 and other existing and yet unknown viruses. A further potential application of the CBR platform is to target malignant cells that cause cancers.
These product candidates, their current state of development, and scientific and commercial progress in the financial year and into 2021 are further elaborated below.
CDX Antibody
The Company’s work on its bispecific antibody targeting some forms of R/R AML, ALL and MDS, its first major project, continued apace in 2020. Most notably, the collaboration with the global pharmaceutical company referred to as “GlobalCo” to co-develop the antibody continued through the year, with some extensions to allow for the impact of the COVID-19 pandemic on GlobalCo’s operations.
The Company believes that the use of FLT3-CD3 (FMS-like tyrosine kinase 3) bispecific antibodies to eliminate hematopoietic stem cells/hematopoietic progenitors (“HSC/HP”) will make conditioning for bone marrow transplants safer by eliminating the side effects that accompany traditional methods of patient preparation for bone marrow (“BM”)/HSC transplantation. The Company’s studies to date suggest that the antibodies will significantly reduce and possibly in some cases eliminate malignant cells and cancer stem cells in patients with refractory or relapsed FLT3-expressing AML. Effective and non-toxic conditioning will extend the use of BM/HSC transplantation to older and more frail patients and potentially target additional indications including autoimmune diseases such as Lupus and Multiple Sclerosis (“MS”) for which the risk of conventional BM transplantation has been a major road-block. The risk profile of BM/HSC transplantation using chemo/radiation conditioning regimes is currently poor. The anticipated drastically improved potential safety profile of conditioning with FLT3-CD3 antibodies will increase the benefit/risk ratio of BM/HSC transplantations, potentially growing the market for such treatments radically and saving greater numbers of lives. These antibodies may also be combined (concurrently or in tandem) with traditional components of conditioning regimens and thus may increase their efficacy while having the potential to lower their dosage, toxicity and corresponding level of undesirable side effects.
The additional time afforded by the extensions to the agreement was used effectively, with a number of additional variants of the antibody developed and tested systematically. The development stage of the agreement concluded at the start of 2021 with the selection of a highly promising clone with regard to manufacturability, yield and stability, as further described in the section below covering events subsequent to the 2020 financial year.
The antibody is now ready to be taken forward to the final stage of testing prior to filing an Investigational New Drug application with the United States’ Federal Drug Administration (“FDA”) for approval to commence clinical trials. These remaining pre-clinical studies will involve tests in Rhesus monkeys to demonstrate their safety and predict their efficacy in human trials. Clinical trials would then commence with a group of patients with R/R FLT3+ AML who are qualified for HSC/HP transplantation, in order to obtain preliminary data on safety/dose escalation and on efficacy for elimination of both malignant cells and HSC/HP (i.e. conditioning for bone marrow transplantation).
The Company’s patent applications designed to protect its intellectual property progressed during the year and should begin to bear fruit in the near future. An additional composition of matter patent application (covering novel sequences of the antibodies discovered and validated by the Company in collaboration with GlobalCo) is expected to be filed following completion of the GlobalCo collaboration agreement.
CAR-T Cell Therapy
Chimeric Antigen Receptor T-cells are a novel form of immunotherapy that reprogrammes a patient’s own T-cells to recognise antigens expressed by cancerous cells and hence destroy them. The Company’s proprietary CAR-T product candidate, which the Company refers to as HEMO-CAR-T, was constructed using its proprietary humanised monoclonal antibody against a target of the FLT3 protein that is over-expressed in AML cells and can be found on their surface. Although a relatively recent addition to the Company’s pipeline, this product candidate saw particularly rapid progress during 2020. Testing demonstrated that HEMO-CAR-T was able to effectively programme human T-cells to identify and destroy human AML-derived cells in vitro (in non-animal studies) and in vivo (in animal studies).
HEMO-CAR-T was further engineered during the year by the Company’s scientists in order to increase the safety and versatility of these cells. This led to the introduction of a safety switch mechanism that modulates the activity of HEMO-CAR-T cells and turns them into a “controllable drug” dubbed SAFE-HEMO-CAR-T. This enhancement should dramatically improve the safety and potential versatility of HEMO-CAR-T cells for the treatment of AML and/or conditioning of bone marrow transplants, as well as a number of additional potential indications. SAFE-HEMO-CAR-T therefore represents a tuneable treatment designed to offer control over immune response, alleviating the risk of cytokine release syndrome, a hard-to-predict issue that has arisen during clinical trials of several other CAR-T therapies, slowing their development.
We were delighted to announce in August that we entered into a Sponsored Research Agreement with the University of Pennsylvania (“Penn”), one of the pioneers in this field, to advance HEMO-CAR-T through IND-enabling studies towards clinical trials. Moreover, if the collaboration with Penn continues to prove successful, the work will continue right through to achievement of clinical proof of concept. Penn’s work is led by Dr Saar Gill, Assistant Professor of Medicine, a haematologist-oncologist physician scientist and Scientific Co-Director of the Cell Therapy and Transplantation program at Penn. Dr Gill’s laboratory is part of the Center for Cellular Immunotherapies (“CCI”) whose Director, Dr Carl H. June, conducted pioneering clinical trials of genetically engineered cells including CAR-T cells in patients with HIV and diverse forms of cancer.
It is noteworthy that Penn is one of the global leaders in this field and does not often work with pharmaceutical groups. The CCI team was responsible for the development of the first of only two CAR-T cell therapies that have received approval to date from the FDA, tisagenlecleucel, now sold by Novartis under the Kymriah® brand name for the treatment of ALL. The Directors believe that this is arguably the best-qualified academic team in the world with which to partner to take this product candidate forward.
Hu-PHEC Stem Cell Therapy
The Company’s Human Postnatal Hemogenic Endothelial Cells (“Hu-PHECs”) are a stem cell therapy product candidate based on the discovery by Co-Founder and CEO Dr Vladislav Sandler’s discovery that hematopoietic progenitor stem cells survive into adulthood. The cells address the problem of blood stem cell donor availability and issues around relapse or cell rejection after transplantation. Hu-PHECs may be used as a source of cancer-free, patient-matched blood stem cells for transplantation into a patient.
The Company’s subsidiary in Belgium, Hemogenyx-Cell SPRL, has been considering plans with a number of potential Belgian-based partners, including Orgenesis, Inc. – the provider of funding to Hemogenyx-Cell and also to Immugenyx in a separate agreement through convertible loans – regarding key building blocks for the path through development towards clinical trials of Hu-PHECs, including the establishment of a cell bank.
The Company’s intellectual property portfolio began with the licensing of the then-pending patent to Dr Sandler’s discovery from Cornell University, where he worked at the time, titled Post-Natal Hemogenic Endothelial Cells and their isolation and use. Patent applications were approved by the United States Patent and Trademark Office and issued on 25 February 2020 as Patent Number 10,570,373, and by the European Patent Office on 13 May 2020 as Patent Number 3068875. The patent applications were filed in 2014 and are the subject of Hemogenyx Pharmaceuticals’ exclusive, worldwide sublicensable licence first granted in 2015 and restated in 2019.
Humanised Mice
The Company’s work is greatly accelerated by its uniquely humanised mice, referred to as Advanced Hematopoietic Chimeras (“AHC”) and a further enhanced form, Advanced peripheral blood Hematopoietic Chimeras (“ApbHC”) that produce a wide range of mature blood cell populations such as human T-cells, B-cells and antibody-producing plasma cells. Unlike other humanised mice, ApbHC do not suffer from Graft versus Host Disease, a disease that complicates and often renders impossible the efficient use of peripheral blood mononuclear cells in transplanted mice, shortening their lifespan and suitability for testing, due to immune cells attacking the host. ApbHC mice also survive for longer than other known mouse models, enabling more testing and more robust results, and thus making them a better potential predictor of outcomes in human studies.
In addition to their inherent value to the Group internally, the Company or its subsidiary Immugenyx LLC have struck several past and ongoing collaboration agreements involving ApbHC with such highly-regarded pharmaceutical industry names as Eli Lilly and Company (“Lilly”) and Janssen Research & Development LLC (a J&J company).
Undisclosed
On 26 June 2020, we announced the aforementioned Biological Investigation and Material Supply Agreement with Lilly. Under the agreement, Lilly supplies the Company with biological materials and related confidential information in order for the Company to perform research and development activities aimed at the discovery and validation of novel materials to be used for the treatment of Lupus and possibly other autoimmune diseases. This work is complementary to the Company’s own development currently being undertaken in this field. Confidentiality stipulations in the agreement mean that developments must remain undisclosed for the time being.
The involvement of Lilly is another major vote of confidence in the Company and its talented team of scientific researchers, as it joins the other global pharmaceutical companies mentioned previously on the roster of the Company’s collaborators. This close collaboration offers the potential for ongoing value-adding licensing arrangements with a major pharmaceutical company with the benefit of its global reach and large-scale resources.
CBR
The Company has been developing a new cell therapy platform which the Company refers to as CBR, the essence of which is the programming of immune cells using a novel type of modifiable synthetic receptor to destroy viral pathogens including SARS-CoV-2, which causes COVID-19. Not only can this type of synthetic receptor potentially combat viral pathogens, it can also potentially be modified to programme immune cells to destroy malignant cells causing cancer. The novel synthetic receptor has no connection to, and does not resemble, any known or widely used CARs (e.g., HEMO-CAR-T), and the Directors are not aware of any direct competitor for this product candidate at this time. Hemogenyx Pharmaceuticals is now engaged in preclinical validation of two CBR-based product candidates: one for the treatment of COVID-19, and the other for the treatment of an undisclosed type of cancer.
Scientific Community Engagement
The Company’s talented team of scientists has continued to receive recognition from the scientific community and has made well-received presentations on its CDX antibody and CAR-T therapy product candidates at the highly influential Keystone Symposia for Advances in Cancer Immunotherapy in August, and at the American Society of Hematology meeting and exposition in December. Following the year end, the Company also presented its expanded range of product candidates at the H.C. Wainwright Global Life Sciences Conference in March 2021, showcasing Hemogenyx Pharmaceuticals as a leader in the field of development of medicines for the treatment of blood and autoimmune diseases to the investment community.
Miscellaneous
In July, the Company announced that its U.S. subsidiary was renamed Hemogenyx Pharmaceuticals LLC in order to align the Company’s names across entities and countries, and henceforth always should be referred to as Hemogenyx Pharmaceuticals.
Post Period End Updates
Following the end of the period under review, the Company has continued to make progress in a number of areas and can highlight to shareholders the following developments:
Convertible Debt Facility
In November 2020, Mint Capital Limited (“Mint”) and the Company entered into a Financing Facility agreement (“Financing Facility”) whereby Mint agreed to subscribe for up to £60 million in aggregate principal amount of unsecured Convertible Loan Notes (“CLNs”) pursuant to a subscription agreement. The shareholders of the Company approved the facility at a general meeting in January 2021. Further details of the Financing Facility are set out under the Financial Results heading below.
The proceeds of the first tranche of £12,000,000 should enable the Company to progress at least two of its product candidates – the CDX antibody and HEMO-CAR-T – through IND-enabling studies into clinical trials and, ultimately, to achieve clinical proof of concept.
CDX Antibody
The Company announced in January 2021 that work with GlobalCo has concluded under the CDX antibody development agreement. The result was the selection of a clone of the antibody that is ready for IND-enabling studies, the key step toward clinical trials. The Company recently received notice that GlobalCo will not in-license the CDX antibody at this juncture, and accordingly gave notice to GlobalCo of its intention to exercise its own option to license GlobalCo’s contributions on an exclusive, worldwide basis. As at the date of this document, the Company and GlobalCo are engaged actively in discussions regarding its future development and their respective intellectual property embodied in the final selected clone.
CAR-T Cell Therapy
Further to the Sponsored Research Agreement with the University of Pennsylvania that commenced in August 2020, a further Master Translational Research Services Agreement was signed in January 2021 under which the Company has retained Penn to conduct additional R&D activities with the involvement of various organisations within Penn. As with the prior agreement, these activities will involve Dr Saar Gill and his laboratory. The intended outcome of the complex of activities under the agreement is attaining clinical proof of concept for HEMO-CAR-T, including its variations such as SAFE-HEMO-CAR-T, for the treatment of AML. The principal stages of activity are:
- Vector manufacturing for the delivery of HEMO-CAR-T to the patient’s T-cells;
- An investigational new drug (“IND”) filing for permission to conduct clinical trials; and
- Clinical manufacturing of patient-specific HEMO-CAR programmed T-cells.
The Company has initiated the process of engaging contract manufacturing organizations for
product development and manufacturing of DNA plasmids, viral vectors and HEMO-CAR-T cells under Current Good Manufacturing Practices (“CGMPs”) to support Phase I clinical trials and has contracted Randall Tlachac and his company Quality Systems LLC (“Quality Systems”) to provide oversight and direct product development, manufacturing and quality control operations.
Mr Tlachac has extensive experience in the successful development of cell and gene-based therapies, having led the development of more than 30 products to Phase I/II clinical trial stage, and played a major role in the implementation of Good Tissue Practices regulations since their promulgation in 2004. Quality Systems will be responsible for supporting the Company’s chemistry, manufacturing, and controls (“CMC”) efforts, including providing support for product development, operations, and quality, and for assisting the Company in the implementation of internal documentation systems, development of CMC sections of regulatory submissions, manufacturing supply agreements, Master Files and other tasks.
Randall Tlachac has played the principal role in the approval of 7 New Drug Applications (“NDAs”), and has extensive experience with development of a wide array of products: over 70 Investigational New Drug (“IND”) applications including multi‐specific antibodies, cell, tissue and gene therapy products, CAR therapies, therapeutic proteins, peptides, peptide conjugates, cationic antimicrobial peptides, small molecule pharmaceuticals nanoparticle formulations, and sterile injectable pharmaceuticals. Mr Tlachac’s agreement to work with the Company is further testament – if further proof were needed than the involvement of Dr Gill and University of Pennsylvania, and of multiple pharmaceutical company partners – of the quality of the Company’s work and its prospects to proceed to clinical trials and beyond rapidly.
Paycheck Protection Program Loan Forgiveness
A loan from the U.S. Small Business Administration under the Paycheck Protection Program – described in Note 23 to the financial statements – was forgiven in April 2021.
Overall, very rapid progress has continued despite the restrictions of COVID-19.
Financial Results
During the year the Group made a loss of £2,095,023 (2019: £1,453,144 loss).
As at 31 December 2019 a total of US$1,500,000 of the total facilities available from convertible loan facilities from Orgenesis Inc. had been paid over to the company. The remaining $500,000 was paid over in February 2020.
On 30 January 2020 the Company announced that it had raised £648,200 before expenses through a placing and subscription of 36,011,116 ordinary shares at a price of 1.8p per share. In May, the Company announced a conditional fundraising of £2,500,000 (before expenses) through an oversubscribed placing of 35,714,286 ordinary shares at a price of 7p per share. The raise was conditional on shareholders approving corresponding resolutions at the 4 June AGM and completed immediately thereafter. In May, the Company issued and allotted 668,000 shares at an exercise price of 5.25p per share for a total consideration of £35,070, pursuant to the exercise of warrants.
In July, the Company’s principal broker, SP Angel Corporate Finance LLP (“SP Angel”), published an updated research note that emphasised the Company’s ongoing research progress and diversification of its product candidate portfolio. The note draws comparisons with the valuations of peer companies specialising in blood diseases and with early-stage (preclinical through to Phase II clinical trial stage) UK-listed companies, and concluded that at the time – as now – the Company’s market capitalisation remains well below its peer-group averages and indicates upside potential for the Company’s shareholders, particularly taking into account the pipeline of assets in development and multiple collaboration agreements with leading names in the pharmaceutical industry. The Directors and the Company’s management and staff remain focused on delivering value to shareholders and saving lives.
The key terms of the Mint Financing Facility and CLNs include:
- A principal amount of up to £60,000,000, split into denominations of £50,000 per loan note, subscribed for at par and with no interest payable.
- The CLNs are to be issued in up to nine tranches. The first tranche of £12,000,000 in principal amount was issued on 3 February 2021. The subsequent eight tranches are issuable at the sole discretion of, and in the amounts determined by, the Company at respective intervals of 90 days after this date.
- Each tranche of CLNs is redeemable at par on the date falling 36 months after the relevant issue date.
- Each of the CLNs is convertible into ordinary shares of 1 pence each at any time during the period commencing on the fifth business day following the relevant issue date and ending at 5.00 p.m. London time on the business day immediately prior to the relevant maturity date.
- The price used for conversion will be equal to a 10 per cent discount to the lesser of (i) 125 per cent. of the closing-bid price as reported by Bloomberg for one ordinary share one trading day before the relevant issue date (subject to adjustment to reflect any sub-division or consolidation of the ordinary shares) and (ii) the lowest closing bid-price as reported by Bloomberg for an ordinary share from the three consecutive trading days ending on the day prior to the date of service of the relevant conversion notice (or if such conversion notice is served after 4.35pm on any such date, then the three consecutive trading days ending on the day such conversion notice is served). In no event shall the conversion price be less than the nominal value of an ordinary share.
- A holder will not be permitted to submit a conversion notice in respect of the CLNs if the total ordinary shares held by the holder following the execution of such conversion notice would exceed 29.9% of the Company’s total ordinary shares.
- If the Company commits an “event of default” then the notes could be redeemed at 114-120% of the principal amount of the convertible loan at the option of the holder.
- The Company also has the ability to redeem the CLNs under certain circumstances at 114% of their principal amount.
- Subject to limited exceptions, the CLNs are not transferable.
- Prior to conversion, the CLNs do not entitle the holder to any voting rights in the Company.
The Company has agreed to pay a fee of 5% of the aggregate principal value of the CLNs issued to the arranger for the Financing Facility, payable in shares, subject to the Directors having the necessary shareholder authorities in place to issue such new shares and such issue not requiring the publication of a prospectus by the Company, and otherwise payable in cash. 7,741,935 shares were allotted as an arrangement fee to the arranger of the Financing Facility for the first tranche of funding.
To date, Mint has converted loan notes with principal value of £2,500,000 into shares, leaving convertible loan notes to a value of £9,500,000 outstanding. A conversion notice for a further £900,000 in principal value of loan notes was received from Mint on 23 April 2021 and the corresponding shares will be allotted on or around 4 May 2021, after publication of this report, leaving convertible loan notes to a value of £8,600,000 outstanding.
Scientific Advisory Board & Board Update
I have chaired the Scientific Advisory Board since September 2017 and have worked with the Company to widen its expertise and to bring in advisers that can specifically help at each stage to which the Company’s product development has advanced.
Our Scientific Advisory Board, under my Chairmanship, brings together experienced experts with extensive biotech and large pharma drug development experience and their calibre is a reflection of the potential opportunity that our therapies present.
There were no changes to the composition of the Board during 2020. The Board has continued to demonstrate its confidence in the ongoing success of the business throughout the period under review and post-period end. I have elected to receive most of my remuneration in share options and collectively we remain confident that the Company’s shares should deliver significant shareholder return over the long term.
Conclusion
In all, the Company has made impressive progress in 2020 and into 2021, particularly considering its highly efficient use of capital and small but talented scientific advisory and research team. As the Company approaches its next phase of growth, the investment rationale is stronger than ever. Careful application of the team’s expertise and ingenuity have given the Company a strong portfolio of complementary product candidates that reduce reliance on any one initiative and give it multiple material opportunities for success. Together, these treatments aim to provide an end-to-end solution to removing the need for dangerous bone marrow transplant conditioning regimens and eliminating the need for bone marrow donors, and now have potential applicability to a range of blood and autoimmune disease as well as viral infections. The Company’s patent protections are growing, and it has continuing recognition in the form of collaborations with some of the largest and most respected groups in cutting-edge biopharmaceutical development.
Shareholders may have confidence that the Company’s prospects remain excellent. My fellow directors and I continue to look forward to the realisation of Hemogenyx Pharmaceuticals’ great potential to deliver rewards both to shareholders in the form of increased value and to our target patients and society at large as a life-saving company.
Prof Sir Marc Feldmann AC, FRS
MB BS, PhD, FRCP, FRCPath, FAA, F Med Sci
Chairman
Directors’ Report for the year ended 31 December 2020
The Directors present their report with the audited financial statements of the Group for the year ended 31 December 2020.
The Company’s Ordinary Shares were admitted to listing on the London Stock Exchange under the name Silver Falcon plc, on the Official List pursuant to Chapters 14 of the Listing Rules, which sets out the requirements for Standard Listings, on 9 November 2015.
On 4 October 2017 the Company’s shareholders voted in favour of acquiring the biotechnology company Hemogenyx Pharmaceuticals Limited, with shares being readmitted to trading on 5 October 2017 under the name Hemogenyx Pharmaceuticals plc.
Principal Activity
The Group’s principal activity is the discovery, development and commercialisation of a suite of products to address current problems associated with the treatment of blood disorders such as cancers and autoimmune diseases, with viral infections, and with bone marrow, or hematopoietic stem cell, transplants. The company’s leading technologies aim to change the way in which bone marrow/hematopoietic stem cell (“BM”/”HSC”) transplants are performed and improve their efficacy. Hemogenyx Pharmaceuticals’ distinct and complementary products include immunotherapy product candidates for the treatment of AML and other blood malignancies and patient conditioning – the CDX bi-specific antibody and CAR-T therapy, and a cell therapy product for BM/HSC transplantation – the Hu-PHEC. Each of these products holds the potential to revolutionise the way BM/HSC transplants are being performed or diseases of the blood are treated, offering solutions that mitigate the dangers and limitations associated with the current standard of care.
The Group has three companies that are located outside of the UK. The principal laboratory of the Group is located in Brooklyn, New York, USA. The Group also has a subsidiary in Liège, Belgium.
Results and Dividends
The Consolidated Statement of Comprehensive Income set out on page 48 shows a loss for the year amounting to £2,095,023 (2019: loss of £1,453,144). The Directors do not propose a dividend in respect of the year ended 31 December 2020 (31 December 2019: nil).
Directors and Directors’ Interests
The Directors who held office during the year and up to the date of this report were as follows:
| Date Appointed | Date Resigned | |
| Professor Sir Marc Feldmann | 9 April 2018 | – |
| Dr Vladislav Sandler | 4 October 2017 | – |
| Alexis Sandler | 4 October 2017 | – |
| Peter Redmond | 29 July 2015 | – |
The Directors of the Company who held office at 31 December 2020 had the following beneficial interests in the Ordinary shares of the Company at 31 December 2020 according to the register of directors’ interests:
| Director | At 31 December 2020 | At 31 December 2019 |
| Professor Sir Marc Feldmann | – | – |
| Peter Redmond* | 5,596,270 | 5,040,714 |
| Dr Vladislav Sandler | 41,544,677 | 41,544,677 |
| Alexis Sandler | 75,090,685 | 75,090,685 |
* Peter Redmond holds the majority of these shares through Catalyst Corporate Consultants Ltd of which he is the sole shareholder.
At the date of this report, there have been no further changes to the Directors’ beneficial interest in the Ordinary shares of the Company as disclosed in the table above.
According to the Register of Directors’ Interests, no rights to subscribe for shares in or debentures of Group companies were granted to any of the Directors or their immediate families, or exercised by them, during the financial year except as indicated below (see Note 20 for detail on option plans):
| Options | |||||
| Date of grant | Number of options at start of year | Options granted or acquired during year | Options lapsed during year | Number of options at end of year | |
| Professor Sir Marc Feldmann | |||||
| 9 Apr 2018 | 18,002,568 | – | – | 18,002,568 | |
| 18,002,568 | – | – | 18,002,568 | ||
| Dr Vladislav Sandler | |||||
| 20 August 2020 | – | 5,000,000 | – | 5,000,000 | |
| – | 5,000,000 | – | 5,000,000 | ||
| Peter Redmond | |||||
| 13 July 2020 | – | 2,200,000 | – | 2,200,000 | |
| – | 2,200,000 | – | 2,200,000 | ||
Qualifying Third Party Indemnity Provision
At the date of this report, the Company has a third-party indemnity policy in place for all Directors.
Substantial Shareholders
As at 31 December 2020, the total number of issued Ordinary Shares with voting rights in the Company was 433,636,255 (now: 494,343,020). The Company has been notified of the following interests of 3 per cent or more in its issued share capital as at the date of approval of this report.
| Number of Ordinary | % of | |
| Party Name | Shares | Share Capital |
| Alexis Sandler | 75,090,685 | 15.19 |
| Vladislav Sandler | 41,544,677 | 8.80 |
| Craig Auringer | 23,837,250 | 4.82 |
| Samantha Bauer | 17,082,201 | 3.46 |
Relationship Agreement
In accordance with Listing Rule 9.8.4(14)R, the Company has set out below a statement describing the relationship agreement entered into by the Company with its principal shareholder.
On 8 September 2017, the Company entered into a Relationship Agreement with Dr Vladislav Sandler and Alexis Sandler (the “Controlling Parties”), which came into force at the Company’s re-admission. The principal purpose of the Relationship Agreement is to ensure that the Company is capable at all times of carrying on its business independently of the Controlling Parties.
If the Company ceases to be admitted to the Main Market of the London Stock Exchange, or the Controlling Parties (together with their associates) cease to hold 20 per cent or more of the voting rights over the Company’s shares the Relationship Agreement shall terminate save for certain specified provisions.
The Relationship Agreement provides that the Controlling Parties undertake to use all reasonable endeavours to procure that they and their associates shall:
- conduct all transactions with the Company on an arm’s length basis and on a normal commercial basis;
- not take any action that would have the effect of preventing the Company from complying with its obligations under the Listing Rules or the corporate governance principles adopted by the Group;
- not propose or procure the proposal of a shareholder resolution which is intended to, or appears to be intended to, circumvent the proper application of the Listing Rules; and
- not take any actions which is intended to, or appears to be intended to, breach or circumvent the proper application of the Relationship Agreement, the Listing Rules or the corporate governance principles adopted by the Group.
The Directors believe that the terms of the Relationship Agreement enable the Company to carry on its business independently from the Controlling Parties and their affiliates and ensure that all transactions and relationships between the Company and the Controlling Parties are, and will be, at arm’s length and on a normal commercial basis. The Company has and, in so far as it is aware, the Controlling Parties and their associates have, complied with the independence provisions set out in the Relationship Agreement from the date of the agreement, through the relevant period under review. The ordinary shares owned by the Controlling Parties rank pari passu with the other ordinary shares in all respects.
Share Capital
Details of the issued share capital, together with details of the movement in issued share capital during the year, are shown in Note 18 to the financial statements.
Financial Instruments
Details of the use of the Company’s financial risk management objectives and policies as well as exposure to financial risk are contained in the Accounting policies and Note 25 of the financial statements.
Future Developments and Events Subsequent to the Year End
Further details of the Group’s future developments and events subsequent to the year end are set out in the Chairman’s Statement and Strategic Report.
Corporate Governance
The Corporate Governance report forms part of the Directors’ Report and is disclosed on pages 28-34.
Going Concern
The Company’s business activities, together with facts likely to affect its future operations and financial and liquidity positions are set out in the Chairman’s Statement and Directors’ Strategic Report. In addition, Note 25 to the financial statements discloses the Company’s capital risk management policy and Note 2 details further considerations made by the Directors in respect of going concern, including an assessment of the possible impact on the Company arising from COVID-19.
The Directors, having made due and careful enquiry, are of the opinion that the Company has access to sufficient funding in order to execute its operations over the next 12 months. The Directors therefore have made an informed judgment, at the time of approving the financial statements, that there is a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. As a result, the Directors have adopted the going concern basis of accounting in the preparation of the annual financial statements.
Political Donations
The Group made no political donations during the year (2019: £nil).
Greenhouse gas emissions
Greenhouse gas emissions, energy consumption and energy efficiency disclosures have not been provided because the Company has consumed less than 40,000 kWh of energy during the period.
Charitable Donations
There were no charitable donations made by the Group in the current or prior year.
Auditors
The auditors, PKF Littlejohn LLP, have expressed their willingness to continue in office and a resolution to reappoint them will be proposed at the Annual General Meeting.
Statement of Directors’ Responsibilities
The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have elected to prepare the financial statements in accordance with international accounting standards in conformity with the Companies Act 2006.
Under Company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that year.
In preparing these financial statements, the Directors are required to:
- Select suitable accounting policies and then apply them consistently;
- Make judgments and accounting estimates that are reasonable and prudent;
- State whether applicable international accounting standards in conformity with the Companies Act 2006 have been followed, subject to any material departures disclosed and explained in the financial statements; and
- Prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group and parent company’s transactions and disclose with reasonable accuracy at any time the financial position of the Group and parent company and enable them to ensure that the financial statements and the Directors’ remuneration report comply with the Companies Act 2006 and, as regards the group financial statements, international financial reporting standards adopted pursuant to Regulation (EC) No.1606/2002 as it applies in the European Union. They are also responsible for safeguarding the assets of the Group and parent company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. They are also responsible to make a statement that they consider that the annual report and accounts, taken as a whole, is fair, balanced, and understandable and provides the information necessary for the shareholders to assess the Group and parent company’s position and performance, business model and strategy.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company’s website. Legislation in the United Kingdom governing the preparation and dissemination of the financial statements may differ from legislation in other jurisdictions.
Directors’ Responsibility Statement Pursuant to Disclosure and Transparency Rules
Each of the Directors, whose names and functions are listed on page 1, confirm that, to the best of their knowledge and belief:
- the group and company financial statements have been prepared in accordance with international financial reporting standards adopted pursuant to Regulation (EC) No.1606/2002 as it applies in the European Union, and give a true and fair view of the assets, liabilities, financial position and loss of the Group and parent company; and
- the Annual Report and financial statements, including the Business review, includes a fair review of the development and performance of the business and the position of the Group and parent company, together with a description of the principal risks and uncertainties that they face.
Disclosure of Information to Auditors
So far as the Directors are aware, there is no relevant audit information of which the Company’s auditors are unaware, and each Director has taken all the steps that he ought to have taken as a Director in order to make himself aware of any relevant audit information and to establish that the Company’s auditors are aware of that information.
Approved by the Board on 30 April 2021
Dr Vladislav Sandler
CEO
Consolidated Statement of Comprehensive Income
| Continuing Operations | Note | Year Ended 31 December 2020 | Year Ended 31 December 2019 |
|
£ |
£ | ||
| Revenue | – | – | |
| Administrative Expenses | 6 | (2,043,633) | (1,589,407) |
| Depreciation Expense | 12 | (106,753) | (94,726) |
| Operating Loss | (2,150,386) | (1,684,133) | |
| Other Income | 7 | 85,237 | 213,126 |
| Finance Income | 3,365 | 14,191 | |
| Finance Costs | (33,239) | (31,328) | |
| Loss before Taxation | (2,095,023) | (1,488,144) | |
| Income tax | 10 | – | 35,000 |
| Loss for the year | (2,095,023) | (1,453,144) | |
| Loss attributable to: | |||
| – Owners of Hemogenyx Pharmaceuticals plc | (2,082,220) | (1,450,627) | |
| – Non-controlling interests | (12,803) | (2,517) | |
| (2,095,023) | (1,453,144) | ||
| Items that may be reclassified subsequently to profit or loss: | |||
| Translation of foreign operations | (61,119) | 16,176 | |
| Other comprehensive income for the year | (61,119) | 16,176 | |
| Total comprehensive income for the year | (2,156,142) | (1,436,968) | |
| Attributable to: | |||
| Owners of Hemogenyx Pharmaceuticals plc | (2,143,339) | (1,434,451) | |
| Non-controlling interests | (12,803) | (2,517) | |
| Total comprehensive income for the year | (2,156,142) | (1,436,968) | |
| Basic and diluted earnings per share attributable to the equity owners of the Company | 11 | (0.005) | (0.004) |
The Notes to the Financial Statements form an integral part of these Financial Statements.
Consolidated Statement of Financial Position
| Group | Note |
31 December 2020 |
31 December 2019 |
| Assets | £ | £ | |
| Non-current assets | |||
| Property, plant and equipment | 12 | 223,858 | 123,922 |
| Right of use asset | 13 | 45,885 | 109,442 |
| Deferred financing costs | 28 | 223,615 | – |
| Intangible asset | 14 | 254,955 | 262,050 |
| Total non-current assets | 747,313 | 495,414 | |
| Current assets | |||
| Trade and other receivables | 17 | 104,972 | 55,804 |
| Cash and cash equivalents | 1,812,299 | 498,679 | |
| Total current assets | 1,917,271 | 554,483 | |
| Total assets | 2,664,584 | 1,049,897 | |
| Equity and Liabilities | |||
| Equity attributable to shareholders | |||
| Paid-in Capital | |||
| Called up share capital | 18 | 4,336,363 | 3,612,429 |
| Share premium | 19 | 9,990,965 | 7,699,789 |
| Other reserves | 20 | 764,815 | 399,229 |
| Reverse asset acquisition reserve | 4 | (6,157,894) | (6,157,894) |
| Foreign currency translation reserve | (7,896) | 53,223 | |
| Retained Earnings | (8,035,514) | (5,953,294) | |
| Equity attributable to owners of the Company | 890,838 | (346,518) | |
| Non-controlling interests | (15,158) | (2,517) | |
| Total Equity | 875,680 | (349,035) | |
| Liabilities | |||
| Non-current liabilities | |||
| Lease liabilities | 13 | 10,028 | 73,192 |
| Borrowings | 23 | – | 1,144,167 |
| Total non-current liabilities | 10,028 | 1,217,359 | |
| Current liabilities | |||
| Trade and other payables | 22 | 160,771 | 141,677 |
| Borrowings | 23 | 1,579,378 | – |
| Lease liabilities | 13 | 38,726 | 39,896 |
| Total Current Liabilities | 1,778,875 | 181,573 | |
| Total Liabilities | 1,788,903 | 1,398,932 | |
| Total equity and liabilities | 2,664,584 | 1,049,897 |
The Notes to the Financial Statements form an integral part of these Financial Statements.
This report was approved by the Board and authorised for issue on 30 April 2021 and signed on its behalf by:
Dr Vladislav Sandler
CEO
Company Statement of Financial Position
| Company | Note |
31 December 2020 |
31 December 2019 |
| £ | £ | ||
| Assets | |||
| Non-current assets | |||
| Loan to subsidiaries | 15 | 2,766,051 | 1,570,839 |
| Deferred financing costs | 28 | 213,472 | – |
| Investment in subsidiary | 16 | 8,000,000 | 8,000,000 |
| Total non-current assets | 10,979,523 | 9,570,839 | |
| Current assets | |||
| Trade and other receivables | 17 | 61,448 | 6,282 |
| Cash and cash equivalents | 1,036,214 | 14,505 | |
| Total current assets | 1,097,662 | 20,787 | |
| Total assets | 12,077,185 | 9,591,626 | |
| Equity and Liabilities | |||
| Equity attributable to shareholders | |||
| Paid-in Capital | |||
| Called up share capital | 18 | 4,336,363 | 3,612,429 |
| Share premium | 19 | 9,990,965 | 7,699,789 |
| Other reserves | 20 | 749,767 | 386,662 |
| Retained Earnings | (3,136,290) | (2,205,815) | |
| Total Equity | 11,940,805 | 9,493,065 | |
| Liabilities | |||
| Current liabilities | |||
| Trade and other payables | 22 | 136,380 | 98,561 |
| Total Current Liabilities | 136,380 | 98,561 | |
| Total Liabilities | 136,380 | 98,561 | |
| Total equity and liabilities | 12,077,185 | 9,591,626 |
Hemogenyx Pharmaceuticals plc has used the exemption granted under s408 of the Companies Act 2006 that allows for the non-disclosure of the Income Statement of the parent company. The after-tax loss attributable to Hemogenyx Pharmaceuticals plc for the year ended 31 December 2020 was £930,475 (2019: £486,048).
The Notes to the Financial Statements form an integral part of these Financial Statements.
This report was approved by the Board and authorised for issue on 30 April 2020 and signed on its behalf by:
Dr Vladislav Sandler
CEO
Consolidated Statement of Changes in Equity
The Notes to the Financial Statements form an integral part of these Financial Statements.
Company Statement of Changes in Equity
Company
| Called up Share Capital | Share Premium | Other reserves | Retained earnings | Total Equity | |
| £ | £ | £ | £ | £ | |
| As at 1 January 2019 | 3,601,762 | 7,340,267 |
680,564 |
(1,765,967) | 9,856,626 |
| Loss in year | – | – |
– |
(486,048) | (486,048) |
| Other Comprehensive Income | – | – |
– |
– | – |
| Total comprehensive income for the year | – | – |
– |
(486,048) | (486,048) |
| Issue of shares – exercise of warrants | 10,667 | 21,333 | – | – | 32,000 |
| Issue of options | – | – | 90,487 | – | 90,487 |
| Writeback of options lapsed | – | – | (46,200) | 46,200 | – |
| Write-back of warrants exercised | – | 338,189 |
(338,189) |
– | – |
| As at 31 December 2019 | 3,612,429 | 7,699,789 |
386,662 |
(2,205,815) | 9,493,065 |
| Loss in year | – | – |
– |
(930,475) | (930,475) |
| Other Comprehensive Income | – | – |
– |
– | – |
| Total comprehensive income for the year | – | – |
– |
(930,475) | (930,475) |
| Issue of shares | 717,254 | 2,262,786 | – | – | 2,980,040 |
| Exercise of warrants | 6,680 | 28,390 | 35,070 | ||
| Issue of options | – | – | 363,105 | – | 363,105 |
| As at 31 December 2020 | 4,336,363 | 9,990,965 |
749,767 |
(3,136,290) | 11,940,805 |
The Notes to the Financial Statements form an integral part of these Financial Statements.
Consolidated Statement of Cash Flows
| Group | Note | Year Ended
31 December 2020 |
Year Ended
31 December 2019 |
|
| £ | £ | |||
| Cash flows generated from operating activities | ||||
| Loss before income tax | (2,095,023) | (1,453,144) | ||
| Depreciation | 12 | 106,753 | 94,726 | |
| Other Non-cash items | 172 | – | ||
| Interest income | (3,365) | (14,191) | ||
| Interest expense | 33,239 | 31,328 | ||
| Compensation settled in shares | – | 32,000 | ||
| Share based payments | 20 | 363,104 | 90,487 | |
| Foreign exchange gain/(loss) | (146,772) | 20,745 | ||
| (Decrease) in trade and other payables | (35,738) | (17,880) | ||
| (Increase)/decrease in trade and other receivables | (21,397) | 16,056 | ||
| Prepaid and deposits | 623 | – | ||
| Net cash outflow used in operating activities | (1,798,404) | (1,199,873) | ||
| Cash flows generated from financing activities | ||||
| Proceeds from issuance of equity securities | 3,148,200 | – | ||
| Proceeds from exercise of warrants | 35,070 | |||
| Proceeds from borrowings | 23 | 461,776 | – | |
| Share issue costs | (168,160) | – | ||
| Deferred financing costs | (223,615) | – | ||
| Payment of lease liabilities | 13 | (41,249) | (39,393) | |
| Net cash flow generated from (used in) financing activities | 3,212,022 | (39,393) | ||
| Cash flows generated from investing activities | ||||
| Interest income | 3,365 | 14,191 | ||
| Purchase of property, plant & equipment | (173,047) | (11,918) | ||
| Net cash flow generated from (used in) investing activities | (169,682) | 2,273 | ||
| Net increase /(decrease) in cash and cash equivalents | 1,243,936 | (1,236,993) | ||
| Effect of exchange rates on cash | 69,684 | (26,756) | ||
| Cash and cash equivalents at the beginning of the period | 498,679 | 1,762,428 | ||
| Cash and cash equivalents at the end of the period | 1,812,299 | 498,679 | ||
The Notes to the Financial Statements form an integral part of these Financial Statements.
Company Statement of Cash Flows
| Company | Note | Year Ended 31 December 2020 | Year Ended 31 December 2019 |
| £ | £ | ||
| Cash flows generated from operating activities | |||
| Loss before income tax | (930,475) | (486,048) | |
| Foreign exchange (gain) | 26,508 | 48,621 | |
| Interest income | – | (76) | |
| Compensation settled in shares | – | 32,000 | |
| Share based payments | 20 | 363,105 | 90,487 |
| (Decrease) in trade and other payables | (13,153) | (35,524) | |
| Decrease in trade and other receivables | (4,195) | 69,692 | |
| Net cash outflow used in operating activities | (558,210) | (280,848) | |
| Cash flows generated from financing activities | |||
| Proceeds from issuance of equity securities | 3,148,200 | – | |
| Proceeds from exercise of warrants | 35,070 | – | |
| Share issue costs | (168,160) | – | |
| Deferred financing costs | (213,472) | – | |
| Net cash flow generated from financing activities | 2,801,638 | – | |
| Cash flows generated from investing activities | |||
| Interest income | – | 76 | |
| Loan to related parties | (1,221,678) | (151,914) | |
| Net cash flow generated from investing activities | (1,221,678) | (151,838) | |
| Net increase/(decrease) in cash and cash equivalents | 1,021,750 | (432,686) | |
| Effect of exchange rates on cash | (41) | (13,812) | |
| Cash and cash equivalents at the beginning of the period | 14,505 | 461,003 | |
| Cash and cash equivalents at the end of the period | 1,036,214 | 14,505 |
The Notes to the Financial Statements form an integral part of these Financial Statements.
Notes to the Financial Statements
1. General information
The Group’s business is preclinical-stage biotechnology focused on the discovery, development and commercialisation of innovative treatments relating to bone marrow/hematopoietic (blood-forming) stem cell (BM/HSC) transplants for blood diseases, including leukaemia, lymphoma and bone marrow failure, autoimmune disease, and viral infections. The products under development are designed to address a range of problems that occur with current standard of care treatments.
The Company’s registered office is located at 5 Fleet Place, London EC4M 7RD, and it is listed on the London Stock Exchange.
2. Summary of significant accounting policies
The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.
Basis of preparation
The financial statements have been prepared in accordance with international accounting standards in conformity with the Companies Act 2006 and international financial reporting standards adopted pursuant to Regulation (EC) No.1606/2002 as it applies in the European Union. The financial statements have been prepared under the historical cost convention.
Basis of consolidation
The consolidated financial statements comprise the financial statements of Hemogenyx Pharmaceuticals plc and its subsidiaries as at 31 December 2020. The financial statements of the subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting policies.
All intra-group balances, transactions, income and expenses and profits and losses resulting from intra-group transactions that are recognised in assets, are eliminated in full.
Subsidiaries are fully consolidated from the date of acquisition, being the date on which the Group obtains control, and continue to be consolidated until the date that such control ceases. Hemogenyx Pharmaceuticals plc owns the majority of the shareholdings and has operational control over all its subsidiaries. Please refer to Note 4 for information on the consolidation of Hemogenyx Pharmaceuticals LLC.
Hemogenyx Pharmaceuticals plc has used the exemption grated under s408 of the Companies Act 2006 that allows for the non-disclosure of the Income Statement of the parent company. The after-tax loss attributable to Hemogenyx Pharmaceuticals plc for the year ended 31 December 2020 was £930,475 (2019: £486,048).
Research and development expenditure
Research and development
Expenditure on research activities, undertaken with the prospect of gaining new scientific or technical knowledge and understanding, is expensed in profit or loss as incurred. Development activities involve a plan or design for the production of new or substantially improved products and processes. Development expenditures are capitalised only if development costs can be measured reliably, the product or process is technically and commercially feasible, future economic benefits are probable, and the Company intends to, and has sufficient resources to, complete development and to use or sell the asset. No development costs have been capitalised to date.
Clinical trial expenses
Clinical trial expenses are a component of the Company’s research and development costs. These expenses include fees paid to contract research organisations, clinical sites, and other organisations who conduct development activities on the Company’s behalf. The amount of clinical trial expenses recognised in the period related to clinical agreements is based on estimates of the work performed using an accrual basis of accounting. These estimates incorporate factors such as patient enrolment, services provided, contractual terms, and prior experience with similar contracts.
Government grants
Government grants relate to financial grants from governments, public authorities, and similar local, national or international bodies. These are recognised when there is a reasonable assurance that the Company will comply with the conditions attaching to them, and that the grant will be received. Government grants relating to research and development are off-set against the relevant costs.
Intangibles
Research and development
Research expenditure is written off as incurred. Development costs are capitalised only if the expenditure can be measured reliably, the product or process is technically and commercially feasible, future economic benefits are probable, the Group intends to and has sufficient resources to complete development and to use or sell the asset, and it is able to measure reliably the expenditure attributable to the intangible asset during its development.
The Group’s view is that capitalised assets have a finite useful life and to that extent they should be amortised over their respective unexpired periods with provision made for impairment when required. Assets capitalised are not amortised until the associated product is available for use or sale. Amortisation is calculated using the straight-line method to allocate the costs of development over the estimated useful economic lives. Estimated useful economic life is assessed by reference to the remaining patent life and may be adjusted after taking into consideration product and market characteristics such as fundamental building blocks and product life cycle specific to the category of expenditure.
Intellectual property (IP)
IP assets (comprising patents, know-how, copyright and licences) acquired by the Group as a result of a business combination are initially recognised at fair value or as a purchase at cost and are capitalised.
Internally generated IP costs are written off as incurred except where IAS 38 criteria, as described in research and development above, would require such costs to be capitalised.
The Group’s view is that capitalised IP assets have a finite useful life and to that extent they should be amortised over their respective unexpired periods with provision made for impairment when required. Capitalised IP assets are not amortised until the Group is generating an economic return from the underlying asset and as such no amortisation has been incurred to date as the products to which they relate are not ready to be sold on the open market. When the trials are completed and the products attain the necessary accreditation and clearance from the regulators, the Group will assess the estimated useful economic like and the IP will be amortised using the straight-line method over their estimated useful economic lives.
Fixed assets
All property, plant and equipment are stated at historical cost less accumulated depreciation or impairment value. Cost includes the original purchase price and expenditure that is directly attributable to the acquisition of the items to bring the asset to its working condition. Depreciation is provided at rates calculated to write off the cost less estimated residual value of each asset over its expected useful economic life. Right of Use assets are depreciated over their expected useful economic life on the same basis as owned assets, or where shorter, the lease term. Assets are reviewed for impairment when events or changes in circumstances indicate that the carrying amount may not be recoverable.
The following rates are used:
| Computer equipment | 33% | Straight-line |
| Property, plant & equipment | 20% – 50% | Straight-line |
Impairment of non-financial assets
The Group is required to review, at least annually, whether there are indications (events or changes in circumstances) that non-financial assets have suffered impairment and that the carrying amount may exceed the recoverable amount. If there are indications of impairment then an impairment review is undertaken. An impairment charge is recognised within operating costs for the amount by which the carrying amount exceeds its recoverable amount. The recoverable amount is the higher of the asset’s fair value less costs to sell and the value-in-use. In the event that an intangible asset will no longer be used, for example, when a patent is abandoned, the balance of unamortised expenditure is written off.
Impairment reviews require the estimation of the recoverable amount based on value-in-use calculations. Non-financial assets relate typically to investments in related parties and in-process development and patents, and require broader assumptions than for developed technology. Key assumptions taken into consideration relate to technological, market and financial risks and include the chance of product launch taking into account the stage of development of the asset, the scale of milestone and royalty payments, overall market opportunities, market size and competitor activity, revenue projections, estimated useful lives of assets (such as patents), contractual relationships and discount rates to determine present values of cash flows.
Investments
Equity investments in subsidiaries are held at cost, less any provision for impairment. As there is no quoted price in an active market, fair value cannot be reliably measured.
Going concern
The preparation of financial statements requires an assessment on the validity of the going concern assumption.
The Directors have given particular thought to the impact on the Group that may result from the novel coronavirus and any other potential pandemics that may arise. The Group’s New York operations are classed as an essential business and are not subject to closure, and so work has continued with prudent hygiene and distancing measures in place including limited work in the laboratory on rota and work from home. The Group is allowing for extended delivery times for some supplies, and for slower progress with collaboration partners. The Board and UK management continue to operate remotely, as usual. At present the Group believes that there should be no material disruption to its work, but the Board continues to monitor these risks and the Group’s business continuity plans.
The Directors have reviewed projections for a period of at least 12 months from the date of approval of the financial statements. The financial statements have been prepared on the going concern basis. The Group’s forecasts and projections, taking account of reasonably possible changes in trading performance, show that the Group will not require further funding in the next 12 months. As discussed in Note 28, the Group has entered into a financing agreement which will provide up to £60 million of financing to the Group over the next few years. The Directors therefore believe that the Group has or will have access to sufficient funding in order to execute its operations over the next 12 months. Therefore, the Directors consider the going concern basis appropriate.
Trade and other receivables and payables
Trade and other receivables are amounts due from customers for services performed in the ordinary course of business. If collection is expected in one year or less (or in the normal operating cycle of the business if longer), they are classified as current assets. If not, they are presented as non-current assets.
Trade and other receivables are recognised initially at fair value, and subsequently measured at amortised cost using the effective interest method, less provision for impairment.
Other liabilities measured at amortised cost are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. The liabilities are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer). If not, they are presented as non-current liabilities.
The liabilities are recognised initially at fair value, and subsequently measured at amortised cost using the effective interest method.
Foreign currencies
Functional and presentation currency
The Company’s presentation currency is the British Pound Sterling (“£”). The functional currency for the Company, being the currency of the primary economic environment in which the Company operates, is the British Pound Sterling. The individual financial statements of each of the Company’s wholly owned subsidiaries are prepared in the currency of the primary economic environment in which it operates (its functional currency).
The financial statements of Hemogenyx Pharmaceuticals LLC, Immugenyx LLC and Hemogenyx-Cell SPRL have been translated in to Pound Sterling in accordance with IAS 21 The Effects of Changes in Foreign Exchange Rates. This standard requires that assets and liabilities be translated using the exchange rate at period end, and income, expenses and cash flow items are translated using the rate that approximates the exchange rates at the dates of the transactions (i.e. the average rate for the period). The foreign exchange differences on translation of Hemogenyx Pharmaceuticals LLC, Immugenyx LLC and Hemogenyx-Cell SPRL are recognised in other comprehensive income (loss).
Foreign currency transactions
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing on the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at period-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit and loss.
Share capital
Ordinary Shares are classified as equity. Equity instruments issued by the Hemogenyx Pharmaceuticals Group are recorded at the proceeds received, net of direct issue costs.
Cash
Cash consists of cash bank deposit balances.
Deferred Financing Costs
Deferred financing costs represent direct expenditures made by the Company for the financing transaction completed in January 2021. These costs will be offset against the proceeds received in 2021 from the financing transactions.
Share based payments
The Group has applied the requirements of IFRS 2 Share-based Payment for all grants of equity instruments.
The Group operates an equity-settled share option plan to certain shareholders. The fair value of the service received in exchange for the grant of options and warrants is recognised as an expense. Equity-settled share based payments are measured at fair value (excluding the effect of non-market based vesting conditions) at the date of grant. The fair value determined at the grant date of equity-settled share-based payment is expensed on a graded vesting basis over the vesting period, based on the Group’s estimate of shares that will eventually vest and adjusted for the effect of non-market based vesting conditions.
Fair value is measured by use of the Black-Scholes model. The expected life used in the models has been adjusted, based on management’s best estimate, for the effects of non-transferability, exercise restrictions, and behavioural considerations.
In addition, the Group issues equity-settled share-based payments to the directors, senior management and employees (“Employee Share Options”), to corporate finance advisers for assistance in raising private equity, and to its Scientific Advisory Board members (“Non-employee Share Options”). Equity-settled share-based payments are measured at fair value at the date of grant for Employee Share Options and the date of service for Non-employee Share Options. The fair value determined at the grant date or service date, as applicable, of the equity-settled share-based payments is expensed, with a corresponding credit to equity, on a straight-line basis over the vesting period, based on the Group’s estimate of shares that will eventually vest. At each subsequent reporting date, the Group calculates the estimated cumulative charge for each award having regard to any change in the number of options that are expected to vest and the expired portion of the vesting period. The change in this cumulative charge since the last reporting date is expensed with a corresponding credit being made to equity. Once an option vests, no further adjustment is made to the aggregate amount expensed.
The fair value is calculated using the Black Scholes method for both Employee and Non-employee Share Options as management views the Black Scholes method as providing the most reliable measure of valuation. The expected life used in the model has been adjusted, based on management’s best estimate, for the effects of non-transferability exercise restrictions and behavioural considerations. The market price used in the model is the issue price of Company shares at the last placement of shares immediately preceding the calculation date. The fair values calculated are inherently subjective and uncertain due to the assumptions made and the limitation of the calculations used.
Taxation
Current tax
Current taxation is based on the results for the year as adjusted for items that are non-assessable or disallowed. It is calculated using rates that have been enacted, or substantially enacted, by the balance sheet date. Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid to the relevant taxation authorities.
Deferred tax
Deferred income tax is recognised on all temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements, with the following exceptions:
- where the temporary difference arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither accounting nor taxable profit or loss;
- in respect of taxable temporary differences associated with investment in subsidiaries, associates and joint ventures, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future; and
- deferred income tax assets are recognised only to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, carried forward tax credits or tax losses can be utilised.
Deferred income tax assets and liabilities are measured on an undiscounted basis at the tax rates that are expected to apply when the related asset is realised or liability is settled, based on tax rates and laws enacted or substantively enacted at the statement of financial position date.
The carrying amount of deferred income tax assets is reviewed at each statement of financial position date. Deferred income tax assets and liabilities are offset, only if a legally enforcement right exists to set off current tax assets against current tax liabilities, the deferred income taxes related to the same taxation authority and that authority permits the Company to make a single net payment.
Income tax is charged or credited directly to equity if it relates to items that are credited or charged to equity. Otherwise income tax is recognised in the statement of comprehensive income.
Financial Assets and Liabilities
Financial assets and liabilities are recognised in the Company’s statement of financial position when the Company becomes a party to the contractual provisions of the instrument. The Company currently does not use derivative financial instruments to manage or hedge financial exposures or liabilities.
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities greater than 12 months after the end of the reporting period. These are classified as non-current assets. The Company’s loans and receivables comprise Trade and Other Receivables and Cash and Cash Equivalents in the Statement of Financial Position.
Impairment of Financial Assets
The Company and Group assesses at each reporting date whether a financial asset is impaired and will recognise the impairment loss immediately through the consolidated statement of comprehensive loss.
Interest Bearing Loans and Borrowings
Borrowings are initially recognised at the fair value of consideration received less directly attributable transaction costs. After initial recognition, borrowings are subsequently measured at amortised cost using the effective interest rate method. Where borrowings are provided by shareholders at an interest rate discounted to market rates, the difference on initial fair value is taken to equity as a capital contribution.
Where the Group has entered into a hybrid instrument whereby there is a debt instrument and an embedded derivative financial liability, the fair value of the debt instrument less the fair value of the derivative financial liability is equal to loan recognised on initial measurement.
IFRS 15, Revenue from Contracts with Customers
The Company follows IFRS 15, which establishes principles for reporting useful information to users of financial statements about the nature, amount, timing, and uncertainty of revenue and cash flows arising from an entity’s contracts with customers. The standard establishes a five-step principle-based approach for revenue recognition and is based on the concept of recognising an amount that reflects the consideration for performance obligations only when they are satisfied, and the control of goods or services is transferred.
The majority of the Group’s revenue is derived from fees related to collaboration agreements.
Management reviewed contracts where the Group received consideration in order to determine whether or not they should be accounted for in accordance with IFRS 15. To date, Hemogenyx Pharmaceuticals has entered into few transactions that meet the scope of IFRS 15. Instead, most income has been generated through collaboration agreements and grants with counterparties that do not meet the definition of a customer, and therefore the contracts fall outside the scope of IFRS 15 and have been accounted for in accordance with IAS 20.
Income is recognised at either a point-in-time or over time, depending on the nature of the services and existence of acceptance clauses.
IFRS 16, Leases
IFRS 16 requires lessees to recognise a lease liability reflecting future lease payments and a ‘right-of-use asset’ for virtually all lease contracts. IFRS 16 includes an optional exemption for certain short-term leases and leases of low-value assets; however, this exemption can only be applied by lessees. For lessors, the accounting remains substantially unchanged. IFRS 16 provides updated guidance on the definition of a lease (as well as the guidance on the combination and separation of contracts); under IFRS 16, a contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.
The right-of-use asset and lease liability are both based on the present value of lease payments due over the term of the lease, with the asset being depreciated in accordance with IAS 16 Property, Plant and Equipment and the liability increased for the accretion of interest and reduced by lease payments.
Note 13 sets out the key impacts on the Consolidated Statement of Comprehensive Loss and the Consolidated Statement of Financial Position of the adoption of the standard.
Segmental reporting
The Group’s operations are located in New York, USA and in Liège, Belgium with the head office located in the United Kingdom. The main assets of the Group, cash and cash equivalents, are held in the United Kingdom, Belgium and the United States. The Board ensures that adequate amounts are transferred internally to allow all companies to carry out their operations on a timely basis.
The Group currently has one reportable segment – a biotechnology company focused on the discovery, development and commercialisation of innovative treatments relating to bone marrow/hematopoietic (blood-forming) stem cell (BM/HSC) transplants for blood disease.
New Accounting Standards and Interpretations issued and applied in the Financial Statements
Amendments to References to the Conceptual Framework in IFRS Standards: included are revised definitions of an asset and a liability as well as new guidance on measurement and derecognition, presentation and disclosure.
Amendment to IFRS 3: Business Combinations: the amendments clarify that to be considered a business, an acquired set of activities and assets must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create outputs. The definition removes the reference to an ability to reduce costs, and the assessment of whether market participants are capable of replacing any missing inputs or processes and continuing to produce outputs. An optional concentration test that permits a simplified assessment of whether an acquired set of activities and assets is not a business has been included as part of the amendments.
Amendments to IAS 1 and IAS 8: Definition of Material: the amendments clarify the definition of material and how it should be applied. The amendments ensure that the definition of material is consistent across all IFRS Standards.
Adoption of the above standards did not have a material impact on the consolidated financial statements.
New Accounting Standards and Interpretations in issue but not applied in the Financial Statements
The standards and interpretations that are issued, but not yet effective, up to the date of issuance of the financial statements are listed below. The Group and Company intend to adopt these standards, if applicable, when they become effective. These are summarised below:
Amendments to IAS 1: Classification of Liabilities as Current or Non-current: the amendments clarify that the classification of liabilities as current or non-current should be based on rights that are in existence at the end of the reporting period, and refer to the “right” to defer settlement by at least twelve months. They make explicit that only rights in place “at the end of the reporting period” should affect the classification of a liability. The amendments clarify that classification is unaffected by expectations about whether an entity will exercise its right to defer settlement of a liability, and clarify that settlement refers to the transfer to the counterparty of cash, equity instruments, other assets or services. Issued 23 January 2020, applies to accounting periods beginning on or after 1 January 2022, subject to EU endorsement.
Amendment to IAS 1: Classification of Liabilities as Current or Non-current – Deferral of Effective Date: the amendment defers the effective date of the January 2020 amendments to IAS 1 by one year to annual reporting periods beginning on or after 1 January 2023. Issued 15 July 2020, applies to accounting periods beginning on or after 1 January 2023 with early application of the January 2020 amendments permitted, subject to EU endorsement.
Amendments to IFRS 3: Business Combinations – reference to the Conceptual Framework: The changes in Reference to the Conceptual Framework (Amendments to IFRS 3) update IFRS 3 so that it refers to the 2018 Conceptual Framework instead of the 1989 Framework. They also add to IFRS 3 a requirement that, for transactions and other events within the scope of IAS 37 or IFRIC 21, an acquirer applies IAS 37 or IFRIC 21 (instead of the Conceptual Framework) to identify the liabilities it has assumed in a business combination. Lastly, they add to IFRS 3 an explicit statement that an acquirer does not recognise contingent assets acquired in a business combination. Issued 14 May 2020, applies for annual periods beginning on or after 1 January 2020, with early application permitted if an entity also applies all other updated references at the same time or earlier, subject to EU endorsement.
Annual Improvements to IFRS Standards 2018-2020: The pronouncement contains amendments to four International Financial Reporting Standards (IFRSs) as result of the IASB’s annual improvements project:
- IFRS 1 First-time Adoption of International Financial Reporting Standards: subsidiary as a first-time adopter – The amendment permits a subsidiary that applies paragraph D16(a) of IFRS 1 to measure cumulative translation differences using the amounts reported by its parent, based on the parent’s date of transition to IFRSs.
- IFRS 9 Financial Instruments – fees in the ‘10 per cent’ test for derecognition of financial liabilities – The amendment clarifies which fees an entity includes when it applies the ‘10 per cent’ test in IFRS 9 in assessing whether to derecognise a financial liability. An entity includes only fees paid or received between the entity (the borrower) and the lender, including fees paid or received by either the entity or the lender on the other’s behalf.
- IFRS 16 Leases – Lease incentives – the amendment to Illustrative Example 13 accompanying IFRS 16 removes from the example the illustration of the reimbursement of leasehold improvements by the lessor in order to resolve any potential confusion regarding the treatment of lease incentives that might arise because of how lease incentives are illustrated in that example. Issued 14 May 2020, applicable for annual periods beginning on or after 1 January 2022 with early application permitted in respect of IFRS 1, IFRS 9, and IAS 41. The amendment to IFRS 16 only regards an illustrative example, so no effective date is stated. All subject to EU endorsement.
The Group has not early adopted any of the above standards and the directors are assessing the impact on future financial statements. There are no other IFRS or IFRIC interpretations that are not yet effective that would be expected to have a material impact on the Group.
3. Significant accounting judgements, estimates and assumptions
The preparation of the financial statements in conformity with International Financial Reporting Standards requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Company’s accounting policies.
Estimates and judgements are continually evaluated, and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.
The principal areas in which judgement is applied are as follows:
Fair value disclosure
The embedded derivative elements of the convertible notes are measured using a risk-based pricing model. The computed fair value was not significant in 2020 and 2019.
Valuation of stock options
Management uses the Black Scholes model to value the share options. The model requires use of assumptions regarding volatility, risk free interest rate and a calculation of the value of the option at the time of the grant. Please see Note 20 for details.
Intangible assets impairment
When there is an indicator of a significant and permanent reduction in the value of intangible assets, an impairment review is carried out. The impairment analysis is principally based on estimated discounted future cash flows. The determination of the assumptions is subjective and requires the exercise of considerable judgement about the outcome of research and development activity, probability of technical and regulatory success, amount and timing of projected future cash flow or changes in market conditions. Any changes in key assumptions could materially affect whether an impairment exists. See Note 14 for further details.
4. Reverse acquisition and LSE listing
On 4 October 2017, the Company acquired the entire issued share capital of Hemogenyx Pharmaceuticals LLC, a private company incorporated in the United States, by way of a share for share exchange. In substance, the shareholders of Hemogenyx Pharmaceuticals LLC acquired a controlling interest in the Company and the transaction has therefore been accounted for as a reverse acquisition. Following the completion of the transaction the Company changed its name to Hemogenyx Pharmaceuticals plc.
The reverse acquisition reserve that arose from the reverse takeover is $6,157,894 at December 31, 2020 and 2019 and is made up of the following:
| Components | ||
| £ | ||
| As at start of year | – | |
| Pre-acquisition losses of Hemogenyx Pharmaceuticals plc1 | (799,763) | |
| Hemogenyx Pharmaceuticals LLC issued capital at acquisition2 | 1,010,849 | |
| Investment in Hemogenyx Pharmaceuticals LLC3 | (8,000,000) | |
| Reverse acquisition expense4 | 1,631,020 | |
|
As at December 31, 2020 and 2019 |
(6,157,894) |
The movements on the Reverse acquisition reserve are as follows:
- These consolidated financial statements present the legal capital structure of the Company. However, under reverse acquisition accounting rules, the Company was not acquired until 4 October 2017 and therefore the entry above is required to eliminate the initial retained losses of the Company.
- Hemogenyx Pharmaceuticals LLC had issued share capital of equivalent to £1,010,849 as at 4 October 2017. As these financial statements present the capital structure of the parent entity, the issue of equity by Hemogenyx Pharmaceuticals LLC has been recorded in this reserve.
- The Company issued 228,571,428 shares at £0.035 each, totalling £8,000,000 for the entire issued capital of Hemogenyx Pharmaceuticals The above entry is required to eliminate the balance sheet impact of this transaction.
- The entry above represents the difference between the value of the equity issued by the Company, and the deemed consideration given by Hemogenyx Pharmaceuticals LLC to acquire the Company.
5. Segment Information
The Group has one reportable segment, the development of breakthrough therapies for the treatment of blood diseases, and administrative functions in the United Kingdom, and therefore the segmental information is the same as that presented in the primary statements.
The following tables present expenditure and certain asset information regarding the Group’s geographical segments for the year ended 31 December 2020 and 2019:
|
Year Ended 31 December 2020 |
Year Ended 31 December 2019 |
|||||
| £ | £ | |||||
| Segment assets | ||||||
| United Kingdom | ||||||
| – Non-current | 348,472 | – | ||||
| – Current | 1,097,662 | 20,787 | ||||
| United States | ||||||
| – Non-current | 533,841 | 495,414 | ||||
| – Current | 798,515 | 513,729 | ||||
| Belgium | ||||||
| – Non-current | – | – | ||||
| – Current | 21,094 | 19,967 | ||||
| Total | ||||||
| – Non-current | 882,313 | 495,414 | ||||
| – Current | 1,917,271 | 554,483 | ||||
| Capital expenditure | ||||||
| United Kingdom | – | – | ||||
| United States | 173,047 | 11,918 | ||||
| Belgium | – | – | ||||
| 173,047 | 11,918 |
Capital expenditure consists of the purchase of property, plant and equipment.
6. Expenses by nature
| Group | Group | ||
| Year Ended 31 December 2020 | Year Ended 31 December 2019 | ||
| £ | £ | ||
| Laboratory expenses | 83,662 | 21,246 | |
| Consumable equipment and supplies | 267,057 | 400,571 | |
| Contractors & consultants | (1,459) | 47,666 | |
| Travel | 4,218 | 33,505 | |
| Staff Costs | 1,130,764 | 691,992 | |
| Insurance | 39,303 | 50,499 | |
| Other | 80,187 | 74,815 | |
| Legal and professional fees | 505,812 | 256,092 | |
| Foreign exchange loss / (gain) | (65,910) | 13,021 | |
| Total Administrative Expenses | 2,043,633 | 1,589,407 | |
|
|
|||
7. Other income
Other income of £85,237 during the year to 31 December 2020 (2019: £213,126) relates to funds received from a third party under a research collaboration programme.
8. Employees
| Group | Group | Company | Company | |||
| Year Ended 31 December 2020 | Year Ended 31 December 2019 | Year Ended 31 December 2020 | Year Ended 31 December 2019 | |||
| £ | £ | £ | £ | |||
| Wages and salaries | 713,788 | 547,127 |
208,750 |
118,251 |
||
| Social security | 37,732 | 40,667 | 2,506 | – | ||
| Share based payments | 363,105 | 90,487 |
363,105 |
90,487 |
||
| Pension contributions | 16,138 | 13,711 | 250 | – | ||
| 1,130,763 | 691,992 |
574,611 |
208,738 |
Average number of people (including Executive Directors) employed:
| Group | Group | Company | Company | |||
| Year Ended 31 December 2020 | Year Ended 31 December 2019 | Year Ended 31 December 2020 | Year Ended 31 December 2019 | |||
| Research & development | 5 | 5 | – | – | ||
| Administration | 3 | 2 | 2 | 2 | ||
| 8 | 7 | 2 | 2 |
9. Auditor’s remuneration
| Group | Group | ||
| Year Ended 31 December 2020 | Year Ended 31 December 2019 | ||
| £ | £ | ||
| Fees payable to the Company auditor: | |||
| Audit of the financial statements of the Group and Company | 45,090 | 45,000 | |
| 45,090 | 45,000 |
10. Income tax
| Group | Group | ||
| Year Ended 31 December 2020 | Year Ended 31 December 2019 | ||
| £ | £ | ||
| Current Tax: | |||
| New York City Biotech tax credit – prior years | – | 35,000 | |
| Tax on loss on ordinary activities | – | 35,000 | |
| Loss on ordinary activities before tax | (2,095,023) | (1,453,144) | |
| Analysis of charge in the year: | |||
| Loss on ordinary activities multiplied by weighted average tax rate for the group of 23.10% (2019: 26.16%) | (483,950) | (380,142) | |
| Disallowed items | 116 | 23,137 | |
| Timing differences | 68,990 | – | |
| New York City Biotech tax credit | – | 35,000 | |
| Tax losses carried forward | (414,844) | (357,005) | |
| Current Tax credit | – | 35,000 |
Weighted average tax rate is calculated by reference to the tax rates effective in each of the jurisdictions. The tax rates effective at 31 December 2020 are 19%, 26% and 29% in the UK, the USA and Belgium respectively.
The Group has accumulated tax losses arising in the UK of approximately £1,447,000 (Dec 2019: £880,391) that should be available, under current legislation, to be carried forward against future profits. No deferred tax asset has been recognised against these losses. The Group has tax losses carried forward in the US of approximately £3,145,000 available under current rules until 2037. No deferred tax asset has been recognised against these losses.
11. Earnings per share
The calculation of the basic and fully diluted earnings per share is calculated by dividing the loss for the year from continuing operations attributable to equity owners of the Group of £(2,082,220) (2019: £(1,450,627)) by the weighted average number of ordinary shares in issue during the year of 414,833,093 (2019: 360,719,748).
Dilutive loss per Ordinary Share equals basic loss per Ordinary Share as, due to the losses incurred in 2020 and 2019, there is no dilutive effect from the subsisting share options. See Note 20 for details of stock options and warrants outstanding.
12. Property, plant and equipment
| Group | Property, plant & equipment | Computer equipment | Total |
| £ | £ | £ | |
| Cost | |||
| 31 December 2018 | 274,877 | – | 274,877 |
| Additions | 6,355 | 5,563 | 11,918 |
| Foreign exchange movement | (11,118) | (184) | (11,302) |
| 31 December 2019 | 270,114 | 5,379 | 275,493 |
| Additions | 167,007 | 6,040 | 173,047 |
| Foreign exchange movement | (12,013) | (462) | (12,475) |
| 31 December 2020 | 425,108 | 10,957 | 436,065 |
| Accumulated depreciation and impairment losses | |||
| 31 December 2018 | 100,934 | – | 100,934 |
| Depreciation | 55,464 | 1,284 | 56,748 |
| Foreign exchange movement | (6,062) | (49) | (6,111) |
| 31 December 2019 | 150,336 | 1,235 | 151,571 |
| Depreciation | 67,499 | 2,360 | 69,859 |
| Foreign exchange movement | (8,052) | (171) | (8,223) |
| 31 December 2020 | 209,783 | 3,424 | 213,207 |
| Carrying amounts | |||
| 31 December 2018 | 173,943 | – | 173,943 |
| 31 December 2019 | 119,778 | 4,144 | 123,922 |
| 31 December 2020 | 215,325 | 7,533 | 222,858 |
13. Leases
The Group adopted IFRS 16 using the modified retrospective approach with the effect of applying this standard at the date of initial recognition of 1 January 2019.
As a lessee, the Group has previously classified leases as operating or finance leases based on whether the lease transferred significantly all of the risks and rewards incidental to the ownership of the underlying asset. Under IFRS 16, the Group recognises right-of-use assets and lease liabilities for all leases on its balance sheet. Each of the two US subsidiaries has an agreement for the lease of laboratory facilities to which IFRS 16 has been applied.
The key impacts on the Statement of Comprehensive Income and the Statement of Financial Position are as follows:
Group & Company
| Right of use asset
£ |
Lease liability
£ |
Income statement
£ |
|||
| Balance on transition | – | – | – | ||
| Additions | 145,923 | (145,923) | – | ||
| Depreciation | (37,978) | – | (37,978) | ||
| Interest | – | (6,830) | (6,830) | ||
| Lease payments | – | 39,393 | – | ||
| Foreign exchange movements | 1,497 | 272 | – | ||
| Carrying value at 31 December 2019 | 109,442 | (113,088) | (44,808) | ||
| Depreciation | (36,894) | – | (36,894) | ||
| Revaluation | (23,777) | 32,031 | – | ||
| Interest | – | (3,637) | (3,637) | ||
| Lease payments | – | 39,431 | – | ||
| Foreign exchange movements | (2,886) | (3,491) | – | ||
| Carrying value at 31 December 2020 | 45,885 | (48,754) | (40,531) |
14. Intangible assets
On 15 January 2015, the Company entered into an Exclusive License Agreement with Cornell University to grant to the Company patent rights to patent PCT/US14/65469 entitled Post-Natal Hematopoietic Endothelial Cells and Their Isolation and Use and rights to any product or method deriving therefrom. The Company paid Cornell University USD $347,500 for such licence rights.
| Cost | Intellectual Property
£ |
| 31 December 2018 | 272,753 |
| Exchange movements | (10,703) |
| 31 December 2019 | 262,050 |
| Exchange movements | (7,095) |
| 31 December 2020 | 254,955 |
The carrying value of intangible assets is reviewed for indications of impairment whenever events or changes in circumstances indicate that the carrying value may exceed the recoverable amount. The products to which they relate are not ready to be sold on the open market. When the trials are completed and the products attain the necessary accreditation and clearance from the regulators, the Group will assess the estimated useful economic life and the IP will be amortised using the straight-line method over their estimated useful economic lives. The directors are of the view that no impairment is required as the test results to date have been very positive and these products are now being moved on towards the clinical trial phase. Accordingly, the directors continue to believe that the products will eventually attain the necessary accreditation and clearance from the regulators and so no impairment has been considered necessary.
Amortisation will be charged to operating costs in the Statement of Comprehensive Income when the Group achieves product sales.
15. Loan to subsidiary
| Company | Company | |||
| Year Ended 31 December 2020
£ |
Year Ended 31 December 2019
£ |
|||
| Loan to Hemogenyx Pharmaceuticals LLC | 2,766,051 | 1,570,839 | ||
| 2,766,051 | 1,570,839 |
Hemogenyx Pharmaceuticals plc has made cumulative loans to Hemogenyx Pharmaceuticals LLC of US$3,769,332 (£2,766,501) as at 31 December 2020 (Dec 2019: (US$2,096,915 (£1,570,839)). The loans are interest free and will be repaid when Hemogenyx LLC’s operational cash flow allows. Management has undertaken an impairment assessment of the loan as at 31 December 2020 and has determined that that there was no impairment required. The interest rate and impairment assessment are reviewed on an annual basis.
16. Investment in subsidiary
| Name | Address of the registered office | Nature of business | Proportion of ordinary shares held directly by parent (%) | Proportion of ordinary shares held ultimately by parent (%) |
| Hemogenyx UK Limited | 5 Fleet Place, London, UK
EC4M 7RD |
Holding Company | 100 | – |
|
Hemogenyx Pharmaceuticals LLC |
9 East Lookerman Street, Suite 3A, Dover, Kent, Delaware, USA, 19901 |
Biomedical sciences |
– |
100 |
|
Immugenyx LLC |
c/o Corporation Service Company 251 Little Falls Drive, Wilmington, Delaware, USA, 19808 |
Biomedical sciences |
– |
95.79% |
|
Hemogenyx-Cell SPRL |
Avenue du Parc Industriel 89, 4041 Milmort, Belgique |
Biomedical sciences |
– |
100 |
The remaining shares in Immugenyx LLC are held by Dr Vladislav Sandler and by an employee, Carina Sirochinsky, as part of their compensation under their respective roles as CEO and Director of Operations. Dr Sandler and Ms Sirochinsky receive 10,000 and 1,000 shares respectively for each year of employment from January 2019. At 31 December 2020, Hemogenyx Pharmaceuticals LLC, Dr Sandler and Ms Sirochinsky each owns 500,000, 20,000 and 2,000 shares in Immugenyx LLC, respectively.
17. Trade and other receivables
| Group | Group | Company | Company | |
| Year Ended 31 December 2020 | Year Ended 31 December 2019 | Year Ended 31 December 2020 | Year Ended 31 December 2019 | |
| £ | £ | £ | £ | |
| VAT receivable | 50,971 | 2,237 | 50,971 | 2,237 |
| Trade and other receivables | 5,297 | 30,075 | – | – |
| Prepayments | 48,704 | 23,492 | 10,477 | 4,045 |
| Total trade and other receivables | 104,972 | 55,804 | 61,448 | 6,282 |
There are no material differences between the fair value of trade and other receivables and their carrying value at the year-end. No receivables were past due or impaired at the year-end.
18. Called up share capital
| Group & Company | Number of shares | £ | ||
| As at 31 December 2018 | 360,176,184 | 3,601,762 | ||
| Issue of shares 28 June 2019 | 1,066,667 | 10,667 | ||
| As at 31 December 2019 | 361,242,853 | 3,612,429 | ||
| Issue of shares – placement | 71,725,402 | 717,254 | ||
| Issue of shares – warrant exercise | 668,000 | 6,680 | ||
| As at 31 December 2020 | 433,636,255 | 4,336,363 |
During 2020, the Company raised £648,200 before expenses through a placing and subscription of 36,011,116 ordinary shares at a price of 1.8p per share. The Company also raised £2,500,000 before expenses through a placing and subscription of 35,714,286 ordinary shares at a price of 7p per share. The Company received £35,070 from the exercise of 668,000 warrants at an exercise price of 5.25p per share.
19. Share premium
| Group & Company
|
£ |
| As at 31 December 2018 | 7,340,267 |
| Issue of shares 28 June 2019 | 21,333 |
| Writeback of value of placement warrants lapsed | 338,189 |
| As at 31 December 2019 | 7,699,789 |
| Issue of shares – placement | 2,430,946 |
| Share issuance costs | (168,160) |
| Issue of share – warrant exercise | 28,390 |
| As at 31 December 2020 | 9,990,965 |
20. Other reserves
|
Group: |
Year Ended 31 December 2020 | Year Ended 31 December 2019 | |||
| £ | £ | ||||
| As at start of year | 399,229 | 686,851 | |||
| Charge for the year – employees | 363,104 | 90,487 | |||
| Fair value of warrants lapsed | – | (338,189) | |||
| Fair value of options lapsed | – | (46,200) | |||
| Convertible Note embedded derivative | 2,482 | 6,280 | |||
|
As at end of year |
764,815 |
399,229 |
|
Company: |
Year Ended 31 December 2020 | Year Ended 31 December 2019 | |||
| £ | £ | ||||
| As at start of year | 386,662 | 680,564 | |||
| Charge for the year – employees | 363,105 | 90,487 | |||
| Fair value of warrants lapsed | – | (338,189) | |||
| Fair value of options lapsed | – | (46,200) | |||
|
As at end of year |
749,767 |
386,662 |
The expense recognised for employee and non-employee services during the year is shown in the following table:
|
Group and Company: |
Year Ended 31 December 2020
|
Year Ended 31 December 2019
|
|
| £ | £ | ||
| Expense arising from equity-settled share-based payment transactions | 363,105 | 90,487 | |
|
Total expense arising from share-based payment transactions |
363,105 |
90,487 |
Employee Plan
Under the Employee Plan (“EMP”) share options are granted to directors and employees at the complete discretion of the Company. The fair value of the options is determined by the Company at the date of the grant. Options granted vest in tranches on each of the following events/dates:
- Admission to the LSE (“Admission”);
- On the date falling six (6) months after Admission;
- On the date falling twelve (12) months after Admission; and
- On the date falling twenty-four (24) months after Admission
On the provision that the option holder remains an employee of the Group.
Options granted to most other option holders from 4 January 2018 onwards vest in equal tranches of 12.5% every three months from the date of grant, until fully vested.
The fair value of the options is determined using the Black Scholes method as stated in Note 2. The contractual life of each option granted is between two and five years. There are no cash settlement alternatives.
Options are settled when the Company receives a notice of exercise and cash proceeds from the option holder equal to the aggregate exercise price of the options being exercised.
Non-Employee Plan
Under the Non-Employee Plan (“NEMP”) share options are granted to non-employees at the complete discretion of the Company. The exercise price of the options is determined by the Company at the date of the grant. The options vest at the date of the grant.
The fair value of the options is determined using the Black Scholes method as stated in Note 2 and not the value of services provided as this is deemed the most appropriate method of valuation. In all cases non-employee option holders received cash remuneration in consideration for services rendered in accordance with agreed letters of engagement. The contractual life of each option granted ranges from two to five years. There are no cash settlement alternatives. Volatility was determined by calculating the volatility for three similar listed companies and applying the average of the four volatilities calculated.
Options are settled when the Company receives a notice of exercise and cash proceeds from the option holder equal to the aggregate exercise price of the options being exercised.
A schedule of options granted is below:
| Number options | |
| Employees, including directors* | 31,319,036 |
| Members of the Scientific Advisory Board | 11,146,751 |
| Total | 42,465,787 |
* Details of options held by individual directors are disclosed in the Directors’ Report.
| Group & Company: | 2020
Number |
2020
Weighted Average Exercise Price pence |
2019
Number |
2019
Weighted Average Exercise Price pence |
|||
| Outstanding at the beginning of the year | 30,553,076 | 3.5 | 36,071,741 | 3.5 | |||
| Granted during the year | 11,912,711 | 7.4 | 712,085 | 3.5 | |||
| Lapsed during the year | – | – | (6,230,750) | 3.5 | |||
| Cancelled during the year | – | – | – | – | |||
|
Outstanding at end of year |
42,465,787 |
4.6 |
30,553,076 |
3.5 |
|||
|
Exercisable at end of year |
36,812,610 |
4.5 |
22,428,934 |
3.5 |
The weighted average remaining contractual life for the share options outstanding as at 31 December 2020 is 2.52 years (2019: 2.84). The weighted average fair value of options granted during the year was 0.042 pence (2019: 0.007). The weighted average exercise price for options outstanding at the end of the year was 4.5 pence (2019: 3.5).
The following table lists the inputs to the models used for the two plans for the years ended 31 December 2020 and 31 December 2019:
| July-Aug-2020
(EMP) |
Jan-2019
(EMP) |
|||
| Expected volatility % | 64-75 | 52.12 | ||
| Risk-free interest rate % | 0.52-1.0 | 0.956 | ||
| Expected life of options (years) | 5 | 5 | ||
| WAEP – pence | 7.4 | 3.5 | ||
| Expected dividend yield | – | – | ||
| Model used | Black Scholes | Black Scholes |
Warrants
The share placement that completed on 4 October 2017 with the issue of 57,142,857 shares at £0.035 carried 1 for 2 warrants for qualifying shareholders over 62,021,429 new ordinary shares at £0.04 per share. In order to qualify for these warrants the shareholder must have retained the shares for a period of 60 days after admission. The warrants expired on 4 October 2019. Warrants were also issued to the brokers who raised funds for that share placement. The warrants were equal in value to 2% of the total number of new shares issued for the funds raised by each broker, exercisable at £0.0525 per warrant for a term of three years from the date of the placing, as prescribed in the Company’s 2017 prospectus. Optiva exercised 668,000 warrants in May 2020. No warrants were issued in 2020.
21. Capital and reserves
The nature and purpose of equity and reserves are as follows:
Share capital comprises the nominal value of the ordinary issued share capital of the Company.
Share premium represents consideration less nominal value of issued shares and costs directly attributable to the issue of new shares.
Other reserves represents the value of options in connection with share-based payments, warrants connected with share placements issued by the Company, and the value of the deemed embedded derivative connected with the Convertible Note liability.
Reverse asset acquisition reserve is the reserve created in accordance with the acquisition of Hemogenyx Pharmaceuticals LLC on 5 October 2017.
Foreign currency translation reserve is used to recognise the exchange differences arising on translation of the assets and liabilities of foreign branches and subsidiaries with functional currencies other than Pounds Sterling, as well as the revaluation of intercompany loans.
Retained earnings represent the cumulative retained losses of the Company at the reporting date.
22. Trade and other payables
| Group | Group | Company | Company | |
| Year Ended 31 December 2020 | Year Ended 31 December 2019 | Year Ended 31 December 2020 | Year Ended 31 December 2019 | |
| £ | £ | £ | £ | |
| Trade and other payables | 113,241 | 61,407 | 88,853 | 34,561 |
| Accruals and deferred income | 47,530 | 80,270 | 47,527 | 64,000 |
| Total | 160,771 | 141,677 | 136,380 | 98,561 |
| Current liabilities | 160,771 | 141,677 | 136,380 | 98,561 |
| Non-current liabilities | – | – | – | – |
23. Borrowings
The borrowings are comprised of borrowings and convertible notes. The Group follows IFRS 9, and as a result, where the instruments contained liability classified embedded derivatives, an election was taken to fair value the entire financial instrument through profit or loss rather than split out the embedded derivative. At 31 December 2019 all borrowings were classified as long-term due to their maturity being more than 12 months from the balance sheet date. At 31 December 2020, all borrowings were classified as current due to their maturity being less than 12 months from the balance sheet date. The notes payable consists of the following:
| Group & Company
|
Year Ended 31 December 2020 | Year Ended 31 December 2019 |
| £ | £ | |
| Borrowings | ||
| Balance at 1 January | 571,628 | 583,269 |
| Drawdowns | 191,146 | – |
| Interest expense | 15,206 | 12,743 |
| Value of embedded derivative transferred to Other Reserves | (1,033) | (6,280) |
| Foreign exchange movement | (23,230) | (18,104) |
| Balance at 31 December | 753,717 | 571,628 |
| Convertible Notes | ||
| Balance at 1 January | 572,539 | 589,557 |
| Drawdowns | 191,161 | – |
| Interest expense | 15,272 | 11,755 |
| Value of embedded derivative transferred to Other Reserves | (941) | (6,040) |
| Foreign exchange movement | (24,966) | (22,733) |
| Balance at 31 December | 753,065 | 572,539 |
| Payroll Protection Loan borrowing | 79,469 | – |
| Foreign exchange movement | (6,873) | – |
| Balance at 31 December | 72,596 | – |
| Total Borrowings at 31 December | 1,579,378 | 1,144,167 |
A summary of the debt facilities is as follows:
During 2018 Orgenesis entered in to two debt facility agreements with the Group, one each with Hemogenyx Pharmaceuticals LLC and Immugenyx LLC:
- On 7 November 2018 the Group entered into a loan agreement with Orgenesis Inc., an organisation with which the Group has an existing collaboration agreement. The loan amount was for not less than US$1,000,000 with the proceeds of the loan to be used solely for the development of the cell therapy technology in accordance with the plan of the collaboration agreement. As at reporting date drawdowns totalling US$1,000,000 (£692,901) had been made with Hemogenyx Pharmaceuticals LLC receiving the funds. The loan carries an interest rate of 2% and has a term of three years. Orgenesis has the option to convert both principal and accrued interest into equity in Hemogenyx-Cell at any time prior to maturity. Hemogenyx-Cell SPRL (“Hemo-Cell”) is a wholly owned Belgian entity and was incorporated in April 2019 at which point this loan facility was treated as a borrowing in accordance with the provisions of IAS39.
- On 7 November 2018 the Group entered into a loan agreement, through its wholly owned subsidiary Immugenyx LLC, with Orgenesis Inc., an organisation with which the Group has an existing collaboration agreement. The loan amount was for not less than US$1,000,000 with the proceeds of the loan to be used solely for the development of the cell therapy technology in accordance with the plan of the collaboration agreement. As at reporting date drawdowns totalling US$1,000,000 (£753,065) had been made. The loan carries an interest rate of 2% and has a term of three years. Orgenesis has the option to convert both principal and accrued interest into equity in Immugenyx LLC at any time prior to maturity. This loan has been treated in accordance with treated in accordance with the provisions of IAS39.
Paycheck Protection Program Loan
On 1 May 2020, the Company received loan proceeds in the amount of approximately $99,000 under the Paycheck Protection Program (“PPP”). The PPP, established as part of the Coronavirus Aid, Relief and Economic Security Act, as amended (“CARES Act”), provides for loans to qualifying businesses for amounts up to 2.5 times of the average monthly payroll expenses of such qualifying business. The loans and accrued interest are forgivable after certain time periods further defined in the CARES Act (the “Covered Period”) as long as the borrower uses the loan proceeds for eligible purposes, including payroll, benefits, rent and utilities, and maintains its payroll levels. The amount of loan forgiveness will be reduced if the borrower terminates employees or reduces salaries during the Covered Period.
Any unforgiven portion of the PPP loan would be payable over two years at an interest rate of 1%, with a deferral of payments for the first six months. The Company used the proceeds for purposes consistent with the PPP and the loan was forgiven in its entirety in April 2021. The outstanding balance at 31 December 2020, prior to loan forgiveness, is included in short term borrowings.
24. Related party disclosures
There were no related party disclosures other than Directors’ remuneration as disclosed in the Remuneration Report section of the Directors’ Report. There are no key management personnel other than the Directors and the Company Secretary.
25. Financial instruments
The Group’s financial instruments consist of cash, amounts receivable, accounts payable and accrued liabilities and deferred payment.
Fair value of financial assets and liabilities
Fair values have been determined for measurement and/or disclosure purposes based on the following methods. When applicable, further information about the assumptions made in determining fair values is disclosed in the notes specific to that asset or liability.
The carrying amount for cash, accounts receivable, and accounts payable and accrued liabilities on the statement of financial position approximate their fair value because of the limited term of these instruments. The fair value of deferred payment approximates its fair value. The investment is carried at cost as it is not traded on an active market.
Fair value hierarchy
Financial instruments that are measured subsequent to initial recognition at fair value are grouped in Levels 1 to 3 based on the degree to which the fair value is observable:
- Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities; and
- Level 2 fair value measurements are those derived from inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and
- Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs).
The Group did not have any financial instruments in Level 1, 2 and 3.
Financial risk management objectives and policies
The Company has exposure to the following risks from its use of financial instruments:
- Credit risk
- Liquidity and funding risk
- Market risk
The following table sets out the amortised costs categories of financial instruments held by the Company as at the year ended 31 December 2020 and year ended 31 December 2019:
| Group | Group | Company | Company | |
| Year Ended 31 December 2020 | Year Ended 31 December 2019 | Year Ended 31 December 2020 | Year Ended 31 December 2019 | |
| £ | £ | £ | £ | |
| Assets | ||||
| Trade and other receivables, except prepayments | 56,267 | 32,312 | 50,971 | 2,237 |
| Cash and cash equivalents | 1,812,299 | 498,679 | 1,036,214 | 14,505 |
| 1,868,566 | 640,433 | 1,087,185 | 16,742 | |
| Liabilities | ||||
| Trade and other payables | (113,241) | (61,407) | (88,853) | (34,561) |
| Lease liabilities | (48,754) | (113,088) | – | – |
| Borrowings | (1,579,378) | (1,144,167) | – | – |
|
|
(1,707,741) | (1,318,662) | (88,853) | (34,561) |
| Group | 1 January 2019 | Cash flows | Non-cash changes | 31 December 2019 | ||
| Share repayment | Foreign exchange movements | Interest charge | ||||
| Long-term borrowings | 1,172,826 | – | – | (53,157) | 24,498 | 1,144,167 |
| Short-term borrowings | – | – | – | – | – | – |
| Total | 1,172,826 | – | – | (53,157) | 24,498 | 1,144,167 |
| Group | 1 January 2020 | Cash flows | Non-cash changes | 31 December 2020 | ||
| Reclassification to reserve | Foreign exchange movements | Interest charge | ||||
| Short-term borrowings (1) | 1,144,167 | 461,776 | (1,891) | (54,949) | 30,275 | 1,579,378 |
| Long-term borrowings | – | – | – | – | – | |
| Total | 1,144,167 | 461,776 | (1,891) | (54,949) | 30,275 | 1,579,378 |
- Borrowings reclassified to short term since all balance are due within twelve months of December 31, 2020.
Credit risk
The Group had receivables of £3,668 owing from customers (31 December 2019: £28,279). All bank deposits are held with Financial Institutions with a minimum credit rating of AAA.
Liquidity and funding risk
The Group regularly reviews its major funding positions to ensure that it has adequate financial resources in meeting its financial obligations. The Group takes liquidity risk into consideration when deciding its sources of funds. The principle liquidity risk facing the business is the risk of going concern which has been discussed in Note 2.
Market risk
Interest rate risk
Interest rate risk is the risk that the value of financial instruments will fluctuate due to changes in market interest rates. The Group’s income and operating cash flows are substantially independent of changes in market interest rates as the Group has no significant interest-bearing assets. The borrowings issued at fixed rates expose the Group to fair value interest rate risk. The Company’s management monitors the interest rate fluctuations on a continuous basis and acts accordingly.
The Company has floating rate financial assets in the form of deposit accounts with major banking institutions; however, it is not currently subjected to any other interest rate risk.
Based on cash balances as above as at the statement of financial position date, a rise in interest rates of 1% would not have a material impact on the profit and loss of the Company and such is not disclosed.
The interest rates on the Convertible Notes are fixed and hence a rise in interest rates of 1% would not have a material impact on the profit and loss of the Group and such is not disclosed.
In relation to sensitivity analysis, there was no material difference to disclosures made on financial assets and liabilities.
At the reporting date the interest rate profile of interest-bearing financial instruments was:
| Group | Group | Company | Company | |
| Year Ended 31 December 2020 | Year Ended 31 December 2019 | Year Ended 31 December 2020 | Year Ended 31 December 2019 | |
| £ | £ | £ | £ | |
| Financial Assets | ||||
| Cash and cash equivalents | 1,812,299 | 498,679 | 1,036,214 | 14,505 |
| Financial Liabilities | ||||
| Borrowings | (1, 579,378) | (1,144,167) | – | – |
Foreign currency risk
The Group operates internationally and has monetary assets and liabilities in currencies other than the functional currency of the operating company involved.
The Group seeks to manage its exposure to this risk by ensuring that where possible, the majority of expenditure and cash of individual subsidiaries within the Group are denominated in the same currency as the functional currency of that subsidiary.
The Group has not entered into any derivative instruments to manage foreign exchange fluctuations.
The following table shows a currency of net monetary assets and liabilities by functional currency of the underlying companies for the years ended 31 December 2020 and 31 December 2019:
| 31 December 2019 | ||||
| Functional Currency | ||||
| Currency of net monetary assets/(liabilities) | Pound Sterling
£ |
US Dollars
£ |
Euro
£ |
Total
£ |
| Pounds Sterling | 13,354 | – | – | 13,354 |
| US Dollars | 1,151 | (679,961) | (571,628) | (1,250,438) |
| Euros | – | – | 19,967 | 19,967 |
| Total | 14,505 | (679,961) | (551,661) | (1,217,117) |
| 31 December 2020 | ||||
| Functional Currency | ||||
| Currency of net monetary assets/(liabilities) | Pound Sterling
£ |
US Dollars
£ |
Euro
£ |
Total
£ |
| Pounds Sterling | 1,024,010 | – | – | 1,024,010 |
| US Dollars | 12,204 | (70,670) | (58,466) | |
| Euros | – | – | (753,623) | (753,623) |
| Total | 1,036,214 | (70,670) | (732,623) | 232,920 |
Capital risk management
The Group defines capital as the total equity of the Company. The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.
In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.
Fair value of financial assets and liabilities
There are no material differences between the fair value of the Group’s financial assets and liabilities and their carrying values in the financial statements.
26. Commitments
Licence
Milestone and royalty payments that may become due under the licence agreement are dependent on, among other factors, clinical trials, regulatory approvals and ultimately the successful development of a new drug, the outcome and timing of which are uncertain.
The Group’s minimum future payments contingent upon meeting certain development, regulatory and commercialisation milestones total £780,484 ($1,035,000) plus £377,045 ($500,000) on receipt of marketing approval from each additional market excluding the United States of America and the European Union. Upon commencement of commercial production, the Group will pay a royalty between 2 to 5% on all net sales. In addition, the Group pays an annual licence maintenance fee of up to £56,557 ($75,000) until the commercial sales are achieved.
27. Ultimate controlling party
The Directors have determined that there is no controlling party as no individual shareholder holds a controlling interest in the Company.
28. Subsequent events
In November 2020, Mint Capital Limited (“Mint”) and the Company entered into a Financing Facility agreement (“Financing Facility”) whereby Mint has conditionally agreed to subscribe for up to £60 million in aggregate principal amount of Convertible Loan Notes pursuant to an agreement entered into with the Company (the “Subscription Agreement”). The shareholders of the Company approved the facility in January 2021 and a prospectus was published on 29 January 2021.
The key terms of the Convertible Loan Notes include:
- A principal amount of up to £60,000,000, split into denominations of £50,000 per Convertible Loan Note. The Convertible Loan Notes will be subscribed for at par.
- The Convertible Loan Notes are to be issued in up to nine tranches. The first tranche of £12,000,000 in principal amount was issued on 3 February 2021. The subsequent eight tranches are issuable at the sole discretion of, and in the amounts determined by, the Company at respective intervals of 90 days after the Initial Issue Date. The aggregate maximum principal amount of the Convertible Loan Notes is limited to £60,000,000.
- No interest is payable on the Convertible Loan Notes.
- The Convertible Loan Notes are unsecured.
- Each tranche of Convertible Loan Notes issued is redeemable at par on the date falling 36 months after the relevant Issue Date (the “Maturity Date”).
- Each of the Convertible Loan Notes is convertible into ordinary shares of £0.01 (1 pence) each in the capital of the Company (“Ordinary Shares”) at any time during the period commencing on the fifth business day following the relevant Issue Date and ending at 5.00 p.m. London time on the business day immediately prior to the relevant Maturity Date (the “Conversion Period”).
- The price used for the conversion (the “Conversion Price”) will be equal to a 10 per cent discount to the lesser of (i) 125 per cent. of the closing-bid price as reported by Bloomberg for one Ordinary Share one trading day before the relevant Issue Date (subject to adjustment to reflect any sub-division or consolidation of the Ordinary Shares) and (ii) the lowest closing bid-price as reported by Bloomberg for an Ordinary Share from the three consecutive trading days ending on the day prior to the date of service of the relevant conversion notice (or if such conversion notice is served after 4.35pm on any such date, then the three consecutive trading days ending on the day such conversion notice is served. In no event shall the Conversion Price be less than the nominal value of an Ordinary Share.
- A holder will not be permitted to submit a conversion notice in respect of the Convertible Loan Notes if the total Ordinary Shares held by the holder following the execution of such conversion notice would exceed 29.9% of the Company’s total Ordinary Shares.
- If the Company commits an “event of default” then the notes could be redeemed at 114-120% of the principal amount of the convertible loan at the option of the holder.
- The Company also has the ability to redeem the convertible loan under certain circumstances at 114% of the principal amount of the convertible loan.
- Subject to limited exceptions, the Convertible Loan Notes will not be transferable.
- Prior to conversion, the Convertible Loan Notes do not entitle the holder to any voting rights in the Company.
Arrangement fee
The Company agreed to pay a fee of 5% of the aggregate principal value of the Convertible Loan Notes issued to the arranger for the Facility (the “Arranger”). Such fee was paid by the allotment and issue of new Ordinary Shares.
Draw down
The Company received £12,000,000 from the first drawn down of the Financing Facility agreement in February 2021. The price of the conversion of the convertible loan notes issued under the Financing Facility agreement into common shares of the Company, as defined by the Financing Facility agreement will be the lesser of (i) 8.4375p and (ii) 90% of the lowest closing bid price as reported on Bloomberg from the three closing bid prices immediately preceding a conversion.
The company issued 7,741,935 shares in February 2021 as an arrangement fee to the arranger of the Financing Facility.
The Company received a conversion notice from Mint in respect of £650,000 in principal amount of Convertible Loan Notes and issued 13,131,313 shares to Mint in March 2021. Further conversion notices were received from Mint in respect of £900,000 and £950,000 in principal amount of Convertible Loan Notes. The Company issued a further 14,285,714 shares to Mint in March 2021, and 24,547,803 shares in April 2021; both of these allotments of shares were admitted to trading on the London Stock Exchange’s main market in April 2021. To date, Mint has converted loan notes with principal value of £2,500,000 into shares, leaving convertible loan notes to a value of £9,500,000 outstanding. A conversion notice for a further £900,000 in principal value of loan notes was received from Mint on 23 April 2021 and the corresponding shares will be allotted on or around 4 May 2021, after publication of this report, leaving convertible loan notes to a value of £8,600,000 outstanding.
Deferred financing costs
Group costs of £223,615 were incurred prior to the year end in connection with the setting up of the Financing Facility. These costs were deferred pending the first draw down under the Financing Facility and will be amortised through profit and loss from that date.
Paycheck Protection Program
The loan from the U.S. Small Business Administration under the Paycheck Protection Program (described in Note 23 to the financial statements above) was forgiven in April 2021.
29. Copies of the annual report
Copies of the annual report will be available on the Company’s web site at https://hemogenyx.com and from the Company’s registered office, 5 Fleet Place London EC4M 7RD.