REG - Redx Pharma plc - Final Audited Results and Operational Update
27/01/2022 07:00
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RNS Number : 7760Z Redx Pharma plc 27 January 2022
REDX PHARMA PLC
("Redx" or "the Company")
Final Audited Results for the Year Ended 30 September 2021 and Operational
Update
RXC004 reported encouraging Phase 1 data and initiated Phase 2 clinical study
RXC007 initiated Phase 1 clinical study and reported interim data
Current cash enables delivery of multiple milestones through calendar year
2022
Alderley Park, UK, 27 January 2022 Redx (AIM:REDX), the clinical-stage
biotechnology company focused on discovering and developing novel, small
molecule, highly targeted therapeutics for the treatment of cancer and
fibrotic disease, today announces audited financial results for the year ended
30 September 2021, as well as an operational update.
Lisa Anson, Chief Executive Officer of Redx, commented:
"During the period, we have made strong progress in advancing our pipeline.
Our lead oncology asset, RXC004, entered a Phase 2 clinical trial and our lead
fibrosis asset, RXC007, entered a Phase 1 clinical trial. Our discovery
pipeline of differentiated programmes continues to progress driven by the
strength of our science and validated by milestone revenue increasing during
the year. We are in a position to deliver meaningful results in the clinic
which could drive benefits for patients and value for shareholders."
Operational Highlights
· Significant clinical progress on lead oncology asset, RXC004, an
oral, potent, selective, small molecule Porcupine inhibitor product candidate:
o Completed monotherapy module of Phase 1 trial showing differentiated level
of activity in Wnt-ligand dependent tumours;
o Presented Phase 1 data at the European Society for Medical Oncology (ESMO)
Congress;
o Selected 2 mg as recommended dose for monotherapy Phase 2 studies;
o Post period, initiated Phase 2 trial in monotherapy treatment in
genetically selected MSS metastatic colorectal cancer, with US IND now open
(PORCUPINE trial); and
o Post period, initiated second Phase 2 trial in monotherapy treatment in
genetically selected pancreatic cancer and unselected biliary cancer
(PORCUPINE2 trial).
· Initiated Phase 1 clinical trial in healthy volunteers for
RXC007, an orally bioavailable selective Rho Associated Protein Kinase 2
(ROCK2) inhibitor with potential for development in multiple fibrotic
conditions:
o Post period, reported interim Phase 1 safety, tolerability and
pharmacokinetic (PK) data on 11 October 2021 showing no adverse events and an
attractive PK profile.
· Progressed discovery portfolio, including our Discoidin Domain
Receptor (DDR) inhibitor fibrosis programme:
o Developed potent proprietary DDR inhibitors with drug-like
characteristics that are now in lead optimisation.
· Increased milestone revenue from progress of partnered
programmes:
o Milestones totalling $7 million received from AstraZeneca ($4 million
related to RXC006) and Jazz Pharmaceuticals ($3 million related to Pan-RAF)
during the period;
o Revenue from the Jazz Pharmaceuticals collaborations received during the
year for the progress on research programmes;
o Post period, on 9 December 2021 Redx announced a $10 million milestone
was earned from Jazz Pharmaceuticals for the progress in ongoing research
collaboration and on 23 December 2021 Redx announced a $9 million milestone
was earned from AstraZeneca as RXC006 entered clinical trials.
· Further strengthened the Redx management team and Board of
Directors reflecting the transformation of the company into a clinical stage
organisation:
o Appointment of experienced key senior management - Dr Jane Robertson as
Chief Medical Officer and Peter Collum as US-based Chief Financial Officer;
o Creation of new role of Chief Operating Officer to be held by James Mead
and General Counsel role held by Claire Solk, who joined Redx on 17 January
2022 from her previous role as Senior Legal Counsel at AstraZeneca;
o Board appointments of Natalie Berner in May 2021 as Non-Executive
Director and Dr Jane Griffiths in December 2021 as new Chair, following the
departure of Iain Ross in June 2021.
Financial Highlights
· Placing and Open Offer in December 2020 of £25.7 million
(gross), which received strong support from existing investors and added
healthcare specialist investors including Polar Capital;
· Cash balance at 30 September 2021 of £29.6 million (30 September
2020: £27.5 million);
· Total revenue for the year of £10.0 million (2020: £5.7
million);
o Including milestone payments of $4 million from AstraZeneca, and $3
million from Jazz Pharmaceuticals;
· Loss for the year of £21.5 million (2020: £9.2 million);
· Total R&D expenditure of £24.4 million (2020: £10.5
million);
· Cash balance funds operations through calendar year 2022.
For the purposes of MAR, the person responsible for arranging for the release
of this announcement on behalf of Redx is Andrew Booth, Company Secretary.
For further information, please contact:
Redx Pharma Plc T: +44 (0)1625 469 918
UK Headquarters
Lisa Anson, Chief Executive Officer
US Office
Peter Collum, Chief Financial Officer
SPARK Advisory Partners (Nominated Adviser) T: +44 (0)203 368 3550
Matt Davis/ Adam Dawes
WG Partners LLP (Joint Broker) T: +44 (0)203 705 9330
Claes Spång/ Satheesh Nadarajah/ David Wilson
Panmure Gordon (UK) Limited (Joint Broker) T: +44 (0)207 886 2500
Rupert Dearden/ Freddy Crossley/ Emma Earl
FTI Consulting T: +44 (0)203 727 1000
Simon Conway/ Ciara Martin
About Redx Pharma Plc
Redx Pharma (AIM: REDX) is a clinical-stage biotechnology company focused on
the discovery and development of novel, small molecule, highly targeted
therapeutics for the treatment of cancer and fibrotic disease, aiming
initially to progress them to clinical proof of concept before evaluating
options for further development and potential value creation. Redx's lead
oncology product candidate, the Porcupine inhibitor RXC004, commenced a Phase
2 programme in November 2021. The Company's selective ROCK2 inhibitor product
candidate, RXC007, is in development for idiopathic pulmonary fibrosis and
commenced a Phase 1 clinical trial in June 2021. Initial results were reported
in October 2021, with full Phase 1 results expected in 2022.
The Company has a strong track record of discovering new drug candidates
through its core strengths in medicinal chemistry and translational science,
enabling the Company to discover and develop differentiated therapeutics
against biologically or clinically validated targets. The Company's
accomplishments are evidenced not only by its two wholly-owned clinical-stage
product candidates and rapidly expanding pipeline, but also by its strategic
transactions, including the sale of pirtobrutinib (RXC005, LOXO-305), a BTK
inhibitor now in Phase 3 clinical development by Eli Lilly following its
acquisition of Loxo Oncology and RXC006, a Porcupine inhibitor targeting
fibrotic diseases including idiopathic pulmonary fibrosis (IPF), which
AstraZeneca is progressing in a Phase 1 clinical study. In addition, Redx has
forged collaborations with Jazz Pharmaceuticals.
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Chair's Statement
Dear Shareholder
Over the last 12 months, Redx has made substantial progress in all aspects of
its pipeline, now with two clinical stage assets, and in raising significant
funds to further support the development of its lead therapeutic programmes.
We have deployed our resources wisely, thereby allowing the Company's
management to continue to pursue its clear strategy under the excellent
leadership of its Chief Executive Officer, Lisa Anson.
During the financial year ended 30 September 2021, despite the ongoing
challenges of COVID-19, we saw continued positive momentum in shareholder
value, building on the strong foundational work of 2019 and 2020. We did this
by delivering clinical and scientific progress, securing new investment and
building on our organisational capabilities. The Company has ended the period
in a strong financial position, enabling it to continue to progress its
differentiated pipeline in oncology and fibrosis.
Clear strategy - Redx's ambition is to become a leading biotechnology company
through the development of novel and differentiated targeted medicines in
cancer and fibrotic disease and to progress highly differentiated product
candidates that will transform the lives of patients. 2021 has seen
significant delivery against the Company's strategy with the following notable
achievements:
· RXC004 progressed to Phase 2: The Company has continued to
progress its lead product candidate, RXC004, a Porcupine inhibitor being
developed as a targeted therapy for Wnt-ligand driven cancer, in clinical
trials. During the period, the monotherapy module of the Phase 1 clinical
trial was completed and the data was subsequently presented at the European
Society for Medical Oncology (ESMO) Congress. Following completion of this
trial, a recommended dose was selected for the monotherapy Phase 2 trials. In
parallel, the combination module of the Phase 1 trial of RXC004 with nivolumab
(an anti-PD1 antibody), initiated during 2021, is ongoing, with results
expected in the first half of 2022 (calendar year). The RXC004 Phase 2
programme initiated post fiscal year end and we expect to see topline results
from this in the first half of the calendar year 2023.
· First clinical programme in fibrosis: RXC007 is a selective ROCK2
inhibitor being developed as a treatment for idiopathic pulmonary fibrosis
(IPF), a life-threatening orphan disease. During the period, the Company
completed the necessary toxicology and manufacturing processes to submit a
Clinical Trial Application (CTA) and in June 2021 initiated a Phase 1 clinical
trial in healthy volunteers. We believe this programme could have strong
commercial potential in an area of limited competition. The RXC007 Phase 1
data is expected to be available in the first half of 2022.
· Investment in our Redx discovery engine: During the year, we
continued to leverage Redx's core strengths in medicinal chemistry, designing
molecules against validated targets in order to discover the next generation
of product candidates for our pipeline. We have built a core team of 60
scientists pursuing several programmes with the aim of submitting three new
investigational new drug applications (INDs) by 2025.
· Progress with partnered assets: In previous years, the Company
chose to partner two of its product candidates: the preclinical stage
Porcupine inhibitor programme, RXC006, to AstraZeneca in August 2020, and the
pan-RAF programme to Jazz Pharmaceuticals in July 2019. Both programmes remain
in active development and Redx received milestone payments on both during the
financial year. In addition, the 2020 research collaboration with Jazz
Pharmaceuticals remains active with a milestone of $10 million earned post
fiscal year end, which further demonstrates the strength, depth and value of
Redx's expertise in medicinal chemistry.
Strengthened financial position - During the year under review, the Board and
management team have continued to adopt a robust set of financial and
governance controls to maintain the highest standards throughout the Company;
more details on this can be found in the Corporate Governance Statement in our
Annual Report. The Board strengthened the financial position of the Company by
securing new investment with a placing for £25.7 million (gross) in December
2020, which received strong support from existing investors and broadened the
Company's shareholder register with the addition of healthcare specialist
Polar Capital.
Outlook - The last 12 months have been very encouraging as we have continued
to deliver on our strategy, which consistently demonstrates our drug discovery
and development capabilities and our ability to progress our in-house
pipeline. Whilst we have been encouraged by the recent financing and the
support from our investors including Redmile Group, Sofinnova Partners and
Polar Capital, we are aware that we continue to face the ongoing funding
challenge faced by many early stage listed biotech companies: to secure
further investment to develop their pipelines, and that further funding will
be required in the coming year. The Board continue to review the best options
for the Company to further strengthen our financial position beyond 2022 so
that we can drive forward our two promising clinical programmes and
preclinical research at pace.
On behalf of the Board, we would like to thank our CEO, Lisa Anson, and CSO,
Richard Armer, along with the rest of our management team and employees for
their hard work and dedication over the year. We would also like to thank our
business partners and suppliers for their continued strong and invaluable
support.
At the start of 2021, Redx was poised to enter a growth phase with a
strengthened financial position and support from new investors combined with
our long-term shareholders. Over the year, we have been able to build on our
strong scientific foundation and enter into this growth phase, with good
progress in the pipeline and an expanding clinical portfolio.
As the Chair role has transitioned, we remain committed to support Redx to
maintain its momentum over the next 12 months as we work to deliver on the
Company's strategic plans.
Peter Presland Dr Jane Griffiths
Interim Chair, to 30 November 2021 Chair, from 1 December 2021
Chief Executive's Report
During my first two years with the Company we established a strong foundation,
building on the core scientific strength with a clear strategy, strengthened
organisation and partnering deals. I am pleased to report that during my third
year with the Company we have entered a chapter of growth as we continue to
transition from a discovery powerhouse to a clinical stage biotechnology
company. The full year results for the 12 months to 30 September 2021 reflect
the significant recent progress we have made on our ambitious journey. With
the backing of leading specialist healthcare investors, we have been able to
grow our scientific organisation and progress our pipeline: we now have two
wholly owned clinical stage assets and have recently initiated our first-ever
Phase 2 programme.
The hallmark of our productivity to date has been our discovery engine, driven
by a core team of experts in medicinal chemistry and translational science who
have worked together for several years and have been able to produce five
compounds that have progressed to preclinical and clinical development. Today,
this integrated team of chemists and biologists utilises cutting edge
technologies optimal for each specific programme rather than being tied to a
single technology platform. This capability continues to underpin many of our
operational highlights over the year and allows us to continue to move at pace
with our pipeline. Our promising lead oncology asset, the selective Porcupine
inhibitor RXC004, has moved into Phase 2, having generated encouraging Phase 1
data which was presented at the prestigious European Society of Medical
Oncology (ESMO) Congress in September. We also commenced a second clinical
programme during the year, with our selective ROCK2 inhibitor RXC007, for
fibrosis. Our major business partnering deals with AstraZeneca and Jazz
Pharmaceuticals are both progressing well, as evidenced by a $4 million
milestone payment from AstraZeneca in June, and a $3 million milestone payment
from Jazz Pharmaceuticals in September. Post fiscal year end, we also earned a
$10 million milestone from Jazz Pharmaceuticals and a $9 million milestone
from AstraZeneca, connected to progress in the respective programmes.
We have continued to build our senior management team with the addition of two
highly experienced senior executives during the period. Dr Jane Robertson
joined as Chief Medical Officer on 1 March 2021 and Peter Collum joined as
Chief Financial Officer on 1 May 2021, our first US-based employee.
In December 2020 we raised £25.7 million (gross) of funds that are now being
deployed to further support and augment the research and development pipeline
of the Company and its subsidiaries (the "Group"), reflecting the strong
support from our key investors. As we grow, we will continue to face the
industry-wide challenge of securing sufficient investment capital in order to
fund R&D and allow us to fully realise the potential of our programmes and
innovative science. Our cash burn rate has risen significantly during the last
12 months, as we have two wholly owned assets in the clinic and an expanded
scientific team. We have sufficient cash runway, on current plans, to last
through Q4 of the calendar year 2022. Further fundraising will therefore be
required in the coming year.
A clear strategy
Our ambition is to become a leading biotechnology company through the
development of novel and differentiated targeted medicines in cancer and
fibrotic disease and to progress highly differentiated product candidates that
will transform the lives of patients. The key elements of our strategy are:
· Advance the development of our lead candidate, RXC004, a
Porcupine inhibitor, through clinical trials in our initial indications and
then for the potential treatment of additional Wnt-ligand dependent tumours;
· Advance the development of RXC007, a selective ROCK2 inhibitor,
initially in clinical trials in idiopathic pulmonary fibrosis (IPF) and
potentially in additional fibrotic indications;
· Invest in our Redx discovery engine to expand our pipeline; we
plan to submit three new INDs by 2025;
· Maximise the full potential of our product pipeline by either
retaining commercial rights or considering attractive development and
commercialization partnerships.
RXC004, an Oral Porcupine Inhibitor for the Treatment of Wnt-Ligand Dependent
Tumours
Our lead product candidate, RXC004, is a clinical stage, highly potent and
selective, orally active once-daily Porcupine inhibitor being developed as a
targeted therapy for Wnt-ligand driven cancer. Wnt signaling is a heavily
investigated pathway. Aberrations contribute directly to tumour growth and
play an important role in immune resistance to treatments with immuno-oncology
agents such as anti-PD1 checkpoint inhibitors. Previous approaches to drug
targets within the Wnt pathway have largely failed due to either toxicity or
lack of efficacy potentially due to redundancy in the pathway. Porcupine is a
key enzyme situated at the top of the Wnt signaling pathway and we designed
RXC004 as an inhibitor of Porcupine to specifically target this pathway and
maximise efficacy while avoiding redundancy and off-target toxicity. By
genetically selecting patients with tumours that have high Wnt-ligand
dependency, such as those with loss of function (LoF) mutations in the Ring
Finger 43 (RNF43) gene and fusions in the R-spondin (RSPO) gene family,
Porcupine inhibitors have the potential to directly target tumours, in
addition to having an immune-enhancing effect. We believe RXC004, if approved,
has the potential to be used as monotherapy and in combination with
immunotherapies in Wnt-ligand dependent tumours.
In July 2021, we selected 2 mg once daily as the recommended dose of RXC004
for our Phase 2 monotherapy, proof of concept clinical trials based on the
safety, pharmacokinetic and target exposure profile observed in our Phase 1
clinical trial. The clinical trial data from the Phase 1 monotherapy module
was presented at the ESMO Congress in September 2021 and included differential
activity in Wnt-ligand dependent tumours, the patient population of interest.
This was the first time Redx reported clinical results and showcased a
breakthrough in the therapeutic potential of the Wnt pathway. In the read-out
from the Phase 1 study, RXC004 monotherapy was well tolerated at doses
demonstrated to inhibit the pathway in patients and showed a differentiated
level of activity in Wnt ligand dependent patients. This Phase 1 efficacy
signal supports our strategy to prescreen patients in our ongoing Phase 2
trials and select only those with specific genetic mutations that define the
tumour as highly dependent on the Wnt ligands. This enables us to more
precisely target patient populations who we believe can benefit from RXC004,
either as monotherapy, as observed in our Phase 1 clinical trial, or in
combination with immune checkpoint inhibitors, which could be applicable in
over 25 different tumour types where activation of the Wnt pathway has been
linked to immune evasion.
We are also evaluating RXC004 in a second module of our Phase 1 clinical trial
in combination with nivolumab, an anti-PD1 antibody. The primary objective of
this module is to evaluate the safety and tolerability of this combination in
patients with unselected advanced malignancies. The results from this
combination trial are expected in the first half of 2022 and will be used to
define a dose of RXC004 to be used in combination with standard dose nivolumab
as part of the Phase 2 clinical trial. A third module, in which patients are
given RXC004 monotherapy on an intermittent dose levels schedule, is expected
to be initiated in the first half of 2022.
Post-period we initiated two Phase 2 proof-of-concept clinical trials in
genetically selected patients with microsatellite stable metastatic colorectal
cancer, or MSS mCRC, as monotherapy and in combination with anti-PD1
immunotherapy, as well as in genetically selected patients with pancreatic
cancer and unselected biliary cancer as monotherapy. The first trial,
PORCUPINE, evaluates RXC004 as a monotherapy and in combination with an
anti-PD1 checkpoint immunotherapy in genetically selected MSS mCRC. The
monotherapy arm in CRC initiated in November 2021 and the second arm, in
combination with anti-PD1, is expected to initiate in the first half of 2022
following dose selection. The second trial, PORCUPINE2, evaluates RXC004 as
monotherapy in genetically selected pancreatic cancer and in unselected
biliary cancer, given biliary cancer is a highly Wnt-ligand driven cancer.
This second trial initiated in January 2022. These indications have
significant unmet medical need given poor survival outcomes and limited safe
and effective treatment options. The addressable patient population for these
initial indications aggregates to approximately 74,000 new cases per year in
the United States, the five major markets in Europe, or EU5, and Japan. We
expect to report topline data from the Phase 2 clinical trials in the first
half of 2023.
We remain confident that our RXC004 programme can unlock the therapeutic
potential of the Wnt pathway as a means to tackle unmet need in a number of
difficult to treat cancers.
RXC007, an Oral Selective ROCK2 Inhibitor for the Treatment of Fibrotic
Diseases
Our second product candidate, RXC007, is a clinical stage, highly selective
and orally available small molecule inhibitor of Rho-Associated Protein Kinase
2, or ROCK2, a clinically validated target that has been shown to sit at a key
junction that regulates various cell signaling pathways central to fibrosis.
Our initial development focus for RXC007 is IPF, given the strong evidence of
the upregulation of ROCK2 in IPF, along with supportive preclinical data in
various lung fibrosis models and compelling data in human precision cut lung
slices (PCLS), which we believe makes RXC007 particularly well-suited for
development in IPF as a lead indication. IPF is an orphan disease with high
unmet need and with a very poor survival and a prognosis similar to many
severe cancers, with median survival of three to five years following
diagnosis. By 2029, the growing IPF market is projected to reach $3.6 billion
in the United States, EU5 and Japan, with approximately 170,000 patients.
Following successful completion of preclinical studies, RXC007 entered a Phase
1 clinical trial in healthy volunteers in the first half of 2021, with IPF
being targeted as the first indication for clinical development. The primary
endpoint of the Phase 1 trial is to assess the safety, tolerability,
pharmacokinetic (PK) profile and some pharmacodynamic (PD) properties of
RXC007. In October 2021, we reported initial data from the single ascending
dose, or SAD, arm of this trial in which we observed that RXC007 was well
tolerated and exhibited a PK profile potentially suitable for once-daily
dosing. We achieved biologically relevant exposures at higher doses and the
half-life was around 11 hours at the 40 mg dose, potentially suitable for
once-daily dosing. We expect to report topline data in the first half of 2022.
Our Phase 2 programme for RXC007 in IPF will initiate in 2022 and will be a
staged approach based on the learnings from what we have observed from recent
trials in the field. Initially, we plan to start a Phase 2a clinical trial to
assess the safety, tolerability and early efficacy of RXC007 in IPF patients
as monotherapy and in combination with standard of care. The Phase 2a will
inform the subsequent Phase 2b dose and in that Phase 2b study we will dose
RXC007 over 12 months in combination with standard of care to assess changes
in lung function as the primary endpoint.
Our Redx Discovery Engine
We continue to leverage our extensive industry experience and know-how with
our Redx discovery engine that integrates our extensive in-house capabilities
in medicinal chemistry and translational biology with a network of external
specialist contractors and high-profile academic collaborations. This engine
enables us to identify validated targets so that we can create potentially
differentiated small molecule new chemical entities (NCEs), typically intended
for oral administration and designed to have high potency, high exposure and
other optimised drug properties.
To date, our approach has successfully delivered five patented compounds, all
of which remain in active development and four of which are now in clinical
development. Our approach involves the following:
1. Target: With the goal of de-risking our programmes we select
biologically or clinically validated targets where we believe there is an
opportunity to successfully apply our drug discovery capabilities in diseases
with high unmet medical need.
2. Design: Design molecules with differentiated properties, leveraging our
design frameworks and our strength and experience in medicinal chemistry and
translational biology to optimise a novel differentiated molecule for the
target.
3. Deliver: Focus our differentiated, targeted small molecules towards
commercially attractive markets in which we believe we can be successful.
The Redx discovery engine's approach is strengthened by the experienced
management team and our renowned chemistry and biology groups, who have
collectively brought 18 product candidates into clinical development. Our
group of 60 scientists are deployed in integrated chemistry and biology teams
that utilise cutting edge technologies as is optimal for each programme,
rather than being tied to a single technology platform. The teams each have
the ability to exchange specific expertise between themselves and to access
additional flexible capacity through our global network of contract
scientists, partners and contract research organisations, or CROs.
We aim to submit three new INDs by 2025 from our current discovery portfolio
of wholly owned research programmes, which are outlined below:
Oncology
Oncology continues to be an area of high unmet need and our oncology research
strategy is focused on discovery and development of highly selective small
molecule drugs for genetically defined cancers and immuno-oncology.
Targeted therapies for genetically defined cancers prevent the growth of
cancers by inhibiting specific proteins/genes required for tumour growth, with
one major advantage being the reduced side effects compared to traditional
chemotherapy. Recent advances in precision medicine have shown that drugs
which target cancer at the genetic level often have the best timely outcomes,
with the choice of treatment options based on the individual genetic
alterations found in a patient's tumour. Early in the discovery process, our
targeted therapy programmes involve discovering biomarkers to identify a
defined/specific patient population that will benefit from our drugs. This
includes the identification and targeting of newly emerging clinical
resistance mechanisms. We believe this approach will increase our success in
the clinic, reduce overall development costs and help to accelerate the
delivery of medicines to patients.
Immuno-oncology is an approach that uses the patient's own immune system to
identify and kill the tumour. Recent advances in immuno-oncology have been
transformative, producing long-lasting, robust responses for certain patients.
These advances include the immune checkpoint inhibitor class of therapies,
such as anti-PD1/PD-L1 antibodies. Despite these breakthroughs, there remains
a significant proportion of patients whose tumours are unresponsive or develop
resistance to such treatments, and therefore fail to benefit from these
lifesaving therapies. Our programmes in immuno-oncology aim to combine our
compounds with existing immune checkpoint inhibitors to improve response rates
in these resistant patient populations.
Redx's oncology research portfolio currently includes three genetically
targeted oncology programmes in early discovery and an immuno-oncology kinase
target programme also in early discovery.
Fibrosis
Fibrosis is an area where there are few treatments and a large and growing
unmet need. Redx's medicinal chemistry strengths, combined with its depth of
biology expertise, make it competitive to develop novel precision therapies to
tackle the underlying fibrosis in major diseases of the lung, liver, kidney
and bowel. Fibrosis is an internal scarring process, which can occur in
response to injury, where excess connective tissue is deposited in an organ or
tissue, thereby impairing its function. Most chronic inflammatory diseases
will result in fibrosis, with progressive injury resulting in organ failure.
Fibrotic disease can occur in nearly any tissue in the body and is a
contributory factor in up to 45% of deaths in the developed world. Solid organ
fibrosis can occur as a result of many different diseases and current
therapeutic options are limited for these chronic and often life-threatening
illnesses.
In fibrosis research, the Company continues to progress its gastrointestinal
targeted ROCK, (GITR), inhibitor research project aimed at treating intestinal
fibrosis associated with Crohn's disease, which leads to strictures and
resection surgery for patients. There is currently limited pharmaceutical
therapy available to manage this condition and we believe that Redx's
compounds could potentially be first-in-class agents. GITR inhibitors are
restricted to the gut due to their limited absorption profile and rapid
enzymatic metabolism of any absorbed material. The compounds have demonstrated
very strong anti-fibrotic effects in GI fibrosis disease models along with a
good general and cardiovascular safety profile. The Redx GITR inhibitor
programme has a compound in preclinical toxicology evaluation and a go/no-go
decision to nominate a development candidate is expected in the first half of
2022.
During the period, Redx moved a new fibrosis programme into the lead
optimization phase. Discoidin Domain Receptors (DDRs) have recently gained
traction as new targets with potential to treat multiple fibrotic conditions.
DDRs are receptor tyrosine kinases containing a discoidin homology domain in
their extracellular region. There are two DDR receptors, DDR1 and DDR2, which
act as non-integrin collagen receptors. On binding of collagen, the DDR
autophosphorylates, which initiates various downstream signaling pathways that
drive clustering, upregulation and further collagen synthesis. DDR expression
is increased in many fibrotic diseases and preclinical proof of concept for
small molecule inhibitors has been demonstrated in preclinical models of lung
and kidney fibrosis. We have developed both dual DDR1/ DDR2 and selective DDR1
series of potent inhibitors with drug-like characteristics that are now in
lead optimization.
Partnered asset portfolio makes progress towards clinic
During the year, Redx-designed molecules continued to make strong progress
with partners, as detailed below:
· In July 2019, we entered into an asset sale to Jazz
Pharmaceuticals of our pan-RAF inhibitor, which is currently in IND enabling
preclinical testing. During the reporting period, in September 2021, we earned
a milestone payment of $3.0 million for this programme.
· In August 2020, Redx entered into an exclusive license agreement
with AstraZeneca AB for our Porcupine inhibitor RXC006 for development and
potential commercialisation. RXC006 (AZD5055) has completed IND enabling
preclinical testing and is now in a Phase 1 clinical trial. Under the terms of
the RXC006 License Agreement, we received an upfront payment of $4.0 million.
A second milestone payment of $4.0 million was received in July 2021 with a
further milestone of $9 million earned in December 2021 as a result of the
initiation of a Phase 1 clinical trial. In addition we are eligible to receive
up to a further $105.0 million of aggregate payments related to development,
regulatory and commercial milestones for the first indication, and additional
milestone payments aggregating $105.0 million for a second and third
indication. We are also eligible to receive aggregate sales-based milestones
of $150.0 million and mid-single digit percentage tiered royalties on net
sales.
· In September 2020, Redx entered an oncology research
collaboration agreement with Jazz Pharmaceuticals Ireland to discover and
develop drug candidates for two cancer targets on the Ras/Raf/MAP kinase
(MAPK) pathway. Under the terms of the agreement we received an upfront
payment of $10 million with a development milestone of $10 million earned on 9
December 2021, post the reporting period. Following delivery of an IND-ready
molecule, we will be eligible to receive up to a further $200 million from
Jazz in development, regulatory and commercial milestone payments for each
programme. The first milestone is payable upon successful IND submission and
all subsequent milestones are contingent on successful completion of the
relevant stages of development. In addition, for both programmes, we are
eligible to receive tiered royalties in mid-single digit percentages based on
any future net sales
These transactions continue to underscore Redx's excellence in drug design and
its business partnering capability. There are few biotech companies of our
size that have completed four major deals as Redx has done in a three year
period starting with the sale of our BTK inhibitor programme (RXC005) to Loxo
Oncology in 2017. This molecule is now being developed by Eli Lilly in several
Phase 3 clinical studies as pirtobrutinib/LOXO-305 and showing potential in a
range of B cell malignancies including those resistant to first generation BTK
inhibitors.
Significantly strengthened financial position
Throughout the year we have worked hard to secure sufficient investment to
realise the full potential evident in our pipeline. The investment by Redmile
Group, Sofinnova Partners and Polar Capital has given us greater security from
a cash perspective, allowing the Company to proceed with an ambitious, but
measured, business plan going forward. The Company ended the period with a
cash balance of £29.6 million (30 September 2020: £27.5 million) as a result
of a number of financial transactions throughout the year.
During the year the Company strengthened its balance sheet by completing a
gross fundraise of £25.7 million which was approved by shareholders on 21
December 2020 and served to add Polar Capital and other investors to our
shareholder register and extend our cash runway through Q4 of the calendar
year 2022.
In addition, the Company added further to its financial security by generating
new revenue from partnership deals including the receipt of a $4 million
milestone payment from AstraZeneca earned in June 2021, followed by a $3
million milestone payment from Jazz Pharmaceuticals earned in September 2021.
During the period we have continued to manage our costs carefully whilst
ensuring that optimal resources are allocated to maximum effect in line with
our strategy. As a result of our transformation into a clinical stage company,
our operating expenses, excluding share based compensation, of £27.1 million
have nearly doubled (£14.1 million in 2020) as we continue to invest in and
advance our pipeline and our programmes move into more cash intensive clinical
stages.
Notwithstanding our strong closing cash position, the level of required
investment in our pipeline and programmes going forward will necessitate the
raising of additional capital in the coming year. Whilst we believe our
clinical programmes and pipeline provide an attractive opportunity to raise
additional capital, we acknowledge that our ultimate ability to raise
sufficient capital on acceptable terms is out of our control. The associated
uncertainty is discussed in more detail in the basis of preparation of the
Consolidated Financial Statements.
Outlook
During the period, whilst navigating our way through various financial
scenarios and the COVID-19 global pandemic, we made strong progress in
advancing our pipeline. Our lead oncology asset, RXC004, entered Phase 2; our
lead fibrosis asset, RXC007, entered Phase 1; and all our partnered assets
have progressed.
I continue to be really excited by the differentiated programmes in our
pipeline and I believe that with the strength of our science, the proprietary
position of our assets and their commercial potential now combined with strong
investment partners, we are in a position to deliver meaningful results in the
clinic which could drive benefits for patients and value for shareholders.
I would like to pay tribute to our former Chairman, Mr. Iain Ross, who stood
down and left the Company on 31 May 2021 after four years in the role. Iain's
leadership and tenacity are recognized by all on the Board and management team
as a key reason that Redx continues to make strong progress. Our thanks also
go to Mr. Peter Presland who stepped up as Interim Chair from 1 June 2021 as
we initiated a search for a new Chair. This was subsequently successfully
concluded and we were delighted to announce the appointment of Dr Jane
Griffiths, who assumed the role on 1 December 2021. The Board look forward to
benefitting from her expertise and experience to guide the Company through
this next stage of the Redx story.
On a personal note, I want to thank the whole Board, management team and
shareholders for their support during what has been an exciting period in the
Company's history, as we now look to growth and transformation. I look forward
to continuing the job I came here to do, which is to build a world-class
biotech company. Most importantly, I would like to thank our employees for
their hard work, resilience and commitment to Redx and to congratulate them on
the strong research and clinical progress achieved in another success-filled
year.
Lisa Anson
Chief Executive Officer
Operational Review
The Directors present this Operational Review for the year ended 30 September
2021 and cover issues not covered elsewhere in their Strategic review, namely:
Key Performance Indicators, and Financial Review.
The principal activities of the business continue to be the discovery and
development of proprietary, small molecule drugs to address areas of high,
unmet medical need.
Management Team
Lisa Anson (Chief Executive Officer), and Dr Richard Armer (Chief Scientific
Officer) have continued in their positions throughout the year. Peter Collum
took up the post of Chief Financial Officer on 1 May 2021 at which time Dr
James Mead took up the new post of Chief Operating Officer. Dr Jane Robertson
joined as Chief Medical Officer in March 2021, following the departure of Dr
Andrew Saunders.
Key Performance Indicators (KPIs)
The Group's KPIs include a range of financial and non-financial measures. The
Board considers pipeline progress, and in particular progress towards the
clinic, to be the main KPI, and updates about the progress of our research
programmes are included in the Chief Executive's Report. Below are the
Financial KPIs considered pertinent to the business.
2021 2020 2019 2018
£m £m £m £m
Cash at year end 29.6 27.5 3.7 6.5
Further progress has been made during the year in securing funding for the
business plan going forward, principally via a Placing and Open Offer which
raised gross proceeds of £25.7m and by the receipt of $4m of milestone
income.
2021 2020 2019 2018
£m £m £m £m
Total operating expenditure 27.1 14.1 10.2 10.6
(excluding share based payment costs)
Expenditure has risen in line with expectations as programmes progress
positively through clinical and preclinical stages, which are cash intensive.
The considerable amount of corporate activity during the year has led to some
increases in associated costs, but management continues to maintain rigorous
cost control, whilst seeking to prioritise resources for scientific
programmes.
2021 2020 2019 2018
£m £m £m £m
Net increase in cash and cash equivalents 2.0 (23.8) (2.8) (17.3)
(including certain one-off payments)
Positive cash flows have been achieved not only from financing activities, but
also importantly from business development opportunities with AstraZeneca and
Jazz Pharmaceuticals. The inflows ensure that the Group has a cash runway
through Q4 of the calendar year 2022 that allows it to fund its business plan
during that period.
Financial Review
Financial position
At 30 September 2021, the Group had cash resources of £29.6m (2020: £27.5m).
In December 2020, the Group raised £25.7m (gross) via a Placing and Open
Offer. At the same time, RM Special Holdings 3, LLC and Sofinnova Crossover 1
SLP converted £3.33m and £1.75m respectively of the principal amount of the
convertible loan notes into Ordinary shares, reducing debt and further
strengthening the Group position.
The partnership with AstraZeneca generated a further £2.8m ($4m) in milestone
payments and exercising of share options by current and former staff generated
£0.3m. Post financial year end a further £2.2m ($3m) milestone payment was
received from Jazz Pharmaceuticals, together with the triggering of further $9
million and $10 million milestones from AstraZeneca and Jazz Pharmaceuticals
respectively.
This funding is sufficient to allow the Group to fund its business plan
through Q4 of the calendar year 2022, based on currently budgeted levels of
expenditure and including certain forecast milestone receipts.
This cash runway and the need for further funding beyond this leads to a
material uncertainty regarding going concern, which is discussed in detail in
note 2.
Revenue
During the year, the Group continued to derive revenue from the outlicensing
agreement with AstraZeneca (via milestone payments) and both the research
collaboration with, and provision of research and preclinical development
services to, Jazz Pharmaceuticals. Milestone income from AstraZeneca is
recognised as received as it relates to contingent consideration on the
license previously granted. In accordance with IFRS 15 "Revenue from Contracts
with Customers", the funds received in advance for the collaboration agreement
with Jazz Pharmaceuticals are recognised as revenue as the obligations under
the contract are performed (being predominantly the underlying development
services). The stage of completeness of the Jazz collaboration is assessed at
each reporting date, and revenue recognised based on the percentage of total
expected costs incurred to date. The expected timing of further recognition is
detailed in note 6. Revenue from other research agreements is invoiced and
recognised as the work is undertaken.
Cost management
Operating expenses continue to be tightly controlled in the context of an
expanding research organisation and programmes progressing through more cost
intensive clinical stages.
Finance costs
Finance costs have risen considerably as a consequence of the charging of a
full years "effective interest" (calculated in valuing the lease liability and
convertible loan note liability under IFRS), on the convertible loan notes in
the current financial year (2020: 2 months). This has been partially offset by
the removal of interest charges on the earlier loans from Moulton Goodies Ltd
and Redmile in 2020.
There was no actual interest paid in 2021 (2020: £0.4m).
Cash flows
Overall positive net cash flow for the year was £2.0m, (2020: £23.8m). See
KPI's for details.
Taxation
The acquisition of a significant proportion of the Group's shares by Redmile
has meant that the SME tax status previously enjoyed is no longer applicable.
The Group has therefore prepared these financial statements on the basis that
going forward it will be claiming Research and Development expenditure credits
rather than R&D tax credits. Claims for prior years are not affected, and
every effort will be made to ensure that the Group receives the maximum
amounts to which it is entitled.
Consolidated Statement of Comprehensive Loss
For the year ended 30 September 2021
Year ended Year ended
Note 30 September 30 September
2021 2020
£'000 £'000
Continuing operations
Revenue 4 10,035 5,685
Research and Development expenses (24,445) (10,460)
General and administrative expenses (6,455) (4,238)
Other operating income 1,120 812
___________ ___________
Loss from operations (19,745) (8,201)
Finance income 13 7
Finance costs (1,711) (974)
___________ __________
Loss before taxation (21,443) (9,168)
Income tax (133) (45)
___________ __________
Loss attributable to owners of Redx Pharma Plc
(21,576) (9,213)
Other comprehensive income
Items that may subsequently be reclassified to profit or loss
Exchange difference from translation of foreign operations
29 -
Total comprehensive loss for the year attributable to owners of Redx Pharma
Plc
(21,547) (9,213)
======== ========
Loss per share (pence)
From continuing operations
Basic & diluted (pence) 5 (8.4) (5.4)
Consolidated Statement of Financial Position
At 30 September 2021 Company No. 07368089
As restated 1 October
Note 2021 2020 2019
£'000 £'000 £'000
Assets
Non-current assets
Property, plant and equipment
3,325 3,048 3,648
Intangible assets 405 411 417
___________ __________ __________
Total non-current assets 3,730 3,459 4,065
___________ __________ __________
Current assets
Trade and other receivables 6,231 1,923 1,232
Current tax 32 32 871
Cash and cash equivalents 29,552 27,513 3,704
___________ __________ __________
Total current assets 35,815 29,468 5,807
___________ __________ __________
Total assets 39,545 32,927 9,872
___________ __________ __________
Liabilities
Current liabilities
Trade and other payables 4,699 3,363 2,784
Contract liabilities 6 4,318 7,069 -
Borrowings 7 - - 468
Lease liabilities 575 503 463
Derivative financial instrument
- - 648
Provisions - - 306
___________ __________ __________
Total current liabilities 9,592 10,934 4,669
Non-current liabilities
Borrowings 7 14,247 16,758 -
Lease liabilities 2,574 3,209 3,712
___________ __________ __________
Total liabilities 26,413 30,901 8,381
___________ __________ __________
Net assets 13,132 2,026 1,491
======== ======= =======
Equity
Share capital 8 2,753 1,952 1,265
Share premium 66,299 37,184 33,263
Share-based compensation 4,752 1,191 1,104
Capital redemption reserve 1 1 1
Exchange translation reserve
29 - -
Convertible note reserve 3,524 4,572 -
Retained deficit (64,226) (42,874) (34,142)
___________ __________ _________
Equity attributable to shareholders
13,132 2,026 1,491
======== ======== =======
Consolidated Statement of Changes in Equity
For the year ended 30 September 2021
Share Share Share based payment Capital Exchange translation Convertible Note Reserve As restated Retained As restated Total
capital premium £'000 Redemption Reserve £'000 Deficit Equity
Reserve £'000 £'000 £'000
£'000 £'000 £'000
At 1 October 2019 1,265 33,263 1,104 1 - - (34,142) 1,491
Loss and total comprehensive loss for the year
- - - - - - (9,213) (9,213)
Transactions with owners of the Company
Issue of ordinary shares 687 4,144 - - - - - 4,831
Transaction costs on issue of ordinary shares
- (93) - - - - - (93)
Transaction costs on the conversion of loan instruments into ordinary shares
- (130) - - - - - (130)
Recognition of equity element of convertible loan notes
- - - - - 4,815 - 4,815
Transaction costs on the issue of convertible loan notes
- - - - - (243) - (243)
Share based compensation - - 568 - - - - 568
Release of share options lapsed in the year
- - (481) - - - 481 -
Movement in year 687 3,921 87 - - 4,572 (8,732) 535
At 30 September 2020 1,952 37,184 1,191 1 - 4,572 (42,874) 2,026
Loss for the year - - - - - (21,576) (21,576)
Other comprehensive income
- - - - 29 - - 29
Loss and total comprehensive loss for the year
- - - - 29 - (21,576) (21,547)
Transactions with owners of the Company
Issue of ordinary shares 473 25,508 - - - - - 25,981
Transaction costs on issue of ordinary shares
- (1,051) - - - - - (1,051)
Partial conversion of the convertible loan notes
328 4,658 - - - (1,048) - 3,938
Share based compensation - - 3,785 - - - - 3,785
Release of share options lapsed in the year
- - (224) - - - 224 -
Movement in year 801 29,115 3,561 - 29 (1,048) (21,352) 11,106
At 30 September 2021 2,753 66,299 4,752 1 29 3,524 (64,226) 13,132
Consolidated Statement of Cash Flows
For the year ended 30 September 2021
Year ended 30 September Year ended 30 September
2020 2020
£'000 £'000
Net cash flows from operating activities
Loss for the year (21,576) (9,213)
Adjustments for:
Income tax 133 45
Finance costs 1,711 974
Finance income (13) (7)
Depreciation and amortisation 633 665
Share based compensation 3,785 568
Derivative financial instrument - (67)
Onerous lease provision - (6)
Profit on disposal of assets - (4)
Movements in working capital
Increase in trade and other receivables (4,651) (905)
(Decrease)/increase in trade and other payables and provisions
(1,414) 7,330
__________ __________
Cash used in operations (21,392) (620)
Tax credit received - 1,008
Interest received 13 7
__________ __________
Net cash (used in) / generated by operations (21,379) 395
__________ __________
Cash flows from investing activities
Sale of property, plant and equipment - 4
Purchase of property, plant and equipment (754) (59)
__________ __________
Net cash used in investing activities (754) (55)
__________ __________
Cash flows from financing activities
Proceeds of share issues 25,980 2,099
Share issue costs (1.051) (223)
Derecognised asset recovered - -
Short term loan - 5,000
Loan notes issued - 23,680
Loan note costs - (1,117)
Repayment of short term loan - (5,000)
Payment of lease liabilities (786) (788)
Interest paid - (182)
__________ __________
Net cash generated by financing activities 24,143 23,469
__________ __________
Net increase in cash and cash equivalents 2,010 23,809
Cash and cash equivalents at beginning of the year
27,513 3,704
Foreign exchange difference 29 -
__________ __________
Cash and cash equivalents at end of the year 29,552 27,513
__________ __________
Consolidated Statement of Cash Flows (Cont'd)
For the year ended 30 September 2021
Reconciliation of changes in liabilities arising from financing activities
2021
£'000
IFRS 16 Lease liability
Balance b/fwd 3,712
Remeasurement (60)
Payment of lease liabilities (786)
Interest on lease liabilities 283
__________
Balance c/fwd (disclosed as current and non-current lease liabilities) 3,149
__________
Convertible loan notes
Balance b/fwd 16,758
Amount converted into Ordinary shares (5,086)
Remeasurement on conversion 1,147
Interest 1,428
Transaction expenses -
___________
Balance c/fwd (disclosed as non-current borrowings) 14,247
___________
Notes to the financial information
1. Basis of preparation
The Group's financial information has been prepared in accordance with the
historical cost convention and in accordance with International Financial
Reporting Standards (IFRS) in conformity with the requirements of the
Companies Act 2006 and on a basis consistent with that adopted in the previous
year.
Whilst the financial information included in this Preliminary Results
Announcement has been prepared in accordance with the recognition and
measurement criteria of IFRS, this announcement does not itself contain
sufficient information to comply with IFRS.
The Preliminary Results Announcement does not constitute the Company's
statutory accounts for the years ended 30 September 2021 and 30 September
2020, within the meaning of Section 435 of the Companies Act 2006 but is
derived from those statutory accounts.
The Group's statutory accounts for the year ended 30 September 2020 have been
filed with the Registrar of Companies, and those for 2021 will be delivered
following the Company's Annual General Meeting. Auditors have reported on the
statutory accounts for 2021 and 2020. The audit report for 2021 was (i)
unqualified, (ii) highlighted a material uncertainty in relation to going
concern to which the auditor drew attention by way of an emphasis of matter
paragraph, without modifying their report and (iii) did not contain statements
under Sections 498 (2) or 498 (3) of the Companies Act 2006 in relation to the
financial statements. The Auditors report for 2020 included no matters to
which the Auditor drew attention by way of emphasis, was unqualified and did
not contain statements under Sections 498 (2) or 498 (3) of the Companies Act
2006 in relation to the financial statements.
The Company is a public limited company incorporated and domiciled in England
& Wales and whose shares are quoted on AIM, a market operated by The
London Stock Exchange.
2. Going concern
The Board have adopted the going concern basis in preparing these accounts
after assessing the Group's cash flow forecasts and principal risks.
At September 30, 2021 the Group held £29.6 million of cash and cash
equivalents. The Group has a history of recurring losses from operations,
including a net loss of £21.5 million for the year ended September 30, 2021
and an accumulated deficit of £64.2 million. Operational cash outflows
continue to be driven by the ongoing focus on the research, development and
clinical activities to advance the programs within the Group's pipeline. The
Group recorded a net increase in cash and cash equivalents of £2.0 million
for the year ended September 30, 2021 primarily from the proceeds of the
placing and open offer in December 2020, in which the Group closed the sale of
45,833,641 Ordinary shares, resulting in gross proceeds of £25.7 million. As
at December 31, 2021, the Group held sufficient cash and cash equivalents to
provide a cash runway through to January 31, 2023 at currently budgeted levels
of expenditure and including certain forecast milestone receipts.
In undertaking the going concern review, the Board has reviewed the Group's
cash flow forecasts to January 31, 2023 (the going concern period). Accounting
standards require that the review period covers at least 12 months from the
date of approval of the financial statements, although they do not specify how
far beyond 12 months a Board should consider. Under its base case, the Group
plans to raise significant further finance within the next 12 months, either
from existing or new investors. Further funding is required under the Board's
plans to continue to develop its product candidates and conduct clinical
trials. Given these plans and requirements, a review period of 12 months is
considered appropriate and the Group and Company plan to raise further funding
within this period to continue with its current strategy.
The Board has identified and assessed downside risks and mitigating actions in
its review of the Group's cash flow forecasts. Raising further capital is
outside the control of the directors. Accordingly, the downside risks include
a severe but plausible scenario where external fund raising is not successful
and is coupled with underperformance against the business plan. Mitigating
actions include the delay of operating expenditure for research activities and
restriction of certain discretionary expenditure including capital
expenditure. Even if its mitigating actions are successful, the Group and
Company will need to raise further capital.
Based on these conditions, the Group has concluded that the need to raise
further capital from either existing or new investors represents a material
uncertainty regarding the Group's ability to continue as a going concern.
Notwithstanding the existence of the material uncertainty, the Board believes
that the adoption of the going concern basis of accounting is appropriate for
the following reasons:
· based on plans and discussions with its advisors and
investors the directors have an expectation that further funding will be
obtained.
· the Group has a track record and reasonable near-term
visibility of meeting expectations under its collaboration agreements and
receiving the associated milestone payments.
· the Group retains the ability to control capital and
other discretionary expenditure and lower other operational spend, as
necessary.
While the Group has successfully accessed equity and debt financing in the
past, there can be no assurance that it will be successful now or in the
future. If the Group is unable to the secure the planned additional financing,
it may not be able to generate sufficient cash flows to support its current
level of activities beyond the going concern period. In the event financing is
not obtained, the Group will need to consider
· new commercial relationships to help fund future
clinical trial costs (i.e., licensing and partnerships); and/or
· reducing and/or deferring discretionary spending on one
or more research and development programs; and/or
· restructuring operations to change its overhead
structure.
The Group's future liquidity needs, and ability to address those needs, will
largely be determined by the success of its product candidates and key
development and regulatory events and its decisions in the future. Such
decisions could have a negative impact on the Group's business operations and
financial condition.
The accompanying consolidated financial statements do not include any
adjustments that would be required if they were not prepared on a going
concern basis. Accordingly, the consolidated financial statements have been
prepared on a basis that assumes the Group will continue as a going concern
and which contemplates the realization of assets and satisfaction of
liabilities and commitments in the ordinary course of business.
3. Prior year restatement
The Group has identified an error within its accounting entries recorded on
the adoption of IFRS 16 - Leases, which was adopted on 1 October 2019. The
error identified was an overstatement of the right of use asset recorded on
transition of £661,000 due to an incorrect reversal of the rent-free period
accrual recognised under IAS 17 through retained earnings rather than as a
reduction of the right of use asset. This resulted in a corresponding
understatement of the retained deficit recorded in the Statement of changes in
equity on transition. In accordance with IAS1, a third balance sheet has been
presented at 1 October 2019.
The financial impact of the error identified is as follows:
As at 1 October 2019 As at 30 September 2020
Reported Adjustment Restated Reported Adjustment Restated
£'000 £'000 £'000 £'000 £'000 £'000
Right of use asset 4,175 (661) 3,514 3,573 (661) 2,912
Retained deficit 33,481(1) 661 34,142(1) 42,213 661 42,874
( )
(1)The Group adopted IFRS 16 from 1 October 2019 and did not restate
comparatives for the 2019 reporting period, as permitted under the specific
transitional provisions in the standard. The reclassifications and the
adjustments arising from the new leasing rules were therefore recognised in
the opening balance sheet on 1 October 2019.
4. Revenue
2021 2020
£'000 £'000
Sale & outlicensing of scientific programmes - 3,142
Revenue from milestones on scientific programmes and research collaboration
5,009 -
Revenue from research collaboration 2,751 516
Revenue from research and preclinical development services
2,275 2,027
10,035 5,685
5. Loss per share
Basic loss per share is calculated by dividing the loss for the period
attributable to ordinary equity holders by the weighted average number of
Ordinary shares outstanding during the period.
In the case of diluted amounts, the denominator also includes Ordinary shares
that would be issued if any dilutive potential Ordinary shares were issued
following exercise of share options.
The basic and diluted calculations are based on the following:
2021 2020
£'000 £'000
Loss for the period attributable to the owners of the Company (21,576) (9,213)
Number Number
Weighted average number of shares 256,430,270 170,050,369
- basic and diluted
Pence Pence
Loss per share - basic and diluted (8.4) (5.4)
The loss and the weighted average number of shares used for calculating the
diluted loss per share are identical to those for the basic loss per share.
This is because the outstanding share options would have the effect of
reducing the loss per share and would therefore not be dilutive under IAS 33
"Earnings per Share".
The Group operates a number of share option schemes which could potentially
dilute basic earnings per share in the future. In addition, the convertible
loans could result in the issuance of 110,288,888 ordinary shares that could
potentially dilute basic earnings per share on conversion.
6. Contract liabilities
2021 2020
£'000 £'000
Contract liabilities 4,318 7,069
4,318 7,069
Reconciliation
Brought forward 7,069 -
Recognised in the year (net) - 7,585
Transfer to revenue (2,751) (516)
Carried forward 4,318 7,069
Unsatisfied performance obligations
The aggregate amount of the transaction price allocated to the performance
obligations that are unsatisfied at the end of the reporting period was
£11.73m as at 30 September 2021 (2020: £14.65m) and is expected to be
recognised as revenue in future periods as follows:
2021 2020
£'000 £'000
Within 1 year 4,438 3,594
In the second to fifth years 7,297 11,060
11,735 14,654
The contract liability (net of contract asset) relates to a single research
collaboration contract.
7. Borrowings
2021 2020
£'000 £'000
Non-current
Convertible loan notes 14,247 16,758
14,247 16,758
On August 4, 2020 Redx Pharma plc issued convertible loan notes with a value
of £22.2m. No interest is payable during the first 3 years, thereafter it is
payable at a maximum rate equal to the US prime rate at that time. The notes
are convertible into Ordinary shares of Redx Pharma plc, at any time at the
option of the holder, or repayable on the third anniversary of the issue. The
conversion rate is 1 Ordinary share for each £0.155 of convertible loan note
held. The convertible loan notes are secured by a fixed and floating charge
over all the assets of the Group.
Initial measurement
In accordance with IAS 32 Financial instruments, the convertible loan notes
have been assessed as compound financial instruments containing equity and
liability components. The Group has calculated the value of the liability
component using a discount rate for an equivalent bond without an equity
component, of 8.5%. The Group determined this rate by obtaining interest rate
from external financing sources and making certain adjustments to reflect the
terms of the instrument; specifically to adjust the interest rate to account
for the expected term of the convertible loan notes, its value and the
conditions attached to it. The value of the conversion feature of £4.57m was
calculated as the residual value of the loan after calculating the fair value
of the liability component and has been recognised as an equity component
within the Convertible note reserve in the Consolidated Statement of Financial
Position. Total transaction costs of £1.1m have been allocate between the
equity and liability components. An increase in discount rate to 9.5% would
decrease the debt element by £248k and a decrease to 7.5% would increase the
debt element by £262k.
Partial conversion
On December 2, 2020 the Group announced that RM Special Holdings 3 LLC and
Sofinnova Crossover 1 SLP would convert £3.33m and £1.75m respectively of
the principal amount of the convertible loan notes into Ordinary shares. Under
the terms of the convertible loan notes, the conversion took place at 15.5p
per new Ordinary share. Accordingly, 32,806,159 new Ordinary shares were
issued and admitted to trading on AIM on December 22, 2020. As of September
30, 2021, an aggregate of £17.1m in principal amount was outstanding under
the convertible loan notes. This equates to 110,288,887 ordinary shares at
£0.155 per share.
The remaining gross principal of £17.1m has been discounted at the effective
interest rate determined on initial measurement, resulting in a discounted
liability of £14.2m. The reduction in the liability has been offset by
adjusting entries to equity representing the issuance of share capital and
associated share premium, and the reduction of the relevant proportion of the
convertible note reserve. There is no impact on the Consolidated Statement of
Loss as this is a no gain, no loss transaction.
8. Share Capital
2021 2020
Numbers Numbers
Number of shares in issue
In issue at 1 October 195,247,413 126,477,914
Issued for cash 45,833,641 16,738,710
Issued in consideration for a loan - 52,030,789
Loan note conversion 32,806,159 -
Exercise of share options 1,394,992 -
In issue at 30 September 275,282,205 195,247,413
£'000 £'000
Share Capital at par, fully paid
Ordinary shares of £0.01 2,753 1,952
All ordinary shares rank equally with regard to the Company's residual assets.
Holders of these shares are entitled to dividends as declared from time to
time and are entitled to one vote per share at general meetings of the
Company. All rights attached to the Company's shares held by the Group are
suspended until those shares are reissued.
Share issues
On December 2, 2020, the Group announced that it had conditionally raised
£25.5m by way of a Placing of Ordinary shares at 56p per share, and up to a
further £2.2m by way of an Open Offer at the same price. All resolutions
required to accomplish this were passed at a general meeting of shareholders
on December 21, 2020. The final gross amount raised was £25.7m and
accordingly 45,833,641 new Ordinary shares were issued and admitted to trading
on AIM on December 22, 2020.
On the same date the Group announced that, subject to successful admission of
the above shares, RM Special Holdings 3, LLC and Sofinnova Crossover 1 SLP
would convert £3.33m and £1.75m respectively of the principal amount of the
convertible loan notes into Ordinary shares. Under the terms of the
convertible loan notes, the conversion took place at 15.5p per new Ordinary
share. Accordingly, 32,806,159 new Ordinary shares were issued and admitted to
trading on AIM on December 22, 2020.
On July 8, 2021, the Group announced the exercise of share options over
894,992 Ordinary shares, The exercise took place at 15.5p per Ordinary share.
The gross amount received was £0.1m and the shares were admitted to trading
on AIM on July 9, 2021.
On September 27, 2021, the Group announced the exercise of share options over
500,000 Ordinary shares, the exercise took place at prices between 22p and 50p
per new Ordinary share. The gross amount received was £0.2m and the shares
were admitted to trading on AIM on September 28, 2021.
9. Related Parties
Balances and transactions between the Company and its subsidiaries, which are
related parties, have been eliminated on consolidation and are not disclosed
in this note. Transactions between the Group and other related parties are
disclosed below:
As a result of the divestment of its entire shareholding in the Group in March
2020, Moulton Goodies Ltd ceased to be a related party at that date.
Transactions have been disclosed to the date that the criteria ceased to be
met.
On the same date, as a result of the purchase of shares by RM Special Holdings
3, LLC ("Redmile"), it became a significant shareholder and related party.
Redmile provided short term loan funding of £5 million during the 2020
financial year, which was repaid together with accrued interest of £0.2
million on 5 August 2020. Further the Group issued £14.5 million convertible
loan notes to Redmile on 4 August 2020 on terms summarised in note 7.
Under the terms of the agreement for its subscription for shares on 20 July
2020, Sofinnova Crossover 1 SLP ("Sofinnova") appointed a director to the
Board of Redx Pharma plc. The Board believes that this satisfies the criteria
for Sofinnova to be considered a related party. On 4 August 2020 the Group
issued £7.6 million convertible loan notes to Sofinnova, the terms of which
can be seen in note 7.
On December 2, 2020 the Group announced that RM Special Holdings 3 LLC and
Sofinnova Crossover 1 SLP would convert £3.33m and £1.75m respectively of
the principal amount of the convertible loan notes into Ordinary shares. Under
the terms of the convertible loan notes, the conversion took place at 15.5p
per new Ordinary share. Accordingly, 32,806,159 new Ordinary shares were
issued and admitted to trading on AIM on December 22, 2020. As of September
30, 2021, an aggregate of £17.1m in principal amount was outstanding under
the convertible loan notes. This equates to 110,288,888 ordinary shares at
£0.155 per share.
The remaining gross principal of £17.1m has been discounted at the effective
interest rate determined on initial measurement, resulting in a discounted
liability of £14.2m.
The reduction in the liability has been offset by credit entries to equity
representing the issuance of share capital and associated share premium. There
is no impact on the Consolidated Statement of Loss as this is a no gain, no
loss transaction.
The interest charge in the period relates to the unwinding of the discount at
the effective interest rate on the convertible loan balances held by Redmile
and Sofinnova respectively.
2021 2020
Charges from related parties £'000 £'000
Moulton Goodies Ltd - loan interest (to 13 March 2020)
- 183
RM Special Holdings 3, LLC - loan interest - 171
RM Special Holdings 3, LLC - convertible loan note interest
954 178
Sofinnova Crossover 1 SLP - convertible loan note interest 474 88
1,428 620
2021 2020
Amounts owed to related parties £'000 £'000
RM Special Holdings 3, LLC - loan note
9,289 14,532
Sofinnova Crossover 1 SLP - loan note
4,958 7,648
14,247 22,180
Amounts owed to/by related parties are disclosed in
borrowings and the convertible note reserve.
10. Contingent liability
During the course of the members' voluntary liquidation of Redx
Anti-Infectives Ltd, a counterparty submitted a proof of debt relating to a
contract signed in 2013 that was rejected by the joint liquidators. The
counterparty has issued an application at the High Court of Justice to reverse
the joint liquidators' decision. The joint liquidators are opposing the
application.
No provision has been made in these accounts, because the Company believes
that the potential claim is without foundation.
11. Events after the reporting period
On 9 December 2021 the Group announced that it had earned a $10m milestone
payment from Jazz Pharmaceuticals and on 23 December 2021 announced that it
had earned a $9m milestone payment from AstraZeneca.
12. Report and accounts
A copy of the Annual Report and Accounts will be sent to all shareholders with
notice of the Annual General Meeting shortly and will also be available to
download from the Group's website at www.redxpharma.com
(http://www.redxpharma.com) in due course.
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