REG - Oxford Cannabinoid - 2023 Final Results
31/08/2023 07:00
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RNS Number : 8684K Oxford Cannabinoid Tech.Holdings 31 August 2023
31 August 2023
Oxford Cannabinoid Technologies Holdings plc
("OCTP", or the "Company")
Final Results for year ended 30 April 2023, Filing of Annual Report and
Accounts and Notice of Annual General Meeting
Oxford Cannabinoid Technologies Holdings plc (LSE: OCTP), the pharmaceutical
company developing prescription cannabinoid medicines, is pleased to announce
its final results for the year ended 30 April 2023 (the "Period") ("Final
Results"), as well as the filing of its Annual Report and Accounts.
Commenting on the results, Julie Pomeroy, OCTP Non-Executive Chair, said:
"This has been a defining year for Oxford Cannabinoid Technologies, marked by
a number of major milestones and significant achievements. The dedication,
expertise and relentless pursuit of excellence by our team has delivered the
transition of OCT from pre-clinical stage to a clinical-stage pharmaceutical
company. We have seen two of our programmes complete their pre-clinical stages
during the year with one of them moving into a Phase I clinical trial in Q2
2023 and are well-positioned for future clinical developments."
Operational Highlights
· Completion of pre-clinical research for OCT461201 (Programme 1)
the Group's lead-compound.
· Submission of is first clinical trial application for OCT461201
by the Medicines and Healthcare products Regulatory Agency (MHRA) and Wales
Research Ethics Committee 2 (REC 2)
· Approval of the first Phase I clinical trial for OCT461201.
· Completion of pre-clinical research for OCT130401 (Programme 2),
a combination of inhaled phytocannabinoids for Trigeminal Neuralgia, now ready
for Phase I clinical trials subject to additional funding.
· First meeting of the Scientific Advisory Board leveraging the
extensive experience of industry-leading experts to complement our
patient-centric strategy.
· Recognition in The Sunday Times Best Places to Work 2023 Awards
in its small companies category.
· Strengthening of the core team with the appointment of Paul
Smalley as Group Finance Director and Rob Bennett as General Counsel and
Company Secretary.
· Ongoing work with existing commercial partners including Aptuit
(Verona) SRL (a subsidiary of Evotec SE), Dalriada Drug Discovery Inc
(Dalriada), Canopy Growth Corporation and Simbec Research Limited.
· Appointment of Axis Capital Markets Limited as Corporate Broker.
Financial Highlights
· Robust balance sheet, debt-free with cash reserves of
approximately £2.3m at year-end (30 April 2022: £9.2m). Cash is forecast to
be fully utilised by April 2024.
· Cash absorbed by operations of £7.0m (FY2022: £5.4m); Loss for
year of £5.9m (30 April 2022: £4.7m).
· Basic and diluted loss per share of (0.62p) (30 April 2022: 0.49p
loss).
· Cost savings continued, including closure of London office in
April 2022, expected to generate savings of approximately £130k p.a.
· Research costs (excluding salary costs) increased in line with
budget to £4.3m (30 April 2022: £2.9m), of which £2.0m relates to OCT461201
and £1.9m on OCT130401. A further £0.4m was spent on Programmes 3 and 4
mainly relating to the development of CB1/CB2 agonists by Dalriada.
· Operational costs increased from £2.3m to £2.7m, including
salaries and associated costs of £1.4m.
· Exceptional items of £0.1m (30 April 2022: £0.3m) relate to
share based (non-cash) payment charges. R&D tax credit in the period of
£1.1m (30 April 2022: £0.8m), with tax losses surrendered for the R&D
tax credit payment.
Post Period-end highlights
· MHRA and REC 2 approval of Phase I clinical trial application for
OCT461201.
· Appointment of Dr Tim Corn as Chief Medical Officer, further
strengthening the core team.
· Expansion into oncology with a potential "first-in-class"
immunotherapy agent for solid tumours.
· Successful administration of the first-in-human dose of
OCT461201, as part of its Phase I clinical trial.
On current trading and prospects, Clarissa Sowemimo-Coker, CEO, added:
The successful advance of our lead drug candidate, OCT461201, to its Phase I
clinical trial, marks a major milestone for Oxford Cannabinoid Technologies
and is the culmination of years of patient research and endeavour. This brings
us one step closer to delivering a vital solution to meet the needs of
patients living with chronic pain conditions. During FY2022-23, we continued
to deploy our cash and resources prudently, ensuring that we are
well-positioned to meet our future objectives in order to develop therapies
that can transform the lives of patients everywhere."
Analyst Briefing, 9.30am, Today 31 August 2023
A briefing for analysts will be held at 9.30am BST today. Analysts interested
in attending should contact Acuitas Communications by emailing
oct@acuitascomms.com (mailto:oct@acuitascomms.com) or by calling +44 (0)20
37450293.
Investor Presentation, 1.30pm, Today 31 August 2023
A live online presentation via the Investor Meet Company platform will also be
held at 1.30pm (BST) today, which is open to all existing and potential
shareholders. Questions can be submitted at any time during the live
presentation.
Investors can sign up to Investor Meet Company for free and add to meet Oxford
Cannabinoid Technologies Holdings plc via:
https://www.investormeetcompany.com/oxford-cannabinoid-technologies-holdings-plc/register-investor
(https://www.investormeetcompany.com/oxford-cannabinoid-technologies-holdings-plc/register-investor%20%0d)
Investors who follow OCTP on the Investor Meet Company platform will
automatically receive an invitation to the event.
Notice of Annual General Meeting ("AGM")
The Company's AGM will be held at the offices of Penningtons Manches Cooper
LLP at 125 Wood Street, London on 28 September 2023 at 11 a.m.
The following documents will be posted to shareholders in due course:
1. Notice of 2023 AGM;
2. Form of Proxy for the 2023 AGM; and
3. The annual report and accounts for the period ended 30 April 2023.
An announcement will be made regarding the posting of these documents as
appropriate. Once published, hard copies will be available to shareholders
upon request to the Company Secretary at Prama House, 267 Banbury Road, Oxford
OX2 7HT and soft copies will be available for download and inspection from the
Company's website at www.oxcantech.com (http://www.oxcantech.com) and from the
FCA's National Storage Mechanism
at www.fca.org.uk/markets/primary-markets/regulatory-disclosures/national-storage-mechanism
(http://www.fca.org.uk/markets/primary-markets/regulatory-disclosures/national-storage-mechanism)
The financial information set out below does not constitute the Company's
statutory financial statements for the period ended 30 April 2023. The
financial information for 2023 is derived from the statutory accounts for that
period. The auditors, Moore Kingston Smith LLP, have audited the 2023
financial statements. Their report was unqualified but included disclaimer of
opinion in relation to going concern.
The announcement has been prepared on the basis of the accounting policies as
stated in the financial statements for the year ended 30 April 2023. The
information included in this announcement is based on the Company's financial
statements which are prepared in accordance with International Financial
Reporting Standards (IFRS). The Company will publish full financial
statements that comply with IFRS on its website in due course.
This announcement contains inside information for the purposes of Article 7 of
EU Regulation 596/2014 (which forms part of domestic UK law pursuant to the
European Union (Withdrawal) Act 2018).
The Directors of the Company accept responsibility for the content of this
announcement.
Enquiries:
Oxford Cannabinoid Technologies Holdings plc +44 (0)20 3034 2820
Clarissa Sowemimo-Coker (CEO) clarissa@oxcantech.com
Cairn Financial Advisers LLP
Emily Staples +44 (0)20 7213 0897
Jo Turner +44 (0) 20 7213 0885
Axis Capital Markets Limited
Richard Hutchison +44 (0)20 3026 0320
Acuitas Communications 020 3745 0293 / 07799 767676
Simon Nayyar simon.nayyar@acuitascomms.com
Arthur Dingemans arthur.dingemans@acuitascomms.com
About Oxford Cannabinoid Technologies Holdings Plc:
Oxford Cannabinoid Technologies Holdings plc ("OCTP") is the holding company
of Oxford Cannabinoid Technologies Ltd (together the "Group"), a
pharmaceutical Group developing prescription cannabinoid medicines initially
targeting the U$ multi-billion global pain market.
OCTP currently has a portfolio of four drug development programmes. Its lead
compound, OCT461201, will initially target neuropathic and visceral pain
(including irritable bowel syndrome ("IBS") and chemotherapy induced
peripheral neuropathy ("CIPN")), with Phase I clinical trials, aimed at
demonstrating safety and tolerability. Trial results are expected in Q3
2023.
(https://www.londonstockexchange.com/news-article/OCTP/updates-on-lead-programme-1-and-programme-2/15391762)
The global market for CIPN alone is currently valued at US$1.61bn and is
forecast to reach US$2.37bn by the year 2027.
OCTP's drug development pipeline comprises both natural and synthetic
compounds, and includes compounds targeting trigeminal neuralgia, a severe
type of face pain, and cannabinoid derivatives targeting pain and potentially
other therapeutic areas. Having established an exclusive license agreement
with Canopy Growth Corporation for their entire pharmaceutical cannabinoid
derivative library, OCTP now has a portfolio of almost five hundred
derivatives and intellectual property rights including fourteen patent
families and associated research data.
OCTP has a clearly defined path to commercialisation, revenues and growth. The
Group is developing drug candidates through clinical trials to gain regulatory
approval (FDA/MHRA/EMA) that will enable medical professionals to prescribe
them with confidence. OCTP's portfolio aims to balance risk, value and time to
market, whilst ensuring market exclusivity around all its key activities.
Caution regarding forward looking statements
Certain statements in this announcement, are, or may be deemed to be, forward
looking statements. Forward looking statements are identified by their use of
terms and phrases such as ''believe'', ''could'', "should" ''envisage'',
''estimate'', ''intend'', ''may'', ''plan'', ''potentially'', "expect",
''will'' or the negative of those, variations or comparable expressions,
including references to assumptions. These forward-looking statements are not
based on historical facts but rather on the Directors' current expectations
and assumptions regarding the Company's future growth, results of operations,
performance, future capital and other expenditures (including the amount,
nature and sources of funding thereof), competitive advantages, business
prospects and opportunities. Such forward looking statements reflect the
Directors' current beliefs and assumptions and are based on information
currently available to the Directors.
Strategic report - HOW WE CREATE VALUE
Chair's Statement
As the Chair of Oxford Cannabinoid Technologies Holdings Plc (OCT), it is with
a sense of pride and optimism that I present to you the annual report for this
year. The unwavering dedication of our team, coupled with the support of our
partners and shareholders, has enabled us to make significant progress. We
remain focussed on our mission to harness the power of cannabinoid medicines
to improve the lives of patients.
A Year of Significant Progress and Transformation
This year has been a defining period for OCT, marked by a number of major
milestones and achievements. The transition of OCT from a pre-clinical stage
pharmaceutical company to a clinical-stage one is a testament to the
dedication, expertise, and relentless pursuit of excellence by our talented
team. We have seen two of our programmes complete their pre-clinical stages
during the year with one of them moving into a Phase I clinical trial in Q2
2023.
After extensive research and development, our lead drug candidate, OCT461201
has now received approval from the Medicines and Healthcare Products
Regulatory Agency (MHRA) and the Wales Research Ethics Committee 2 (REC 2) for
Phase I clinical trials. This is not just a procedural milestone; it is a
major step towards our core objective of bringing relief to patients suffering
from debilitating pain. The global market for chemotherapy-induced peripheral
neuropathy (CIPN), which OCT461201 targets, is burgeoning. With its value
forecast to reach US$1.17 billion by 2028, this market presents a significant
opportunity for OCT to make a difference to patients' quality of life.
During the year pre-clinical work on our drug candidate, OCT130401, was
completed successfully. This programme is developing synthetic
phytocannabinoids (pCBs) in combination with a medical device.
Addressing Challenges with Resilience
The pharmaceutical industry is inherently complex and dynamic. The challenges
are multifaceted, ranging from regulatory hurdles to financial constraints.
However, our team, under the leadership of our Chief Executive Officer (CEO),
Clarissa Sowemimo-Coker, has demonstrated resilience and innovation. The
leadership transitions during the year have been smooth, and the new members
of our executive team, Paul Smalley, Finance Director, and Rob Bennett,
General Counsel and Company Secretary, have brought new insight and
expertise. I would like to thank the whole team whose dedication and
expertise have been the driving force behind our achievements. I would also
like to thank Dr. John Lucas and Karen Lowe, who left us during the year, for
their contribution to our journey.
Strengthening Partnerships and Collaborations
Our progress would not have been possible without forging strong partnerships
and collaborations. This year, we strengthened our collaboration with
Simbec-Orion, a clinical research organisation with an impressive track
record. This partnership has been instrumental in advancing our lead drug
candidate through to clinical trial. Additionally, our contract research
agreement with Aptuit (Verona) SRL, a subsidiary of Evotec SE, has been vital
in our pre-clinical work on OCT461201. These collaborations epitomise our
commitment to aligning with industry leaders to expedite our goals.
In August 2022, we achieved another milestone with the inaugural meeting of
our Scientific Advisory Board (SAB) in London. Comprising a panel of highly
regarded experts in our therapeutic areas of interest, the SAB has been a
catalyst in bridging the gap between pre-clinical research, clinical trials,
and patient care. The insights and guidance provided by the SAB have been
invaluable in shaping our clinical strategy. This ensures that our approach is
not only scientifically rigorous but also patient-centric.
Corporate Governance
Corporate governance is the backbone of OCT. As a company listed on the
London Stock Exchange's Main Market, we are acutely aware of the
responsibilities and scrutiny that come with this status. Our board, advised
by Rob Bennett, our General Counsel and Company Secretary, has ensured that
our governance structures are robust and transparent. We have developed a
comprehensive risk management framework that is adaptive to the ever-changing
landscape of the pharmaceutical industry. We remain strongly committed to
transparency, accountability, and probity. We regularly review the alignment
of our governance practices with the UK Corporate Governance Code and other
relevant standards and regulations.
Environmental and Sustainability Initiatives
We are also conscious of our environmental impact and are actively seeking
ways to reduce our carbon footprint and contribute to a sustainable future.
Following COVID-19 lockdowns, we ended our lease on a permanent head office,
moving to a modern technology-enabled remote-only approach. This not only
reduces the carbon footprint by eliminating daily commutes but also saves
time, reduces costs, and allows us to recruit a diverse workforce beyond
commuting distance. We supplement this remote-first approach with co-working
spaces and periodic get-togethers to build and reinforce culture and team
cohesion.
Looking Ahead
We are now starting the clinical phases of our lead compound whilst continuing
with our pre-clinical work on other compounds. Our focus remains on harnessing
the power of cannabinoid medicines to make a meaningful difference in the
lives of patients. We will continue to innovate, collaborate, and uphold the
highest standards of corporate governance. We can only do this with the
continued support of our staff, our partners and our shareholders who have all
played such an important role in our development so far and for which I offer
my sincere thanks. By working together, we have the power to change lives
and shape the future of cannabinoid medicine for the benefit of patients
worldwide.
Julie Pomeroy
Chair
CEO's Review
I am immensely proud to share my first update as CEO of OCT. We have made
significant progress over the year and we believe we are poised for further
success in the next year.
Drug Development
Our lead drug candidate, OCT461201, has successfully advanced to its Phase I
clinical trial, marking a significant milestone as we transition from a
pre-clinical to a clinical-stage pharmaceutical company. This achievement is
particularly noteworthy as OCT461201 has demonstrated considerable promise as
a potential therapy for CIPN and Irritable Bowel Syndrome (IBS). Our dedicated
team of scientists and researchers have been working tirelessly to ensure that
the development of OCT461201 is based on rigorous scientific principles. The
progression to clinical trial is a culmination of extensive research, and it
brings us one step closer to providing a much-needed solution for patients
suffering from chronic pain conditions. It is a testament to our unwavering
commitment to innovation and excellence in developing therapies that can
transform lives.
Our People
In this past year, our people have continued to be our foundation. We're proud
to share that our dedicated focus on enhancing employee engagement has led to
our recognition as one of The Sunday Times Best Places to Work in 2023.
Despite our small team size, we see career growth not just in terms of
hierarchy, but in the broadening of skills and responsibilities. This unique
approach enables our team members to engage in diverse projects and actively
contribute to our Company's direction. Our vibrant and supportive work
environment, which encourages both personal and professional growth, is a
testament to our employees' unmatched dedication and resilience. As we
continue to shape the future of our industry, we thank our teams for their
commitment to our mission.
Business Model and Drug Development Strategy
At OCT, our business model is thoughtfully devised to reflect our mission,
values, and commitment to excellence. We focus on developing prescription
cannabinoid medicines, with a particular emphasis on the significant pain
market, whilst ensuring a patient-centred approach.
Our patient-centred approach is fundamental to our business model, and the
recent appointment of Dr. Tim Corn as Chief Medical Officer (CMO) at OCT is a
testament to this commitment. Dr. Corn, an esteemed figure in the
pharmaceutical industry, has held senior positions in several organisations
and has been instrumental in over twenty regulatory approvals in the US and
Europe. As CMO, he will oversee clinical research and development activities,
providing expert medical guidance. His appointment marks a significant step in
strengthening our senior team and aligning our efforts with clinical
excellence as we move into our clinical phase and progress our programmes
through clinical trials towards commercialisation. In summary, our business
model goes beyond financial gains; it's about profoundly impacting lives
through innovation, collaboration, and unwavering adherence to our values.
Scientific Advisory Board
In August 2022, OCT held the first meeting of its SAB in London. Hosted by our
Chief Scientific Officer (CSO), Dr. Valentino Parravicini, the SAB has been
instrumental in bridging the gap between pre-clinical research, clinical
trials, and patient care. The SAB, comprising esteemed experts, provided
advice and guidance on the design of our Phase I clinical trials for OCT461201
and OCT130401. The insights garnered from these meetings have been invaluable
in shaping our clinical strategy. Additionally, the establishment of the SAB
last year reflects our commitment to cultivating a best-in-class network of
scientific, academic, and commercial partners. With the recent appointment of
Dr. Corn as CMO, we are further bolstering this network and validating our
vision. The SAB has continued to meet on a regular basis, providing critical
insights and guidance, ensuring that our drug development programmes are not
only scientifically sound but also centred around the needs of the patients.
Financial Risk Management
I would like to emphasise the paramount importance we place on financial risk
management. It is essential to our long-term sustainability and our ability to
continue making strides in the development of cannabinoid medicines. We are
acutely aware that our stakeholders expect judicious management of our
financial resources. To this end, we have been meticulously managing our cash
and resources, ensuring that we are well-positioned to meet our objectives.
Notably, our clinical trial for OCT461201 is being entirely funded from OCT's
existing resources, which is a testament to our commitment to prudent
financial stewardship.
Moreover, our approach to financial risk management is underpinned by a
comprehensive understanding of the various types of risks, including market,
credit, and operational risks. We have integrated risk appetite statements
into our governance framework, ensuring that decision-making across the
organisation is aligned with our risk tolerance levels. This approach supports
us in safeguarding OCT's resources and ensuring the stability of our cash
flows, which is crucial for capitalising on growth opportunities and
delivering value to our shareholders.
In conclusion, financial risk management is not just a function; it is an
ethos that permeates every facet of our operations. Through vigilant
governance, informed decision-making, and a commitment to transparency, we are
fortifying OCT's financial foundations and paving the way for continued
innovation and growth.
Note 20 of the notes to the financial statements explains the Group's exposure
to financial risks and how these risks could affect the Group's future
financial performance.
Outlook for the Future
As we look to the future, we feel a sense of modest optimism and hopeful
expectation. Our lead drug candidate, OCT461201, is poised to complete its
Phase I clinical trial in Q3 2023. This milestone is not just a step in the
regulatory process; it is a beacon of hope for countless patients with unmet
needs in pain management. The data we expect to gather regarding the safety,
tolerability, and pharmacokinetic profile of OCT461201 will be instrumental in
shaping the subsequent phases of clinical trials and supporting our indication
expansion strategy, enabling us to help even more patients with unmet needs.
We have built a strong, dedicated team, and our lean structure and flexibility
as a small business has enabled us to remain on target for our stated
objective of regulatory approval during 2027 - an incredibly short timeframe
made possible by our "fast-track" drug development strategy, which lowers
developmental risk, costs, and timeframes.
Furthermore, our pipeline of drug candidates is robust and diverse. With the
insights gained from our SAB and the support of our partners, we are
well-positioned to explore new therapeutic avenues and further expand our
portfolio. Our recent expansion into oncology (Programme 4) is just one
example of this approach in action. Our commitment to innovation in
cannabinoid medicines remains unwavering, and we will continue to explore the
therapeutic potential of cannabinoids in addressing a range of conditions.
Additionally, we are acutely aware of the dynamic nature of the pharmaceutical
industry and the global healthcare landscape. As such, we are committed to
remaining agile and adaptive, ensuring that our strategies and operations are
attuned to emerging trends and opportunities. Our collaborations with industry
leaders and academic institutions will continue to be a cornerstone of our
approach, as we believe that collective wisdom and expertise are critical to
driving innovation.
Financial sustainability is also at the forefront of our considerations. As we
advance in our drug development programmes, we will continue to exercise
prudent financial management, ensuring that we are strategically allocating
resources to maximise value for our shareholders and stakeholders.
In conclusion, the Board anticipates a bright future for OCT. With a strong
pipeline, a committed team, and a clear vision, we are poised to make
significant strides in the realm of cannabinoid medicines. Our focus remains
steadfast on improving the lives of patients living with debilitating pain and
contributing positively to global healthcare.
Closing Remarks
In closing, I would like to extend my deepest gratitude to our team, partners,
and shareholders for your unwavering support and dedication, particularly
following my appointment as CEO. Your contributions have been instrumental in
our achievements thus far and I am truly grateful for your efforts. I am
confident in our mission and goals, and I believe that together, we will
continue to make a meaningful impact in the lives of patients and the medical
community at large.
Clarissa Sowemimo-Coker
Chief Executive Officer
CSO's REVIEW
Programme 1: OCT 461201
This programme is a 'cannabinoid-like' new chemical entity (NCE) for
neuropathic and visceral pain conditions.
During the year, the Group has carried out a significant number of
pre-clinical studies which show that OCT461201 is well positioned for small
fibre neuropathies, as it successfully reduced pain in a model of CIPN.
CIPN is the consequence of the damage caused to the nerves by common
chemotherapeutic drugs. The hallmarks of CIPN are pain, numbness and tingling
in the extremities. On average, up to an estimated 60% of people undergoing
chemotherapy are affected by CIPN. CIPN can be progressive and enduring,
leading to years of debilitation and suffering.
In response to this encouraging data in CIPN, the Company's strategy in
neuropathic pain, is to focus on a clinical development programme aimed to
benefit patients with small fibre neuropathies, such as cancer patients
suffering from CIPN, and potentially, patients suffering from diabetic
neuropathy.
Globally, there is an urgent need for new therapies to treat CIPN as there are
currently no approved therapies for this condition. The current standard of
care is the off-label use of gabapentinoids (gabapentin and pregabalin) and
antidepressants (e.g., duloxetine), drugs associated with serious side
effects. Furthermore, in some cases their overall clinical effectiveness is
inadequate, leaving cancer patients in pain, with a reduced quality of life
and the prospect of having to change or stop their chemotherapy altogether.
The large unmet medical need in patients suffering from CIPN is estimated to
have a global market forecast to reach US$1.17bn by the year 2028, which, in
the view of the Directors, could grow to over US$7bn once combined with other
small fibre neuropathies.
In July 2021, OCT entered into a £2.6 million contract research agreement for
the preclinical work on OCT461201 with Aptuit (Verona) SRL, a subsidiary of
Evotec SE (together Evotec). This work, which was completed in December 2022,
used Evotec's INDiGO programme, an integrated drug development process for
accelerating early drug candidates to clinical trial stage which aligns with
the Company's strategy of accelerating the standard pharmaceutical timelines.
The INDiGO programme provided the comprehensive manufacturing, safety, and
toxicology packages necessary for regulatory submission to the UK Medicines
& Healthcare products Regulatory Agency (MHRA) and the United States Food
and Drug Administration (FDA).
In January 2023, OCT submitted a combined clinical trials application for
OCT461201, to the MHRA and REC 2 (the Submission). The Submission was a
pivotal moment for OCT, as it marked the beginning of moving from a
pre-clinical stage business to a clinical stage company. Post year end, in May
2023, we received combined approval for the Submission from the MHRA and REC
2, and our first Phase I first-in-human clinical trial commenced in Q2 2023.
The trial is being conducted in the UK in healthy volunteers, with a single
ascending dose. The trial aims to demonstrate the safety and tolerability of
OCT461201, whilst also providing pivotal information on its pharmacokinetic
profile, to confirm its value as a potential drug. The clinical trial is
anticipated to complete within Q3 2023.
Programme 2: OCT 130401
This programme is developing synthetic phytocannabinoids (pCBs) in combination
with a medical device for the effective, safe, and non-addictive treatment of
chronic and severe pain conditions. The initial target for OCT130401 is
trigeminal neuralgia (TN). TN is a chronic pain condition that causes an
excruciating, stabbing, electric shock-like facial pain. It has a fast and
unexpected onset and because of this has been difficult to treat. Each episode
may only last a few seconds, but some people will suffer multiple (up to 100)
episodes during one day. TN is on the rise with between approximately 10,000
and 15,000 new cases diagnosed each year. We estimate that there are currently
over 65,000 people living with the condition in the UK.
The pCBs will be delivered to the lungs via inhalation using a simple
pressurised metered dose inhaler (pMDI) similar to an asthma inhaler. This
alternative route of administration bypasses issues associated with oral
delivery of cannabinoids (e.g., onset time, poor bioavailability and high
first-pass metabolism). Fast onset of the medicine is particularly
important for indications where the pain is sudden and severe, as is the case
with TN. The low-dosage administration is aimed at achieving a therapeutic
effect while controlling side effects and managing the risk of abuse. pMDIs
have a long history of use, they take into account the human factor to
optimise compliance and have a straightforward regulatory pathway. Doctors and
patients alike are familiar with the device and this, together with an easy to
carry and easy to use design, is expected to facilitate uptake and compliance.
In January 2022, OCT entered into a drug development agreement with Charles
Rivers Laboratories Edinburgh Ltd (Charles Rivers). The Charles Rivers work
package included completing the preclinical safety and pharmacological work
for the pMDI developed with Purisys LLC, which provided the current Good
Manufacturing Practice active product ingredients, and Oz UK Ltd, which
developed the formulation and the device. In December 2022 pre-clinical work
on OCT130401 was completed successfully. We were particularly pleased with the
'device through life' with each canister comfortably delivering in excess of
160 actuations, well over the 120 required by the regulator. This programme is
now ready to enter Phase I clinical trials, which is subject to a fundraise.
Phytocannabinoid-derivatives library
The Group initially held a library of 93 proprietary cannabinoid derivatives,
with preliminary data from a selection of these derivatives suggesting that
the library contains compounds that could become candidate drug assets for a
range of pain indications. To supplement this library, in September 2021 OCT
signed an exclusive license agreement with Canopy Growth Corporation (Canopy)
for their entire pharmaceutical cannabinoid derivative library, including 335
derivatives and intellectual property rights including 14 patent families and
associated research data. During the year the Company continued to synthesise
new derivatives and the library now includes close to 500 proprietary
compounds. The advantage of this approach is that we can make modifications to
the compounds' structures to achieve improvements in stability,
bioavailability and support the diversification of druggable targets.
This enlarged library of cannabinoid derivatives is at the centre of
Programmes 3 and 4. OCT has been working with Dalriada Drug Discovery Inc
(Dalriada), to screen the expanded library. for the drug-like compounds with
the aim of targeting multiple therapeutic areas, including pain, neurology,
immune-inflammation and oncology.
Dalriada previously designed, synthesised, and experimentally tested all 335
compounds in the Canopy library which means we are able to leverage Dalriada's
existing knowledge and experience as it continues its experimental research on
our behalf. During the year we have made significant progress on both
programmes.
Programme 3
Programme 3, OCT960609, is a dual CB1 and CB2 agonist targeting an undisclosed
neuropathic pain indication, which is active at 3mg/kg per os. In our early
studies, OCT960609 has demonstrated very good bioavailability via oral
administration and displays a better profile than tetrahydrocannabinol (THC)
(intraperitoneal; absorption bypassed) in terms of analgesia and behavioural
alterations.
Programme 4
Programme 4 marks a significant expansion for the Company, as this molecule is
a potential "first-in-class" immunotherapy agent for the treatment of solid
tumours. Analysis of the initial data shows excellent drug-like potential in
terms of in vitro potency and selectivity to target, as well as in vivo
availability in blood. This implies substantive potential for the development
of a cannabinoid-based medicine that could be taken at home, as a tablet. We
are now conducting further studies, including a safety-pharmacology assessment
before final candidate selection, which we anticipate will take place in 2024.
As the existing programmes move to the next stages of drug development, the
library will continue to provide opportunities to identify potential new
candidates to enter the OCT cannabinoid research engine.
Closing Remarks
In conclusion, this has been a year of significant progress on all four drug
development programmes. We have made exciting breakthroughs and have many
reasons to be optimistic about the future. Expanding our remit to include
oncology, while continuing with our primary focus on pain, places us at the
forefront of cannabinoid research and is noteworthy for a company of our size.
Commencing our first clinical trial is a hugely important milestone for the
team, our partners, and all our stakeholders and I am tremendously proud of
our achievements. We're moving ever closer to our ultimate goal of putting
medicines in the hands of patients in need.
DR Valentino Parravicini
Chief Scientific Officer
Financial REVIEW
Finance Strategy
Our financial strategy is to support, and expedite where possible, the overall
Group aim of developing and commercialising licensed prescription medicines by
maximising the financial resources available for direct investment in our drug
programmes. This is achieved by operating cost-effective and risk-based
financial and operational controls over all areas of expenditure and
investment into research and development.
Financial Performance
Following the Group's admission to the Official List and to trading on the
London Stock Exchange's Main Market in May 2021 where £14.8m net of costs was
raised, research costs increased in line with budget in the year from £2,891k
to £4,304k. These costs mainly relate to OCT461201 where £2,038k was spent
on pre-clinical activity, ahead of the clinical trials which commenced in Q2
2023 and OCT130401 where pre-clinical activity also progressed as planned with
expenditure of £1,874k. Across the remaining two programmes, £378k was spent
on programmes 3 and 4 mainly relating to the development of CB1/CB2 agonists
by Dalriada. The remaining spend of £14k related to the SAB.
Alongside the research activity, operational costs increased from £2,320k to
£2,670k, with the main costs relating to salaries (£1,306k) and associated
expenses.
A complete review of costs was undertaken in the year to identify areas of
potential savings to maximise the financial resources available for research.
No bonuses have been paid to the executive team in the year, and
remuneration for the C-Suite and Non-Executive Directors has been frozen at
prior year rates. No new share options have been granted in the year.
Exceptional items of £64k (2022: £292k) in the year relate to share based
payment charges being prior year share options (to staff and Board members)
and warrants issued to advisers as part of the IPO process.
The Group benefited from a research and development (R&D) tax credit of
£1,089k in the year, with tax losses surrendered for the R&D tax credit
payment. Due to changes in the criteria for R&D tax credits, research
costs have been recognised in the Company rather than the subsidiary, Oxford
Cannabinoid Technologies Ltd (OCTL). There was a receivable of £1,848k at the
year end relating to R&D tax credits (2022: £760k). The prior period
claim (£760k) was received in August 2023. Both direct and indirect costs are
now embedded within the finance systems in order to optimise the claim
amount.
Cash absorbed by operations was £7,042k (2022: £5,373k). The loss for the
year was £5,945k (2022: £4,712k). Basic and diluted loss per share was
0.619p (2022: 0.491p). Note 20 of the financial statements details the
Board's exposure to, and management of, credit, liquidity and cashflow risk.
The Group is not exposed to any significant interest rate or foreign exchange
risks and therefore it does not require any formal hedging policies to be in
place (as detailed in note 20 of the financial statements).
Other Assets
From the net proceeds raised from the fundraising on IPO in May 2021, cash
reserves stood at £2,297k at 30 April 2023 (30 April 2022: £9,166k) and
remain forecast to have been fully utilised by April 2024.
The licence agreement for OCT461201 held as an intangible asset by the Group
was not impaired in the year (2022: £20k), in addition to an amortisation
charge of £39k (2022: £36k) in the year, resulting in a closing net book
value (NBV) of £7k (30 April 2022: £46k).
Prepayments of £255k (30 April 2022: £1,472k) related to a contract research
organisation (CRO) invoicing in advance of works to conclude the pre-clinical
phase on Programme 1. The majority of these prepayments are for annual
insurances.
Trade and Other Payables
Trade payables of £286k (30 April 2022: £1,798k) form the majority of
current liabilities of £584k (30 April 2022: £2,025k). Accruals of £286k
(30 April 2022: £174k) largely relate to professional services and
advisers.
Key Performance Indicators
The Group has three core KPIs:
KPI 2023 Outcome
Non-financial The lead programme, OCT461201, and Programmes 3 and 4 remain on target.
OCT130401 was paused post completion of pre-clinical, in order to extend the
Delivery of milestones detailed in the IPO prospectus for the four core Group's cash runway.
programmes.
Financial The Group has a cash runway until April 2024.
Cash runway (i.e. the length of time that the cash balance will last given the
current cash burn rate).
Financial At 30 April 2023, the Group's current ratio was 7.9 (30 April 2022: 5.8), as a
result of cash and current liabilities reducing.
Current ratio (i.e. the ability of the Group to meet its liabilities due
within 12 months with its current assets) is calculated by dividing current
assets by current liabilities.
In addition to these three key performance indicators that are analysed by the
Board, wider financial information is reviewed to ensure the most important
and relevant aspects of the Group's performance are measured and communicated,
including research expenditure (as described under Financial Performance).
There is a focus on ensuring best value is achieved and that costs remain
within budget.
Paul Smalley
Finance Director
MANAGING RISKS
Risk Management
At OCT, we understand that risk management is an integral part of our business
operations. It is a continuous, proactive process that involves identifying,
assessing, responding to, and monitoring risks. Our risk management process is
designed to protect our business and help us achieve our objectives. In line
with our commitment to constant improvement, we have undertaken a thorough
overhaul of our risk management practices. This comprehensive review and
subsequent refinements enable us to be more adaptable in an ever-changing
environment, bolstering our resilience and supporting the continued
achievement of our goals.
Our Approach to Risk
Our approach to risk management is both strategic and comprehensive. We
consider internal and external drivers of operational, hazard, financial, and
strategic risk areas over short, medium, and long-term timescales. We consider
the effects they could have on our business model, our culture, and our
strategy. We believe that effective risk management is essential to the
successful execution of our strategy and the achievement of our objectives.
Risk Appetite
Our risk appetite is determined by the nature of the risk and how that risk
could affect us. We have a higher appetite for risks that present us with a
clear opportunity for reward, and we actively seek out those that provide the
greatest opportunities. We have some appetite for risks with a possible
opportunity for reward. With these risks, we carefully balance our mitigation
efforts with our view of the possible rewards. We have a very low appetite or
tolerance for risks that only have negative consequences, particularly when
they could adversely impact health & safety, our values, culture, or
business model. We aim to eliminate these risks with our mitigation efforts.
The Board sets and regularly reviews key and principal risks.
The Risk Management Process
Our risk management process involves four key steps:
Identification: We identify risks from both a bottom-up and a top-down
perspective. We record these in programme risk registers. We also conduct ad
hoc reviews of new and emerging risks throughout the year as they arise.
Categorisation and Assessment: We assess risks using a business-wide scoring
mechanism that considers both the likelihood of occurrence and the potential
impact. We prioritise them by their risk score, and an assessment of the level
of exposure against our risk appetite. The assessment criteria of impact and
likelihood, however, is adapted to each risk category to ensure that it is
appropriate for the nature and scope of the risks in that category. Risks that
exceed our appetite may require additional risk response.
Response: Risks that require a response have additional mitigation strategies
agreed and a future action plan drawn up together with a timeframe. We assign
responsibility for the implementation of action plans.
Monitoring and Reporting: We provide a consolidated key risks report to the
Executive Committee and Board for review, using escalation criteria previously
set by them. Mitigation plans and the progress made against them are also
reported. The Board considers and agrees on the key risks, appetites, and
mitigation strategies which are fed back to risk owners. We conduct this
exercise twice yearly and it is used to determine the Group's principal risks.
Reports
Our risk reporting structure includes:
Risk Register: We record risk registers for each programme in our drug
development pipeline. In addition to this, there is a business-wide risk
register that looks at risks across the business. The registers include all
the information required to capture the risk accurately and are maintained on
our risk management information system. We identify an owner for each risk
register responsible for its maintenance as well as the risks it contains.
Key Risk Dashboard: We consolidate our key risk report from the risk
registers. This report outlines the highest-scoring risks, emerging risk
issues, the biggest influences on our risk profile, and changes to the risks
reported. The key risk dashboard also provides a business-wide perspective on
risks.
Principal Risks: We consolidate the principal risks from the key risk report.
These are those risks that we consider could have a potentially material
impact on our operations and/or achievement of our strategic objectives.
In conclusion, our risk management process is a comprehensive approach that
involves identifying, assessing, responding to, and monitoring risks. It
requires the active involvement of the Board, senior management, and all
employees. It also necessitates the implementation of robust policies and
procedures, effective risk reporting, and a culture that encourages the
identification and management of risks.
Principal Risks
People
Risk and Impact
OCT's operations could be significantly impacted if we fail to attract,
retain, and develop our key personnel or lose a key team member.
Mitigating Factors
We operate share option schemes and offer competitive reward packages to
recruit and retain key staff. We have forward planning of staffing needs and
recruitment strategies in place. In the post-COVID-19 era, we have adopted a
remote-first approach, allowing us to recruit the best talent without
geographical constraint, while offering co-working solutions for those who
prefer not to or cannot work from home. We continue to focus on leadership
development and succession planning.
Mitigation Actions in 2023
We will continue to review and enhance our reward and recognition packages. We
will refine our staffing needs and recruitment strategies based on our
programme progression and business growth.
Risk Appetite
The success of OCT is driven by our key personnel. We have a low appetite for
people risk and strive to ensure our team feels valued, rewarded
appropriately, and has opportunities to develop and progress in their OCT
career. We understand staff turnover is a part of all organisations, but we
strive to minimise this risk through our mitigation strategies.
Delayed Drug Development
Risk and Impact
There is a risk that regulatory agencies may delay our application, impacting
our strategic objectives and potentially altering the programme strategy. This
could result in a delay in OCT's ability to generate product revenues.
Mitigating Factors
To mitigate this risk, OCT maintains dialogue with clinical sites to ensure
flexibility in clinical timelines. We also employ a thorough vendor selection
process to ensure high-quality data, choosing to work with Tier 1 drug R&D
CROs.
Mitigation Actions in 2023
We will continue to maintain regular interaction with clinical sites and
regulatory agencies to ensure we are aligned with their expectations and can
adapt quickly to any changes. We will also continue to evaluate our vendor
selection process to ensure we are working with high-quality vendors that
provide reliable data.
Risk Appetite
OCT understands the inherent risks involved in the regulatory approval process
for new drug products. We have a low appetite for risks that could lead to
significant delays in our programme strategy. We strive to mitigate this risk
through careful planning, regular communication with regulatory agencies and
clinical sites, and ensuring the quality of our data through rigorous vendor
selection.
Unsuccessful Drug Development
Risk and Impact
In line with other pre-revenue pharmaceutical development companies, there is
a risk that OCT fails to develop a drug product that can be approved by the
regulatory agencies and marketed. Failure can occur at any stage during the
research and development process. Any termination of any phase in development
of our drug candidates risks harming the commercial prospects of the drug
candidates. The failure to develop an approved drug product could ultimately
lead to the cessation of the business.
Mitigating Factors
OCT is running multiple programmes across several value inflection points to
diversify risk. An experienced CSO is engaged, and we work with leading
specialists in the field to complete testing and screening on our behalf. An
SAB of leading specialists has been established to oversee the clinical
development plan. We maintain strong communication channels with regulatory
bodies, engaging early prior to moving to clinical trials.
Mitigation Actions in 2023
We will continue to look to diversify our portfolio of drug development
programmes to mitigate the risk of failure in any single programme. We have
recently appointed a CMO to strengthen the team and oversee our clinical
trials. We will also continue to engage with leading specialists and our SAB
to guide our development efforts. Regular and proactive engagement with
regulatory bodies will remain a key focus to ensure we are aligned with
regulatory expectations and guidelines.
Risk Appetite
Given the nature of pharmaceutical development, OCT understands that there is
a high degree of risk and a high rate of failure amongst companies for drug
candidates proceeding through clinical trials. However, we strive to mitigate
this risk through careful planning, diversification of programmes, and
leveraging the expertise of our team and advisory board. We have a low
appetite for risks that could lead to the cessation of the business.
Quality Assurance
Risk and Impact
OCT relies on third parties, including CROs, to perform Good Practice (GXP)
activities in a satisfactory manner. There is a risk that the quality of this
research is below the required standard for the results to be relied on as
part of OCT's applications to the regulatory agencies for their drugs to be
licensed. If CROs fail to comply with applicable current good practices
(cGXPs), the clinical data generated in OCT's R&D may be deemed
unreliable. The regulatory authorities may require OCT to perform additional
activities before approving marketing applications, causing significant delays
to commercialisation and requiring significantly greater expenditures.
Mitigating Factors
To mitigate this risk, OCT only uses experienced partners with a successful
track record in performing clinical trials to the right cGXPs. The CSO
engages with regulatory authorities to confirm the required cGXPs. We
establish contractual obligations and penalties for the quality of services
with our CRO partners and operate quality assurance processes by the CSO with
support from quality assurance and regulatory subject matter experts.
Mitigation Actions in 2023
We will continue to monitor the performance of CRO partners and their
adherence to cGXPs. We will review the outcomes of CSO engagement with
regulatory authorities and evaluate the effectiveness of quality assurance
processes and the support provided by quality assurance and regulatory subject
matter experts. We will also assess the enforcement of contractual obligations
and penalties with CRO partners.
Risk Appetite
OCT has a very low-risk appetite when it comes to quality assurance. We
understand the critical importance of maintaining high standards in our
research and development activities, and we strive to ensure that all
third-party partners adhere to the highest levels of good practice.
Cash Management
Risk and Impact
As a pre-revenue company investing in drug development, OCT faces the risk of
insufficient funds potentially compromising our ability to continue
development and operations. OCT's reliance on fundraising and R&D tax
credits may result in insufficient funds for operations, causing delays,
financial instability, and difficulty in attracting new investors.
Mitigating Factors
To mitigate this risk, OCT implements cash flow forecasting and actively
manages cash flow and is fully aware when additional cash is required for its
programmes. Our executive team reviews all expenditures to ensure we are
making the most effective use of our resources.
Mitigation Actions in 2023
We will continue to implement and refine our cash flow forecasting and active
cash management strategies. We will also continue to review all expenditures
to ensure we are making the most effective use of our resources.
Risk Appetite
OCT understands the financial risks inherent in pre-revenue pharmaceutical
development. We have a low appetite for risks that could lead to financial
instability or the inability to continue our operations. We strive to mitigate
this risk through careful financial planning, cash flow management, and
prudent expenditure.
Fundraising
Risk and Impact
With the funds raised from the IPO expected to be fully utilised by April
2024, there is a risk that OCT will be unable to raise funds at appropriate
rates and at the right time for the business's needs. Significant volatility
in the Group's share price, unsupportive shareholders, negative news stories,
and unfavourable market conditions could impact our ability to raise further
funding. This could result in a lack of cash for operations, causing financial
instability and difficulty in attracting new investors.
Mitigating Factors
To mitigate this risk, OCT maintains consistent, frequent, and transparent
investor relations. We have a crisis communications strategy in place, with
detailed specific issue preparedness. Our CEO and board members maintain
relationships with current investors and outreach to potential new investors.
OCT is actively engaging with shareholders in a variety of ways, including
in-person and virtual meetings, regular podcasts, and recorded visual
interviews with Proactive Investor, StockBox and Investor Meet Company. We
have also been attending and speaking at numerous conferences, releasing
articles to keep shareholders updated on the Company's progress. These efforts
ensure that our shareholders are kept informed of developments and that their
voices are heard.
Mitigation Actions in 2023
We will continue to maintain regular and transparent communication with our
investors and the market. We will also continue to refine our crisis
communications strategy and investor outreach efforts. Regular and proactive
engagement with our current and potential investors will remain a key focus.
Risk Appetite
OCT understands the financial risks inherent in fundraising for pre-revenue
pharmaceutical development. We have a low appetite for risks that could lead
to financial instability or the inability to continue our operations. We
strive to mitigate this risk through careful financial planning, investor
relations management, and prudent expenditure.
Leading with Integrity: A Review of Our Commitment to Doing the Right Thing
Our Ethical Approach to Business
Our business model is built on a foundation of integrity and ethical conduct.
We believe that doing the right thing is not just a moral obligation but also
a key driver of sustainable success. This year, we have taken significant
steps to embed ethical considerations into our decision-making processes,
ensuring that our actions align with our values and the expectations of our
stakeholders. This commitment is reflected in our adherence to the Animal
Welfare Act 2006 and our voluntary ban on testing on great apes, even in
countries where it is legal to do so.
We recognise the ethical responsibility to treat all animals respectfully,
while striving to minimise their pain or distress, and to avoid it completely
whenever possible. To this end, OCT is committed to following the high
standards of internationally recognised practices on the humane treatment of
animals. We uphold and embrace the "3Rs" of animal research, namely:
• the replacement of animals when possible and/or acceptable;
• the reduction of the numbers of experiments and of animals
required by each experiment; and
• the minimisation of pain and distress, by means of refinement of
animal studies procedures.
All animals used in OCT studies are specifically bred for research. In
addition, all facilities where animals are bred, housed, or undergo procedures
are accredited by the Association for Assessment and Accreditation of
Laboratory Animal Care (i.e., AAALAC-accredited) or are in the process of
first accreditation and undergo regular visits by AAALAC. This ensures that
all animal staff are competent, trained, continuously educated and assessed.
OCT ensures that qualified veterinarians are available at all times for advice
and help in the care of animals.
We do not work with or test cosmetics, food, or drink supplements.
Environmental Stewardship
We recognise our responsibility towards the environment and have implemented
measures to reduce our carbon footprint. Our transition to a remote-first
working model, initiated in response to the COVID-19 lockdowns, has not only
improved our operational efficiency but also significantly reduced our
contribution to transportation-related emissions. We have also terminated our
lease on our traditional office space, further reducing our environmental
impact. We are committed to exploring further opportunities to enhance our
environmental performance and contribute to a sustainable future.
Task Force on Climate-related Financial Disclosures (TCFD)
Since its inception, OCT has operated with a streamlined, virtual-centric
model, which inherently limits our direct environmental footprint. We have
neither acquired physical facilities nor undertaken activities with notable
environmental implications, rendering our exposure to climate-related risks
minimal. However, as we chart our course beyond 2023, our commitment is
unwavering towards comprehending our environmental footprint and crafting
sustainability strategies over the forthcoming 5 years, aptly suited to our
operational size, and taking steps to address the eleven TCFD recommendations
with the four thematic areas detailed below.
While limited in its environmental impact, our operational ethos is
underscored by a proactive approach to environmental stewardship. Our core
pursuits are anchored in drug research and development. As of now, aside from
our sustained drive to minimise travel, no pronounced climate risks have
surfaced.
Governance
Disclose the organisation's governance around climate-related risks and
opportunities.
a. Describe the board's oversight of climate-related risks and opportunities
The Board actively recognises the significance of climate-related risks and
opportunities. While the Company does not have a dedicated climate risk
committee at present, the Board is mindful that as the business grows there
will be need to evaluate how to practically and effectively incorporate the
evaluation of climate-related risks and opportunities within Board,
sub-committee, and management decision-making and reporting.
b. Describe management's role in assessing and managing climate-related risks
and opportunities.
OCT recognises that the management team has a crucial role in the day-to-day
assessment and management of climate-related risks and opportunities. The
Directors are aware that there will be a need to explore ways to further to
evaluate climate-related matters within both the management's operational
procedures and the broader governance structure, including potential
sub-committees and reporting mechanisms.
Strategy
Disclose the actual and potential impacts of climate-related risks and
opportunities on the organisation's businesses, strategy, and financial
planning where such information is material.
a. Describe the climate-related risks and opportunities the organisation
has identified in the short, medium and long term.
In the short term, OCT's operational model presents minimal direct
climate-related risks. As OCT looks toward the medium and long term,
especially considering potential expansion, the Board will actively identify
opportunities to minimise OCT's carbon footprint and enhance its positive
impact on environmental sustainability.
b. Describe the impact of climate related risks and opportunities on the
organisation's businesses, strategy and financial planning.
OCT's remote-first approach has minimised its contribution to
transport-related emissions. Beyond the evident environmental benefits, this
decision also streamlines our operations, potentially leading to financial
efficiencies by reducing overheads and bolstering productivity.
c. Describe the resilience of the organisation's strategy, taking into
consideration different climate-related scenarios, including a 2°C-or-lower
scenario.
OCT's strategy is inherently resilient, crafted to accommodate a spectrum of
climate-related scenarios. OCT's present operational model intrinsically
curtails its environmental impact, positioning it favourably even under
stringent climate scenarios, such as the 2°C-or-lower target. The Board is
committed to reviewing and refining its strategy in light of evolving
climate-related insights as it becomes appropriate to do so.
Risk Management
Disclose how the organisation identifies, assesses and manages climate-related
risks.
a. Describe the organisation's processes for identifying and assessing
climate-related risks.
OCT employs a rigorous risk management process, central to our business
operations. This involves a continuous cycle of identifying, assessing,
responding to, and monitoring risks, including those related to climate. While
climate change was not highlighted as a principal risk for the fiscal year
ending 30 April 2023, our comprehensive approach ensures that we remain
vigilant to emerging climate trends and their potential implications. We
identify risks from both bottom-up and top-down perspectives, recording them
in programme risk registers and conducting ad hoc reviews as new risks emerge.
b. Describe the organisation's processes for managing climate-related risks.
Once identified, we categorise and assess risks using a business-wide scoring
mechanism, considering both their likelihood and potential impact. Risks that
exceed our appetite or those that present clear opportunities for reward are
given special attention. For such risks, mitigation strategies are developed,
action plans are drawn up, and responsibilities are assigned for their
implementation. Our transition to a remote-first working model, for instance,
was in part a strategic response to potential climate-related risks associated
with transportation emissions.
c. Describe how processes for identifying, assessing, and managing
climate-related risks are integrated into the organisation's overall risk
management.
The Board consistently reviews key risks, ensuring a comprehensive approach
that addresses both traditional and climate-related challenges. The Executive
Committee and Board is updated with consolidated risk reports, enabling
informed strategic decisions. Our robust risk management involves the Board,
management, and staff, supported by solid policies and proactive risk
identification. As we progress, we'll adapt our strategies to emerging climate
insights, prioritising sustainability and resilience.
Metrics & Targets
Disclose the metrics and targets used to assess and manage relevant
climate-related risks and opportunities where such information is material.
a. Disclose the metrics used by the organisation to assess climate-related
risks and opportunities in line with its strategy and risk-management process.
OCT recognises the importance of metrics in understanding and managing its
carbon footprint. Given our distinctive operational model, where we neither
own laboratories nor have a centralised office, our direct environmental
impact is inherently limited. We monitor our operations to ensure alignment
with best practices in sustainability.
b. Disclose Scope 1, Scope 2, and, if appropriate, Scope 3 greenhouse gas
(GHG) emissions, and related risks.
Our Scope 1 and Scope 2 GHG emissions are minimal due to our remote
operational model. We are vigilant about potential Scope 3 emissions, ensuring
that our broader supply chain also prioritises environmental sustainability.
While OCT is not currently subject to GHG reporting requirements, we
understand the need in the future as it becomes relevant to assess our
environmental impact and are aware of the challenges in quantifying the
complete carbon footprint of our supply chain.
c. Describe the targets used by the organisation to manage climate-related
risks, opportunities and performance against targets.
While we've already made progress in minimising our carbon footprint, we
intend to define clear targets for further reductions when it becomes
appropriate to do so. We commit to regularly reviewing and reporting our
performance against these targets in annual disclosures, ensuring transparency
and accountability.
In conclusion, OCT is deeply committed to a sustainable future, continuously
assessing its environmental impact and adapting its strategies to ensure
minimal carbon emissions, even as we consider potential expansion in the
future.
Social Responsibility
We are dedicated to creating a diverse and inclusive workplace where everyone
is treated with respect and dignity. We believe that our commitment to social
responsibility extends beyond our organisation to the wider community. Further
details of our stakeholder engagement can be found in our s172 Statement.
Governance
We understand the importance of strong governance in maintaining the trust of
our stakeholders. We have implemented robust governance structures and
processes to ensure transparency, accountability, and compliance with all
relevant laws and regulations. Our commitment to doing the right thing is
reflected in our zero-tolerance approach to bribery and corruption, as well as
our adherence to the professional codes of industry associations including
ABPI, AAALAC, AALAS, Bioindustry Association, CDP, DA4S, NC3Rs and the
Scottish Lifesciences Association. Further details of our governance can be
found in our Governance Report.
In conclusion, doing the right thing is at the heart of our business. We are
committed to acting with integrity, respecting the environment, contributing
positively to society, and maintaining strong governance. We believe that this
commitment will drive our sustainable success and make a meaningful difference
in the world.
GOING CONCERN AND VIABILITY STATEMENT
Going Concern
The Directors have reviewed the Group's financial position for the 12 months
following the approval of these financial statements. The Group's business
activities, financial standing, and factors likely to influence its future
development, performance, and position are detailed in the CEO's Review and
Financial Review.
(a) Principal Risks Assessment
The Group's capital management objectives, policies, and processes, financial
risk management objectives, financial assets and liabilities details, and its
exposure to credit and liquidity risks are elaborated in notes 20 and 21 of
the financial statements.
(b) Trading Results, Future Trading Forecasts, and Financial Scenario Modelling Review
The Group prepares budgets and cash flow forecasts to ensure it can meet its
liabilities as they fall due, with stringent controls in place to manage cash
going forward. However, the Directors have identified a material uncertainty
that may cast significant doubt on the Group's ability to continue as a going
concern without raising additional funds. The Group's cash runway extends only
8 months beyond the signing of these accounts, assuming that the planned
programme research remains unchanged. Therefore, the Group may be unable to
realise its assets and discharge its liabilities in the normal course of
business.
(c) Funding and Cash Reserves
The Board is planning for the next round of funding, previously signalled, to
support our current drug development programmes through to their next stage of
development and key value inflexion points. Cash remains well-managed with the
next round of fundraising due to take place by the end of Q4 2023, market
permitting. In the absence of, or delay in obtaining any further debt or
equity funding, the existing cash funds will be fully utilised by April 2024.
(d) Results of Scenario Testing
The uncertainty as to the future impact on the Group of the ongoing global
situation has been considered as part of the Group's adoption of the going
concern basis. The Directors are confident that the Group is working in
alignment with the development plan. Several key partners have been onboarded
and drug development work continues in earnest, with Programme 1 (OCT461201)
having started its clinical trial in Q2 2023.
(e) Conclusion on Going Concern
After considering the Group's current financial position, the Directors have
concluded that there is a reasonable expectation that the Group has adequate
resources to continue its operational existence for the foreseeable future.
This conclusion is based on the Group's current cash position, the planned
future fundraising, and the ongoing development of its drug discovery
programmes.
However, it is acknowledged that the Group's ability to continue as a going
concern is dependent on successful future fundraising and the progression of
its drug development programmes. The Directors are actively managing these
risks and uncertainties and are confident in the Group's ability to raise the
necessary funds and progress its drug development programmes as planned.
Therefore, the financial statements have been prepared on a going concern
basis, which contemplates the continuity of normal business activities and the
settlement of liabilities in the ordinary course of business.
The Directors will continue to monitor the Group's going concern status,
particularly in light of the ongoing global situation and its potential impact
on the Group's operations and financial position. They are committed to taking
appropriate actions as necessary to ensure the continued viability of the
Group.
Long-term Prospects and Viability
(f) Assessment of Long-term Prospects
The Directors have assessed the prospects of the Company over a longer period
than the 12 months minimum required by the 'Going Concern' provision. The
Directors anticipate the regulatory approval of the first drug produced by OCT
in 2027. This milestone will mark a significant shift in the Group's financial
position and is a key factor in the Directors' assessment of the Group's
viability. The Group's strategy is well documented and, in addition to
Programme 1 which is in clinical trials, includes medium-term targets of
developing Programmes 2, 3 and 4, each targeting different therapeutic areas
and each at different stages of development. The Group currently generates no
revenue and relies on its cash reserves and future fund-raising exercises to
fund its clinical trials.
(g) Current Position
The Group's current position is characterised by a strong focus on drug
development, with several key partners onboarded and drug development work
continuing in earnest, supported by the Group's current financial position of
£2,297k cash in the bank as of 30 April 2023. The Group's cash runway extends
8 months beyond the signing of these accounts, assuming that the planned
programme research remains unchanged. Therefore, the Group may be unable to
continue its research and discharge its liabilities in the normal course of
business. However, the Board is planning for the next round of funding,
previously signalled, to support our current drug development programmes
through to their next stage of development and key value inflexion points.
(h) Strategy and Business Model
The Group's strategy involves the development of Programme 1 (OCT461201), a
patent-protected new chemical entity targeting CIPN and IBS and Programme 2
(OCT130401), which is the development of synthetic pCBs for the effective,
safe, and non-addictive treatment of chronic and severe pain conditions. The
Group is also working on expanding its portfolio with the development of
Programmes 3 and 4, which involve screening an expanded library of cannabinoid
derivatives with the aim of targeting multiple therapeutic areas, including
pain, neurology, immune-inflammation, and oncology.
(i) Robust Assessment of Principal Risks
The Group is faced with several principal risks, including the potential
failure of significant drug development programmes, the inability to secure
additional funding, and the ongoing global situation. To manage these risks,
the Group has set clear objectives and policies and has implemented processes
for managing its capital and financial risk. Detailed information about the
Group's financial assets and liabilities, as well as its exposure to credit
risk and liquidity risk, can be found in note 20 of the financial statements.
The Group also prepares budgets and cash flow forecasts to ensure it can meet
its liabilities as they fall due and has strict controls in place to manage
cash effectively. Despite the risks and uncertainties, the Directors are
actively managing these issues and remain confident in the Group's ability to
secure the necessary funds and advance its drug development programmes as
planned.
(j) Assessment of Viability
The Directors have acknowledged a significant uncertainty that may impact the
Group's sustainability, but they are confident in the Group's alignment with
the development plan. They have successfully partnered with key stakeholders,
and the Group is actively engaged in drug development, with a clinical trial
for OCT461201 commenced in Q2 2023. It is important to note that the Group's
viability does not solely rely on the success of a single drug development
programme. The Group has a library of almost 500 proprietary cannabinoid
derivatives, which serves as a robust pipeline for future development.
Furthermore, the Group's long-term viability is supported by its broader drug
development lifecycle, which includes Programmes 2, 3, and 4. These programmes
offer potential future value for the Group and are at different stages of
development, targeting various therapeutic areas. The diversification of these
programmes helps mitigate the risks associated with any single drug
development project and provides multiple opportunities for future success.
(k) Time Period and Scenario Modelling
The time horizon for the viability assessment extends to 2027, which is when
the Directors anticipate that Programme 1 will achieve regulatory approval.
Scenario modelling includes potential adverse or unsatisfactory results from
clinical trials resulting in programmes being terminated and lack of equity
raising. However, the Group's viability is not solely dependent on the success
of a single drug development programme but is supported by a library of almost
500 proprietary cannabinoid derivatives, providing a robust pipeline for
future development.
(l) Results of Scenario Testing
Our viability testing takes into account the potential impact of significant
failures in drug development. While such failures could pose challenges, they
do not fundamentally alter the Company's overall drug development potential.
This is due to the robustness of our portfolio, providing a range of
opportunities for discovery and development.
While a failure in a particular drug development programme could have specific
negative impacts, it does not change the overall outcome of the viability
testing. This is because the Group has multiple strategies in place to
generate additional capital if needed. These strategies include the potential
sale of existing programmes in the current drug development portfolio,
licensing of intellectual property rights, raising equity financing in the
public markets, or exploring other private financing options. These measures
provide the Group with a degree of resilience and flexibility, enabling it to
navigate potential challenges and continue its operations even in the face of
adverse outcomes in specific drug development programmes.
(m) Conclusion on Viability
Based on the results of this analysis, the Directors have a reasonable
expectation that the Group will be able to continue in operation and meet its
obligations as they fall due over the period to 2027. This conclusion is based
on the Group's current cash position, the planned future fundraising, the
ongoing development of its drug discovery programmes, and the robustness of
its cannabinoid library. However, it is acknowledged that the Group's
viability is dependent on successful future fundraising, the progression of
its drug development programmes, and the management of principal risks. The
Directors will continue to monitor the Group's viability status, particularly
in light of the ongoing global political, economic, social, technological,
legal and environmental situation and its potential impact on the Group's
operations and financial position. They are committed to taking appropriate
actions as necessary to ensure the continued viability of the Group.
Other Directors' statements
Statement of Directors' Responsibilities
The Directors are responsible for preparing the Directors' Report, Strategic
Report, Directors' Remuneration Report and the financial statements in
accordance with applicable law and regulations.
Company law requires the Directors to prepare Group and Company financial
statements for each financial year. The Directors are also required to prepare
Group financial statements in accordance with UK adopted International
Accounting Standards under the Listing Rules of the Financial Conduct
Authority for companies trading on the Main Market. Under the Listing Rules,
the Directors have also elected to prepare the Company financial statements in
accordance with UK adopted International Accounting Standards.
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 and profit or loss of the Group and Company for that period. In
preparing the Group and Company financial statements, the Directors are
required to:
• select suitable accounting policies and then apply them
consistently;
• make judgements and accounting estimates that are reasonable and
prudent;
• state whether they have been prepared in accordance with UK
adopted International Accounting Standards and;
• prepare the financial statements on the going concern basis unless
it is inappropriate to presume that the Group and the Company will continue in
business.
The Directors are responsible for keeping adequate accounting records that are
sufficient to show and explain the Group's and Company's transactions and
disclose with reasonable accuracy at any time the financial position of the
Group and Company and enable them to ensure that the financial statements
comply with the Companies Act 2006. They are also responsible for safeguarding
the assets of the Group and the Company and hence for taking reasonable steps
for the prevention and detection of fraud and other irregularities.
Website publication
The Directors are responsible for ensuring the Annual Report and the financial
statements are made available on a website. Financial statements are published
on the Company's website in accordance with legislation in the United Kingdom
governing the preparation and dissemination of financial statements, which may
vary from legislation in other jurisdictions. The maintenance and integrity of
the Company's website is the responsibility of the Directors. The Directors'
responsibility also extends to the ongoing integrity of the financial
statements contained therein.
Report review process for the Annual Report
The consolidated financial statements are drafted by appropriate members of
the reporting and leadership teams and co-ordinated by the Finance Director to
ensure consistency. A series of planned reviews is undertaken by the reporting
team and Executive Directors. In advance of final consideration by the Board,
they are reviewed by the Audit Committee.
The Board's review of the system of internal control
The Board is responsible for the Group's overall approach to risk management
and internal control and has reviewed the Group's risk management and internal
controls systems for the period 1 May 2022 to the date of the Annual Report
and Financial Statements and is satisfied that they are effective.
Section 172(1) statement
The Board reviews all matters and decisions through the consideration and
discussion of reports which are sent in advance of each of their meetings and
through presentations to the Board. When the Directors discharge their duty as
set out in section 172 of the Companies Act 2006 ('section 172' or 's.172').
The Directors are required to include a statement of how they have had regard
to stakeholders and the other factors set out in section 172(1)(a) to (f) when
performing their duty. The full s.172(1) statement contains examples of how
the Directors have had regard to the matters in s.172(1)(a) to (f) when
engaging with stakeholders.
Disclosure of information to the Auditor
The Directors who held office at the date of approval of this Report of
Directors confirm that so far as each Director is aware:
• there is no relevant audit information of which the Company's
auditor is unaware; and
• the Directors have taken all steps that they ought to have taken
as Directors to make themselves aware of any relevant audit information and to
establish that the auditor is aware of that information.
Future developments
The Directors consider that the continued investment in the development of the
Group's four core development programmes will allow the business to obtain
regulatory approval for its first programme during 2027. Continued progress
towards Phase I clinical trials for two of the four drug development
programmes post year end provide further assurance to the Board that the Group
is on target to deliver the key stages in the four programmes as outlined in
the Chair's Statement and the Strategic Report.
Directors' responsibility statement
The Directors whose names and functions towards the end of the Annual Report
and Accounts confirm to the best of their knowledge:
• the financial statements, prepared in accordance with the relevant
financial reporting framework, give a true and fair view of the assets,
liabilities, financial position and profit or loss of the Group and Company,
and the undertakings included in the consolidation taken as a whole;
• the Management Report which comprises the CEO's Review, the CSO's
Review, the Financial Review and the Principal Risk Section of the Annual
Report and Accounts includes a fair review of the development and performance
of the business and the position of the Group and Company and the undertakings
included in the consolidation taken as a whole, together with a description of
the principal risks and uncertainties they face; and
• the Annual Report and Accounts, taken as a whole, is fair,
balanced and understandable and provides the information necessary for
shareholders to assess the Group's performance, business model and strategy.
The Company takes responsibility for all of the information drawn up and made
public in the Annual Report and Accounts.
This responsibility statement was approved by the Board of Directors and is
signed on its behalf by:
Clarissa Sowemimo-Coker
Paul Smalley
Chief Executive Officer
Finance
Director
Governance report - HOW WE PRESERVE VALUE
Corporate governance report
"Our journey so far has been marked by significant milestones and
achievements, and we are poised to continue this trajectory with renewed
vigour and determination. Our focus remains on harnessing the power of
cannabinoid medicines to make a meaningful difference in the lives of
patients."
Introduction
In line with the Chair's statement at the beginning of the Annual Report, we
at OCT are committed to upholding the highest standards of integrity and
trustworthiness in the modern business world. These principles are the bedrock
of our corporate governance practices. I am pleased to be part of a Board that
is not only highly experienced and high-performing but also dedicated to
achieving the best outcomes for all our stakeholders. Our Chair, Julie
Pomeroy, has expressed pride and optimism in her statement, highlighting our
transition from a pre-clinical to a clinical-stage pharmaceutical company, a
testament to our team's dedication and expertise.
Strategic Initiatives
Our strategic initiatives are designed to align with our mission and business
objectives. They encompass a range of activities, including research and
development, partnerships and collaborations, and financial strategies. These
initiatives are crucial in driving our growth, enhancing our competitiveness,
and ensuring we deliver on our commitment to our stakeholders.
Stronger Governance
As a pre-revenue company, our focus has been on programme and risk management
together with cash flow management. These aspects are deeply embedded in our
culture and are the first items on the agenda at all Board meetings. Our
commitment to these areas has been instrumental in navigating the complexities
of the pharmaceutical industry and achieving our operational targets.
Financial Governance
Our financial governance practices are designed to ensure the effective
management and control of our financial resources. This includes the
development and implementation of financial policies and procedures, budgeting
and forecasting, financial risk management, and compliance with relevant
financial regulations and standards.
Stakeholder Engagement
Our stakeholder engagement practices are aimed at building and maintaining
strong relationships with all our stakeholders, including our shareholders,
employees, partners, and the communities in which we operate. We believe in
open and transparent communication and actively seek feedback from our
stakeholders to inform our decision-making and strategic planning processes.
We utilise a variety of different methods to engage our stakeholders
including: in-person and virtual meetings; site visits; broadcast investor
updates with interactive Q&A sessions; video interviews; podcasts; and
other social media channels where we operate and monitor #AskOCT as a direct
line of communication to the Company.
Conclusion
As we look to the future, we are filled with optimism. Our journey so far has
been marked by significant milestones and achievements, and we are poised to
continue this trajectory with renewed vigour and determination. Our focus
remains on harnessing the power of cannabinoid medicines to make a meaningful
difference in the lives of patients. We will continue to innovate,
collaborate, and uphold the highest standards of corporate governance.
Together, we have the power to change lives and shape the future of
cannabinoid medicine.
Rob Bennett
General Counsel and Company Secretary
BOARD OF DIRECTORS
Board meeting attendance
Julie Pomeroy (Chair) (10/10)
Richard Hathaway (9/10) 1
Paul Smalley (6/6) Appointed 17 October 2022
Karen Lowe (4/4) Resigned 17 October 2022
John Lucas (5/5) Resigned 2 December 2022
Cheryl Dhillon (10/10)
Bishrut Mukherjee (8/10) 2
Clarissa Sowemimo-Coker (10/10)
Neil Mahapatra (10/10)
Board of Directors
Julie Pomeroy
Age:67
Chair
Appointed to the Board: 2021
Contribution to the long-term sustainable success of the Company
Julie brings over 20 years' experience as a plc Board director and
accordingly she has an in-depth knowledge of UK listed companies and the
corporate governance standards required for such companies. She is a
Chartered Accountant and a Chartered Director. She was Finance Director and
Company Secretary of AIM listed Dillistone Group Plc for over 10 years and
brings strong finance credentials to the Company. Julie has also had over
10 years' experience as a non-executive director of various NHS organisations
where she has chaired or been a member of their audit committees.
Other public appointments:
Dillistone Group plc
Committee: Audit (Chair), Remuneration, and Nomination
Clarissa Sowemimo-Coker
Age:42
Chief Executive Officer
Appointed to the Board: 2021
Contribution to the long-term sustainable success of the Company
Clarissa's multi-sector professional experience in law, compliance,
operations, and investor relations are essential to the long-term sustainable
success of OCT. She has over 15 years' experience in the legal and regulatory
field and is a qualified solicitor in England and Wales. She has a strong
governance background and a proven track record of implementing compliance
programmes to help companies meet their legal and regulatory obligations.
Clarissa is a strong leader and communicator with an entrepreneurial mindset.
She is able to build relationships with shareholders, motivate teams, and
clearly articulate the Company's vision and strategy. She is committed to
ensuring OCT is a diverse and inclusive workplace, which will be essential to
its long-term success.
Other public appointments:
None
Cheryl Dhillon
Age:64
Senior Independent Director
Appointed to the Board: 2021
Contribution to the long-term sustainable success of the Company
Cheryl has over 30 years' pharmaceutical industry experience spanning across
companies from start up to large global enterprises in positions ranging from
SVP of Finance to CEO. Her skill set encompasses hands on management of many
of the functions critical to successful development and commercialisation of
specialty pharmaceutical products, particularly into EU markets. Since
taking semi-retirement in 2020, she has focused her expertise helping
innovative healthcare related companies at Board level. Along with being a
Fellow of ACCA she has an MBA from University of Hertfordshire specialising in
strategy and has a coaching qualification from the University of Strathclyde.
Other public appointments:
None
Committee: Audit, Remuneration (Chair), and Nominations (Chair)
Richard Hathaway
Age:56
Non-Executive Director
Appointed to the Board: 2022
Contribution to the long-term sustainable success of the Company
Richard brings a breadth of financial experience as a former adviser to a
range of international businesses, both public and private, across a range of
sectors, as well as from his senior finance and corporate development roles at
Imperial Brands. In particular, he has extensive transactions, financing and
capital raising experience that is highly relevant to OCT as it pursues
further investment rounds to support the delivery of its strategy. As a
former auditor of a wide range of UK listed companies and former head of risk
management at Imperial, he also contributes extensive corporate governance
experience. He is a Chartered Accountant with extensive recent and relevant
financial experience.
Other public appointments:
Compania de Distribucion Integral Logista Holdings SA
Committee: Audit.
Neil Mahapatra
Age:43
Non-Executive Director
Appointed to the Board: 2021
Contribution to the long-term sustainable success of the Company
As a co-founder of OCT, Neil brings to bear valuable executive leadership and
a proven ability to cultivate companies with robust growth potential. His deep
understanding of the cannabinoid sector, enriched by his considerable
expertise in managing investor relations, contributes significantly to the
strategic depth of the Company. His achievements include the establishment of
the influential investment firm, Kingsley Capital Partners (KCP), and the
initiation of the ground-breaking 'End our Pain' campaign, a testament to his
strategic acumen and forward-thinking approach. In addition, his diverse
portfolio of experience and impactful contributions, which range from
healthcare corporate finance to private equity, underline his role in
promoting the long-term sustainable success of the Company.
Other public appointments:
Odyssean Investment Trust plc.
Committee: None
Paul Smalley
Age: 49
Finance Director
Appointed to the Board: 2022
Contribution to the long-term sustainable success of the Company
Paul brings more than 25 years' UK and international financial experience to
the Board including strategic management capabilities gained across a wide
range of market sectors, with expertise extending to IT, HR and procurement.
Most recently he was the Finance Director and Company Secretary of Panthera
Biopartners Ltd, a clinical trials management company overseeing financial,
operational and treasury management, as well as assisting with mergers and
acquisitions.
Paul has worked in a variety of organisations, from SMEs to quoted companies
including as Finance Director of JOST UK Ltd, which was a UK subsidiary of
JOST Werke AG, a company quoted on the Frankfurt Stock Exchange.
Paul holds a BA in Accounting and Finance from Lancaster University and is
also a chartered global management accountant and Chartered Management
Accountant.
Other public appointments:
None
Committee: None
Bishrut Mukherjee
Age:35
Appointed to the Board: 2021
Contribution to the long-term sustainable success of the Company
Bishrut has a wide range of experience within operational delivery, M&A,
corporate venturing and Innovation, principally across regulated industries
including those of pharmaceuticals, manufacturing, energy, and
FMCG. Bishrut's background in business development and operations leadership
is valuable to the company as it reviews new opportunities and looks to
deliver its drug candidate pipeline. He is a Chartered Engineer and has an MBA
from London Business School.
Other public appointments:
None
Committee: Remuneration and Nominations
Executive Committee and Company Secretary
Clarissa Sowemimo-Coker
Chief Executive Officer
Details above
Paul Smalley
Finance Director
Details above
Dr. Valentino Parravicini
Chief Scientific Officer
Appointed:
Dr. Valentino Parravicini was appointed as the Chief Scientific Officer of OCT
in July 2020.
Contribution to the long-term sustainable success of the Company
Dr. Parravicini brings a distinguished career in oncology, inflammation, and
immunology to OCT. His extensive experience leading groundbreaking projects
and his award-winning work in pharma and biotech are significant assets to the
Company.
As Chief Scientific Officer, Dr. Parravicini oversees all of OCT's ongoing
drug discovery and development studies, including the pre-clinical development
of OCT461201, the Company's lead CB2 agonist. His role involves close
collaboration with OCT's lead business and research partners, as well as the
development of new research partnerships globally. His expertise and
leadership are helping to advance OCT's objective to become a global leader in
developing cannabinoid-based prescription medicine.
Dr. Tim Corn
Chief Medical Officer
Appointed:
Dr. Tim Corn was appointed as the Chief Medical Officer of OCT in June 2023.
Contribution to the long-term sustainable success of the Company
Dr. Corn brings a wealth of experience from his previous senior roles in
various pharmaceutical organisations, including Jazz Pharmaceuticals, EUSA
Pharma Inc and Confo Therapeutics SA. His extensive knowledge of the
regulatory environment and his track record of contributing to over twenty
regulatory approvals in the US and Europe are invaluable assets to OCT.
In his role as Chief Medical Officer, Dr. Corn is responsible for overseeing
OCT's clinical research and development activities. His guidance and advice
are crucial as OCT navigates through all stages
of clinical development towards commercialisation, further strengthening
the senior team and validating the Company's vision for future growth.
Rob Bennett
General Counsel and Company Secretary
Appointed:
Rob joined OCT as General Counsel in December 2022 and was appointed Company
Secretary on 12 January 2023.
Contribution to the long-term sustainable success of the Company
Rob Bennett brings over 15 years of UK and international experience across
multiple sectors, including retail, fast-moving consumer goods, manufacturing,
innovation, and FinTech. His expertise in legal, risk, and compliance, honed
through senior roles at listed and large private companies, including General
Counsel and Company Secretary roles, is a significant asset to OCT.
As General Counsel and Company Secretary, Rob plays a pivotal role in OCT's
operations. His expertise in mergers and acquisitions, coupled with his
recognition in Legal 500's GC Powerlists in 2021 and 2022, underscores his
value to the team. In his role, Rob serves as the link between the Executive
Committee and the Board, managing a number of external stakeholder
relationships. He heads the legal function and oversees corporate governance
responsibilities. His international experience and legal knowledge are crucial
to OCT's growth and long-term success.
KEY ACTIVITIES OF THE BOARD DURING 2022/23
(a) Overview
The Board of OCT convened 10 times during the year, including the Annual
General Meeting. Additional meetings were organised as necessary to ensure the
Board could effectively fulfil its responsibilities. At each meeting, the
Board received strategic, operational, and financial updates from the CEO, CFO
and CSO. The Board also considered aspects of Group culture and strategy at
various points during the year.
(b) Drug Development and Clinical Trials
In March 2022, OCT signed a five-year Master Service Agreement with Benuvia
Manufacturing Inc. for OCT 130401, OCT's drug-device combination for the
treatment of TN.
In July 2022, OCT entered into a Master Service Agreement and Work Order with
Simbec Research Limited for its first-in-human Phase I clinical trial for its
lead compound, OCT461201, that commenced in Q2 2023.
In January 2023, OCT submitted a combined clinical trials application for its
lead programme, OCT461201, to the MHRA) and REC 2.
In May 2023, OCT received approval from the MHRA and REC 2 for the combined
Phase I clinical trial application for OCT461201.
(c) Strategic Objectives and Financing
The Board received ongoing updates from the Executive Directors and CSO on the
implementation of strategy throughout the year.
(d) Risk Management and Internal Control
The Board initiated a root and branch review of the risk management and
internal controls.
The Board made the strategic decision to pause the clinical phase of OCT130401
in order to extend the cash runway.
The Board routinely considered its conflict of interests.
The Board received an update on Cyber & IT Security.
The Board reviewed the compliance training completion rates.
(e) Corporate Reporting and Performance Monitoring
The Board reviewed the rolling forecasts and approved the 2023 budget.
The Board approved the year-end and interim results.
The Board approved monthly business updates.
The Board reviewed the 2022 Report & Accounts to ensure it is fair,
balanced, and understandable.
(f) Stakeholder Engagement
The Board hosted the Annual General Meeting (AGM) on 28 September 2022.
The Board received updates on our investor engagement programmes and regular
investor relations activity.
Employee engagement was another significant focus for the Board during the
year. We are proud to have been recognised in The Sunday Times Best Places to
Work in 2023 and Living Wage accreditation, a testament to our efforts in
creating a supportive and engaging work environment.
(g) Governance
The Board performed an evaluation of the Board's effectiveness, led by the
Chair and internally facilitated by the Company Secretary.
The Board received regular governance updates from the Company Secretary.
The Board reviewed OCT's vision, purpose, and values.
The Board reviewed Executive Team succession planning.
In addition to the matters listed, the Board received governance, legal, and
regulatory updates at regular intervals from the Company Secretary and the
Board's advisers. Risk remains a matter reserved for the Board, and a detailed
review of our risk management processes and principal risks was conducted.
There have been no reports to our whistleblowing helpline.
Section 172(1) statement
Our Directors, in accordance with the Companies Act 2006 (the Act), are
committed to fostering the success of OCT for the collective benefit of our
shareholders, while also considering our other key stakeholders. We firmly
believe that to advance our strategy and achieve enduring success, the Board
must take into account all relevant stakeholders in decision-making and ensure
that every decision aligns with our culture of 'doing the right thing'.
The challenge lies in balancing the competing priorities of stakeholders, as
it is not always feasible to yield positive outcomes for all. Our stakeholder
engagement provides our Board with a deep understanding of stakeholder
concerns, enabling them to carefully weigh all relevant factors and select the
course of action that best fosters high standards of business conduct and the
long-term success of OCT. The principles of s.172 are not merely
considerations at the Board level; they are ingrained in our culture and
influence all our company activities.
The diverse interests of stakeholders are taken into account in the business
decisions we make across the Company, at all levels. This is reinforced by our
Board setting the right tone from the top. All significant decisions by the
Board are subject to a s.172 evaluation to identify the likely long-term
consequences of any decision and the impact of the decision on our
stakeholders.
In carrying out their duties during 2022-2023, the Directors have considered
the matters set out in s.172 of the Act.
In performing their duties during 2022-2023, the Directors have acted in a way
they considered, in good faith, would be most likely to promote the success of
the Company for the benefit of its members as a whole. In doing this, they
have had regard (amongst other matters) to:
(a) The likely consequences of any decisions in the long term:
The Board has made strategic decisions to advance the Company's lead compound,
OCT461201, into clinical trials, a significant milestone for the Company. This
compound has shown potential as an effective therapy for CIPN and IBS. The
decision to advance into clinical trials is a significant step towards
achieving our core aim of providing a much-needed safe and effective treatment
for patients, while also generating value for shareholders.
Like all early-stage drug discovery businesses, this process is complex. Each
phase of clinical trials brings us closer to commercialisation, reducing
failure risk and increasing shareholder value. While the benefits of today's
decisions may not be immediately apparent, we are confident that our strategic
choices will yield significant future rewards.
(b) The interests of the Company's employees:
The Board recognises the importance of employee engagement and the significant
contributions made by all employees to the Company's ongoing success. We have
maintained open lines of communication with our employees through regular 'all
hands' meetings and updates, fostering a positive and supportive work
environment. Our commitment to employee engagement and creating a conducive
work environment was recognised when OCT was listed in The Sunday Times Best
Places to Work 2023.
In response to the evolving work environment, we have adopted a 'remote-first'
approach, offering flexible work arrangements such as remote working. This
approach contributes to a better work-life balance for our employees and is a
testament to our adaptability. Despite being a fully remote company, we are
mindful of the need to nurture the Company's culture. Therefore, we ensure
that we make time for in-person engagement, regularly convening at shared
office spaces for face-to-face interaction and team building.
We also respect individual preferences and circumstances, understanding that
the ability to work from home is a privilege not available to all. To support
all team members, we provide access to coworking spaces for those who prefer
this arrangement, ensuring they have the resources they need to thrive in
their roles.
In addition to these flexible work arrangements, OCT is committed to the
continuous development of its workforce. We offer regular training
opportunities, ensuring that employees have the skills and knowledge necessary
to excel in their roles. In the relevant period, Paul Smalley completed his
ESG (Environmental, Social, and Governance) certification, reinforcing our
commitment to sustainable and responsible operations.
The Board is pleased with the consistent progress and the fact that we remain
on track to meet our financial and operational targets. This achievement is a
testament to the adaptability, skill, and 'can do' attitude of our team, which
has been further enhanced by our flexible and inclusive work environment.
(c) The need to foster the Company's business relationships with suppliers, customers, and others:
The Board, through its digital-first approach, has empowered the Executive
Team to cultivate strategic alliances with a variety of suppliers. This
strategy has led to the establishment of robust relationships with a broad
spectrum of businesses, propelling our drug development process significantly
forward. Key partners, such as Aptuit (Verona) SRL, part of Evotec SE, and
Simbec Research Limited, part of Simbec-Orion Group Ltd, have played
instrumental roles in the progression of our first-in-human Phase I clinical
trial. These partnerships, fortified by our digital-first strategy, are
indispensable for the successful advancement of our drug candidates.
In addition to fostering relationships with partners, OCT has built strong
connections with all its suppliers, including Simbec Research Limited, Evotec,
ProPharma Group, Charles River, and Dalriada Drug Discovery. This has been
achieved through regular communication and update meetings, as well as site
visits and in-person meetings where appropriate. This open dialogue has
enabled us to promptly address any concerns and collaboratively find solutions
that are mutually beneficial.
Furthermore, OCT has proactively engaged with regulators to ensure our
operations meet all necessary standards. We have worked closely with the MHRA
during the filing of our first Clinical Trial Application (CTA), tailoring our
strategy to meet the MHRA's specific requirements for a successful submission.
We have maintained a transparent and open dialogue with the MHRA, promptly
addressing any queries or concerns they may have. As one of the few companies
licensed to possess and supply class one substances under the Misuse of Drugs
Act 1971, we have also continued our engagement with the Home Office,
including conducting an in-person site visit to the licensed premises as part
of the successful license renewal process.
Our digital-first strategy not only optimises our operations but also enhances
communication efficiency with our partners and regulators. This approach
bolsters our collaborative efforts and innovation in our shared mission of
healthcare advancement. These relationships and engagements are vital in
fostering the Company's business relationships with suppliers, customers, and
others, contributing to the long-term success of OCT.
(d) The impact of the Company's operations on the community and the environment
The Board acknowledges our significant role within the community and the
broader implications of our operations. We are dedicated to conducting our
business responsibly and sustainably. In line with this commitment, we made a
strategic decision in October 2021 to transition to a fully remote business
model, terminating the lease on our head office.
Adopting a remote-first approach has not only transformed the way we work but
has also significantly reduced our carbon footprint. By minimising commuting,
we have lessened our contribution to transportation-related emissions,
demonstrating our commitment to environmental stewardship.
Furthermore, our digital-first strategy has enabled us to reduce the
environmental impact associated with paper usage and printing. By leveraging
digital tools and platforms for our operations, we are minimising waste and
promoting sustainability.
These strategic decisions reflect our dedication to reducing our environmental
impact, contributing positively to our community, and leading by example in
sustainable business practices.
(e) The desirability of the Company maintaining a reputation for high standards of business conduct:
The Board is steadfast in its commitment to uphold high standards of business
conduct. As part of this commitment, we have voluntarily adopted the UK
Corporate Governance Code, a step up from the QCA Code. This move signifies
our dedication to adhere to a significantly higher standard of corporate
governance, reflecting our belief in the importance of good governance for the
successful and ethical operation of our business.
During the relevant period and whilst in her roles as Company Secretary,
Clarissa Sowemimo-Coker completed the Corporate Governance Diploma, further
enhancing our governance capabilities and demonstrating our commitment to
continuous learning and improvement in this critical area.
In addition, we have undertaken a comprehensive 'root and branch' risk review.
This rigorous process allows us to identify, assess, mitigate, and control
risks across our business, ensuring we are well-prepared to navigate any
challenges that may arise.
We have implemented robust governance structures and processes, ensuring that
we operate in a transparent, ethical, and responsible manner. Our adherence to
these high standards of business conduct not only enhances our reputation but
also contributes to our long-term success and sustainability.
(f) The need to act fairly between members of the Company:
The Board is deeply committed to equitable treatment of all Company members,
with a focus on open and transparent communication with our shareholders,
ensuring that their interests are always at the forefront of our decisions.
In August 2022, when we made the strategic decision to pause the clinical
phase of OCT130401, we made sure to extensively engage with our shareholders.
We collected their views and feedback through consultations with shareholders
and took them into serious consideration, demonstrating our commitment to an
inclusive and respectful decision-making process.
Our CEO, Clarissa, and CSO, Valentino, have been actively engaging with
shareholders in a variety of ways, including in-person and virtual meetings,
regular podcasts, and recorded visual interviews with Proactive Investor,
StockBox and Investor Meet Company. They have also been attending and speaking
at numerous conferences and releasing articles to keep shareholders updated on
the Company's progress. These efforts ensure that our shareholders are kept
informed of developments and that their voices are heard.
In all our actions, we strive to uphold the principles of corporate
governance: fairness, accountability, transparency, and responsibility. This
commitment guides our interactions with shareholders and shapes our approach
to conducting business, reinforcing our dedication to acting fairly between
all members of the Company.
This approach to stakeholder engagement has enabled us to make balanced and
informed decisions that promote the long-term success of OCT. We will continue
to engage with our stakeholders in this manner in the future.
Our stakeholder engagement approach, which emphasises open communication and
active feedback, has been key in making balanced decisions that foster OCT's
long-term success. The Board is confident that these actions have bolstered
OCT's sustainability and success. We will persist in this approach, continuing
to consider the matters set out in Section 172(1)(a) to (f) of the Act in all
future decisions, ensuring our actions align with the interests of our
shareholders, employees, suppliers, customers, and the communities we impact.
2018 UK Corporate Governance Code: application and compliance
The Financial Reporting Council (FRC) released the latest version of the UK
Corporate Governance Code (referred to as the 'Code') in 2018. A copy of the
Code can be accessed via www.frc.org.uk (http://www.frc.org.uk/) . This Code
is applicable to accounting periods commencing on or after 1 January 2019. We
are delighted to announce that our Company has successfully applied all the
Principles of the Code throughout the relevant period. The following summary
provides an overview of how we have achieved this application.
Section 1: Board leadership and company purpose
(a) A successful company is led by an effective and entrepreneurial board, whose role is to promote the long-term sustainable success of the company, generating value for shareholders and contributing to wider society.
The Board of OCT promotes the long-term sustainable success of the Group and
Company by maintaining oversight of the delivery of the Group's strategy,
aiming to generate shareholder value and contribute to wider society. The
Board has a diverse range of skills, knowledge, and experience, and exercises
independent and objective judgment. They also recognise that as the programmes
move closer to commercialisation, the required skill set of the Board will
change. The Board and Committees meet regularly to ensure that the strategy is
delivered and that risks are effectively managed.
(b) The board should establish the company's purpose, values and strategy, and satisfy itself that these and its culture are aligned. All directors must act with integrity, lead by example and promote the desired culture.
OCT has a clearly defined purpose, which is to develop cannabinoid-based
medicines with the aim of improving the quality of life for patients with
unmet medical needs. The Board of OCT plays a pivotal role in establishing the
Company's purpose, values, and strategy. It is responsible for setting the
strategy and key policies, ensuring robust corporate governance, and
monitoring progress towards the achievement of objectives and plans. The Board
is also vigilant in ensuring that OCT's unique culture is aligned with its
purpose, values, and strategy.
Furthermore, the Board places significant emphasis on workforce engagement as
an integral part of its agenda. It recognises that the workforce is a critical
stakeholder, and engaging with them is vital for the Company's success. The
methods and mechanisms through which the Board engages with the workforce are
detailed in the Nominations Committee report.
The strategy of OCT is subject to regular review by the Board, at least twice
per year, to ensure that it remains relevant and effective in guiding the
Company towards its goals. Additionally, the Company's culture, values, and
ethics are documented and can be found in the strategic report section.
This structured approach ensures that the Company remains focused on its core
purpose while aligning its culture and values with its strategic objectives.
Through regular reviews and engagement with the workforce, the Board ensures
that the Company is adaptable and responsive to the evolving needs of its
stakeholders and the market.
(c) The board should ensure that the necessary resources are in place for the company to meet its objectives and measure performance against them. The board should also establish a framework of prudent and effective controls, which enable risk to be assessed and managed.
OCT takes a proactive and comprehensive approach to ensure that the Company
has the necessary resources in place to meet its objectives and to measure its
performance against these objectives. This includes not only financial
resources but also human capital and expertise. For instance, OCT has
established an SAB, which brings in additional expertise and insights that are
crucial for the Company's focus on developing cannabinoid-based medicines.
Recognising the risks associated with having a small management team, the
Board has plans to expand resources, particularly as the Company's programmes
progress towards clinical trials. This is indicative of the Board's
forward-looking approach in resource planning, ensuring that the Company is
well-prepared to handle the increasing complexities and demands as it grows.
In addition to resource allocation, the Board places a strong emphasis on
establishing a robust framework of controls. The Audit Committee, a
sub-committee of the Board, plays a significant role in this regard. The
Committee reviews and assesses the Company's risk management processes,
including the identification and management of principal and emerging risks.
The Committee is also provided with information on front-line controls and
receives assurance from the external auditor.
Key Performance Indicators (KPIs) are used to measure the Company's
performance against its objectives. Information on the KPIs and the Company's
performance against them can be found in the Financial Review.
Furthermore, the Audit Committee report includes a summary of the internal
control framework, highlighting the mechanisms in place to ensure that the
Company's operations are aligned with its strategy and objectives.
(d) In order for the company to meet its responsibilities to shareholders and stakeholders, the board should ensure effective engagement with, and encourage participation from, these parties.
OCT acknowledges the significance of maintaining an active and effective
engagement with its shareholders and a broader group of stakeholders. The
Board of OCT is cognisant of the diverse interests and concerns of its
stakeholders and actively engages with them on a regular basis.
The Company has a broad group of clearly defined stakeholders, which may
include shareholders, employees, customers, suppliers, and the communities in
which it operates. The Board members are actively involved in engaging with
these groups, and this engagement is instrumental in informing the Board's
decision-making processes.
One of the key objectives of OCT for the year 2022/23 was to strengthen and
increase engagement with shareholders and the wider stakeholder base. This
reflects the Company's commitment to transparency and responsiveness to the
needs and expectations of its stakeholders.
In addition to engagement, the Board is also diligent in fulfilling its
statutory duties as outlined in section 172 of the Companies Act. This section
requires directors to act in a way that they consider, in good faith, would be
most likely to promote the success of the Company for the benefit of its
members as a whole. In doing so, directors must have regard to various factors
including the interests of the Company's employees, the need to foster
business relationships with suppliers and customers, and the impact of the
Company's operations on the community and the environment.
Detailed explanations of how OCT engages with its shareholders and wider
stakeholder base, and how this engagement informs the Board's decision-making
processes, can be found in the Section 172 Statement which provides insights
into how the Board members have discharged their 'section 172' statutory
directors' duties.
(e) The board should ensure that workforce policies and practices are consistent with the company's values and support its long-term sustainable success. The workforce should be able to raise any matters of concern.
OCT places a high emphasis on creating a positive and supportive work
environment for its workforce. The Company recognises that its employees are
one of its most valuable assets and is committed to implementing policies and
practices that align with its values and contribute to its long-term
sustainable success.
One of the notable achievements of OCT in this regard is its recognition in
The Sunday Times Best Places to Work 2023. This recognition is a testament to
the Company's commitment to employee engagement and creating a conducive work
environment. The Sunday Times Best Places to Work awards are known for their
rigorous criteria, and only companies that meet strict engagement standards
are recognised. OCT's inclusion in this list is a significant achievement and
reflects the Company's dedication to its workforce.
Furthermore, OCT is proactive in offering flexible work arrangements, such as
remote working, which contributes to a better work-life balance for its
employees. This flexibility is particularly important in the modern work
environment and demonstrates the Company's adaptability and responsiveness to
the needs of its employees.
In addition to flexible work arrangements, OCT is committed to the continuous
development of its workforce. The Company offers regular training
opportunities, ensuring that employees have the skills and knowledge necessary
to excel in their roles. This not only contributes to the personal and
professional development of the employees but also ensures that the Company
has a skilled and competent workforce that can contribute to its objectives.
Moreover, OCT takes pride in being a supportive employer that recognises
success at every level. This culture of recognition and support fosters a
sense of belonging and motivation among the employees, which in turn
contributes to higher productivity and engagement.
In summary, through flexible work arrangements, continuous training
opportunities, a culture of recognition, and a supportive work environment,
OCT ensures that its workforce policies and practices are consistent with the
Company's values and support its long-term sustainable success.
Section 2: Division of responsibilities
(f) The chair leads the board and is responsible for its overall effectiveness in directing the company. They should demonstrate objective judgement throughout their tenure and promote a culture of openness and debate. In addition, the chair facilitates constructive board relations and the effective contribution of all non-executive directors, and ensures that directors receive accurate, timely and clear information.
The Board confirms that Julie Pomeroy was independent on appointment when
assessed against the circumstances set out in Provision 10 of the Code. The
roles of Chief Executive and Chair are not held by the same individual and the
Chair has never held the position of Chief Executive of the Company. These
factors help ensure that the Chair demonstrates objective judgement throughout
her tenure. The Chair is mindful of her role in facilitating constructive
Board relations and promoting a culture of openness and debate amongst the
Board. This in turn encourages the effective contribution of all the
Non-Executive Directors. The 2023 Board evaluation concluded that the Board
was effective, supportive and doing well. The Chair is supported in this by
the Company Secretary, who ensures the effective flow of information in a
timely manner between the Board and senior management.
(g) The board should include an appropriate combination of executive and non-executive (and, in particular, independent non-executive) directors, such that no one individual or small group of individuals dominates the board's decision-making. There should be a clear division of responsibilities between the leadership of the board and the executive leadership of the company's business.
OCT recognises the importance of having an effective board that is led by a
Chair who is committed to ensuring the overall effectiveness of the Board in
directing the Company. The Chair of OCT plays a pivotal role in leading the
Board and is responsible for ensuring that the Board functions effectively in
setting and implementing the Company's direction and strategy.
The Chair demonstrates objective judgment throughout their tenure, ensuring
that decisions made by the Board are in the best interest of the Company and
its stakeholders. By promoting a culture of openness and debate, the Chair
ensures that all board members, including Non-Executive Directors, are
encouraged to voice their opinions and contribute to discussions. This culture
is essential for ensuring that a range of perspectives is considered in the
Board's decision-making process.
In addition to fostering an open culture, the Chair facilitates constructive
relations among board members. This involves ensuring that the Board operates
cohesively and that the contributions of Non-Executive Directors are
effectively integrated into the Board's discussions and decisions.
Another critical responsibility of the Chair is to ensure that the Board
members receive accurate, timely, and clear information. This is essential for
enabling the Board members to make informed decisions. The Chair, therefore,
works closely with the Company Secretary and other relevant personnel to
ensure that the Board is well-informed and has access to all the necessary
information.
(h) Non-executive directors should have sufficient time to meet their board responsibilities. They should provide constructive challenge, strategic guidance, offer specialist advice and hold management to account.
Non-Executive Directors are actively engaged and commit sufficient time to
fulfil their board responsibilities. They are involved in meetings and calls
with executive management and key stakeholders throughout the year.
Non-Executive Directors at OCT provide constructive challenge and strategic
guidance, contributing their expertise and offering specialist advice. They
play a critical role in holding the management accountable and bringing
objective judgment to board decisions.
The Board ensures that Non-Executive Directors have the capacity to allocate
enough time to their roles. When appointing new Directors or authorising
existing Directors to take on additional appointments, the Board assesses the
time commitment required and ensures that it does not conflict with their
responsibilities at OCT.
When reviewing the Nominations Committee's recommendation to appoint a new
Director, the Board will always assess whether the candidate is able to
allocate enough time to the role. Similarly, when assessing the acceptability
of an existing Director's wish to take on external appointments, the Board
will assess the additional demand on that Director's time before authorising
the appointment. This occurs within the Board's agreed existing protocol
whereby any significant appointments taken on whilst serving as a Director of
the Company must be approved by the Board before they are entered into. This
is set out in the Schedule of Matters Reserved for the Board which may be
found on the Company's website. During the reporting period, Neil Mahapatra's
appointment as Non-Executive Director of the London Stock Exchange traded
company, Odyssean Investment Trust plc, was authorised by the Board. Prior to
the appointment, the Board considered whether Neil could allocate enough time
to his role as a Non-Executive Director of OCT. The Board was satisfied that
Neil had the requisite time to fulfil the new role as well as his current role
with OCT.
The number of Board and Committee meetings held, as well as attendance, is
documented and reviewed to ensure active participation by Non-Executive
Directors. This information can be found below.
(i) The board, supported by the company secretary, should ensure that it has the policies, processes, information, time and resources it needs in order to function effectively and efficiently.
All of the Directors of the Company have access to the advice of the Company
Secretary, who is responsible for advising the Board on all governance
matters. The Board has implemented a Group policy framework which is
considered by the Board on an annual basis. Individual policies and associated
practices are considered alongside the framework review process. As stated in
the Schedule of Matters Reserved for the Board (which may be found on the
Company's website) the appointment and removal of the Company Secretary is a
decision for the Board as a whole.
Section 3: Composition, succession and evaluation
(j) Appointments to the board should be subject to a formal, rigorous and transparent procedure, and an effective succession plan should be maintained for board and senior management. Both appointments and succession plans should be based on merit and objective criteria and, within this context, should promote diversity of gender, social and ethnic backgrounds, cognitive and personal strengths.
The Board reviewed its composition and has a formal and transparent procedure
for Board appointments. The Nominations Committee met three times during the
year and there is a formal and transparent procedure for Board appointments.
The Committee recognises the importance of diversity when considering
potential appointments.
(k) The board and its committees should have a combination of skills, experience and knowledge. Consideration should be given to the length of service of the board as a whole and membership regularly refreshed.
The composition of the Board was considered ahead of the Company's IPO. During
the year, an internal review of both the skills matrix and current Board
composition of knowledge and experience was completed. Directors are
encouraged to keep their skills up to date.
(l) Annual evaluation of the board should consider its composition, diversity and how effectively members work together to achieve objectives. Individual evaluation should demonstrate whether each director continues to contribute effectively.
The Group is transitioning to the specific requirement of the UK Corporate
Governance Code with regard to having an annual evaluation of the Board's
composition and diversity. An initial internal review was completed with no
external input. Actions identified from the review included opportunities to
broaden the range of regular training topics for Board members.
Section 4: Audit, risk and internal control
(m) The board should establish formal and transparent policies and procedures to ensure the independence and effectiveness of internal and external audit functions and satisfy itself on the integrity of financial and narrative statements.
The Board has established formal and transparent policies and procedures,
which ensure the external auditor and internal audit function are independent
and effective and are accountable to the Audit Committee. The Board also
monitored the integrity of the annual and interim financial statements of the
Company through the Audit Committee. Further information about the work of the
Audit Committee, including the subjects above, may be found in the Audit
Committee report.
(n) The board should present a fair, balanced and understandable assessment of the company's position and prospects.
A statement regarding the Directors' responsibility for preparing the Annual
Report and Accounts and the Directors' assessment of the Annual Report and
Accounts, taken as a whole, as being fair, balanced and understandable and
providing the necessary information for shareholders to assess the Company's
position, performance, business model and strategy, may be found in the
Strategic Report.
(o) The board should establish procedures to manage risk, oversee the internal control framework, and determine the nature and extent of the principal risks the company is willing to take in order to achieve its long-term strategic objectives.
The Board is responsible for the Group's systems of internal control and risk
management, and for reviewing their effectiveness. The Board is assisted with
these responsibilities by the Audit Committee. Such a system is designed to
manage rather than eliminate the risks of failure to achieve business
objectives, as well as to help the business take appropriate opportunities.
The Board has conducted reviews of the effectiveness of the system of internal
controls through the processes described within the 'Risk management' and
'Principal risks and uncertainties' sections and are satisfied that it accords
with the Code and with the Guidance on Risk Management, Internal Control and
Related Financial and Business Reporting. As described in the Audit Committee
report, a key controls project is ongoing across the Group to focus and
further strengthen our overall control framework. This work to further enhance
internal controls will lead to better assurance and efficiencies through
opportunities to formalise and automate controls and improve visibility to the
Executive Committee and Board in a consistent way across the Group. The
assessment of the principal and emerging risks, the uncertainties facing the
Group, and the ongoing process for identifying, evaluating and managing the
significant risks faced by the Group is set out in the 'Risk management' and
'Principal risks and uncertainties' sections. The Board confirms that it has
conducted a robust assessment of the principal and emerging risks.
Section 5: Remuneration
(p) Remuneration policies and practices should be designed to support strategy and promote long-term sustainable success. Executive remuneration should be aligned to company purpose and values, and be clearly linked to the successful delivery of the company's long-term strategy.
The way the Remuneration Committee has ensured our remuneration policies and
practices are aligned with our culture, our strategy and risk management is
discussed in the Remuneration Committee report.
(q) A formal and transparent procedure for developing policy on executive remuneration and determining director and senior management remuneration should be established. No director should be involved in deciding their own remuneration outcome.
The way the Remuneration Committee has ensured our remuneration policies and
practices are aligned with our culture, our strategy and risk management is
discussed in the Remuneration Committee report.
The Remuneration Committee has delegated responsibility for setting the
Executive Directors' remuneration under the shareholder-approved Directors'
remuneration policy. The Remuneration Committee also has delegated
responsibility for setting the Chair of the Board's remuneration and the
remuneration of senior management (i.e. the members of the Executive Committee
and the Company Secretary). No Director is able to determine their own
remuneration outcome. The Remuneration Committee reviews workforce
remuneration and related policies when setting Executive Director
remuneration. Ensuring these factors are always considered means our
remuneration policies are clear and as predictable as possible. Further
information may be found in the Remuneration Committee report.
(r) Directors should exercise independent judgement and discretion when authorising remuneration outcomes, taking account of company and individual performance, and wider circumstances.
The Remuneration Committee membership is made up of only independent
Non-Executive Directors. Details of whether the Remuneration Committee
exercised its discretion during the year may be found in the Remuneration
Committee report.
UK Corporate Governance Code Provisions
The UK Corporate Governance Code, as published by the Financial Reporting
Council, provides a comprehensive set of standards for corporate governance,
accounting, and actuarial work in the UK. It underscores the significance of
good corporate governance for the long-term sustainable success of a company.
The Code includes principles and provisions that address board leadership,
company purpose, division of responsibilities, composition, succession and
evaluation, audit, risk and internal control, and remuneration. Applicable to
all companies with a premium listing, the Company has voluntarily adopted the
code and the Code encourages high-quality reporting on the application of its
principles and provisions. It also offers guidance on board effectiveness and
promotes engagement with shareholders and other key stakeholders.
As for the compliance with the provisions of the Code, it is important to note
that the Code operates on a 'comply or explain' basis. This means that while
we strive to adhere to all provisions, there may be instances where we choose
not to comply, but we will always provide a clear explanation for such
decisions. The Code acknowledges that an alternative to complying with a
provision may be justified in particular circumstances based on a range of
factors, including the size, complexity, history, and ownership structure of a
company.
As a pre-revenue small cap business engaged in drug discovery and clinical
trials, complying in full with some provisions of the Code is not appropriate
and we have explained why in each instance below.
Provision 5: For engagement with the workforce, one or a combination of the
following methods should be used: a director appointed from the workforce; a
formal workforce advisory panel; a designated non-executive director. If the
board has not chosen one or more of these methods, it should explain what
alternative arrangements are in place and why it considers that they are
effective.
The Company acknowledges that it has not adopted any of the methods outlined
in Provision 5 of the Governance Code for workforce engagement. Given the
small size of our workforce, the Board has determined that the prescribed
methods are not appropriate. Instead, the Company has implemented an
alternative arrangement wherein the CEO conducts weekly all-hands meetings to
maintain robust engagement with the entire workforce. This approach ensures
that the Board effectively considers the interests of the workforce in its
discussions and decision-making. The Board believes that this alternative
arrangement is effective in the current context of the Company. Further
details on workforce engagement can be found in the Nominations Committee
report.
Provision 11: At least half the board, excluding the chair, should be
non-executive directors whom the board considers to be independent.
The Company acknowledges that it is currently not in compliance with Provision
11 of the UK Corporate Governance Code. This provision stipulates that at
least half of the Board members, excluding the Chair, should be non-executive
directors considered independent by the Board. Our board's current composition
includes a higher proportion of Non-Executive Directors who are not deemed
independent according to the circumstances outlined in Provision 10.
This deviation primarily stems from our strategic decision to grant share
options to our Non-Executive Directors (excluding Bishrut and Richard) at the
time of our IPO in May 2021. This decision was based on our belief in the
transformative power of personal investment in the Company, as it
incentivises, motivates, and aligns the Directors with the long-term
prosperity of the Company. It also demonstrates their confidence and
commitment to the Company's mission, which is a trust factor when attracting
investors and funding. However, we understand that this approach may be seen
as compromising the independence of our Non-Executive Directors according to
the provisions of the UK Corporate Governance Code.
The deviation is also due to our transitional phase, wherein key Non-Executive
Directors representing significant shareholders are playing a vital role in
driving strategic initiatives. We are committed to achieving compliance with
Provision 11 in the medium term and have identified that our succession
planning must include actively seeking qualified independent Non-Executive
Directors to join the Board. The Nomination Committee is overseeing this
process and will ensure that the Board composition aligns with the provision
in due course.
We believe that our approach to Non-Executive Director remuneration, including
share options granted on IPO, is a balanced one that aligns the interests of
our Non-Executive Directors with those of our shareholders and the long-term
success of the Company. We will continue to monitor and review our practices
in light of evolving best practice and regulatory requirements.
Further details regarding the Board composition and the steps being taken to
address this non-compliance can be found in the Nominations Committee report.
Provision 12: The board should appoint one of the independent non-executive
directors to be the senior independent director to provide a sounding board
for the chair and serve as an intermediary for the other directors and
shareholders.
The Company acknowledges that during the reporting period, it was not in
compliance with Provision 12 of the Governance Code, which requires the
appointment of a Senior Independent Director. However, Cheryl Dhillon
informally assumed the role. The Board has recently taken steps to formally
recognise Cheryl Dhillon as the Senior Independent Director, effective from
the May 2023 board meeting. This appointment is aimed at enhancing the
governance structure and ensuring compliance with Provision 12.
Provision 24: The board should establish an Audit & RISK Committee of
independent non-executive directors, with a minimum membership of three, or in
the case of smaller companies, two. The chair of the board should not be a
member. The board should satisfy itself that at least one member has recent
and relevant financial experience. The committee as a whole shall have
competence relevant to the sector in which the company operates.
The Company acknowledges that it is not in full compliance with Provision 24
of the UK Corporate Governance Code, which stipulates the formation of an
Audit Committee consisting of independent non-executive directors, with the
Chair of the Board not being a member. Currently, Julie Pomeroy, the Chair of
the Board, also holds the position of the Chair of the Audit Committee. This
decision was made in light of the Chair's substantial financial expertise and
the necessity for consistent leadership.
In addition to this, it is important to note that Karen Lowe, an Executive
Director/CFO, was a member of the Audit Committee from the start of the
relevant period until her resignation on 31 October 2022. This was a carryover
from the previous period when the Company adopted the QCA code before
voluntarily transitioning to the Corporate Governance Code.
Following Karen's departure, the Company decided that her successor, Paul
Smalley, should not be a member of the Audit Committee, further aligning the
Company's governance with the provisions of the UK Corporate Governance Code.
While Richard Hathaway's ties to Imperial Brands might impact perceptions of
his independence, his extensive background in auditing and risk management is
invaluable. His experience as an auditor for UK listed companies and
leadership in risk management at Imperial Brands greatly enhances the Audit
Committee. The Board believes Richard's expertise significantly enriches the
committee's efficacy.
To address potential conflicts of interest and independence issues, the Board
has ensured the inclusion of independent Non-Executive Directors on the Audit
Committee and has established regular reviews of the Chair's dual role by the
Board. The Board is of the belief that this structure, while not strictly
adhering to Provision 24, serves the best interest of the Company at this
juncture. The situation will be continually reviewed, and adjustments will be
made as deemed necessary..
Provision 26: The annual report should describe the work of the Audit
Committee, including:
• the significant issues that the Audit &
RISK Committee considered relating to the financial statements, and how
these issues were addressed;
• an explanation of how it has assessed the
independence and effectiveness of the external audit process and the approach
taken to the appointment or reappointment of the external auditor, information
on the length of tenure of the current audit firm, when a tender was last
conducted and advance notice of any retendering plans;
• in the case of a board not accepting the
Audit & RISK Committee's recommendation on the external auditor
appointment, reappointment or removal, a statement from the Audit & RISK
Committee explaining its recommendation and the reasons why the board has
taken a different position (this should also be supplied in any papers
recommending appointment or reappointment);
• where there is no internal audit function,
an explanation for the absence, how internal assurance is achieved, and how
this affects the work of external audit; and
• an explanation of how auditor independence
and objectivity are safeguarded, if the external auditor provides non-audit
services.
The Company acknowledges non-compliance with Provision 26 due to the absence
of an internal audit function. The Board, after annual reviews, considers an
internal audit function to be disproportionate given the size, complexity and
risk profile of OCT during the year. Instead, internal assurance is maintained
through robust governance, risk management, and internal controls. The Audit
Committee plays a key role in overseeing risks, evaluating controls, and
ensuring the external audit's independence and effectiveness. The Committee
also liaises with the Remuneration Committee to incorporate risk
considerations in remuneration policies.
Nominations Committee report
NominationS Committee meeting attendance
Cheryl Dhillon (Chair) (3/3)
Julie Pomeroy (3/3)
Bishrut Mukherjee (3/3)
Introduction from the Committee Chair
I am pleased to present this report covering the work of the Nominations
Committee in 2023. The Nominations Committee continues to be one of the core
governance safeguards for OCT. This report details how the Committee seeks to
avoid governance issues by engaging in transparent processes and adopting best
practice guidance.
The purpose of this report is to provide a comprehensive overview of the
Nominations Committee's work in 2023 for OCT. The Nominations Committee plays
a critical role in ensuring good governance practices within the Company. This
report will outline the Committee's commitment to transparency and adherence
to best practices.
Board Evaluation
One of the key activities carried out by the Nominations Committee in 2023 was
a thorough evaluation of the Board. This evaluation was conducted internally,
with the assistance of the Company Secretary. The evaluation process involved
the use of a detailed self-assessment questionnaire and separate surveys.
These tools were specifically designed to identify any skills gaps within the
Board, assess the overall effectiveness of the Board, and gather feedback from
each Director on their own individual performance and that of their fellow
Directors.
The Board evaluation yielded valuable insights for each Director. These
insights provide Directors with actionable information that they can use to
enhance their contributions to the Board. Additionally, the evaluation process
aims to improve the overall effectiveness of the Board as a whole.
Succession
In September 2022 the Committee oversaw the process of appointing the new
Group Finance Director ensuring that the process was rigorous and thorough.
Paul Smalley joined the Company in October 2022. Paul's strong background in
strategic management spans various market sectors, including IT, HR, and
procurement. His diverse experience, ranging from small and medium-sized
enterprises to publicly quoted companies, will be a valuable asset to our
Company. The Committee also appointed Clarissa Sowemimo-Coker, a highly
qualified internal candidate, as the new CEO. Clarissa, who joined the Company
in 2018 and who previously held the positions of Chief Operating Officer and
General Counsel, assumed the role of CEO on an interim basis in December
before the Committee made the appointment permanent in April 2023. Both
appointments were accompanied by a handover period with the outgoing CEO and
Finance Director, ensuring a smooth transition of leadership within the Board.
The Committee also played a significant role in the appointment of two new
members of the executive team. Our new General Counsel and Company Secretary,
Rob Bennett, joined OCT in December 2022 and assumed the role of Company
Secretary on 12 January 2023. Rob brings a wealth of experience and expertise
to the Company, having previously served as General Counsel and Company
Secretary at Bestway Retail. His professional journey spans over 15 years,
during which he has gained extensive experience in the UK and international
markets across various sectors. His expertise in legal, risk, and compliance
matters has been honed through his work with SMEs and quoted companies. Rob's
exceptional work has been recognised in the Legal 500's GC Powerlists in 2021
and 2022, and he was a finalist for the Team of the Year at The Lawyer Awards
in 2021.
Dr Tim Corn has been appointed to the newly created position of CMO. Dr Corn
is an independent pharmaceutical consultant who brings a wealth of experience
from his senior roles in both large and small pharmaceutical organisations. He
currently holds the position of CMO at Nodenza Inc and serves as a Medical
Adviser to Confo Therapeutics SA. In addition, he is a non-executive director
on the Board of Physiomics plc. In his new role as CMO, Dr Corn will be tasked
with overseeing the Company's clinical research and development activities and
providing expert medical guidance and advice to the team. These appointments,
which were made following a rigorous process, have significantly strengthened
the leadership of OCT.
Composition and Diversity
The Nominations Committee remains mindful of the importance of diversity
within leadership and senior management teams. Based on the key findings and
recommendations from the FTSE Women Leaders Review and the Parker Review, it's
clear that diversity, particularly gender and ethnic diversity, is a crucial
aspect of effective board composition. The FTSE Women Leaders Review
highlights significant progress in gender diversity, with the FTSE 100
surpassing the 40% target for women on boards three years ahead of schedule,
reaching 40.5% representation. However, challenges remain, particularly in CEO
roles and the achievement of the 33% target for women in leadership positions.
The composition of the OCT board reflects a commitment to diversity and
inclusion. As at 30 April 2023, out of the seven board members, three are
women, including the Non-Executive Chair, Senior Independent Director and the
CEO, constituting approximately 43% of the Board. This representation
surpasses the Hampton- Alexander Review's 33% target and aligns with the 40%
achieved by FTSE 100 companies. Furthermore, as at 30 April 2023, three
members of the Board are of colour, including the Senior Independent Director,
representing approximately 43% ethnic diversity, in line with the Parker
Review's recommendations. Diverse boards, encompassing both gender and ethnic
diversity, are known to encourage varied perspectives, foster innovation, and
enhance decision-making. OCT's board exhibits this positive indicator. To
maintain and enhance diversity, this committee is ensuring diversity is
integral to succession planning and recruitment strategies. Moreover,
fostering an inclusive culture that values and respects diversity in all forms
is essential. We believe that by fully embracing diversity, OCT can tap into a
broader range of experiences, knowledge, and networks, leading to
comprehensive discussions, well-informed decisions, and a more inclusive
corporate culture.
Employee Engagement
Our Company has placed a significant emphasis on employee engagement, which
has been recognised by our inclusion in The Sunday Times' prestigious list of
the Best Places to Work in 2023. This acknowledgement demonstrates our
commitment to fostering a supportive and captivating work environment.
In response to the COVID-19 lockdowns, we made a strategic decision to
terminate our lease on traditional office space and transition to a fully
remote working model supported by advanced technology. This shift not only
helps us reduce our carbon footprint by eliminating the need for daily
commuting but also provides time and cost savings. Additionally, it allows us
to hire a diverse workforce from beyond our immediate commuting radius.
To complement our remote-first approach, we utilise shared coworking spaces
and organise regular gatherings to foster strong company culture and enhance
team unity.
Looking Ahead
In order to enhance the effectiveness and long-term sustainability of OCT, the
Committee plans to allocate more time in 2024 to evaluate the composition of
the Board. While the current Board possesses a diverse range of skills and
experience, it is recognised that a more comprehensive succession plan needs
to be developed. With the exception of Richard Hathaway, all Non-Executive
Directors (NEDs) were appointed in 2021 and have equal terms. However, the
Committee acknowledges the importance of implementing a succession plan that
encompasses short-term, medium-term, and long-term contingencies, based on the
outcomes of a thorough board-effectiveness assessment. Throughout this
process, it is crucial to retain the necessary expertise required to support
the Company's continuous growth, strategic initiatives, and commitments to all
our stakeholders.
Cheryl Dhillon
Chair, Nominations Committee
Group ethnicity diversity statistics
Number of board members (2) Percentage of the board Number of senior positions on the board (3) Number in executive management (including direct reports) Percentage of executive management (including direct reports)
Gender (4)
Men 4 57.1% 1 3 (4) 75% (67%)
Women 3 42.9% 3 1 (2) 25% (33%)
Not specified/prefer not to say - - - - -
Ethnicity (4)
White British or other White (including minority-white groups) 4 57.1% 3 4 (5) 100% (83%)
Mixed/Multiple Ethnic Groups 3 42.9% 1 0 0%
Asian/Asian British - - - - -
Black/African/Caribbean/Black British (1) (17%)
Other ethnic group, including Arab
Not specified/prefer not to say
(1) Data gathered from Employee and Board Survey (July 2023)
(2) The Board includes the Chair, Executive Directors and Non-Executive
Directors.
(3) Senior positions on the Board include the CEO, CFO, Chair and Senior
Independent Director.
(4) The information disclosed, and the format of the table, is prescribed by
Listing Rule 14.3.33R.
EQUALITY & Diversity Policy
OCT is dedicated to promoting equal opportunities for all employees and job
applicants. We aim to create an environment that is free from discrimination
and harassment, where cultural diversity and individual differences are
positively valued, and decisions are based on merit. We do not discriminate
against employees on the basis of age, disability, gender reassignment, gender
identity, marital or civil partner status, pregnancy or maternity, race,
colour, nationality, ethnic or national origin, religion or belief, sex or
sexual orientation.
We encourage and celebrate diversity and have established an open and
collaborative culture that allows great people to do what they do best. We
seek to avoid any form of unlawful discrimination in all aspects of employment
including recruitment, promotion, opportunities for training, pay and
benefits, discipline and selection for redundancy.
We are committed to ensuring equal pay for employees undertaking equal work,
operating a rewards system that is transparent, based on objective criteria
and free from gender bias. We annually review existing pay and reward
mechanisms for all our employees and analyse and identify reasons for any
significant gender variations.
We monitor the ethnic and gender composition of the existing workforce and of
applicants for jobs, and the number of people with disabilities within these
groups. We take appropriate action to address any problems which may be
identified as a result of the monitoring process.
We may use appropriate lawful methods, including positive action, to address
the underrepresentation of any group which we identify as being
underrepresented in particular types of job. We may choose to favour a
candidate from an under-represented minority in cases where two candidates for
a job or for promotion are equally well qualified.
As of now, our board does not have a specific target for female membership or
members from an ethnic minority. However, we are mindful of the
recommendations of both the Parker Review and FTSE Women Leaders Review and
are committed to increasing diversity at all levels within the organisation.
We will continue to review this policy on an annual basis to ensure it remains
appropriate.
Succession
A crucial aspect of the Nominations Committee's responsibilities is the
establishment and preservation of a consistent leadership structure, as well
as the proactive management of changes and their effects on the Company's
future leadership requirements. This applies to both Executive and
Non-Executive roles. Having the right leaders in place allows the Company to
compete effectively in the market and fulfil its obligations to its
stakeholders.
As outlined in the rest of this report, the Nominations Committee has
successfully managed succession plans for both the Board and senior
management, ensuring that the necessary skills, expertise, and experience are
present in the Company's leadership.
Board
Succession
The Nominations Committee assesses the skills and expertise present on the
Board, comparing them to the skills and expertise it deems necessary given the
Company's strategy, business priorities, and culture. Since the Company's
inception, our core strategy has remained largely consistent. However, changes
in the market, the size of our organisation, and its maturity stage shall
necessitate an evolution of our Board through thoughtful and well-managed
succession planning that does not compromise the Board's stability.
The process typically used for Non-Executive Director appointments is outlined
below. We shall introduce a phased succession programme for Non-Executive
Directors and are satisfied with the balance of tenure length, as well as
diversity, background, and perspective of our current Non-Executive Directors.
Appointment
When Board succession planning identifies the need for a Non-Executive
appointment to the Board, the Nominations Committee will engage an external
search consultancy to carry out the recruitment process for a new
Non-Executive Director.
The external search consultancy will be informed of our Equality and Diversity
Policy (if they are not already aware) and the Nominations Committee will
specifically instruct them to produce a diverse shortlist of candidates for
the position. The skills matrix, along with the collective knowledge,
experience, and diversity of the Board and the Directors' length of service,
will be used by the Committee to identify opportunities for a new
Non-Executive Director to enhance the Board's skillset. This will guide the
search undertaken by the external search consultancy.
Following the longlisting and shortlisting processes, and before the
Nominations Committee makes any recommendation to the Board, the preferred
candidate will meet with existing members of the Board.
Induction
It was highlighted in this year's Board Evaluation that there is an
opportunity for improvement in this regard. In collaboration with the Company
Secretary, new Directors shall undergo an induction programme tailored to
their individual needs. This typically includes meetings with members of the
Executive Committee, key employees, and advisers. New Directors will also
receive a variety of documentation, including Company publications, Board
materials, and formal information on the role and responsibilities of
UK-listed company directors.
Remuneration Committee report
Remuneraton Committee meeting attendance
Cheryl Dhillon (Chair) (3/3)
Julie Pomeroy (3/3)
Bishrut Mukherjee (3/3)
Remuneration Committee Chair's statement
As the Chair of the Remuneration Committee, I am delighted to present the
Annual Remuneration Report for OCT for the financial year ended 30 April 2023
Remuneration Policy and Executive Compensation
This year, we have continued to uphold our commitment to aligning executive
remuneration with the long-term interests of our shareholders and the
strategic objectives of our company. We firmly believe that a well-structured
remuneration policy is pivotal to attracting, retaining, and motivating the
high-calibre talent that underpins our success.
Balancing Attraction and Financial Prudence
Being a pre-revenue business, we are keenly aware of the need to balance the
attraction of the best possible external candidates with the demands of
cashflow challenges. This delicate balance has been a key consideration in our
remuneration decisions this year, and we have strived to ensure that our
compensation packages are both competitive and sustainable.
Looking Ahead
In the coming year, a key focus will be reviewing our remuneration policies to
ensure they continue to support our strategic objectives and align with the
long-term sustainable success of our business. We will also aim to extend the
principles of these policies to all levels of the business, ensuring that our
commitment to strategic success permeates every layer of our organisation.
We intend to review how we can strengthen the alignment between executive
remuneration and our strategic objectives by introducing performance metrics
within and enhancing the Long-Term Incentive Plan (LTIP).
Commitment to Fairness and Transparency
Our remuneration policy continues to be guided by principles of fairness,
transparency, and market competitiveness even during a challenging global cost
of living crisis. We have maintained a balanced approach to remuneration,
ensuring that rewards reflect individual performance, the performance of the
business, and the interests of our shareholders.
Conclusion
We thank our shareholders for their ongoing support and constructive
engagement on remuneration matters. We look forward to continuing our dialogue
in the year ahead.
Cheryl Dhillon
Chair, Remuneration Committee
Summary of the Directors' remuneration policy
Our remuneration policy is designed to support the strategic objectives of OCT
and align the interests of our Executive Directors and senior management with
those of our shareholders. The policy is based on the following key
principles:
· Competitiveness: Our remuneration packages are designed to
attract, retain, and motivate high-calibre individuals who will contribute to
the long-term success of the Company.
· Alignment with shareholders: A significant proportion of
executive remuneration is performance-related and linked to the achievement of
strategic objectives that drive shareholder value.
· Performance linkage: We believe in rewarding success. Therefore,
a substantial part of our remuneration packages is linked to individual and
Company performance.
· Prudence: Given our status as a pre-revenue business, we are
mindful of our cashflow challenges. Therefore, our remuneration policy is
designed to balance the need for competitiveness with financial prudence.
(s) Executive Directors' Remuneration Policy
The remuneration package of the Executive Directors (including the previous
Executive Chairman) includes the following elements:
Basic salary
Salaries are normally reviewed annually, and take into account inflation,
market conditions and salaries paid to directors of comparable companies.
Pay reviews also take into account Group and personal performance. The Board
as a whole decides the remuneration of the Executive Directors, informed by
the recommendation of the Remuneration Committee. There were no increases in
the current year due to the share price performance.
Performance related pay scheme
There are two performance related pay schemes for Executive Directors. The
first is an annual bonus scheme which is based upon the achievement of certain
targets by the Group, as appropriate. The Executive Directors' bonus
recognised in the 2023 financial year is £nil (2022: £nil) 3 . Bonus is
capped at 20% of base salary.
The second scheme is a share option scheme, with 34,121,581 options granted to
Directors (and 35,462,775 to senior employees, four of whom have subsequently
left the Group) as part of the replacement of options previously granted in
OCTL, and a further 62,427,016 options at a strike price of £0.065 granted in
May 2021 to Directors (and 24,010,392 to senior employees) under a new
scheme. No share options were issued in the current year. Full details on
the schemes can be found in note 24. Variable remuneration cannot exceed 50%
of an Executive Director's base salary.
(t) Non-Executive Directors' Remuneration Policy
The fees for the Non-Executive Directors are determined by the Board, with the
Non-Executive Directors excluded from any discussions or decisions about their
own remuneration. The Non-Executive Directors do not receive bonuses or
pension contributions and are not entitled to participate in any of the
Group's share schemes other than the options granted on IPO in May 2021.
A total of 7,203,117 share options were granted at a strike price of £0.065
to three Non-Executive Directors in May 2021, with no further options issued
since then. Reasonable expenses incurred in carrying out their duties as
Directors of the Group are reimbursed.
Directors' remuneration report
Executive Director Remuneration
The Board's policy is that service contracts of Executive Directors are not
fixed term and should provide for termination by the Group on nine months'
notice. The service contracts of each of the current Executive Directors
provide for such a period of notice (having been increased from six months in
January 2022). The independent Non-Executive Directors have letters of
appointment providing fixed three-year service periods, which may be
terminated by giving six months' notice. Directors in post during the year
were as follows:
Date Appointed to OCT Date Appointed to OCTL Date Resigned from OCT Date Resigned from OCTL
Executive Directors
Dr John Lucas CEO Director 23-Apr-21 21-May-21 02-Dec-22 02-Dec-22
Clarissa Sowemimo-Coker COO and General Counsel (until Dec22 then CEO) Director 04-Feb-21 25-Jun-19
- -
Karen Lowe Finance Director Director 23-Apr-21 21-May-21 17-Oct-22 17-Oct-22
Paul Smalley Finance Director Director 17-Oct-22 17-Oct-22 - -
Non-Executive Directors
Neil Mahapatra Director 04-Feb-21 10-Mar-17 - -
Julie Pomeroy Director 23-Apr-21 - - -
Cheryl Dhillon Director 23-Apr-21 - - -
Bishrut Mukherjee Director 23-Apr-21 26-Feb-20 - 21-May-21
Gavin Sathianathan Director 23-Apr-21 21-Jun-18 24-Nov-21 21-May-21
Richard Hathaway Director 01-Feb-22 - - -
Directors' Remuneration (audited)
Details of the remuneration of the Directors for the financial year are set
out below. This excludes share options which are shown separately.
Salaries & Fees Pension Other Benefits Total Fixed Bonus Total Variable
£ £ £ £ £ £
2023 2022 2023 2022 2023 2022 2023 2022 2023 2022 2023 2022
Executive Directors
Neil Mahapatra (1) - 116,875 - 13,136 - - - 130,011 - - - -
Dr John Lucas (2) 258,263 183,333 26,597 19,544 - - 284,860 202,877 - - - -
Clarissa Sowemimo-Coker (3) 194,167 174,167 20,738 18,627 764 796 215,669 193,590 - - - -
Karen Lowe (4) 159,590 149,375 11,244 12,754 1,388 964 172,222 163,093 - - - -
Paul Smalley (5) 90,733 - 8,511 - 568 - 99,812 - - - - -
Non-Executive Directors
Julie Pomeroy (6) 45,000 27,083 - - - - 45,000 27,083 - - - -
Cheryl Dhillon 7 25,000 22,917 - - - - 25,000 22,917 - - - -
Bishrut Mukherjee (8) 25,000 14,583 - - - - 25,000 14,583 - - - -
Gavin Sathianathan (9) - 25,694 - - - - - 25,694 - - - -
Richard Hathaway10 - - - - - - - - - - - -
Neil Mahapatra1(1) 25,000 5,208 - - - - 25,000 5,208 - - - -
TOTAL 822,753 719,235 67,090 64,061 2,720 1,760 892,563 785,056 - - - -
1. Neil Mahapatra was paid a base salary of £150,000 and £15,000 for
Directors' responsibilities, this was paid pro rata 1 June 2021 to 14 February
2022. He received 10% pension benefit and 3% of qualified earnings for
Auto-Enrolment pensions. From 14 February 2022 onwards he received an annual
fee of £25,000 in his role as Non-Executive Director.
2. Dr John Lucas (CEO) was paid a base salary of £185,000 and £15,000 for
Directors' responsibilities, He received 10% private pension and 3% of
qualified earnings for Auto-Enrolment pensions. The maximum that he could have
received under the bonus system is £40,000 (2022: £40,000). As detailed in
the table above he received no bonus in the year or the prior period.
3. Clarissa Sowemimo-Coker was paid a base salary of £175,000 pro rata as
COO/General Counsel and £185,000 as CEO and £15,000 for Directors'
responsibilities. She receives 10% private pension and 3% of qualified
earnings for Auto-Enrolment pensions.
4. Karen Lowe was remunerated in line with time spent which exceeded the
contractual basis, this was based on the base salary of £175,000 FTE and
£15,000 for Directors' responsibilities. She received 10% private pension and
3% of qualified earnings for Auto-Enrolment pensions.
5. Paul Smalley was paid a base salary of £130,000. He receives 10% private
pension and 3% of qualified earnings for Auto-Enrolment pensions.
6. Julie Pomeroy received a fee of £25,000 as a Non-Executive Director, this
was paid on a pro-rata basis from 1 June 2021 to 14 February 2022. As Chair
she receives a fee of £45,000, this was paid on a pro-rata basis from 15
February 2022.
7. Cheryl Dhillon receives a fee of £25,000.
8. Until 1 September 2021 Bishrut Mukherjee was a representative of Imperial
Brands Plc (a significate shareholder of the Group via its subsidiary Imperial
Brands Ventures Ltd) and received no remuneration. Since 1 October 2021 he has
been an independent member of the Board and receives a fee of £25,000 per
annum.
9. Gavin Sathianathan received an annual fee of £25,000 pro-rated up to his
resignation on 24 November 2021.
10. Richard Hathaway joined the Board on 1 February 2022 as a representative
of Imperial Brands Plc and receives no remuneration.
Pension
The Group has one pension scheme (a defined contribution scheme), which all
new employees (excluding Non-Executive Directors) are eligible to join. The
Company contribution rate for new-hire Executive Directors is set at the same
rate as the wider workforce, 10%.
Benefits
The Group offers private medical cover for Executive Directors and immediate
family, this policy extends to the wider workforce as promoting health and
well-being is in keeping with the ethos of the Company.
Directors' Share Options
Number of options granted in the prior year under the replacement share option Number of options granted in the prior year under the new scheme for Directors
scheme for Directors previously employed by OCTL of the Group
At £0.0416 price At £0.05 price At £0.065 price
Neil Mahapatra - - 2,401,039
Dr John Lucas 11,597,393 9,870,797 26,411,430
Clarissa Sowemimo-Coker 5,798,696 6,854,695 26,411,430
Karen Lowe - - 7,203,117
Paul Smalley - - -
Gavin Sathianathan - - 2,401,039
Cheryl Dhillon - - 2,401,039
Julie Pomeroy - - 2,401,039
Bishrut Mukherjee - - -
Richard Hathaway - - -
17,396,089 16,725,492 69,630,133
There were no new options granted in the current year, and no options that
vested. See note 24 for details of the Group's Share Option Schemes.
Directors' Shareholdings and Interests (audited)
The interests of each person who has served as a Director of the Company
during the year as at 30 April 2023 (together with interests held by his or
her persons closely associated) are shown in the table below:
Number of Ordinary Shares held
Dr John Lucas -
Clarissa Sowemimo-Coker 1,189,594
Karen Lowe 340,010
Paul Smalley -
Julie Pomeroy 200,000
Neil Mahapatra 199,355,382
Bishrut Mukherjee 111,111
Cheryl Dhillon -
Richard Hathaway -
There is no requirement for Directors or Non-Executive Directors to hold
shares in the Company.
Non-Executive Director Remuneration
Our Non-Executive Directors are compensated with a fixed fee for their
services. Unlike other roles, they do not receive bonuses or pension
contributions. However, in alignment with our belief in the value of personal
investment and commitment to the Company's mission, all Non-Executive
Directors, with the exception of Bishrut Mukherjee and Richard Hathaway, were
granted share options at the time of our Initial Public Offering (IPO) in May
2021
A total of 7,203,117 share options were granted at a strike price of £0.065.
This decision was made to incentivise and align our Non-Executive Directors
with the long-term prosperity of the Company, transforming their relationship
with the business from being purely transactional to becoming active
participants in the continuing success of the Company. This approach does not
compromise their independence and objectivity in decision-making.
It's important to note that no new share options have been granted since the
IPO. This is in line with our commitment to maintaining the independence of
our Non-Executive Directors and ensuring that their decisions are not
influenced by the prospect of additional share options.
For the year 2023, the fees for our Non-Executive Directors were £120,000. We
believe that this remuneration structure, combining fixed fees with share
options, is a balanced approach that aligns the interests of our Non-Executive
Directors with those of our shareholders and the long-term success of the
Company.
Audit Committee report
Audit Committee meeting attendance
Julie Pomeroy (Chair) (4/4)
Richard Hathaway (4/4)
Karen Lowe (3/3) Resigned 17 October 2022
Cheryl Dhillon (3/4) 4
Introduction from the Committee Chair
As the Chair of the Audit Committee for Oxford Cannabinoid Technologies, I am
pleased to present our 2023 Audit Report.
Risk Management and Internal Controls Review
At the request of the Board, the Company Secretary conducted a 'root and
branch' review of the Company's risk management. As a pre-revenue business
involved in complex and costly drug development and clinical trials, we
believe it is crucial for us to have a thorough understanding of how
uncertainty affects our business objectives. While we had a good understanding
of these effects before, we now significantly improved our focus and
comprehension which enhances the Board's strategic thinking and
decision-making process.
Looking Ahead
Next year, we are looking to continue our work on risk management,
particularly focusing on identifying, assessing, and mitigating potential
risks that could impact our strategic objectives.
Conclusion
We are proud of the progress we have made over the past year and remain
committed to maintaining the highest standards of corporate governance. We
believe that our robust governance structure and risk management processes
will continue to serve the best interests of our shareholders and other
stakeholders.
Thank you for your continued support.
Julie Pomeroy
Chair of the Audit Committee
Financial Reporting
One of the Committee's principal responsibilities is to review and report to
the Board on the clarity and accuracy of the Group's financial statements,
including the Annual Report & Accounts and interim statement.
The Audit Committee reviewed Oxford Cannabinoid Technologies' 2022 Annual
Report and Accounts and the half-yearly financial report published in January
2023. As part of these reviews, the Committee received papers from management
on accounting policy, areas of significant judgement, the Group's key risks,
going concern considerations, and longer-term viability. The Committee also
discussed reports from Moore Kingston Smith LLP (MKS) on their audit of the
Annual Report and Accounts and review of the half-yearly financial report.
The Committee considered whether the Annual Report and Accounts were fair,
balanced, and understandable and contained the information necessary for
shareholders to assess the Company's position, performance, business model,
and strategy.
(a) R&D Tax Credit
The committee recognises that R&D tax credits are an important source of
income for the Company whilst in pre-revenue phase. In order to ensure the
validity of tax credits, the Company engages a 3(rd) party R&D tax
specialist to provide a detailed R&D report to support the tax submission
that is made on an annual basis.
(b) Governance Updates
Updates on the latest governance practices for audit committees and changes in
reporting requirements were provided by the external auditor. The Committee
received regular updates on the proposed corporate governance reforms as set
out in the Government's White paper 'Restoring trust in audit and corporate
governance'.
(c) Committee Effectiveness
An effectiveness review was carried out on the Committee and its members as
part of the wider external Board evaluation process. The review concluded that
the current mix of financial, commercial and relevant sector experience of the
Audit Committee, and that of its advisers, was such that the Committee could
effectively exercise its responsibilities to the Group in relation to risk and
controls.
(d) Policies and Conflicts
The Committee reviewed its policies in relation to allocation of non-audit
work and employment of ex-audit firm personnel. It also reviewed the
Directors' conflicts of interest register.
(e) Committee Composition and Performance
Throughout the year under review, the Audit Committee was comprised of two
independent Non-Executive Directors and a non-independent Non-Executive
Director, each bringing a wealth of diverse experience to the table. The Board
is confident that the Committee, including its Chair, Julie Pomeroy, possesses
an appropriate level of recent and relevant financial expertise to effectively
discharge its duties.
We acknowledge that the Company's current structure does not fully comply with
Provision 24 of the UK Corporate Governance Code. This provision stipulates
that an Audit Committee should consist of independent Non-Executive Directors,
with the Chair of the Board not being a member. However, Julie Pomeroy, the
Chair of the Board, also serves as the Chair of the Audit Committee. This
decision was made in light of Julie's extensive financial expertise and the
need for consistent leadership. Richard Hathaway is regarded as a
non-independent Non-Executive Director but is a member of the Audit Committee
in view of his strong audit and financial background.
The Board conducts regular reviews of Julie's dual role. While this
arrangement does not strictly adhere to Provision 24 of the UK Corporate
Governance Code, the Board believes it is in the best interest of OCT at this
time. This situation will continue to be reviewed, and adjustments will be
made as necessary.
Julie Pomeroy was appointed as the Audit Committee Chair in 2021. She is
responsible for setting the Committee's agenda and maintaining key
relationships between the Executive Committee, the Company Secretary, and
senior representatives of the external auditor. Julie ensures that key audit
issues are reported to the Board in a timely and effective manner and that
these issues are communicated to shareholders in the Annual Report. At the
2023 AGM, Julie will present a summary of the Audit Committee's work to
shareholders.
(f) Recent and Relevant Financial Experience
Julie, our Audit Committee Chair, brings a wealth of experience to the role,
with over two decades serving as a Board director for public limited
companies. As a Chartered Accountant and a Chartered Director, she possesses a
deep understanding of the corporate governance standards required for
UK-listed companies. Julie served as the Finance Director and Company
Secretary of AIM-listed Dillistone Group Plc for over a decade, providing her
with robust financial credentials. Furthermore, her tenure as a non-executive
director for various NHS organisations, where she either chaired or was a
member of their audit committees, has enriched her experience in governance
and oversight roles.
Richard, offers a broad range of financial experience, having previously
advised a variety of international businesses, both public and private, across
multiple sectors. His senior finance and corporate development roles at
Imperial Brands have equipped him with extensive transaction, financing, and
capital-raising experience, which is particularly relevant to OCT as we seek
further investment rounds to support our strategic objectives. As a former
auditor of numerous UK-listed companies and the former head of risk management
at Imperial, Richard also contributes extensive corporate governance
experience. He is a Chartered Accountant with substantial recent and relevant
financial experience.
(g) Competence Relevant to the Sector
Cheryl, another integral member of our team, brings over 30 years of
pharmaceutical industry experience, spanning start-ups to large global
enterprises. She has held various positions, from Senior Vice President of
Finance to CEO, and has hands-on management experience in many of the
functions critical to the successful development and commercialisation of
specialty pharmaceutical products, particularly in EU markets. Since
transitioning to semi-retirement in 2020, Cheryl has focused her expertise on
assisting innovative healthcare-related companies at the Board level. In
addition to being a Fellow of the Association of Chartered Certified
Accountants (ACCA), she holds an MBA from the University of Hertfordshire,
specialising in strategy, and a coaching qualification from the University of
Strathclyde.
(h) External Auditor
The Committee has primary responsibility for managing the relationship with
the external Auditor, MKS, including assessing their performance,
effectiveness, and independence annually and recommending to the Board their
reappointment or removal.
The Company has complied with the provisions of the UK Corporate Governance
Code for the financial year under review in respect to audit tendering and the
provision of non-audit services.
(i) Annual Review of the External Auditor
The Committee conducts an effectiveness review of the external Auditor on an
annual basis which aims to ensure a robust audit is performed, auditor
performance is optimised, and encourages candid feedback and communication
between the Auditor and the Committee.
After taking all of these matters into account, the Committee concluded that
MKS had performed their audit effectively, efficiently, and to a high quality.
Accordingly, the Committee has recommended to the Board that MKS be
reappointed as Auditor to the Group for the year ending 30 April 2024.
(j) External Auditor Independence
Auditor independence is an essential part of the audit framework and the
assurance it provides. The Committee therefore undertook a comprehensive
review of auditor independence prior to appointment and during 2022, which
included:
· A review of the independence of the external auditor and the
arrangements which they have in place to restrict, identify, report and manage
conflicts of interest.
· A review of the changes in key external audit staff for the
current year and the arrangements for the day-to-day management of the audit
relationship.
· Consideration of the overall extent of non-audit services
provided by the external auditor, in addition to case-by-case approval of the
provision of non-audit services as appropriate.
· Deliberation of the likelihood of a withdrawal of the auditor
from the market and note taken of the fact that there are no contractual
obligations to restrict the choice of external auditor.
At the year end, the external auditor formally confirmed that they had
complied with the requirements of the FRC Ethical Standard as well as internal
requirements and their independence and objectivity had been maintained.
(k) External Auditor Effectiveness
To assess the effectiveness of the external auditor, the Committee reviewed:
· The proposed plan of work presented by the external auditor,
including audit risks, materiality, terms of engagement and fees prior to
commencement of the 2022 audit.
· The external auditor's fulfilment of the agreed audit plan and
any variations from the plan.
· Evaluation from key management personnel and members of the
Committee of the external auditor's exercise of professional scepticism and
challenge.
· Robustness and perceptiveness of the auditor in their handling of
the key accounting and audit judgements.
· Internal control and risk content of the external auditor's
report.
· Independence of thought and potential for conflict.
(l) External Auditor Fees
All relevant fees proposed by the external auditor must be reported to and
approved by the Audit Committee. Details of external audit fees may be found
in note 8 to the consolidated financial statements.
Policy for Non-Audit Services Provided by the External Auditor
The main aims of this policy are to:
· Ensure the independence of the auditor in performing the
statutory audit; and
· Avoid any conflict of interest by clearly detailing the types of
work that the auditor can and cannot undertake.
The Audit Committee has reviewed the policy for non-audit services to ensure
that it is in line with the FRC's Revised Ethical Standards 2019 (which took
effect from 15 March 2020) and the FRC's Audit Quality Practice Aid 2019. The
policy, in line with regulation, substantially limits the non-audit services
which can be provided by the external auditor. The policy provides:
· A 70% cap of the value of the audit fee for all non-audit
services calculated on a rolling three-year basis.
· Categories of service that are prohibited from being carried out
by the auditor.
The policy specifies a de minimis limit as well as the type of non-audit work
that the auditor may be engaged in without the matter first being referred to
the Audit Committee, which considers each referral on a case-by-case basis.
The policy ensures that the auditor does not audit its own work or make
management decisions for the Company or any of its subsidiaries. The policy
also clarifies responsibilities for the agreement of fees payable for
non-audit work. No non-audit services were provided by MKS during the year.
(m) Annual Review of the Internal Audit Function
The Company acknowledges non-compliance with Provision 26 due to the absence
of an internal audit function. The Board, after annual reviews, considers an
internal audit function to be disproportionate given the size, complexity, and
risk profile of Oxford Cannabinoid Technologies (OCT) during the period.
Instead, internal assurance is maintained through robust governance, risk
management, and internal controls. The Audit Committee plays a key role in
overseeing risks, evaluating controls, and ensuring the external audit's
independence and effectiveness. The Committee also liaises with the
Remuneration Committee to incorporate risk considerations in remuneration
policies.
(n) Fraud Risk
The Company recognises internal fraud risk that with such a small team there
is limited segregation of duties that can be operated. External fraud risk
comes mainly from our R&D suppliers and the Company operates a reasonable
set of controls to ensure goods and services have been received prior to
payment, and any changes in supplier details are checked before payments are
made. Fraud risk is not considered to be a corporate risk, but it is
considered at an operational risk level.
(o) Cyber and Information Security Risk
Together with hardware and software installation, maintenance and management,
the Company engages a 3(rd) party that holds ISO270001 accreditation, to
provide basic controls and mechanisms to mitigate the likelihood and impact of
a cyber security attack.
(p) Whistleblowing
The Audit Committee is responsible for handling complaints related to
accounting, risk issues, internal controls, and auditing matters. Reports are
made to the Committee as necessary. The Board oversees the Company's
whistleblowing policy. It is noteworthy that, to date, there have been no
reports made to the whistleblowing line. This reflects our commitment to
maintaining a transparent and accountable work environment where employees
feel safe and secure.
(q) Conflicts of Interest
In accordance with the Companies Act 2006, Directors are obligated to avoid
situations where there may be a conflict, or potential conflict, between their
duties to the Company and their personal interests or other duties they owe to
a third party.
Should a Director become aware that they, or a connected party, have an
interest in an existing or proposed transaction with the Company, they are
required to notify the Board as soon as practicable. The Board has the
authority to authorise such a conflict if it is determined that doing so would
be in the best interests of the Company.
The Audit Committee reviews the output of this process annually to ensure that
conflicts of interest are appropriately monitored and managed. This process is
part of our commitment to maintaining the highest standards of corporate
governance and ensuring the integrity of our operations.
Directors' report
The Directors have the pleasure of submitting their report and the audited
financial statements for the year ended 30 April 2023. Comparative figures
relate to the previous financial period of 11 months from 1 June 2021 to 30
April 2022.
To make our Annual Report and Accounts more accessible, a number of the
sections traditionally found in this report can be found in other sections of
the Annual Report and Accounts where it is deemed that the information is
presented in a more connected and accessible way. The Directors' report
comprises the sections detailed below, including the statement on political
donations and R&D. Any sections that have been moved have been
cross-referenced below for ease of reference:
Located in the strategic report:
Principal Group activities, business review and results: The principal
activities of Oxford Cannabinoid Technologies and its subsidiary can be found
in this section.
Research and Development: The Group also has undertaken research and
development activities during the financial period and these are detailed in
the CSO's Review. The Directors consider the investment in research to be
fundamental to the success of the business in the future.
Directors' statement of disclosure of information to the auditor: This
statement may be found in the Strategic Report.
Internal control and risk management arrangements: Internal control
arrangements information may be found in the Audit Committee report. Risk
management arrangements information may be found in this section and in the
Principal risks and uncertainties section.
Located in the governance section:
2018 UK Corporate Governance Code (the 'Code'): Information on how the Company
applied the Principles and complied with the provisions of the Code may be
found in this section. A copy of the Code can be accessed via www.frc.org.uk
(http://www.frc.org.uk/) .
Diversity policies: The Group's Equality & Diversity Policy are available
in the Nominations Committee report.
Stakeholder engagement: Details regarding the engagement with suppliers,
regulators and others in business relationships with the Company may be found
in this section.
Employees: Information about the total number of employees and gender
diversity statistics are located in this section. The average number of
employees and their remuneration are shown in note 7. The methods of engaging
with the workforce may be found in this section.
Located in the additional information section:
Dividend: The consolidated Statement of Comprehensive Income for the year is
set out towards the end of the Annual Report. No final dividend is proposed
(2022: £nil).
Annual General Meeting (AGM): Information about the AGM can be found towards
the end of the Annual Report. The recommendation to reappoint MKS as the
Group's auditor, can be found towards the end of the Annual Report.
Share capital and substantial shareholdings: Information in this regard can be
found towards the end of the Annual Report.
Overseas subsidiaries: Information in this regard can be found towards the end
of the Annual Report.
Indemnity and Insurance: Details of Directors' Indemnity and Insurance is
located towards the end of the Annual Report.
Significant agreements: There are no significant agreements to which the
Company is a party that take effect, alter or terminate upon a change of
control of the Company following a takeover bid.
Political donations
The Group made no political donations during the current year and previous
financial period. Nor has it made any contributions to any non-UK political
party during the current year or previous financial period.
Non-financial reporting
Non-financial measures are an important part of our business and we have
consistently recognised the importance of non-financial information in our
annual reports. The Board is committed to acting responsibly and working with
our stakeholders to manage the social and ethical impact of our activities. We
aim to treat all our stakeholders fairly and with integrity, as we explain in
the introduction to our sustainability matters report.
We have a number of Group policies to provide guidance to our employees. The
policies are designed to be easily understood and they generally include
examples of acceptable and unacceptable behaviours.
By order of the Board
Rob Bennett
Company Secretary
30 August 2023
Financial Statements - OUR FINANCIAL PERFORMANCE
(a) Independent Auditor's Report to the members of Oxford Cannabinoid Technologies Holdings Plc
Disclaimer of opinion
We were engaged to audit the financial statements of Oxford Cannabinoid
Technologies Holdings Plc ('the Company') and its subsidiary ('the Group') for
the year ended 30 April 2023 which comprise the Consolidated Statement of
Comprehensive Income, the Consolidated and Company Statements of Financial
Position, the Consolidated and Company Statements of Changes in Equity, the
Consolidated and Company Statements of Cash Flows, and notes to the financial
statements, including significant accounting policies. The financial reporting
framework that has been applied in their preparation is applicable law and UK
adopted International Accounting Standards.
We do not express an opinion on the financial statements of the Group or the
Company. Because of the significance of the matter described in the basis for
disclaimer of opinion section of our report, we have not been able to obtain
sufficient appropriate audit evidence to provide a basis for an audit opinion
on the financial statements.
Basis for disclaimer of opinion
As disclosed in note 1 to the financial statements, the financial statements
of the Group and Company are prepared on the assumption that the Group and
Company will continue as a going concern.
Whilst the Group is planning for the next round of funding, this is not due to
take place until the fourth quarter of 2023, market conditions permitting. In
the absence of, or in the event of a delay in, obtaining any further debt or
equity funding, the existing cash funds held by the Group will be fully
utilised by April 2024. Whilst we acknowledge the Group remains on target with
the timescales set out for all four of its drug research and development
programmes, the Group's cash runway therefore extends only 8 months beyond the
date of approval of the financial statements, assuming that the planned
programme research remains unchanged. Therefore, the Group may be unable to
realise its assets and discharge its liabilities in the normal course of
business for at least twelve months from the date of approval of the financial
statements.
The ability of management to raise further financing and to successfully
progress its drug research and development programmes are key assumptions
supporting the Directors' conclusions that it is appropriate to prepare the
financial statements of the Group and Company on a going concern basis. Whilst
we understand a financial broker has been engaged to support the company and
to proceed with a transaction for an equity financing for the Company's cash
requirements, and the broker determines they have the capacity to arrange the
financing to an order of magnitude to allow the Group and Company to continue
to operate as a going concern based on current cash flow projections, there
has been no significant progress as at the date of approval of the financial
statements towards actively identifying commitments from investors and the
ability to do so will be dependent on market conditions and programme
development at the time of the equity fund raise.
As a result, we have not been able to obtain sufficient appropriate audit
evidence to support the assumption that a fundraising of sufficient magnitude
is achievable within the necessary timeframe to allow the Group and Company to
continue to operate as a going concern for at least twelve months from the
date of approval of the financial statements, Consequently we were unable to
obtain sufficient appropriate audit evidence to enable us to form an audit
opinion on these financial statements.
The financial statements do not reflect any adjustments that would be required
should the Group and Company be unable to continue as a going concern.
Our approach to the audit
Our audit approach was a risk-based approach founded on a thorough
understanding of the Group's business, its environment, and its risk profile.
We conducted substantive audit procedures and evaluated the Group's internal
control environment. The components of the Group were evaluated by the Group
audit team based on a measure of materiality, considering each component as a
percentage of the Group's total assets, current assets, and gross profit,
which allowed the Group audit team to assess the significance of each
component and determine the planned audit response.
We have evaluated two significant components - both the parent Company and its
subsidiary. A full scope audit was performed on the financial statements of
both components by the audit team. We evaluated the controls in place at each
component by performing walkthroughs over the financial reporting systems
identified as part of our risk assessment. We also reviewed the accounts
production process and addressed critical accounting matters. We then
undertook substantive testing on significant classes of transactions and
material account balances.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were
of most significance in our audit of the financial statements of the current
year and include the most significant assessed risks of material misstatement
(whether or not due to fraud) we identified, including those which had the
greatest effect on: the overall audit strategy, the allocation of resources in
the audit; and directing the efforts of the audit engagement team. These
matters were addressed in the context of our audit of the financial statements
as a whole, and in forming our opinion thereon, and we do not provide a
separate opinion on these matters.
Key audit matter - Group How our scope addressed the matter - Group
Going concern Our conclusions in respect of going concern have been detailed in the Basis
for Disclaimer of Opinion section of our audit report.
The Group is pre revenue and has incurred a loss for the year of £5.945m
(2022: £4.712m loss).
Whilst the Group has no outstanding borrowings as at 30 April 2023 (2022:
nil), its cash funds have decreased in the year to £2.297m (2022: £9.166m).
The directors have prepared cash flow forecasts that show that, in the absence
of further debt or equity funding, the existing cash funds will be fully
utilised by April 2024 (if current forecast levels of project expenditure
continue).
Given the trading performance in the year, including the decrease in cash
funds, and the absence of any further debt or equity financing, the ability of
the Group and Company to continue in business as a going concern was
considered to be a key audit risk area.
Key audit matter - Company How our scope addressed the matter - Company
Valuation and classification of investments in subsidiary undertakings and The scope of our work included, but was not restricted to:
valuation of amounts owed by subsidiary undertakings
· Critically assessing management's assessment of impairment
including critically assessing the external valuation used by management to
The carrying value of investments in subsidiary undertakings recognised in the support their assessment;
Parent Company Statement of Financial Position at 30 April 2023 was £7.226m
(2022: £7.226m) and the total amount owed by the Company's subsidiary · Critically assessing the competence and independence of the third
undertakings recognised in the Parent Company Statement of Financial Position party valuation expert;
at 30 April 2023 was £1.917m (2022: £5.446m).
· Critically assessing the key underlying assumptions used in the
valuation and obtaining and assessing documentation to support the
assumptions;
The directors are required to make an assessment to determine whether the
carrying value of investments and amounts owed by the subsidiary undertakings · Performing sensitivity analysis on the valuation taking into
are recoverable. Due to the significance of the amounts in question in the consideration management's base and downside scenarios;
context of the Company Statement of Financial Position, the carrying value of
investments and the recoverability of the amounts owed were key risk areas for · Critically assessing management's intercompany matrix to confirm
the audit of the Parent Company. that all intercompany balances have been included and materially reconciled at
30 April 2023;
· Critically assessing the cash flow model and the judgements and
The directors are also required to consider the classification of investments estimates applied in the model which support the ability of the subsidiary to
at the year end given the novation of contracts from the subsidiary generate sufficient profits and cash flows to enable them to repay the amounts
undertaking in the year to the parent company. owed to the Company;
· Performing sensitivity analysis on the cash flow model prepared
by management taking into consideration management's base and downside
The Company's disclosures in respect of investments, goodwill and amounts owed scenarios;
by the subsidiary undertakings are shown in notes 10, 13 and 15 to the
financial statements. · Critically assessing the factors which determine whether the
investments should be reclassified as goodwill following the novation of
contracts to the parent company;
·
· Challenging key assumptions as to why management consider the
amounts owed by subsidiary undertakings to be recoverable;
· Critically assessing post year end trading and the liquidity
position of the subsidiary; and
· Evaluating the accounting policy and detailed disclosures
included in the financial statements to confirm whether information provided
in the financial statements is compliant with the requirements of UK adopted
International Accounting Standards.
Key observations
Based on the work performed we concluded that we agreed with management's
assertion that no provision or impairment was required against amounts owed by
the subsidiary undertaking following a provision of £0.678m that was
recognised in the prior financial year ended 30 April 2022.
We further concluded that we agreed with management's assertion that the
investments should be reclassified as goodwill at 30 April 2023 as a result of
the novation of contracts referred to above.
We also concluded that we agreed with management's assertion that no
impairment was required against the carrying value of goodwill.
We consider the disclosures in the financial statements to be acceptable.
Our application of materiality
The scope and focus of our audit engagement was influenced by our assessment
and application of materiality. We define materiality as the magnitude of
misstatement that could reasonably be expected to influence the readers and
the economic decisions of the users of the financial statements. We use
materiality to determine the scope of our audit engagement and the nature,
timing and extent of our audit procedures and to evaluate the effect of
misstatements, both individually and on the financial statements as a whole.
Due to the nature of the Group, we considered the loss for the year to be the
main focus for the readers of the financial statements, and accordingly this
consideration influenced our judgement of materiality. Based on our
professional judgement, we determined materiality for the Group to be
£117,000 based on a percentage of loss for the year (2%). Based on our
professional judgement, we determined materiality for the Company to be
£115,000 based on a percentage of the loss for the year (2%).
On the basis of our risk assessment, together with our assessment of the
overall control environment, our judgement was that performance materiality
(i.e. our tolerance for misstatement in an individual account or balance) for
the Group and Company was 50% of materiality, namely £58,500 and £57,500
respectively.
We agreed to report to the Audit Committee all audit differences in respect of
the Group and Company in excess of £5,800 and £5,700 respectively and, as
well as differences below that threshold that, in our view, warranted
reporting on qualitative grounds. We also reported to the Audit Committee on
disclosure matters that we identified when assessing the overall presentation
of the financial statements.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion the part of the Directors' Remuneration Report to be audited
has been properly prepared in accordance with the Companies Act 2006.
Because of the significance of the matter described in the basis for
disclaimer of opinion section of our report, we have been unable to form an
opinion whether, based on the work undertaken in the course of the audit:
· the information given in the Strategic Report and the Directors'
Report for the financial year for which the financial statements are prepared
is consistent with the financial statements; and
· the Strategic Report and the Directors' Report have been prepared
in accordance with applicable legal requirements.
Matters on which we are required to report by exception
Notwithstanding our disclaimer of opinion on the financial statements, in the
light of the knowledge and understanding of the Group and the Company and
their environment obtained in the course of the audit, performed subject to
the pervasive limitation described above, we have not identified material
misstatements in the Strategic Report or the Directors' Report.
Arising from the limitation of our work referred to above:
· we have not received all the information and explanations we
require for our audit; and
· we were unable to determine whether adequate accounting records
have been kept.
We have nothing to report in respect of the following matters where the
Companies Act 2006 requires us to report to you if, in our opinion:
· returns adequate for our audit have not been received from
branches not visited by us; or
· the Company financial statements and the part of the directors'
remuneration report to be audited are not in agreement with the accounting
records and returns; or
· certain disclosures of directors' remuneration specified by law
are not made; or
· a corporate governance statement has not been prepared by the
Company.
Corporate governance statement
We have reviewed the directors' statement in relation to going concern,
longer-term viability and that part of the Corporate Governance Statement
relating to the entity's voluntary compliance with the provisions of the UK
Corporate Governance Code.
Because of the significance of the matter described in the basis for
disclaimer of opinion section of our report, we have been unable to report as
to whether the following statements are appropriate:
· The Directors' statement with regards the appropriateness of
adopting the going concern basis of accounting and any material uncertainties
identified set out in the Going Concern and Viability Statement;
· The Directors' explanation as to its assessment of the Group's
prospects, the period this assessment covers and why the period is appropriate
set out in the Going Concern and Viability Statement;
· The Directors' statement on whether it has a reasonable
expectation that the Group will be able to continue in operation and meet its
liabilities set out in the Going Concern and Viability Statement;
· The Directors' statement on fair, balanced and understandable set
out in Other Directors' Statements.
Notwithstanding our disclaimer of opinion on the Group and Company financial
statements, based on the work undertaken as part of our audit, we have
concluded that each of the following elements of the Corporate Governance
Statement is materially consistent with the financial statements and our
knowledge obtained during the audit:
· The Board's confirmation that it has carried out a robust
assessment of the emerging and principal risks set out in the Governance
Report;
· The section of the annual report that describes the review of
effectiveness of risk management and internal control systems set out in the
Strategic Report; and
· The section describing the work of the Audit Committee set out in
the Audit Committee report.
Responsibilities of directors
As explained more fully in the directors' responsibilities statement, the
directors are responsible for the preparation of the financial statements and
for being satisfied that they give a true and fair view, and for such internal
control as the directors determine is necessary to enable the preparation of
financial statements that are free from material misstatement, whether due to
fraud or error.
In preparing the financial statements, the directors are responsible for
assessing the Group's and Company's ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to
liquidate the Group or the Company or to cease operations, or have no
realistic alternative but to do so.
Auditor's Responsibilities for the audit of the financial statements
Our responsibility is to conduct an audit of the Group's and Company's
financial statements in accordance with International Standards on Auditing
(UK) and to issue an auditor's report.
However, because of the matter described in the basis for disclaimer of
opinion section of our report, we were not able to obtain sufficient
appropriate audit evidence to provide a basis for an audit opinion on these
financial statements.
We are independent of the Group and Company in accordance with the ethical
requirements that are relevant to our audit of the financial statements in the
UK, including the FRC's Ethical Standard, and we have fulfilled our other
ethical responsibilities in accordance with these requirements.
Explanation as to what extent the audit was considered capable of detecting
irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and
regulations. We design procedures in line with our responsibilities, outlined
above, to detect material misstatements in respect of irregularities,
including fraud. The extent to which our procedures are capable of detecting
irregularities, including fraud is detailed below.
The objectives of our audit in respect of fraud, are; to identify and assess
the risks of material misstatement of the financial statements due to fraud;
to obtain sufficient appropriate audit evidence regarding the assessed risks
of material misstatement due to fraud, through designing and implementing
appropriate responses to those assessed risks; and to respond appropriately to
instances of fraud or suspected fraud identified during the audit. However,
the primary responsibility for the prevention and detection of fraud rests
with both management and those charged with governance of the Company.
Our approach was as follows:
· We obtained an understanding of the legal and regulatory
requirements applicable to the Company and considered that the most
significant are the Companies Act 2006, UK adopted International Accounting
Standards, the Listing Rules, the Disclosure Guidance and Transparency Rules,
and UK taxation legislation.
· We obtained an understanding of how the Company complies with
these requirements by discussions with management and those charged with
governance.
· We assessed the risk of material misstatement of the financial
statements, including the risk of material misstatement due to fraud and how
it might occur, by holding discussions with management and those charged with
governance.
· We inquired of management and those charged with governance as to
any known instances of non-compliance or suspected non-compliance with laws
and regulations.
· Based on this understanding, we designed specific appropriate
audit procedures to identify instances of non-compliance with laws and
regulations. This included making enquiries of management and those charged
with governance and obtaining additional corroborative evidence as required.
· We evaluated managements' incentives to fraudulently manipulate
the financial statements and determined that the principal risks related to
management bias in accounting estimates and judgemental areas of the financial
statements. We challenged the assumptions and judgements made by management in
respect of the significant areas of estimation, as described in the key audit
matters section.
There are inherent limitations in the audit procedures described above. We are
less likely to become aware of instances of non-compliance with laws and
regulations that are not closely related to events and transactions reflected
in the financial statements. Also, the risk of not detecting a material
misstatement due to fraud is higher than the risk of not detecting one
resulting from error, as fraud may involve deliberate concealment by, for
example, forgery or intentional misrepresentations, or through collusion.
Other matters which we are required to address
Following the recommendation of the Audit Committee, we were reappointed by
the Company's Annual General Meeting (AGM) on 28 September 2022 as auditor of
the Company to hold office until the conclusion of the next AGM of the
Company. We were originally appointed by the Audit Committee on 15 June 2021
to audit the financial statements for the year ended 31 May 2021, and our
total uninterrupted period of engagement is three years covering periods from
our appointment through to the year ended 30 April 2023.
The non-audit services prohibited by the FRC's Ethical Standard were not
provided to the Group or Company and we remain independent of the Group and
the Company in conducting our audit engagement.
Our audit opinion is consistent with the additional report to the Audit
Committee.
Use of our report
This report is made solely to the Company's members, as a body, in accordance
with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been
undertaken for no purpose other than to draw to the attention of the Company's
members those matters which we are required to include in an auditor's report
addressed to them. To the fullest extent permitted by law, we do not accept or
assume responsibility to any party other than the Company and Company's
members as a body, for our work, for this report, or for the opinions we have
formed.
Matthew Banton (Senior Statutory Auditor)
For and on behalf of Moore Kingston Smith LLP, Statutory
Auditor
6(th) Floor
9 Appold Street
London
EC2A 2AP
(b) Consolidated Statement of Comprehensive Income
Year ended Period ended
30 April 30 April
2023 2022
Notes £ £
Revenue - -
Research costs (4,303,608) (2,891,497)
Gross loss (4,303,608) (2,891,497)
Administrative expenses (2,670,151) (2,320,292)
Exceptional items 4 (63,850) (291,598)
Operating loss 5 (7,037,609) (5,503,387)
Finance income 6 3,838 -
Finance costs 6 - -
Loss before taxation (7,033,771) (5,503,387)
Income tax 9 1,088,721 791,058
Loss for the year/period (5,945,050) (4,712,329)
Other comprehensive income
Items that may be reclassified to profit or loss - -
Total comprehensive loss for the year/period attributable to owners of the (5,945,050) (4,712,329)
Parent Company arising from continuing operations
Loss per share attributable to the ordinary equity holders of the Company:
Basic loss per share from continuing and total operations 5 (#RANGE!_bookmark90) (0.619p) (0.491p)
Diluted loss per share from continuing and total operations 25 (0.619p) (0.491p)
(c) Consolidated Statement of Financial Position
30 April 30 April
2023 2022
Notes £ £
Non-current assets
Intangible assets 10 7,272 46,080
Property, plant and equipment 11 - -
Right-of-use assets 12 - -
7,272 46,080
Current assets
Trade and other receivables 15 2,191,133 2,606,616
Cash and cash equivalents 16 2,297,343 9,165,596
4,488,476 11,772,212
Total assets 4,495,748 11,818,292
Current liabilities
Trade and other payables 17 583,920 2,025,264
Lease liabilities - -
Borrowings - -
Total current liabilities 583,920 2,025,264
Non-current liabilities
Borrowings - -
Total non-current liabilities - -
Total liabilities 583,920 2,025,264
Net assets 3,911,828 9,793,028
Equity
Called up share capital 18 9,604,156 9,604,156
Share premium account 18 11,877,466 11,877,466
Share based payment reserve 24 1,513,458 1,449,608
Other reserve 18 643,455 643,455
Retained earnings (19,726,707) (13,781,657)
Total equity 3,911,828 9,793,028
The financial statements were approved and authorised for issue by the Board
of Directors on 30 August 2023 and were signed on behalf of by:
Paul Smalley
Finance Director
Company Registration No. 13179529
(d) Company Statement of Financial Position
30 April 30 April
2023 2022
Notes £ £
Non-current assets
Intangible assets 10 7,233,436 46,080
Investment in subsidiary 13 - 7,226,164
7,233,436 7,272,244
Current assets
Cash and cash equivalents 16 104,569 2,122,992
Trade and other receivables 15 4,073,139 7,819,642
4,177,708 9,942,634
Total assets 11,411,144 17,214,878
Current liabilities
Trade and other payables 17 261,781 195,687
Total current liabilities 261,781 195,687
Net assets 11,149,363 17,019,191
Equity
Called up share capital 18 9,604,156 9,604,156
Share premium account 18 11,877,466 11,877,466
Share based payment reserve 24 1,376,924 1,313,074
Retained earnings (11,709,183) (5,775,505)
Total equity 11,149,363 17,019,191
As permitted by section 408 of the Companies Act 2006, the Parent Company's
income statement has not been included in these financial statements. The
loss for the Parent Company was £5,933,678 (2022: £5,365,258).
The financial statements were approved and authorised for issue by the Board
of Directors on 30 August 2023 and were signed on behalf of the Board by:
Paul Smalley
Finance Director
Company Registration No. 13179529
(e) Consolidated Statement of Changes in Equity
Notes Share capital Share premium account Share based payment reserve Other reserve Retained earnings Total
£ £ £ £ £ £
At 1 June 2021 9,604,156 11,877,466 1,158,010 643,455 (9,069,328) 14,213,759
Loss for the period - - - - (4,712,329) (4,712,329)
Other comprehensive income - - - - -
Total comprehensive loss - - - - (4,712,329) (4,712,329)
Transactions with owners
Share-based payment charge (warrants) 24 - - 202,953 - - 202,953
Share-based payment charge (options) 24 - - 88,645 - - 88,645
Total transactions with owners - - 291,598 - - 291,598
Balance at 30 April 2022 9,604,156 11,877,466 1,449,608 643,455 (13,781,657) 9,793,028
Notes Share capital Share premium account Share based payment reserve Retained earnings Total
£ £ £ Other reserve £ £
£
At 1 May 2022 9,604,156 11,877,466 1,449,608 643,455 (13,781,657) 9,793,028
Loss for the year - - - - (5,945,050) (5,945,050)
Other comprehensive income - - - - - -
Total comprehensive loss - - - - (5,945,050) (5,945,050)
Transactions with owners
Share-based payment charge (warrants) 24 - - 12,154 - - 12,154
Share-based payment charge (options) 24 - - 51,696 - - 51,696
Total transactions with owners - - 63,850 - - 63,850
Balance at 30 April 2023 9,604,156 11,877,466 1,513,458 643,455 (19,726,707) 3,911,828
(f) Company Statement of Changes in Equity
Share capital Share premium account Share based payment reserve Retained earnings Total
£ £ £ £ £
Notes
9,604,156 11,877,466 1,021,476 (410,247) 22,092,851
At 1 June 2021
Loss for the period - - - (5,365,258) (5,365,258)
Total comprehensive loss for the period - - - (5,365,258) (5,365,258)
Transactions with owners
Share-based payment charge (options) 24 - - 202,953 - 202,953
Share-based payment charge (warrants) 24 - - 88,645 - 88,645
Total transactions with owners - - 291,598 - 291,598
Total equity at 30 April 2022 9,604,156 11,877,466 1,313,074 (5,775,505) 17,019,191
Notes Share capital Share premium account Share based payment reserve Retained earnings Total
£ £ £ £ £
At 1 May 2022 9,604,156 11,877,466 1,313,074 (5,775,505) 17,019,191
Loss for the year - - - (5,933,678) (5,933,678)
Total comprehensive loss - - - (5,933,678) (5,933,678)
Transactions with owners
Share-based payment charge (warrants) 24 - - 12,154 - 12,154
Share-based payment charge (options) 24 - - 51,696 - 51,696
Total transactions with owners - - 63,850 - 63,850
Balance at 30 April 2023 9,604,156 11,877,466 1,376,924 (11,709,183) 11,149,363
(g) Consolidated Statement of Cash Flows
Notes 2023 2022
£ £
Cash flows from operating activities
Cash absorbed from operations 19a (7,042,074) (5,373,021)
Interest received 6 3,838 -
Tax refunded 9 169,983 -
Net cash outflow from operating activities (6,868,253) (5,373,021)
Cash flows from investing activities
Proceeds from disposal of property, plant and equipment 11 - 2,500
Net cash inflow from investing activities - 2,500
Cash flows from financing activities
Repayment of borrowings - (50,000)
Lease liability payments 12 - (44,684)
Net cash outflow from financing activities - (94,684)
Net decrease in cash and cash equivalents (6,868,253) (5,465,205)
Cash and cash equivalents at the beginning of the period 16 9,165,596 14,630,801
Cash and cash equivalents at end of the period 16 2,297,343 9,165,596
(h) Company Statement of Cash Flows
2023 2022
Notes £ £
Cash flows from operating activities
Cash absorbed from operations 19a (2,018,423) 2,122,992
Net cash (outflow)/inflow from operating activities (2,018.423) 2,122,992
Net (decrease)/increase in cash and cash equivalents (2,018,423) 2,122,992
Cash and cash equivalents at the beginning of the period 2,122,992 -
Cash and cash equivalents at end of the period 104,569 2,122,992
Notes to the Financial Statements
1 General Information
Oxford Cannabinoid Technologies Holdings Plc is a public limited company
limited by shares, incorporated and domiciled in England and Wales. Its
registered office and principal place of business is Prama House, 267 Banbury
Road, Oxford OX2 7HT. Incorporated on 4 February 2021, the Company's shares
were admitted to trading on the London Stock Exchange on 21 May 2021.
All press releases, financial reports and other information are available at
our Shareholder Centre on our website: www.oxcantech.com
(http://www.oxcantech.com) .
The consolidated financial statements are presented in Pound Sterling (£) and
have been rounded to the nearest pound.
2 Summary of Significant Accounting Policies
2(a) Basis of preparation
Compliance with IFRS
The consolidated and company financial statements of the Group have been
prepared in accordance with UK adopted International Accounting Standards and
interpretations issued by the IFRS Interpretations Committee (IFRIC)
applicable to companies reporting under IFRS. The financial statements comply
with IFRS as issued by the International Accounting Standards Board (IASB).
Historical cost convention
The financial statements have been prepared on a historical cost basis, unless
stated otherwise in the accounting policies below.
2(b) Principles of consolidation and equity accounting
The consolidated financial statements consolidate the Company and its
subsidiary undertakings drawn up to 30 April. Subsidiaries are all entities
over which the Company has control. The Group controls an entity where the
Group is exposed to, or has rights to, variable returns from its involvement
with the entity and has the ability to affect those returns through its power
to direct the activities of the entity. Subsidiaries are fully consolidated
from the date on which control is transferred to the Group. They are
deconsolidated from the date that control ceases.
The acquisition method of accounting is used to account for business
combinations by the Group as detailed in note 2(c), except as otherwise
detailed. Inter-company transactions, balances and unrealised gains on
transactions between Group companies are eliminated on consolidation.
Unrealised losses are also eliminated unless the transaction provides evidence
of an impairment of the transferred asset. Accounting policies of subsidiaries
have been changed where necessary to ensure consistency with the policies
adopted by the Group.
2(c) Business combinations
The acquisition method of accounting is used to account for all business
combinations, regardless of whether equity instruments or other assets are
acquired. The consideration transferred for the acquisition of a subsidiary
comprises the:
· fair values of the assets
transferred;
· liabilities incurred to the former
owners of the acquired business;
· equity interests issued by the
Group;
· fair value of any asset or
liability resulting from a contingent consideration arrangement; and
· fair value of any pre-existing
equity interest in the subsidiary.
Identifiable assets acquired and liabilities and contingent liabilities
assumed in a business combination are measured initially at their fair values
at the acquisition date. Acquisition-related costs are expensed as incurred.
On 17 May 2021, in connection with the pre-IPO group restructuring, the
existing OCTL shareholders entered into a Share Exchange Agreement with OCT,
with OCT becoming the legal acquirer of OCTL. The Group restructuring does not
constitute a business combination and consequently it is not a reverse
acquisition as defined in IFRS 3. However, although the transaction is
outside of the scope of IFRS 3 it has been accounted for on a similar basis,
as detailed in guidance issued by the IFRS Interpretations Committee. Other
reserves represent the value of shares obtained in excess of the par value
under the share for share exchange agreement.
2(d) Going concern
The Directors are required to satisfy themselves that it is reasonable for
them to conclude whether it is appropriate to prepare the financial statements
on a going concern basis, and as part of that process they have followed the
Financial Reporting Council's guidelines ("Guidance on the Going Concern Basis
of Accounting and Reporting on Solvency and Liquidity Risk" issued April
2016).
The Group's business activities together with factors that are likely to
affect its future development and position are set out in the Chair's
Statement, the CEO's Review and Financial Review. Budgets and detailed
cashflow forecasts that look beyond twelve months from the date of these
consolidated financial statements have been prepared and used when considering
the Group's ability to meet its liabilities as they fall due, without raising
further funding. The Directors have made various assumptions in preparing
these forecasts, using their view of both the current and future economic
conditions that may impact on the Group during the forecast period.
As detailed in the Directors' Report, the Board have, however, identified that
a material uncertainty exists on the Company's ability to continue as a going
concern in relation to working capital. The Company's cash runway will only
extend eight months beyond signing these financial statements and therefore,
the Company may be unable to realise its assets and discharge its liabilities
in the normal course of business without a further fundraise within the next
eight months. The Board is planning on raising additional funds within this
period to provide further financial resources in order to progress with the
next stages of the research programmes. Whilst preparations are in progress
for this fundraise, alternative options for short to medium term financing are
also being considered. Further controls over discretionary spend will be
implemented to extend the current cash resources if required. Given the
mitigating controls that are in place for a successful fundraise and the
strength of controls that exist over cash management (as detailed in Principal
Risks and Uncertainties), the Board are confident that preparing the financial
statements on a going concern basis remains appropriate.
Key risks and potential scenarios that could negatively impact on the Group's
ability to continue to research and ultimately develop and retail prescribed
medicines within the timescales previously presented have been considered. The
signing of the agreement with Evotec for one of the Group's leading drug
candidates (OCT 461201) is an example of where the Directors have actively
managed some key external risk factors by selecting a partner who offers an
integrated drug development process, with acceleration through to clinical
trial stage.
The Directors have also considered the impact of the COVID-19 pandemic. Due to
the nature of the Group's activities, there has not been a significant
on-going impact on the business. Nonetheless, the Directors have taken steps
to mitigate the impact including entering into agreements with CROs that,
where possible, place responsibility for any delays with the other party.
After making enquiries including detailed consideration of the Group's
cashflow, solvency and liquidity position, the Board has a reasonable
expectation that OCT, OCTL and the Group as a whole have adequate resources to
continue in operational existence for at least twelve months (with significant
changes to the programme spend or with further fundraising) from the date of
signing of these financial statements. As such, the Board continues to adopt
the going concern basis in preparing the consolidated financial statements and
annual report.
2(e) Foreign currency translation
Items included in the consolidated financial statements of each of the Group's
entities are measured using Pound Sterling, which is the Group's functional
and presentation currency.
Foreign currency transactions are translated into the functional currency
using the exchange rates at the dates of the transactions. Foreign exchange
gains and losses resulting from the settlement of such transactions, and from
the translation of monetary assets and liabilities denominated in foreign
currencies at period end exchange rates, are generally recognised in the
Statement of Comprehensive Income.
2(f) Research & development costs
Prior to achieving regulatory approval, all expenditure on research activities
is recognised as an expense in the period in which it is incurred. Once such
approval is obtained, expenditure can then be recorded as an internally
generated intangible asset arising from the Group's development activities if
the following conditions can be demonstrated, in accordance with IAS 38
Intangible Assets:
· the technical feasibility of completing the intangible asset so
that it will be available for use or sale;
· the intention to complete the intangible asset and use or sell
it;
· the ability to use or sell the intangible asset;
· how the intangible asset will generate probable future economic
benefits;
· the availability of adequate technical, financial and other
resources to complete the development and to use or sell the intangible asset;
and
· the ability to measure reliably the expenditure attributable to
the intangible asset during its development.
2(g) Tax
Income tax
Current tax payable is based on taxable profit for the period. The Group's
liability for current tax is calculated using the main corporation tax rate
for the period.
The Group is entitled to claim special tax deductions for qualifying
expenditure (i.e. the Research and Development Tax Incentive regime in the
UK). The Group accounts for such allowances as tax credits, which reduces
income tax payable and current tax expense.
Tax expense recognised in profit or loss comprises the sum of deferred tax and
current tax not recognised in other comprehensive income or directly in
equity.
Deferred tax
Deferred income taxes are calculated using the liability method on temporary
differences. This involves the comparison of the carrying amount of assets and
liabilities in the consolidated financial statements with their respective tax
bases used in the computation of taxable profit.
Deferred tax liabilities are generally recognised for all taxable temporary
differences and deferred tax assets are recognised to the extent that it is
probable that taxable profits will be available against which deductible
temporary differences can be utilised. However, deferred tax is not provided
on the initial recognition of goodwill, or on the initial recognition of an
asset or liability unless the related transaction is a business combination or
affects tax or accounting profit. Deferred tax on temporary differences
associated with investments in subsidiaries is not provided if reversal of
these temporary differences can be controlled by the Group and it is probable
that reversal will not occur in the foreseeable future.
The amount of deferred tax provided is based on the expected manner of
recovery or settlement of the carrying amount of assets and liabilities, using
tax rates enacted or substantively enacted at the reporting date.
Deferred tax assets and liabilities are offset when there is a legally
enforceable right to offset current tax assets against current tax liabilities
and when they relate to income taxes levied by the same taxation authority and
the Group intends to settle its current tax assets and liabilities on a net
basis.
Given the Company and Group are several years away from generating a taxable
profit, no deferred tax asset is recognised in respect of trading losses.
Deferred tax liabilities are always provided for in full and are calculated at
tax rates that are expected to apply to their respective period of
realisation, provided they are enacted or substantively enacted at the balance
sheet date.
2(h) Leases
Until 2 April 2022, the Group leased the head office in London under a five
year lease period and office equipment. The latter are short term leases of
low value assets and as such were accounted for as operating leases, all of
which had ended by 31 March 2022.
Contracts may contain both lease and non-lease components. The Group allocates
the consideration in the contract to the lease and non-lease components based
on their relative stand-alone prices. However, for the lease of premises for
which the Group is a lessee, it has elected not to separate lease and
non-lease components and instead has accounted for this as a single lease
component.
Lease terms are negotiated on an individual basis. The lease agreements do not
impose any covenants other than the security interests in the leased assets
that are held by the lessor. Leased assets are not used as security for
borrowing purposes.
Lease payments are discounted using the Group's incremental borrowing rate,
being the rate that the individual lessee would have to pay to borrow the
funds necessary to obtain an asset of similar value to the right-of-use asset
in a similar economic environment with similar terms, security and conditions.
To determine the incremental borrowing rate the Group:
· uses the monthly average of UK resident banks' sterling weighted
interest rate on 'other loans, new advances to SMEs' as a basis;
· uses a build-up approach adjusting for credit and any currency
risk, economic factors and property yields for commercial property in the
local area;
· benchmarks against similar companies that are also pre-revenue,
of a similar scale and sector; and
· makes adjustments specific to the lease, e.g. term and currency.
An incremental borrowing rate of nil (2022: 5.31%) was calculated and applied
in determining right-of-use costs and asset value.
Assets and liabilities arising from a lease are initially measured on a
present value basis. Lease liabilities include the net present value of the
fixed payments (including in-substance fixed payments), less any lease
incentives receivable. Lease payments to be made under reasonably certain
extension options are also included in the measurement of the liability.
Lease payments are allocated between principal and finance cost. The finance
cost is charged to profit or loss over the lease period so as to produce a
constant periodic rate of interest on the remaining balance of the liability
for each period.
Right-of-use assets are measured at cost comprising the following:
· the amount of the initial
measurement of lease liability;
· any lease payments made at or
before the commencement date less any lease incentives received;
· any initial direct costs, and
· restoration costs.
Right-of-use assets are depreciated over the shorter of the asset's useful
life and the lease term on a straight-line basis. The Group has chosen not to
revalue right-of-use assets held by the Group.
The lease term is reassessed if an option is actually exercised (or not
exercised) or the Company becomes obliged to exercise (or not exercise) it.
The assessment of reasonable certainty is only revised if a significant event
or a significant change in circumstances occurs, which affects this
assessment, and that is within the control of the lessee.
2(i) Impairment of assets
Intangible assets that have an indefinite useful life are not subject to
amortisation and are tested annually for impairment, or more frequently if
events or changes in circumstances indicate that they might be impaired. Other
assets are tested for impairment whenever events or changes in circumstances
indicate that the carrying amount may not be recoverable. An impairment loss
is recognised for the amount by which the asset's carrying amount exceeds its
recoverable amount, and is recorded as an exceptional item. The recoverable
amount is the higher of an asset's fair value less costs of disposal and value
in use.
For the purposes of assessing impairment, assets are grouped at the lowest
levels for which there are separately identifiable cash inflows which are
largely independent of the cash inflows from other assets or groups of assets
(cash-generating units). Non-financial assets that suffered an impairment are
reviewed for possible reversal of the impairment at the end of each reporting
period.
2(j) Cash and cash equivalents
For the purpose of presentation in the statement of cash flows, cash and cash
equivalents includes cash on hand, deposits held at call with financial
institutions, other short-term, and highly liquid investments with original
maturities of three months or less that are readily convertible to known
amounts of cash and which are subject to an insignificant risk of changes in
value. There are no bank overdraft arrangements.
2(k) Other financial assets
The Group classifies its financial assets in the following measurement
categories:
· those to be measured subsequently at fair value (either through
Other Comprehensive Income or through profit or loss); and
· those to be measured at amortised cost.
The classification depends on the entity's business model for managing the
financial assets and the contractual terms of the cash flows.
For assets measured at fair value, gains and losses will either be recorded in
profit or loss or Other Comprehensive Income. For investments in equity
instruments that are not held for trading, this will depend on whether the
Group has made an irrevocable election at the time of initial recognition to
account for the equity investment at fair value through other comprehensive
income (FVOCI).
Financial assets are derecognised when the rights to receive cash flows from
the financial assets have expired or have been transferred and the Group has
transferred substantially all the risks and rewards of ownership.
At initial recognition, the Group measures a financial asset at its fair value
plus, in the case of a financial asset not at fair value through profit or
loss (FVTPL), transaction costs that are directly attributable to the
acquisition of the financial asset. Transaction costs of financial assets
carried at FVTPL are expensed in profit or loss.
2(l) Property, plant and equipment
Property, plant and equipment is stated at historical cost less depreciation.
Historical cost includes expenditure that is directly attributable to the
acquisition of the items.
Subsequent costs are included in the asset's carrying amount or recognised as
a separate asset, as appropriate, only when it is probable that future
economic benefits associated with the item will flow to the Group and the cost
of the item can be measured reliably. The carrying amount of any component
accounted for as a separate asset is derecognised when replaced. All other
repairs and maintenance are charged to profit or loss during the reporting
period in which they are incurred.
Depreciation is calculated using the straight-line method to allocate the cost
(or, if applicable, revalued amounts) of the assets, net of any residual
values, over the lease term for leasehold improvements and estimated useful
lives for office and computer equipment:
Leasehold improvements 5 years
Office
equipment 5
years
Computer equipment 5 years
Each year, the difference between depreciation based on the cost (or, if
applicable, revalued carrying amount) of the asset charged to profit or loss
and depreciation based on the asset's original cost, net of tax, is
reclassified from the property, plant and equipment revaluation surplus to
retained earnings.
The assets' residual values and useful lives are reviewed, and adjusted if
appropriate, at the end of each reporting period.
An asset's carrying amount is written down immediately to its recoverable
amount if the asset's carrying amount is greater than its estimated
recoverable amount.
Gains and losses on disposals are determined by comparing proceeds with
carrying amount. These are included in profit or loss.
2(m) Intangible assets
Intangible assets are stated at cost less amortisation and are reviewed for
impairment whenever there is an indication that the carrying value may be
impaired.
Intangible assets are comprised of licence fees paid for the use of trademarks
on compounds being developed. Such assets are defined as having finite useful
lives and the Group amortises the costs using the straight-line method over
the estimated useful life of five years. The charge for amortisation is
included within administrative expenses.
2(n) Trade and other payables
These amounts represent liabilities for goods and services provided to the
Group prior to the end of the financial period which are unpaid. The amounts
are unsecured and are usually paid within 30 days of recognition. Trade and
other payables are presented as current liabilities unless payment is not due
within 12 months after the reporting period. They are recognised initially at
their fair value and subsequently measured at amortised cost using the
effective interest method.
2(o) Borrowings
Borrowings are initially recognised at fair value, net of transaction costs
incurred. Borrowings are subsequently measured at amortised cost. Any
difference between the proceeds (net of transaction costs) and the redemption
amount is recognised in profit or loss over the period of the borrowings using
the effective interest method. Fees paid on the establishment of loan
facilities are recognised as transaction costs of the loan to the extent that
it is probable that some or all of the facility will be drawn down. In this
case, the fee is deferred until the draw-down occurs. To the extent there is
no evidence that it is probable that some or all of the facility will be drawn
down, the fee is capitalised as a prepayment for liquidity services and
amortised over the period of the facility to which it relates.
Borrowings are removed from the balance sheet when the obligation specified in
the contract is discharged, cancelled or expired. The difference between the
carrying amount of a financial liability that has been extinguished or
transferred to another party and the consideration paid, including any non-
cash assets transferred or liabilities assumed, is recognised in profit or
loss as other income or finance costs.
Borrowings are classified as current liabilities unless the Group has an
unconditional right to defer settlement of the liability for at least 12
months after the reporting period.
2(p) Provisions
Provisions for any legal claims are recognised when the Group has a present
legal or constructive obligation as a result of past events, it is probable
that an outflow of resources will be required to settle the obligation, and
the amount can be reliably estimated. Provisions are not recognised for future
operating losses.
Where there are a number of similar obligations, the likelihood that an
outflow will be required in settlement is determined by considering the class
of obligations as a whole. A provision is recognised even if the likelihood of
an outflow with respect to any one item included in the same class of
obligations may be small.
Provisions are measured at the present value of management's best estimate of
the expenditure required to settle the present obligation at the end of the
reporting period. The discount rate used to determine the present value is a
pre-tax rate that reflects current market assessments of the time value of
money and the risks specific to the liability. The increase in the provision
due to the passage of time is recognised as interest expense.
2(q) Employee benefits
Short-term obligations
Liabilities for wages and salaries, including non-monetary benefits, annual
leave and accumulating sick leave that are expected to be settled wholly
within 12 months after the end of the period in which the employees render the
related service are recognised in respect of employees' services up to the end
of the reporting period and are measured at the amounts expected to be paid
when the liabilities are settled. Leave obligations are calculated by
multiplying the average days of outstanding leave at the period end by the
daily salary rate of the employee concerned. The liabilities are presented
as current employee benefit obligations in the balance sheet.
Other long-term employee benefit obligations
There are no other long-term employee benefit obligations.
Post-employment obligations
The Group operates one post-employment scheme, a defined contribution pension
plan available to all employees. The Group pays contributions to publicly or
privately administered pension insurance plans on a mandatory, contractual or
voluntary basis. The Group has no further payment obligations once the
contributions have been paid. The contributions are recognised as an employee
benefit expense when they are due. Prepaid contributions are recognised as an
asset to the extent that a cash refund or a reduction in the future payments
is available.
Share-based payments
Share-based compensation benefits are provided to employees via the Group
Employee Option Plan, an employee share scheme, the executive short-term
incentive scheme and share appreciation rights. Information relating to these
schemes is set out in note 26.
Employee options
The fair value of options granted under the Group Employee Option Plan is
recognised as an employee benefit expense, with a corresponding increase in
equity. The total amount to be expensed is determined by reference to the fair
value of the options granted:
· including any market performance conditions (e.g. the Company's
share price);
· excluding the impact of any service and non-market performance
vesting conditions (e.g. profitability, sales growth targets and remaining an
employee of the entity over a specified time period); and
· including the impact of any non-vesting conditions (e.g. the
requirement for employees to save or hold shares for a specific period of
time).
The total expense is recognised over the vesting period, which is the period
over which all of the specified vesting conditions are to be satisfied. At the
end of each period, the entity revises its estimates of the number of options
that are expected to vest based on the non-market vesting and service
conditions. It recognises the impact of the revision to original estimates, if
any, in profit or loss, with a corresponding adjustment to equity.
The Employee Option Plan is accounted for as detailed in note 26. When the
options are exercised, the appropriate amount of shares are transferred to the
employee. The proceeds received, net of any directly attributable transaction
costs, are credited directly to equity.
Bonus plans
Where contractually obliged or where there is a past practice that has created
a constructive obligation to give staff bonuses, the Group recognises a
liability and an expense for bonuses based on a formula that takes into
consideration certain financial and operational objectives.
2(r) Contributed equity
Ordinary shares are classified as equity. Incremental costs directly
attributable to the issue of new shares or options are shown in equity as a
deduction, net of tax, from the proceeds. The excess of the proceeds from
share issues over the par value is classified as a share premium account.
The other reserve represents the difference on consolidation between the value
of the shares issued and the value of shares acquired by the Company in its
acquisition of OCTL in May 2021. The Share- based payment reserve represents
the fair value of equity-settled share-based payment transactions as detailed
in note 26.
2(s) Dividends
Provision is made for the amount of any dividend declared, being appropriately
authorised and no longer at the discretion of the entity, on or before the end
of the reporting period but not distributed at the end of the reporting
period.
2(t) Earnings per share
Basic earnings per share
Basic earnings per share is calculated by dividing:
· the profit or loss attributable to owners of the Group, excluding
any costs of servicing equity other than ordinary shares; and
· by the weighted average number of ordinary shares outstanding
during the financial period, adjusted for bonus elements in ordinary shares
issued during the period.
Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of
basic earnings per share to take into account:
· the after-income tax effect of interest and other financing costs
associated with dilutive potential ordinary shares; and
· the weighted average number of additional ordinary shares that
would have been outstanding assuming the conversion of all dilutive potential
ordinary shares.
2(u) Exceptional items
Exceptional items comprise costs that are considered by the Directors not to
relate to the day to day financial performance of the Group. These are costs
incurred by the Group that are considered by the Directors to be material in
size and are unusual or infrequent in occurrence which require separate
disclosure within the consolidated financial statements. They include one-off
transactions and non-cash items such as the share-based payment charge.
2(v) Segmental Reporting
Operating segments are reported in a manner consistent with the internal
reporting to the chief operating decision-maker (CODM). The CODM, who is
responsible for allocating resources and assessing performance, has been
identified as the Board of Directors. The Directors consider that, as the
Group is non-revenue generating, there is only one operating segment and
consequently no segmental analysis is required.
2(w) Government grants
Government grants are recognised in the Consolidated Statement of
Comprehensive Income so as to match with the related expenses that they are
intended to compensate. It is considered whether there are any conditions for
the funding to be refunded. The amount allocated as a government grant (in the
form of a tax credit) is determined by reference to the specific agreed costs
and activities identified as meeting the criteria under the government scheme
for research and development expenditure. Government grants are recorded as an
offset to the relevant expense in the Consolidated Statement of Comprehensive
Income and are capped to match the relevant costs incurred.
2(x) New and forthcoming standards and interpretations
There were no new or amended standards adopted in the year that were relevant
to the Group.
New standards and interpretations not yet adopted
A number of new accounting standards, amendments to accounting standards and
interpretations have been issued by the International Accounting Standards
Board with an effective date after the date of these financial statements. The
Directors have chosen not to early adopt these standards and interpretations,
and the Directors do not expect them to have a material impact on the entity
in the current or future reporting periods and on foreseeable future
transactions.
Effective date
IAS 1 Presentation of Financial Statements - amendments regarding the disclosure of
accounting policies
1 January 2023
IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors - amendments
regarding the definition of accounting estimates
1 January 2023
IAS 12 Deferred Tax related to Assets and Liabilities arising from a Single 1 January 2023
Transaction
IFRS 17 & 9 Comparative Information 1 January 2023
IAS 1 Presentation of Financial Statements - amendments regarding the classification 1 January 2024
of liabilities
IAS 1 Presentation of Financial Statements - amendments regarding the non- current 1 January 2024
liabilities with covenants
IFRS 16 Lease Liability in a Sale and Leaseback 1 January 2024
3 Critical Estimates and Judgements
The preparation of financial statements requires the use of accounting
estimates which, by definition, will seldom equal the actual results.
Management also needs to exercise judgement in applying the Group's accounting
policies. However uncertainty about these assumptions and estimates could
result in outcomes that would require a material adjustment to the carrying
amount of the asset or liability in future periods.
Estimates and judgements are continually evaluated. They are based on
historical experience and other factors, including expectations of future
events that may have a financial impact on the entity and that are believed to
be reasonable under the circumstances. The areas involving significant
estimates or judgements which management consider may have a significant risk
of causing a material adjustment to the reported amounts in the period were:
Going concern basis
As outlined in note 2(d), judgement has been applied in accounting for the
Group as a going concern. In reaching the decision the Directors have
considered current cash reserves and forecast cashflows, solvency and
liquidity, particularly with regard to the cash resources expected to be fully
utilised by April 2024.The forecasts are based on various assumptions
including a successful fundraising within the next 8 months, charges from
research partners, rate of progression through to commercialisation, and
external economic conditions.
There is a material uncertainty over the Group's ability to realise its assets
and discharge its liabilities in the normal course of business, without a
further fundraise within the next 8 months. Given the level of mitigating
controls in place over the risks involving fundraising and cash management (as
detailed in Principal Risks and Uncertainties), the Board currently believe
that preparing the financial statements on a going concern basis remains
appropriate.
Research & development costs
Judgement is used in the classification and hence treatment of costs incurred
in the research and development of the core programmes outlined in the CSO's
Review. During the year all of the £4,303,608 costs incurred were accounted
for as research costs and expensed to profit or loss, on the basis that none
of the programmes were yet at a stage of having gained regulatory approval for
commercialisation (and hence having a measurable future economic benefit).
R&D tax credits receivable
Judgement is applied in calculating the tax credits that the Group consider to
be receivable from HMRC in relation to research costs incurred. Evidence is
retained to support the methodology adopted by the Group in calculating
R&D tax relief claims, part of which involves the judgement of experienced
senior managers and Directors in articulating the scientific advancements and
uncertainties for the wider market of the Group's research programmes based on
contemporaneous evidence. The tax credit receivable of £ 1,848,447 is
detailed in note 15.
Impairment of intangible fixed assets
Judgement is involved in determining the useful economic life and potential
impairment of the goodwill. This includes consideration of the continuing
likelihood of the asset to generate value to the Group or any other event
which may have a detrimental effect on the carrying value of the asset.
Warrants and share options
The Black-Scholes model is used to calculate the appropriate charge of the
warrants and share options. The calculation involves a number of estimates
and judgements to establish the appropriate inputs to be entered into the
model, including the use of an appropriate interest rate, expected volatility,
exercise restrictions and behavioural considerations. A significant element of
judgement is therefore involved in the calculation of the charge. In the
financial year the charge was £63,850 (2022: £291,598) as shown in note 4.
4 Exceptional Items
The Consolidated Statement of Comprehensive Income includes exceptional items
totalling £63,850 (2022: £291,598) comprised of:
Year ended Period ended
30 April 30 April 2022
2023
Note £ £
Share-based payment charge 24 63,850 291,598
63,850 291,598
Share-based payment charge
As detailed in note 24, the Group operates two share option schemes for its
Directors and senior employees one relating to options transferred from OCTL
and a new scheme for OCT. In addition, warrants were issued as part of the
listing in May 2021, a charge of £51,696 (2022: £202,953) which is included
within the total charge for the current period.
5 Operating Loss
Operating loss is stated after charging / (crediting):
Year ended Period ended 30 April
30 April 2022
2023
£ £
Depreciation of property, plant and equipment - 12,143
Amortisation of right-of-use assets - 10,565
Amortisation of intangible assets 38,808 35,577
Impairment of intangible assets - 20,000
Gain on release of right-of-use assets - (79,202)
Operating lease rentals - 2,494
Share based payment charge 63,850 291,598
Foreign exchange loss 22,594 25,694
6 Finance Income and Finance Costs
Year ended Period ended
30 April 30 April
2023 2022
£ £
Finance income 3,838 -
Finance costs - -
3,838 -
Finance income
This relates to interest received on bank accounts.
7 Employees
The monthly average number of employees was 7 (2022: 7), which excludes
Non-Executive Directors.
2023 2022
Number Number
Research 2 2
Management 5 5
Total number of employees 7 7
Their aggregate remuneration, including Executive Directors' remuneration,
comprised:
Year ended Period ended
30 April 30 April
2023 2023
£ £
Wages and salaries 1,058,240 817,671
Pension 98,727 85,634
Social security costs 149,317 121,564
Share based payments 51,696 88,645
1,357,980 1,113,514
Details of Directors' emoluments, share options and pension entitlements are
given in the Directors' Remuneration Report.
Employee Benefit Obligations
30 April 30 April
2023 2022
£ £
Leave obligations 15,043 11,731
Total employee benefit obligations 15,043 11,731
The leave obligations cover the Group's liabilities for annual leave which are
classified as short-term benefits, as explained in note 2(q). The liability
comprises all of the accrued annual leave, with the entire amount of the
provision presented as current, since the Group does not have an unconditional
right to defer settlement. However, based on past experience, the Group does
not expect all employees to take the full amount of accrued leave or require
payment within the next 12 months.
The Group operates a defined contribution pension plan which receives fixed
contributions from Group companies. The Group's legal or constructive
obligation for these plans is limited to the contributions. The expense
recognised in the current period in relation to these contributions was
£98,727 (2022: £85,634).
Medical insurance is provided to all current employees. The expense recognised
in the current period in relation to these costs was £6,138 (2022: £4,970).
There are no post-employment obligations.
8 Auditor's Remuneration
During the period, the Group incurred the following costs in respect of
services provided by the auditor:
Year Period ended 30 April
ended 30 April 2022
2023 £
£
Fees payable to the Company auditor for the audit of the parent company 79,553 72,500
Fees payable to the Company auditor for further services:
- audit of Company's subsidiaries pursuant to legislation 12,650 12,500
- other services pursuant to legislation 6,122 10,475
9 Income Tax
The Group is pre-revenue generating, but on target to gain regulatory approval
of its first product during 2027. The Group benefits from research and
development corporation tax relief in both the current year and prior periods
claimed on allowable research expenditure.
A deferred tax asset of approximately £3,884,180 (2022: £2,125,737) relating
to carried forward losses of £15,536,719 (2022: £8,502,949) has not been
recognised due to the uncertainty of the timing of future taxable profits.
The deferred tax assets have been calculated at 25% (2022:25%).
Year ended Period Ended
30 April 30 April
2023 2022
£ £
Current tax credit
UK corporation tax on loss for the current period (1,088,721) (759,726)
Adjustment from previous periods - (31,332)
UK corporation tax on loss (1,088,721) (791,058)
The income tax credit differs from the theoretical credit arising from
applying UK corporate tax rates to the loss for the reasons below:
Loss before taxation (7,033,771) (5,503,387)
Expected tax based on a corporation tax rate of 19% (2022: 19%) (1,336,416) (1,045,644)
Effect of expenses not deductible in determining taxable profit 24,821 94,423
Effect of income not taxable in determining taxable profit - (16,265)
Depreciation in excess of capital allowances - 13,165
Losses carried forward 659,179 403,865
Enhanced research and development relief utilised (996,603) (550,456)
Losses surrendered for R&D tax credit 1,500,557 973,884
Research and development tax credit (1,088,721) (759,726)
Adjustment from previous periods - (31,332)
Rate difference between CT rate and R&D repayment rate 148,462 127,028
Taxation credit for the year/period (1,088,721) (791,058)
10 Intangible Assets
Group
Licences£ Total
£
Cost 155,245 155,245
At 1 June 2021
Additions - -
At 30 April 2022 155,245 155,245
Additions - -
At 30 April 2023 155,245 155,245
Amortisation
At 1 June 2021 53,588 53,588
Charge in year 35,577 35,577
Impairment 20,000 20,000
At 30 April 2022 109,165 109,165
Charge in year 38,808 38,808
At 30 April 2023 147,973 147,973
Net book value at 30 April 2022 46,080 46,080
Net book value at 30 April 2023 7,272 7,272
Company Total
Goodwill Licences £
£ £
Cost
At 1 June 2021 - - -
Transfer from subsidiary - 155,245 155,245
At 30 April 2022 - 155,245 155,245
Transfers from investments (note 13) 7,226,164 - 7,226,164
At 30 April 2023 7,226,164 155,245 7,381,409
Amortisation
At 1 June 2021 - - -
Transfer from subsidiary - 53,588 53,588
Charge in year - 35,577 35,577
Impairment - 20,000 20,000
At 30 April 2022 - 109,165 109,165
Charge in year - 38,808 38,808
At 30 April 2023 147,973 147,973
Net book value at 30 April 2022 - 46,080 46,080
Net book value at 30 April 2023 7,226,164 7,272 7,233,436
The Directors have undertaken a detailed impairment review of licences in the
current period and as a result of this process no impairment has been
identified as being required as at 30 April 2023. In addition, the Directors
have undertaken a review of investments and as a result of this process and
valuation, the investment has been reclassified as goodwill. No impairment has
been identified as being required as at 30 April 2023.
11 Property, Plant and Equipment
Leasehold Office equipment Computer Total
improvements equipment
Group £ £ £ £
Cost
At 1 June 2021 57,182 14,201 7,929 79,312
Disposals (57,182) (14,201) (7,929) (79,312)
At 30 April 2022 - - - -
At 30 April 2023 - - - -
Depreciation
At 1 June 2021 22,413 6,519 3,554 32,486
Charge in period 8,812 2,142 1,189 12,143
Disposals (31,225) (8,661) (4,743) (44,629)
At 30 April 2022 - - - -
At 30 April 2023 - - - -
Net book value at 30 April 2023/30 April 2022 - - - -
The Company held no fixed assets at 30 April 2023 or 30 April 2022.
All fixed assets were disposed of as part of the termination of the lease on
the London office on 2 April 2022, with a net loss on disposal of £32,183.
12 Right-of-Use Assets
This note provides information for leases where the Group is a lessee. The
Group does not act as a lessor in any capacity.
30 April 2023 30 April 2022
Group £ £
Cost
At 1 May 2022/ 1 June 2021 - 174,116
Adjustment to IFRS 16 recognition - -
Disposals - (174,116)
At 30 April 2023 / 30 April 2022 - -
Amortisation
At 1 May 2022/ 1 June 2021 - 163,551
Charge in period - 10,565
Disposals - (174,116)
At 30 April 2023 / 30 April 2022 - -
Net book value at 30 April 2023 / 30 April 2022 - -
The right-of-use asset was comprised of one lease on the head office building,
which commenced in April 2019 for five years and was terminated on 2 April
2022.
The Consolidated Statement of Comprehensive Income shows the following amounts
relating to leases:
Notes 30 April 2023 30 April 2022
£ £
Amortisation charge of right-of-use assets
Leased head office 5 - 10,565
Interest expense (included in finance costs) 6 - -
The total cash outflow for leases in the period was £nil (2022: £44,684).
Short term and low value leases
Under IFRS 16 short term and low value leases can be accounted for as
operating leases. As such, costs for short term leases for low value office
equipment have therefore been expensed in the year, as detailed in note 5.
13 Investments
Investments
Company 30 April 2023 30 April 2022
£ £
At 1 May 2022/ 1 June 2021 7,226,164 7,226,164
Transfer to goodwill (note 10) (7,226,164) -
At 30 April 2023 / 30 April 2022 - 7,226,164
The Group's subsidiary at 30 April 2023 is set out below. The share capital
consists of ordinary shares that are held directly by the Group, and the
proportion of ownership interests held equals the voting rights held by the
Group. The country of incorporation or registration is also their principal
place of business.
Place of business / country of incorporation Ownership
Name and address of Entity Interest held by Group Indirect or Indirect Principal Activity
%
Oxford Cannabinoid Technologies Ltd England and Wales 100 Direct Pharmaceutical research
Prama House, 267 Banbury Rd,
Oxford OX2 7HT
The Directors have undertaken a detailed review in the current period and as a
result of this process and assessment of valuation, the investment has been
reclassified as goodwill. No impairment has been identified as being required
as at 30 April 2023.
14 Financial Assets and Financial Liabilities
The Group holds the following financial instruments: Notes 30 April 30 April
2023 2022
£ £
Financial assets at amortised cost
Cash and cash equivalents 16 2,297,343 9,165,596
Other receivables 15 46,475 35,996
2,343,818 9,201,592
Liabilities at amortised cost
Trade and other payables 17 583,920 2,025,264
583,920 2,025,264
The maximum exposure to credit risk at the end of the reporting period is the
carrying amount of each class of financial assets mentioned above.
15 Trade and Other Receivables
Group Company
30 April 30 April 30 April 30 April
2023 2022 2023 2022
£ £ £ £
Prepayments and accrued income 254,676 1,472,316 254,676 1,472,310
Tax credit receivable (note 3) 1,848,447 929,709 1,848,447 759,726
VAT recoverable 41,535 168,595 6,259 105,313
Amounts due from group undertakings - - 1,917,293 5,446,307
Other receivables 46,475 35,996 46,464 35,986
2,191,133 2,606,616 4,073,139 7,819,642
The inter-company balance between OCT and its subsidiary OCTL is unsecured,
interest-free and repayable on demand. The balance includes a provision as
detailed in note 23.
16 Cash and Cash Equivalents
Group Company
30 April 30 April 30 April 30 April
2023 2022 2023 2022
£ £ £ £
Cash at bank and in hand 2,297,343 9,165,596 104,569 2,122,992
Neither the Group nor the Company have a bank overdraft facility.
17 Trade and Other Payables
Group Company
30 April 30 April 30 April 30 April
2023 2022 2023 2022
£ £ £ £
Trade payables 286,249 1,798,291 4,449 9,146
Accruals and deferred income 286,425 174,088 246,776 134,438
Other taxation and social security 11,246 52,885 10,556 52,103
Other payables - - - -
583,920 2,025,264 261,781 195,687
18 Equity
Share Capital
30 April 30 April 30 April 30 April
2023 2022 2023 2022
Number Number £ £
Ordinary Shares
Issued and fully paid of £0.01 each 960,415,644 960,415,644 9,604,156 9,604,156
Total 960,415,644 960,415,644 9,604,156 9,604,156
Authorised share capital is £10,084,364 (2022:£10,084,364).
Reconciliation of Ordinary Shares Number Par Value Share Premium Total
of Shares £ £ £
Opening balance 1 May 2022 960,415,644 9,604,156 11,877,466 21,481,622
Balance 30 April 2023 960,415,644 9,604,156 11,877,466 21,481,622
Other Reserve
On 17 May 2021, pursuant to a share for share exchange, OCT unconditionally
acquired the shares of OCTL, prior to the admission of the Group onto the
Official List and to trading on the main market of the London Stock Exchange
on 21 May 2021. Although the transaction was not a reverse acquisition as
defined in IFRS 3, the Directors accounted for the transaction on a similar
basis as detailed in guidance issued by the IFRS Interpretation Committee.
The value of shares obtained in excess of the par value under the share for
share exchange agreement has been included as an other reserve of £643,455
(2022: £643,455). This reserve is not distributable.
19 Cash Flow Information
19(a) Cash used in operations
Group Company
Note 30 April 30 April 30 April 30 April
2023 2022 2023 2022
£ £ £ £
Loss after income tax from:
Continuing operations (5,945,050) (4,712,329) (5,933,678) (5,365,258)
Loss after income tax (5,945,050) (4,712,329) (5,933,678) (5,365,258)
Adjustments for:
Research and Development tax credit 9 (1,088,721) (791,058) (1,088,721) (759,726)
Release of Greek subsidiary assets - 49,653 - -
Depreciation and amortisation 5 (#_bookmark22) 38,808 78,285 38,808 55,577
Loss on disposal of property, plant and equipment - 32,183 - -
Share-based charge 24 63,850 291,598 63,850 291,598
Finance costs - net 6 (3,838) - - -
Decrease / (increase) in trade receivables 1,334,220 (1,393,649) 4,835,224 7,943,045
(Decrease)/Increase in trade and other payables (1,441,343) 1,072,296 66,094 (42,244)
Cash used in operations (7,042,074) (5,373,021) (2,018,423) 2,122,992
19(b) Non-cash investing and financing activities
Non-cash investing and financing activities disclosed in other notes are the
options and shares issued to employees under the OCTL Employee Option Plan and
warrants issued to advisers (see note 26).
19(c) Net funding reconciliation
The analysis of net debt and the movements in net debt for each of the periods
presented is detailed below:
Group Company
30 April 30 April 30 April 30 April
Net funds 2023 2022 2023 2022
£ £ £ £
Cash and cash equivalents (note 16) 2,297,343 9,165,596 104,569 2,122,992
Borrowings - - - -
Lease liabilities - - - -
Net cash and cash equivalents 2,297,343 9,165,596 104,569 2,122,992
20 Financial Risk Management
This note explains the Group's exposure to financial risks and how these risks
could affect the Group's future financial performance.
As a pre-revenue Group, the core financial risks that the Group are exposed to
are credit and liquidity risks. The Group's financial risk management is
predominantly controlled by the finance team under policies approved by the
Board of Directors. Financial risks are identified, evaluated and managed in
close co‑operation with the Executive Directors.
Liquidity risk
The Group has cash and cash equivalents £2,297,343 as at 30 April 2023. The
Group does not operate a bank overdraft facility, and was debt free at 30
April 2023.
The Group manages liquidity risk through rolling cash flow forecasts and
budgetary controls, ensuring sufficient cash is available to meet obligations
when due, predominantly those relating to the research of the four drug
programmes. Rolling cash flow forecasts and liquidity performance indicators
are monitored by management and reported to and overseen by the Board of
directors on a quarterly basis, as part of the overall risk management
framework.
As detailed in note 2(d) and in the Directors' Report, the current cash
reserves are expected to be fully utilised by April 2024. The Board have
considered various options that would allow the Group to extend its cash a
further three months beyond that in the event that there was a delay in the
next round of fundraising. The Board has taken into consideration the level
and timing of the Group's working capital requirements (which takes into
account reductions in overhead costs and controls over discretionary spending
to preserve cash flow). Consideration has been given to ongoing discussions
around further third-party investment on a short to medium term basis, and the
extent to which these discussions are advanced. The Board remains confident
that it will be able to raise funds to progress its strategy beyond the end of
April 2024. However, no such funding has been unconditionally committed at
the date of approval of these financial statements.
As per the resolutions passed at the Group's last Annual General Meeting, the
Group is able to issue a further 5% of ordinary shares without having to seek
additional shareholder consent. As at the 30 April 2023, none of this headroom
had been used.
Credit risk
Credit risk refers to the risk that a counterparty will default on its
contractual obligations resulting in financial loss to the Group. The Group
has a policy of only dealing with creditworthy counterparties, principally
involving banks and their wholly-owned subsidiaries with a credit rating in
excess of B (as defined by at least one credit rating agency) when placing
cash on deposit. In addition, at the year end there were no trade receivables
in the Statement of Financial Position. The other receivables relate to
R&D tax credit, VAT receivable from HMRC and related parties (see note
25). The exposure to credit risk is therefore currently limited to the
carrying amount of cash and cash equivalents of £2,297,343 (30 April 2022:
£9,165,596).
Foreign currency exchange risk
All assets are held in Pound Sterling and the main foreign currencies used to
pay suppliers are Euro and US Dollar. Consequently, foreign exchange risk is
not considered to be material to the Group. Whilst the loss on foreign
currency transactions rose in the period (albeit still immaterial), this was
partly due to the change in foreign currency payment facilities and overall
the foreign exchange risk is not considered to be material to the Group.
Maturities of financial liabilities
The tables below analyse the Group's financial liabilities into relevant
maturity groupings based on their contractual maturities for all
non-derivative financial liabilities (the Group does not hold any derivative
financial instruments at the current or prior financial period end).
The amounts disclosed in the table are the contractual undiscounted cash
flows. Balances due within 12 months equal their carrying balances as the
impact of the discounting is not significant.
Contractual maturities at 30 April 2023 <6 months 6 to 12 1 to 2 years 2 to 5 years Total contractual cash flows and carrying amounts
months
£ £ £ £ £
Trade and other payables 583,920 - - - 583,920
Total non-derivatives 583,920 - - - 583,920
Contractual maturities at 30 April 2022 <6 months 6 to 12 1 to 2 years 2 to 5 years Total contractual cash flows and carrying amounts
months
£ £ £ £ £
Trade and other payables 2,025,264 - - - 2,025,264
Total non-derivatives 2,025,264 - - - 2,025,264
21 Capital Management
The Group's objectives when managing capital are to: safeguard its ability to
continue as a going concern, and maintain an optimal capital structure to
reduce the cost of capital, in order that the Group can continue to research
and develop the four drug programmes that could ultimately be commercialised
and generate profits available for distribution to the shareholders.
In order to achieve this, the Group may issue new shares and sell assets.
Consistent with others in the industry, the Group monitors capital on the
basis of the following gearing ratio:
Net debt as per note 19(c) divided by Total 'Equity' (as shown in the
Consolidated Statement of Financial Position).
30 April 30 April
2023 2022
£ £
Debt - -
Cash 2,297,343 9,165,596
Net cash 2,297,343 9,165,596
Total equity 3,911,828 9,793,028
Gearing 58.7% 93.6%
The movement in gearing is as a result of the utilisation of cash funds during
the financial year. There remain no financial covenants in place over the
Group.
No dividends are proposed for the current financial period as the Group
remains pre-revenue (2022: £nil).
22 Events Occurring After the Reporting Period
On 17 May 2023, the Group announced that the MHRA and REC 2 had approved its
Phase I clinical trial application for OCT461201. On 8 June 2023, the Group
announced the appointment of Dr Tim Corn as Chief Medical Officer. On 17 July
2023, the Group announced its expansion into oncology, having identified a
potential "first-in-class" immunotherapy agent for the treatment of solid
tumours. On 27 July 2023, the Group announced the successful administration of
the first-in-human dose of OCT461201, as part of its Phase I clinical trial.
23 Related Party Transactions
The Group is headed by Oxford Cannabinoid Technologies Holdings Plc, the
ultimate parent entity. There is no ultimate controlling party.
Key management personnel compensation
Detailed remuneration disclosures are provided in full in the Directors'
Remuneration Report. The Directors received dividends paid by the Company of
£nil (2022: £nil).
The amounts outstanding at the year end due to key management was £nil (2022:
£nil).
The following transactions occurred with other related parties:
Transactions in year ended Transactions in period ended 30 April 2022 Balance at 30 April 2023 Balance at 30 April 2022
30 April 2023
Purchase of management services from related party (a) - 35,000 - -
Amounts owed by a related party (b) - - 35,994 35,994
Inter-company loan (d) 3,529,014 9,532,376 1,917,293 5,446,307
Payments by OCTL on behalf of OCT (c) - 2,122,789 - -
Payments by OCT on behalf of OCTL (c) - 2,071,983 - -
(a) Until 31 December 2021 a management service agreement was in place
between the Group and Kingsley Capital Partners LLP ('KCP'), with the
Executive Chair of the Group (Neil Mahapatra, until 11 February 2022) also
being the Managing Partner of KCP.
(b) Between December 2021 and January 2022, the Group paid £35,994 for
professional services, which KCP agreed to reimburse the Group for. This is
included as a receivable in the Statement of Financial Position at the year
end.
(c) Due to a delay in the opening of a bank account for OCT, until November
2021 all cash was held in the bank account of OCTL, who made payments on
behalf of OCT during the period. That position was reversed from December
2021. No payments were made on the behalf of OCT by OCTL in the year ended
30 April 2023.
(d) A provision of £678,325 has been made in the period ended 30 April 2022
against the inter-company loan, with the provision remaining as at 30 April
2023.
24 Share-Based Payments
Share-based payment reserve:
Group Company
30 April 30 April 30 April 30 April
Share Options 2023 2022 2023 2022
£ £ £ £
As at 1 May 2022/ 1 June 2021 1,150,105 1,061,460 1,013,571 924,926
Share options: Old Scheme (OCTL) - - - -
Share options: New Scheme Issued 2022 (OCT) 51,696 88,645 51,696 88,645
As at 30 April 2023 / 30 April 2022 1,201,801 1,150,105 1,065,267 1,013,571
Group Company
30 April 30 April 30 April 30 April
Warrants 2023 2022 2023 2022
£ £ £ £
As at 1 May 2022 / 1 June 2021 299,503 96,550 299,503 96,550
Warrants issued May 12,154 202,953 12,154 202,953
2021
As at 30 April 2023 /30 April 2022 311,657 299,503 311,657 299,503
Total share-based payment reserve 1,513,458 1,449,608 1,376,924 1,313,074
Employee Option Plan
The Group operates an equity-settled share-based remuneration scheme for
employees. The only vesting condition is that the individual remains an
employee of the Group over the vesting period.
During the period, the Group recognised a share-based payment expense of
£51,696 (2022: £88,645) in relation to options.
Share Options Issued
OCTL issued 89,523 share options to four employees on 24 February 2020, that
were exercisable at a price of £18.88 per share under the original OCTL
Option Scheme.
On 14 May 2021, the Board adopted the Group's Replacement Option Scheme to
facilitate the grant of replacement options in OCT by the Company to option
holders who held options over shares of OCTL under the original OCTL Option
Scheme. No new grants or options will take place under the Replacement Option
Scheme and all of the options vested on 21 May 2021 when the Group listed. A
total of 69,584,356 options were issued to three current and two previous
employees, with an expiry date of 10 years from the original grant date. Two
of the employees (both of whom are Directors) given replacement options are
subject to a lock-in period of one year as part of the IPO (expired 21 May
2022).
On 17 May 2021, the Board adopted the Group's New Employee Share Option Scheme
to incentivise certain of the Group's employees and Directors. This new scheme
provides for the grant of both Enterprise Management Incentives (EMI) options
and non-tax advantaged options. Options granted under the new scheme are
subject to certain conditions, the key elements of which are as follows:
· The Remuneration Committee may grant options to any employee,
executive or Non-Executive Director of the Group;
· No consideration will be payable for the grant of options;
· The Remuneration Committee determines the exercise price of
options before they are granted, which shall be 30% above the 10-day
volume-weighted average price (VWAP) of the Ordinary Shares at the date of
grant of the option; and
· Options can normally only be exercised on satisfaction of the
exercise conditions determined by the Remuneration Committee at grant,
including any performance conditions which may be set.
On 21 May 2021, 86,437,408 options were granted to 5 employees (4 of whom were
Directors, 1 who switched to a Non-Executive Director role on 11 February
2022) and 7,203,117 were granted to three Non-Executive Directors under the
new scheme. Each of the options have an exercise price equal to 30% over the
placing price, being £0.065. They are exercisable from May 2022, on a
straight-line basis over a period of 3 years. There are no vesting conditions.
During the year, 22,409,698 options were exercised, forfeited or expired.
Share options issued under the Replacement Option Scheme, all of which were
outstanding at the end of the year, have the following expiry dates and
exercise prices:
Grant date Expiry date Exercise price Share options
30 April 2023
14 May 2021 24 February 2030 £0.042 32,859,279
14 May 2021 24 February 2030 £0.05 22,412,951
Vested and exercisable at 30 April 2023 55,272,230
The assessed fair value at grant date of options converted or granted during
the year ended 30 April 2023 was £0.019 for £0.05 replacement options,
£0.0209 for £0.042 replacement options, and £0.003 for the new options. The
fair value at grant date is independently determined using an adjusted form of
the Black-Scholes model which includes a Monte Carlo simulation model that
takes into account the exercise price, the term of the option, the impact of
dilution (where material), the share price at grant date and expected price
volatility of the underlying share (informed by the volatilities of peer group
companies), the expected dividend yield and the risk-free interest rate for
the term of the option.
An expense of £51,696 for the New Employee Share Option Scheme was recognised
during the year ended 30 April 2023 (2022: £88,645). Expenses for the Old
Employee Share Option Scheme recognised during the year were £nil (2022:
£nil).
The inputs into the option pricing model, calculated using the model described
above, for the options issued under the new scheme in May 2021 included:
Share price (trading price as at 28 May 2021 on LSE) £0.04
Exercise price £0.065
Expected volatility 32.28%
Expected life 3 years
Risk free interest rate 0.4638%
Warrants
On 21 May 2021, OCT issued a total of 33,307,275 warrants all with an exercise
price of £0.05 and a 5 year exercise period, vesting on the day of issue.
None of the warrants had been exercised by 30 April 2023.
The Black-Scholes model is used to calculate the appropriate charge for the
warrants. The use of this model to calculate a charge involves using a number
of estimates and judgements to establish the appropriate inputs to be entered
into the model, covering areas such as the use of an appropriate interest
rate, expected volatility, exercise restrictions and behavioural
considerations. A significant element of judgement is therefore involved in
the calculation of the charge. During the period, the Group recognised total
share- based payment expenses for warrants of £12,154 (2022: £202,953).
The inputs into the warrants pricing model are as follows:
Share price (trading price as at 28 May 2021 on LSE) £0.04
Exercise price £0.05
Expected volatility 34.43%
Expected life 5 years
Risk free interest rate 0.5353%
Volatility was based on that of a company in the same sector as the Group,
experienced at a similar stage in the Group's development, and is within the
average banding for the Western European pharmaceutical sector.
25 Loss Per Share
Year ended Period ended
30 April 2023 30 April 2022
£ £
25(a) Basic loss per share
Basic loss per share attributable to the ordinary equity holders of the (0.00619) (0.00491)
Company
25(b) Diluted loss per share
From continuing operations attributable to the ordinary equity holders of the (0.00619) (0.00491)
Company
Total diluted loss per share attributable to the ordinary equity holders of (0.00619) (0.00491)
the Company
Year ended Period ended
30 April 2023 30 April 2022
£ £
Basic loss per share
Loss attributable to the ordinary equity holders of the Company used in (5,945,050) (4,712,329)
calculating basic loss per share:
Diluted loss per share
Loss from continuing operations attributable to the ordinary equity holders of
the Company:
Used in calculating basic loss per share (5,945,050) (4,712,329)
Used in calculating diluted loss per share (5,945,050) (4,712,329)
Loss attributable to the ordinary equity holders of the Company used in (5,945,050) (4,712,329)
calculating diluted loss per share
25(c) Weighted average number of shares used as the denominator
2023 2022
Number Number
Weighted average number of ordinary shares used as the denominator in
calculating basic loss per share
960,415,644 960,415,644
Adjustments for calculation of diluted loss per share: - -
Weighted average number of ordinary shares and potential ordinary shares used
as the denominator in calculating diluted loss per share
960,415,644 960,415,644
The conditions relating to the issued share options and warrants are such that
they are anti-dilutive.
Directors and Professional Advisers
Directors
Cheryl Dhillon
Richard Hathaway
Neil Mahapatra
Bishrut Mukherjee
Julie Pomeroy
Paul Smalley (Appointed 17 October 2022)
Clarissa Sowemimo-Coker
Company Secretary
Robin Bennett (Appointed 12 January 2023)
Company number
13179529
Registered office
Prama House
267 Banbury Road
Oxford OX2 7HT
Auditor
Moore Kingston Smith LLP
6(th) Floor
9 Appold Street
London EC2A 2AP
Principal Bankers
Barclays Bank
1 Churchill Place
Canary Wharf
London, E14 5HP
Public Relations Advisers
Acuitas Communications ltd
33 Foley Street
London, W1W 7TL
Brokers
Axis Capital Markets Ltd
St Clements House
27 St Clements Lane
London EC4N 7AE
Financial Advisers
Cairn Financial Advisers LLP
9(th) Floor, 107 Cheapside
London EC2V 6DN
Overseas subsidiary operations
Details of all subsidiaries and their locations are detailed in note 13. OCT
Hellas Pharmaceuticals Research & Development Laboratory S.A, a
non-trading subsidiary in Greece was dissolved in June 2021.
Directors
The following Directors have held office in the Company in the period from 1
May 2022 to the signing of the financial statements:
Julie Pomeroy Non-Executive Chair
Neil Mahapatra Non-Executive Director
Dr John Lucas Chief Executive Officer (Resigned 2 December 2022)
Clarissa Sowemimo-Coker CEO from 02 December 2022 (Chief Operating Officer until 02 December 2022 and
Company Secretary until 12 January 2023)
Karen Lowe Finance Director (Resigned 17 October 2022)
Bishrut Mukherjee Non-Executive Director
Cheryl Dhillon Non-Executive Director
Richard Hathaway Non-Executive Director
Paul Smalley Finance Director (Appointed 17 October 2022)
The interests of the Directors (including family interests) in the share
capital of the Company are listed below.
Substantial shareholdings
As at 30 April 2023, the Company has been notified of, or is aware of, the
shareholders holding 3% or more of the issued share capital of the Company, as
detailed below:
Name of holder Number of shares Issued % of share capital
Neil Mahapatra (Kingsley Capital Partners LLP) 198,466,493 20.66%
Hargreaves Lansdown (Nominees) Limited 134,276,472 13.98%
Imperial Brands Ventures Limited 104,376,988 10.87%
Aurora (Nominees) Limited 47,394,377 4.93%
Vidacos (Nominees) Limited 46,346,328 4.83%
Bank of New York (Nominees) Limited 45,926,796 4.78%
Hsdl (Nominees) Limited 45,013,469 4.69%
Interactive Investor Services (Nominees) Limited 44,366,166 4.62%
Jim (Nominees) Limited 41,378,224 4.31%
Annual General Meeting
The Company's Annual General Meeting will be held at the offices of
Penningtons Manches Cooper LLP, 125 Wood Street, EC2V 7AW on 28 September 2023
at 11.00 am. The Notice convening the Annual General Meeting (AGM) and an
explanation of the business to be put to the meeting is contained in the
separate document which accompanies this report.
Auditor
During the period, Moore Kingston Smith LLP was re-appointed as the Group's
auditor. The Board recommend that Moore Kingston Smith LLP be reappointed as
auditor at the AGM on 28 September 2023.
Directors' and officers' insurance
The Group maintains insurance cover for all Directors and officers of Group
companies against liabilities which may be incurred by them while acting as
Directors and officers.
Subsequent events
On 17 May 2023, the Group announced that the MHRA and REC 2 had approved its
Phase I clinical trial application for OCT461201. On 8 June 2023, the Group
announced the appointment of Dr Tim Corn as Chief Medical Officer. On 17 July
2023, the Group announced its expansion into oncology, having identified a
potential "first-in-class" immunotherapy agent for the treatment of solid
tumours. On 27 July 2023, the Group announced the successful administration of
the first-in-human dose of OCT461201, as part of its Phase I clinical trial.
Glossary of Annual Report Terms and Abbreviations
Annual General Meeting (AGM)
Aptuit (Verona) SRL, a subsidiary of Evotec SE (together "Evotec")
Association for Assessment and Accreditation of Laboratory Animal Care
(AAALAC)
A private, non-profit organisation that promotes the humane treatment of
animals in science through voluntary accreditation and assessment programmes.
Association of Chartered Certified Accountants (ACCA)
Charles Rivers Laboratories Edinburgh Ltd (Charles Rivers)
Chemotherapy-induced Peripheral Neuropathy (CIPN)
Neurological condition triggered by certain cancer treatments, causing
symptoms such as tingling, pain, and weakness in the hands and feet due to
chemotherapy's damaging effects on the peripheral nerves, with debilitating
effects on the patient.
Chief Executive Officer (CEO)
Chief Medical Officer (CMO)
Chief Operating Decision-Maker (CODM)
The individual or group responsible for strategic decisions that affect the
Company's operations and performance.
Chief Scientific Officer (CSO)
Companies Act 2006 (the Act)
Environmental, Social, and Governance (ESG)
Fair Value Through Other Comprehensive Income (FVOCI)
A classification of financial assets that are held with the objective of
collecting contractual cash flows and selling financial assets.
Fair Value Through Profit or Loss (FVTPL)
A classification for financial assets that are held for trading or are managed
and whose performance is evaluated on a fair value basis.
Financial Reporting Council (FRC)
Good x Practice (GxP)
A set of guidelines that industries must follow to produce products that are
safe and of high quality.
Quality guidelines and regulations applied in the pharmaceutical industry.
GxP is the abbreviation of "Good x Practice". The "x" in GxP stands for the
field the guidelines and regulations applied to.
Some examples of GxPs include:
GMP - Good Manufacturing Process
GLP - Good Laboratory Practice
GDP - Good Distribution Practice
GCP - Good Clinical Practice
GxP are often referred to as current (cGxP).
IFRS Interpretations Committee (IFRIC)
A committee that interprets the application of International Financial
Reporting Standards (IFRS).
Initial Public Offering (IPO)
International Accounting Standards Board (IASB)
An independent group that sets accounting standards accepted as a basis for
financial reporting in many countries.
Irritable Bowel Syndrome (IBS)
A chronic gastrointestinal disorder characterised by recurring abdominal pain,
discomfort, and changes in bowel habits such as diarrhoea, constipation, or a
mix of both..
Long-Term Incentive Plan (LTIP)
A reward system designed to improve employees' long-term performance by
providing rewards that may not be tied to the Company's share price.
Medicines and Healthcare Products Regulatory Agency (MHRA)
The UK government agency responsible for ensuring that medicines and medical
devices and other healthcare products are effective and acceptably safe.
Moore Kingston Smith LLP (MKS)
The Company's Auditors
Net Book Value (NBV)
New Chemical Entity (NCE)
A drug molecule that has a unique chemical structure and has not been
previously approved or marketed as a pharmaceutical compound or as an active
ingredient in any investigational or approved drug product.
Oxford Cannabinoid Technologies Holdings Plc (OCT)
Oxford Cannabinoid Technologies Limited (OCTL)
Phytocannabinoids (pCBs)
Chemical compounds that occur naturally in the cannabis plant. The term
'natural' is often added to differentiate them from synthetically produced
cannabinoids.
Pressurised Metered Dose Inhaler (pMDI)
A device that delivers a specific amount of medication to the lungs, in the
form of a short burst of aerosolised medicine.
Research and Development (R&D)
Involves the process of discovering, designing, testing and developing new
drugs and medical treatments.
Scientific Advisory Board (SAB)
A group of experts, usually external to an organisation or institution, who
provide guidance, recommendations, and expertise on scientific, technical, or
research-related matters.
Task Force on Climate-related Financial Disclosures (TCFD)
A market-driven initiative, set up to develop a set of recommendations for
voluntary and consistent climate-related financial risk disclosures in
mainstream filings.
Tetrahydrocannabinol (THC)
The main psychoactive compound in cannabis that produces the 'high' or
euphoric effects. It interacts with the brain's cannabinoid receptors
(e.g., CB1) to produce various physiological and psychological effects
Tier 1 Drug R&D CROs
Top-level contract research organisations that provide support to the
pharmaceutical, biotechnology, and medical device industries in the form of
research services.
Trigeminal Neuralgia (TN)
Trigeminal neuralgia is a severe chronic neurological disorder characterised
by sudden, intense pain, often triggered by even mild stimuli such as
touching, talking, or chewing. Triggered by damage to the trigeminal nerve,
the pain is localised in the head and in the face..
United States Food and Drug Administration (FDA)
The federal agency of the United States Department of Health and Human
Services responsible for protecting and promoting public health through the
control and supervision of food safety, prescription and over-the-counter
medications, vaccines, and other biological products.
Wales Research Ethics Committee 2 (REC 2)
An independent research committee that reviews new or revised study protocols
and gives an opinion on ethical aspects and acceptability of the proposed
activity. The committees can be based in different parts of the UK, including
Wales
1 Richard was unable to attend the July Board meeting due to a pre-existing
commitment. The July Board meeting comprised a sign-off on the Annual Report
and updates from the CEO and CFO. Richard received the Annual Report in
advance of the meeting and was able to review and provide feedback on the
Annual Report to the Chair before the meeting. The Company Secretary updated
Richard following the meeting.
2 Bishrut was unable to attend the August Board meeting due to a conflicting
work commitment. Bishrut received the Board papers in advance of the meeting
and was able to feed back his views to the Chair before the meeting. Bishrut
could not attend the April Board meeting at short notice due to unexpected
personal reasons. The Company Secretary updated Bishrut following the meeting.
3 The figure of £0 for the annual bonuses of our executive directors in
2023 requires further explanation. Despite the team's exceptional operational
performance and their meeting of key strategic objectives, which would
typically qualify them for a bonus, the Remuneration Committee made the
difficult decision not to issue bonuses this year. This decision was
influenced by several factors, including the current share price of the
Company, wider market conditions, and the Company's cash runway.
4 Cheryl was unable to attend the January Audit Committee meeting due to
conflicting work commitments. The January meeting was to review the 2023
interim results. Cheryl received the Committee papers in advance of the
meeting and was able to feed back her views to the Chair before the meeting.
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