REG - Redx Pharma plc - Final Results for the Year Ended 30 September 2022
20/12/2022 07:00
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RNS Number : 2428K Redx Pharma plc 20 December 2022
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF ARTICLE 7 OF
EU REGULATION 596/2014 AS IT FORMS PART OF DOMESTIC LAW IN THE UNITED KINGDOM
BY VIRTUE OF THE EUROPEAN UNION (WITHDRAWAL) ACT 2018.
REDX PHARMA PLC
("Redx" or "the Company")
Final Audited Results for the Year Ended 30 September 2022
Successful fundraise extends cash runway into 2024
Wholly-owned assets, RXC004 and RXC007 enter Phase 2 clinical trials
Nomination of RXC008 as a potential first-in-class development candidate
Alderley Park, UK, 20 December 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 2022.
Lisa Anson, Chief Executive Officer, Redx Pharma, said: "I am very proud of
our track-record of consistently generating differentiated drug candidates and
excited by the potential of the five clinical molecules we have discovered to
treat significant unmet needs in cancer and fibrosis. During the period, we
have continued to make strong progress across our pipeline: from our
world-class discovery engine through to our clinical stage assets. Our two
lead assets, RXC004 and RXC007, are now in Phase 2 clinical studies, and we
look forward to reporting results from these studies during the next calendar
year. Additionally, during the period, we nominated RXC008 for the potential
treatment of fibrostenotic Crohn's disease, as our next clinical development
candidate to come from our world-class discovery engine.
"Importantly, given the current economic and market back-drop, during the
period we were also able to raise significant additional capital to bolster
our balance sheet. This provides us with a cash runway into 2024 that will
allow us to deliver multiple value-inflection points."
Operational Highlights
· Initiated Phase 2 clinical trials of RXC004, an oral Porcupine
inhibitor for the targeted treatment of Wnt-ligand dependent cancers:
o In November 2021, initiated PORCUPINE, a Phase 2 trial in genetically
selected microsatellite stable metastatic colorectal cancer (MSS mCRC), that
has progressed following treatment with standard of care;
o In January 2022, initiated PORCUPINE2, a Phase 2 trial in genetically
selected pancreatic cancer and biliary cancer, with recruitment for the
monotherapy biliary arm nearing completion;
o Post-period, in November 2022, presented data from the Phase 1 study
evaluating RXC004 in combination with nivolumab at the Society for
Immunotherapy of Cancer (SITC) Conference, with patient enrolment for the
combination arm of PORCUPINE now open.
o Post period, in December 2022, a clinical trial collaboration and supply
agreement with MSD (Merck & Co., Inc., Rahway, NJ, USA) announced for the
supply of KEYTRUDA® 1 (#_ftn1) (pembrolizumab) for the combination arm of
PORCUPINE2
· Commenced Phase 2 programme for RXC007, a selective ROCK2
inhibitor being developed for interstitial lung diseases including idiopathic
pulmonary fibrosis (IPF):
o In March 2022, encouraging Phase 1 data showing an excellent safety and
pharmacokinetic profile was presented at the Interstitial Lung Disease Drug
Development (ILD) Summit. Final data from this study was presented,
post-period in October, at the International Colloquium on Lung and Airway
Fibrosis (ICLAF);
o Post-period, in October 2022, initiated Phase 2a clinical study in
patients with IPF
o Post-period, in October 2022, presented preclinical efficacy data showing
pleiotropic effects of RXC007 in chronic graft versus host disease (GvHD) at
ICLAF.
· In March 2022, nominated RXC008, a Gastrointestinal (GI) targeted
ROCK inhibitor and potential first-in-class treatment for fibrostenotic
Crohn's disease, as the Company's next clinical development candidate:
o In June 2022, presented results from a research collaboration with Ghent
University assessing the preclinical efficacy of RXC008 at the Extracellular
Matrix Pharmacology (ECM) Congress;
· In January 2022, announced that the Company's discoidin domain
receptor (DDR) inhibitor fibrosis programme has entered lead optimisation:
o Post-period, presented preclinical data on REDX12271, a novel, potent,
selective and orally active DDR1 inhibitor, in chronic kidney disease models,
at the American Society of Nephrology (ASN) Kidney Week in October 2022.
· Furthered academic collaborations with world-leading research
institutes to enhance the Company's research into novel targets:
o In April 2022, expanded the Company's collaboration with the Garvan
Institute for Medical Research to better understand treatments that could
enhance patient survival in highly fibrotic cancers;
o RXC004 and ROCK2 selective inhibitor data from the collaboration showing
that targeting fibrosis associated with pancreatic cancer led to increased
survival in mouse models was presented at the ECM Congress in June 2022.
· Significant progression of partnered programmes with AstraZeneca
and Jazz Pharmaceuticals resulting in milestone payments totalling $24 million
during the period:
o In December 2021, a $10 million milestone payment from Jazz
Pharmaceuticals was triggered for the progress in the oncology research
collaboration focused on the MAPK pathway. A target under this collaboration
continues to progress towards an IND application;
o In December 2021, a $9 million milestone payment was received from
AstraZeneca as a result of the initiation of Phase 1 trials in healthy
volunteers for RXC006 (now AZD5055);
o In June 2022, Jazz announced that the U.S. Food and Drug Administration
(FDA) had cleared the IND application for the pan-RAF inhibitor JZP815,
triggering a milestone payment of $5 million from Jazz to Redx.
o Post period, in November 2022, Jazz announced that the first patient had
been dosed on the JZP815 Phase 1 clinical trial
· Strengthened and grew Board of Directors and management team:
o Appointment of Dr Jane Griffiths as Chair on 1 December 2021 and Dr Rob
Scott as Non-Executive Director in January 2022;
o Appointment of Claire Solk as General Counsel in January 2022;
o In March 2022, established a Science Committee of the Board of Directors
to review and assess the Company's R&D programmes and strategies and
oversee its progress in achieving its scientific goals.
Financial Highlights
· Cash balance at 30 September 2022 of £53.9 million (30 September
2021 £29.6 million) which includes $24 million in milestone payments earned
from partnered programmes during the period;
· Successful placing of £34.3 million (gross) completed in June
2022, priced at market, which received strong support from existing investors
and added a new specialist healthcare investor, Invus, to Redx's shareholder
base;
· Significant investment in research and development activities led
to increased overall expenditure of £34.4 million (FY 2021: £27.1 million);
· Loss for the period of £18.0 million (FY 2021 £21.5 million);
· Cash runway into January 2024
The person responsible for the release of this announcement on behalf of the
Company is Claire Solk, Company Secretary.
For further information, please contact:
Redx Pharma Plc T: +44 (0)1625 469 918
UK Headquarters
Caitlin Pearson, Head of Communications
ir@redxpharma.com (mailto:ir@redxpharma.com)
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 diseases, 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, being developed as
a targeted treatment for Wnt-ligand dependent cancers, commenced a Phase 2
programme in November 2021. The Company's lead fibrosis product candidate,
the selective ROCK2 inhibitor RXC007, is in development for interstitial lung
disease and commenced a Phase 2a trial for idiopathic pulmonary fibrosis (IPF)
in October 2022. Redx's third drug candidate, RXC008, a GI-targeted ROCK
inhibitor for the treatment of fibrostenotic Crohn's disease, is progressing
towards a CTA/IND application at the end of 2023.
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 AZD5055/RXC006, a Porcupine inhibitor
targeting fibrotic diseases including IPF, which AstraZeneca is progressing in
a Phase 1 clinical study. In addition, Redx has forged collaborations with
Jazz Pharmaceuticals, which includes JZP815, a pan-RAF inhibitor developed by
Redx which Jazz is now progressing through Phase 1 clinical studies and an
early stage oncology research collaboration.
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Chair's Statement
Dear Shareholder,
In my first 12 months as Chair, I have been impressed with the significant
progress made at Redx, as we build on our R&D capabilities and our
clinical pipeline matures. Both of our lead assets, RXC004 and RXC007, are now
in Phase 2 clinical trials and our discovery engine has continued to fuel our
preclinical pipeline, with the nomination of RXC008 as a development
candidate, and our discoidin domain receptor (DDR) programme moving into lead
optimisation. During the period, despite challenging market conditions, we
were also successful in raising significant funds to ensure we can continue to
execute on our development plans for our clinical and preclinical programmes.
Our ambition is to create world-leading medicines that will transform
patients' lives. By leveraging our world-class medicinal chemistry and
translation science expertise, we can create best-in-class or first-in-class
treatments for unmet medical needs and beyond our current clinical portfolio
we have the ambitious target of submitting three wholly-owned INDs by 2025.
2022 was a year of significant progress towards these goals, with the
following notable achievements:
· RXC004 commenced Phase 2 programme: RXC004, a Porcupine
inhibitor, is being developed as a targeted therapy for Wnt-ligand dependent
cancers, both as monotherapy and in combination with immunotherapies.
· RXC007 Phase 2 programme initiated: RXC007, a selective ROCK2
inhibitor, is being developed for interstitial lung diseases (ILD) including
idiopathic pulmonary fibrosis (IPF) a life-threatening orphan disease with
poor prognosis.
· Investment in our Redx discovery engine: Our world-class
discovery engine sits at the core of everything we do. We nominated our next
wholly-owned development candidate, RXC008, a Gastro-Intestinal (GI)-targeted
ROCK inhibitor for the treatment of fibrostenotic Crohn's disease and our DDR
inhibitor programme entered lead optimisation.
Despite the challenges of the equity markets, in June 2022 we were successful
in securing additional financing to support our development plans. Through a
share placing, which was supported by all existing major shareholders, and
attracted an additional specialist healthcare investor, Invus, we raised
£34.3 million (gross). Additionally, due to the significant progress made
with our ongoing partnerships and collaborations, we earned $24 million
(£18.1 million) of non-dilutive milestone payments. These new funds in
addition to pre-existing cash will support the Company through the next stage
of significant pipeline progression and provides a cash runway into 2024.
During the last 12 months we have continued to deliver against our strategy.
Our ability to progress our in-house pipeline, delivering potential
much-needed new treatment options for patients, will also ultimately drive
long-term shareholder value.
On behalf of the Board, I would like to thank our executive team led by Chief
Executive, Lisa Anson, who have continued to successfully guide the Company
over the last 12 months, and all of our employees who, with their dedication
and hard work, have ensured we have progressed our business towards its goals.
We would also like to thank our shareholders, business partners and suppliers
for their ongoing support. Finally, I would like to thank my fellow Redx Board
members for providing their invaluable insights and expertise to the executive
team.
As I come to the end of my first calendar year as Chair of Redx, I am proud of
our achievements. Our progress in the last 12 months has offered a step-change
in the development of Redx as a clinical- stage biotech, and we look forward
towards another exciting year ahead.
Dr Jane Griffiths
Chair
Chief Executive's Report
In the last 12 months we have continued with strong momentum across all
aspects of the business and have made significant progress with both our
clinical-stage assets and our discovery engine. I am proud that we are now a
well-established clinical-stage biotechnology company with a rich pipeline of
assets. The results for the full year ended 30 September 2022, demonstrate the
progress we have made operationally, with two wholly-owned assets now in Phase
2 trials, and a robust preclinical pipeline that forms the basis for our
ambition to generate three INDs by the end of 2025. We have worked hard during
the period to attract top talent to Redx to strengthen both the leadership
team and the scientific team, as well as completing a successful fundraise
with the support of new and existing investors. Our people are our biggest
asset, driving our discovery engine with their world-class medicinal chemistry
and translational science expertise. The underlying strength of our science
has led to several exciting developments for the Company during the year, and
post-period.
We were delighted to start the period by showcasing last year's progress at
the R&D Day we held in October 2021. The event focused on our development
plans for both RXC004 and RXC007, and we were joined by key opinion leaders in
their respective fields. Professor Scott Kopetz, Department of
Gastrointestinal Medical Oncology, Division of Cancer Medicine, The University
of Texas MD Anderson Cancer Center, talked to the potential of porcupine
inhibition with RXC004 in genetically selected patients with microsatellite
stable metastatic colorectal cancer (MSS mCRC). Professor Gisli Jenkins,
Faculty of Medicine, National Heart & Lung Institute, Imperial College
London, spoke about ROCK and its importance in fibrosis; and Professor Toby
Maher, Professor of Medicine and Director of Interstitial Lung Disease, Keck
School of Medicine, University of Southern California, Los Angeles, gave a
more detailed overview of idiopathic pulmonary fibrosis (IPF) and the unmet
medical need for patients. Twelve months on, I am very pleased to be able to
report on the further momentum that we have made with our pipeline.
Our ambition is to transform the lives of patients by delivering better
medicines faster. We strive to become a leading biotechnology company through
the development of novel and differentiated targeted therapeutics in cancer
and fibrotic disease and to progress highly differentiated product candidates.
We continue to pursue our ambition with a clear strategy built upon the
following four elements which I will review in turn in this report:
· Advancing our clinical programmes:
o RXC004, an oral Porcupine inhibitor, through our initial
indications and then in studies for the potential treatment of additional
Wnt-ligand dependent cancers
o RXC007, an oral selective ROCK2 inhibitor, initially in clinical
trials for IPF and then more broadly in Interstitial Lung Disease (ILD) with
potential to explore additional fibrotic conditions including
cancer-associated fibrosis
· Investing in our Redx discovery engine to expand our pipeline
to deliver three new wholly-owned INDs by 2025, including advancing RXC008 to
clinic
· Maximising the full potential of our product pipeline by either
retaining commercial rights or considering attractive development and
commercialization partnerships
· Attracting and retaining the best people by providing a
world-class environment
Advancing our Clinical Programmes: RXC004, an Oral Porcupine Inhibitor for the
Targeted Treatment of Wnt-Ligand Dependent Tumours
RXC004, is a clinical-stage, highly potent and selective, orally active,
once-daily Porcupine inhibitor being developed as a targeted therapy for
Wnt-ligand dependent cancer. Wnt signaling is a heavily investigated pathway,
well established as a key driver of hard-to-treat cancers, and Porcupine is
the first target on this pathway showing real clinical promise. 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 controls the secretion of all 19 Wnt-ligands, reducing the risk of
redundancy in those cancers that are Wnt-ligand dependent. Not only do
aberrations in the Wnt pathway contribute directly to tumour growth, they also
play an important role in immune resistance, in particular to treatment with
immuno-oncology agents such as PD-1 checkpoint inhibitors. With this
knowledge, we have designed our RXC004 clinical studies to test both
hypotheses, by undertaking modules in both monotherapy and in combination with
immunotherapies. By genetically selecting patients with tumours that are
Wnt-ligand driven, 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. Our initial indications for this genetic
selection approach are MSS mCRC and pancreatic cancer. We are also undertaking
a study for monotherapy and combination applications in biliary cancer, where
genetic selection is not required as over 70%(( 2 (#_ftn2) )) of biliary
cancers have high Wnt-ligand expression.
Phase 2 clinical programme initated
During the period, we commenced our Phase 2 programme for RXC004. The first
study in the programme, PORCUPINE, is focused on patients with MSS mCRC that
has progressed following treatment with standard of care and is evaluating
preliminary efficacy and safety of RXC004. As previously announced, we
demonstrated preclinically that RXC004 can block activation of the Wnt pathway
and restore the ability of the immune system to fight the tumour, meaning that
it has the potential to both directly inhibit tumour growth and have an
immune-enhancing effect. The monotherapy arm of the PORCUPINE Phase 2 study
commenced in November 2021 and is ongoing with 14 patients dosed. The
combination arm of the PORCUPINE study has recently commenced screening.
In December 2021, we announced a strategic partnership with Caris Life
Sciences® (Caris) which leverages Caris' clinical trial solutions to enhance
the speed of recruitment at US study centers in the PORCUPINE study, as well
as provide insights into epidemiology and prognosis. In June 2022, Chief
Investigator, Professor Scott Kopetz, The University of Texas MD Anderson
Cancer Center, Houston, TX, detailed the design of both the monotherapy and
combination arms of PORCUPINE at the American Society of Clinical Oncology
(ASCO) Annual Meeting.
The second trial in our Phase 2 programme, PORCUPINE2, is evaluating RXC004 as
a monotherapy for patients with genetically selected pancreatic cancer and as
a monotherapy and in combination with pembrolizumab for unselected patients
with biliary tract cancers. This study commenced in January 2022 with
recruitment for the monotherapy biliary arm nearing completion.
Combination arms with checkpoint inhibitors now open
Post-period, at the Society for Immunotherapy of Cancer (SITC) Conference, we
presented data from our Phase 1 study evaluating RXC004 in combination with
nivolumab, (OPDIVO® - Bristol Myers Squibb, an anti-PD-1 antibody), which was
consistent with the previously released Phase 1 results of RXC004 as a
monotherapy. The data supported the initiation of the combination arms of
the Phase 2 PORCUPINE and PORCUPINE2 studies in genetically selected patients
with MSS mCRC and patients with biliary cancer, indications where immune
checkpoint inhibitors alone are ineffective. The recommended RXC004 dose for
these combination arms is 1.5mg once daily and patient enrollment is now open
for PORCUPINE and will commence in H1 2023 for PORCUPINE2.
All three indications have significant unmet medical needs 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 (EU5), and Japan(( 3 (#_ftn3) )).
Advancing our Clinical Programmes: RXC007, a selective ROCK2 inhibitor for the
treatment of interstitial lung disease (ILD) with an initial indication in
idiopathic pulmonary fibrosis (IPF)
Announcing that our lead fibrosis asset, RXC007, had entered Phase 2 studies
post-period, was an important milestone for the Company and is an exciting
development for IPF patients.
RXC007 is a potent, highly selective and orally-active inhibitor that targets
Rho Associated Coiled-Coil Containing Protein Kinase 2 (ROCK2) which sits at a
nodal point in the cell signalling pathway, central to fibrosis. ROCK2 is
therefore an important emerging drug target and RXC007 has the potential to
treat several fibrotic diseases. 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.
Phase 1 data suggests RXC007 has an excellent safety and pharmacokinetic
profile
In March 2022, topline data from the Phase 1 healthy volunteers clinical study
was presented at the Virtual Interstitial Lung Disease Drug Development
Summit, which demonstrated that RXC007 has an excellent safety and
pharmacokinetic profile, with a half-life of approximately 9-11 hours,
suitable for once daily dosing. No adverse events were observed in the single
ascending dose phase, following single doses of 2-70 mg (dosed once or twice
in a day), and no serious adverse events were observed in the multiple dose
phase (dosed at 50 mg twice daily for 14 days), with only transient,
reversible, mild adverse events. The pharmacokinetics were as predicted from
preclinical data, with linear exposure for 2-70 mg, and biologically relevant
exposures achieved from 20 mg BID. No significant effect on systemic exposure
was seen when dosed with food. The full data was presented at the 21(st)
International Colloquium on Lung and Airway Fibrosis (ICLAF) in October 2022
in Iceland.
Phase 2a clinical study in IPF initiated
Post-period we enrolled the first patient into our Phase 2a IPF clinical
study. This will be a staged approach based on learnings we have observed from
recent trials in the field, and will ensure that we can select a dose for
further development based on safety, PK, target engagement, fibrosis
biomarkers and early signs of efficacy.
The Phase 2a study will be a 12-week, randomised, dose escalation study with
and without standard of care agents. Three cohorts, each consisting of 16
patients, will be dosed with an escalating dose of RXC007, with the key
endpoints being safety, PK profile, changes from baseline in lung function -
Forced Vital Capacity (FVC) and Carbon Dioxide Diffusion Coefficient (DLCO),
changes from baseline in Quantitative Lung Fibrosis Score and airway volume
and resistance on high resolution computerised tomography (HRCT) scan. The
initial dosing period will last for 12 weeks however, patients may continue
for longer if there are no signs of disease progression. The data collected
will inform the dose we take forward into a larger potential Phase 2b study,
which will be powered to detect an efficacy signal based on the current
regulatory endpoint of FVC change over 12 months.
Broader ILD development plan
Post-period, we also presented compelling preclinical data in murine
sclerodermatous chronic graft versus host disease (GvHD) models at ICLAF in
October 2022. The data presented showed the pleiotropic, anti-fibrotic effects
of RXC007. The murine sclerodermatous GvHD model recapitulates aspects of
human scleroderma with prominent skin thickening, lung fibrosis, and
upregulation of cutaneous collagen. Furthermore, the underlying disease
mechanisms that drive pathology in the model show similarities to those
observed in auto-immune driven fibrotic diseases such as systemic sclerosis
and ILD. RXC007, dosed orally and therapeutically, was able to significantly
reduce skin thickness, fibrosis and collagen deposition in the skin and lungs
as measured by hydroxyproline. The strength of this preclinical data supports
our plan to establish a broader ILD development plan, which we intend to
investigate in the future Phase 2b study. In November 2022, Dr Nicolas
Guisot, VP Drug Discovery at Redx, spoke and presented a poster at the
Antifibrotic Drug Discovery (AFDD) Meeting which again supports our further
development plans, showing the potential of RXC007 in the treatment of
fibrosis, including IPF and chronic fibrosing interstitial lung disease
(CF-ILD).
Investing in Our Redx Discovery Engine
The nomination of RXC008, a GI-targeted ROCK inhibitor, for development and
initiation of the lead optimisation phase with our potent proprietary DDR
inhibitors, were both important achievements from our discovery engine, which
underline our scientific capability in drug discovery.
Our validated, world-class discovery engine fuels our business model and
incorporates our expertise in both medicinal chemistry and translational
science. Focused on creating potentially differentiated small molecules
designed to have high exposure, high potency and other optimised drug
properties, 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. To date, our discovery
engine has been responsible for the discovery of five assets that have
progressed into clinical development, all of which are ongoing in-house or
with partners.
RXC008: A potential first-in-class treatment for fibrostenotic Crohn's disease
In March 2022, RXC008 was nominated as our latest development candidate.
RXC008 is a potent, oral, small molecule non-systemic ROCK 1/2 inhibitor for
the treatment of fibrostenotic Crohn's disease. RXC008 avoids the significant
cardiovascular side effects of pan-ROCK inhibitors, including tachycardia and
hypotension, by being GI-restricted via high efflux and low permeability,
resulting in virtually no systemic breakthrough, with the molecule being
rapidly metabolised by paraoxonase enzymes in the plasma should any
breakthrough occur.
RXC008 has shown impressive anti-fibrotic effects in disease models, including
the adoptive T-cell transfer model, a model that is believed to mimic the
human disease situation well, where it was shown to suppress fibrosis. In
animal models, RXC008 dosed orally at 10 mg/kg once daily reduced tissue
damage, colon erosion and ulceration, and strongly inhibited fibrosis.
Likewise, RXC008 also shows strong anti-fibrotic effects in the chemically
induced DSS GI fibrosis model, when dosed prophylactically at 10 mg/kg orally
once daily. We are particularly excited by these results, which showed a
reduction in fibrosis in the histology score and an observation of a 25%
reduction in smooth muscle hyperplasia. Importantly, in this study carried out
with Ghent University, presented at the Extracellular Matrix Pharmacology
Congress in June 2022, we were also able to look at the inhibition of fibrosis
with RXC008 using non-invasive MRI scans and showed that RXC008
reduced tissue entropy - a surrogate marker of fibrosis that correlates with
histology scoring. We aim to use this translationally in our clinical trials
going forward.
Crohn's disease affects 1.7m people globally(( 4 (#_ftn4) )), with over half
developing stricture formation within the first 10 years of diagnosis(( 5
(#_ftn5) )). There are currently no approved therapeutic treatments for this
indication, with present treatment options limited to invasive surgical
interventions including balloon dilation, stricture-plasty and eventually
bowel resection. We are therefore extremely excited about the potential of
RXC008 to be a first-in-class treatment option and transform the lives of
these patients.
Discoidin domain receptors: a novel approach for the treatment of multiple
fibrotic conditions
In addition to RXC008, in January 2022 we announced that we had identified
potent proprietary discoidin domain receptor (DDR) inhibitors with drug-like
characteristics that are now in lead optimisation. DDRs have recently gained
traction as new druggable targets with the potential to treat multiple
fibrotic conditions, including lung and kidney fibrosis. 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.
Post-period, in November 2022, work from this programme was presented as a
poster at the American Society of Nephrology Kidney Week, which highlighted
compelling preclinical data with our novel, potent, selective and orally
active DDR1 inhibitor, in chronic kidney disease models. The data presented
showed selective inhibition of DDR1, a reduction in inflammation and
fibrosis in a mouse unilateral ureteral obstruction (UUO) model in both
prophylactic and therapeutic intervention. Significantly, to our
knowledge, this is the first example of selective inhibition of DDR1 with a
small molecule giving rise to efficacy in mouse UUO models.
Academic collaborations continue to bear fruit
We have set ourselves the ambitious target of submitting three wholly-owned
INDs by 2025, including RXC008, which is progressing towards a CTA/IND
application at the end of 2023, and have grown our chemistry and biology teams
accordingly in order to support this ambition. Outside of our in-house
expertise, we have a broad network of contractors, partners and academic
collaborators who we work with to support our ambition.
Academic collaborations are an integral part of the Redx approach to discovery
and, in April 2022, we announced a collaboration with the Garvan Institute of
Medical Research (the Garvan), a premier Australian medical research
institute, which expanded on preclinical work already underway between Redx
and the Garvan. The collaboration aims to better understand treatments that
could lead to increased patient survival in currently very poorly treated,
highly fibrotic cancers, such as pancreatic cancer. Together, we are
developing an enhanced understanding of cancer-associated fibrosis through
detailed scientific studies utilising patient-derived tumour tissue grown in
mice, which is thereby able to mimic human disease as closely as possible.
The research brings together the Garvan's research capabilities and leading
preclinical cancer models with our proprietary molecules in development for
novel targets potentially implicated in cancer-associated fibrosis, such as
Porcupine, ROCK2 and DDR. The programme provides cancer patients with access
to targeted therapies matched to the genomic and/or the fibrotic signature of
their tumour or tumour environment. RXC004 is being tested against RNF43
mutant pancreatic cancer, and preclinical work is ongoing to determine if the
patient population may be expanded beyond RNF43 loss of function patients to
include a wider fibrotic signature in pancreatic cancer. Pre-clinical data
from the collaboration demonstrating the efficacy of targeting fibrosis
associated with pancreatic cancer in mouse models with RXC004 and a Redx
proprietary ROCK2 selective inhibitor was presented at the Extracellular
Matrix Pharmacology Congress in June 2022 and post-period, in November 2022 at
the SITC Conference.
Maximising The Full Potential of Our Product Pipeline
Redx has completed several major partnering deals in recent years, comprised
of full asset sales, out-licencing agreements and research collaborations.
During the period, these partnerships contributed significant, non-dilutive
funding to the Company, through the receipt of $24 million (£18.1 million) in
milestone payments.
In December 2021 a $10 million (£7.4 million) milestone was triggered under
our oncology collaboration with Jazz Pharmaceuticals (Jazz), which entered its
second year. Under this agreement, which is targeting the RAS-RAF-MAP kinase
(MAPK) pathway, Redx is responsible for research and preclinical development
activities up to IND application to the US Food and Drug Administration (FDA).
One of the targets under this agreement is progressing towards IND
application, the other was halted by Jazz in June 2022 due to pipeline
prioritisation and the evolving competitive landscape.
Under a separate agreement with Jazz, signed in July 2019 and focused on
developing a precision pan-RAF inhibitor, the team successfully achieved IND
clearance from the FDA in June 2022, triggering a further $5 million (£4
million) milestone payment. JZP815 targets specific components of the
mitogen-activated protein kinase (MAPK) pathway that, when activated by
oncogenic mutations, can be a frequent driver of human cancer. Redx was
responsible for development activities up to completion of IND-enabling
studies, and with this successful milestone, our work under this collaboration
has now ceased and all further development is now being completed by Jazz, as
per the agreement. Post-period, Jazz announced that the first patient had been
dosed in Phase 1 clinical studies for JZP815, making it the fifth compound
from Redx's discovery engine to successfully enter clinical development. Redx
remains entitled to development, regulatory and commercial milestone payments
as well as incremental tiered royalties in mid-single digit percentages, based
on any future net sales of JZP815.
Further validating our business strategy and discovery engine capabilities is
our out-licensing agreement with AstraZeneca, signed in August 2020, for
RXC006 (AZD5055), a Porcupine inhibitor being developed for the treatment of
IPF. In December 2021, Redx earned a $9 million (£6.7 million) milestone for
the initiation of Phase 1 trials in healthy volunteers with AZD5055, which
completed the total $17 million (£12.6 million) available between deal
signature and successful commencement of a clinical trial. Redx remains
eligible to receive further development, regulatory and commercial milestone
payments as well as tiered royalties of mid-single digit percentages, based on
any future net sales of AZD5055.
We are proud of our ability to secure deals with top-tier partners who
recognise the differentiated assets that we discover at Redx. 2022 was an
exceptional year, with the receipt of $24 million (£18.1 million) in
milestones, and both JZP815 and AZD5055 entering Phase 1 clinical studies,
however we expect the momentum of milestones payments to slow as these
candidates progress and if successful, future milestones will not be as
frequent. Following the success of these partnership deals, in line with our
strategy and business development plans, we will continue to review future
development and commercialisation partnership opportunities as they arise.
Attracting and Retaining the Best People by Providing a World-Class
Environment
Our people remain our biggest asset, driving our discovery engine with their
world-class medicinal chemistry and translational science expertise. The
integrated team comprises of both chemists and biologists and continues to
utilise cutting edge technologies optimal for each specific programme.
Announcing post-period that the fifth molecule from our discovery engine,
JZP815, had entered Phase 1 clinical trials, is testament to their ability and
determination. The underlying strength of our science has led to exciting
developments for the Company both during the year, and post-period.
In December 2021, we strengthened the Board with the appointment of Dr Jane
Griffiths as our new Chair, and in January 2022 with the addition of Dr Rob
Scott as Non-Executive Director. We decided, after these appointments, to form
a new Board committee, the Science Committee, which is responsible for
reviewing and assessing Redx's R&D programmes and strategies, in addition
to overseeing the Company's progress against its scientific goals. The
committee is chaired by Dr Bernhard Kirschbaum, with Dr Rob Scott and Lisa
Anson serving as members. We were pleased at our Annual General Meeting in
March 2022 to receive strong support from our shareholders on all resolutions,
including the re-election of our Board members.
Throughout the course of the year, we also added important new expertise to
the leadership team in the form of newly created positions of General Counsel
and Head of Quality. Post-period we were also delighted to appoint a Head of
Business Development, who will drive our efforts in securing key partnerships
as we bring more assets to clinical development.
As we develop as a clinical-stage biotech organisation and our team continues
to grow, we are focusing more resource on providing the capabilities,
infrastructure and skills required to support this growth. As we returned to
more normalised working procedures following the COVID-19 pandemic, we took
the opportunity to engage with all of our employees, including through a staff
survey and a company-wide workshop aligning around our Company ambition and
mission, which were well received and showed strong staff engagement. We see
the investment in building a strong corporate culture as crucial - valuing our
employees and continuing to attract top-tier talent will drive and ensure our
continued success. As a team we have implemented an explicit set of values -
Teamwork, Resilience, Innovation, High Standards and Agility. These are
embedded throughout the business to ensure that Redx is not only a world-class
biotech scientifically, but also culturally.
Further Strengthening of Our Financial Position
In order to continue to realise the full potential of our pipeline, we have
worked hard to strengthen our balance sheet through a successful fundraise
supplemented by non-dilutive milestone payments from our partnered programmes.
In June 2022, our shareholders approved a fundraise of £34.3 million (gross)
at 59 pence per share, which was priced at market despite challenging
macroeconomic conditions. The fundraise, which was approved by shareholders on
6 June 2022, added a new specialist healthcare investor, Invus, to our
shareholder register, and we were delighted to receive strong support from all
our major existing investors: Redmile Group, Sofinnova Partners, Polar Capital
and Platinum Asset Management.
As a result, the Company ended the period with a cash balance of £53.9
million (30 September 2021: £29.6 million). This cash balance provides Redx
with a cash runway into 2024 and allows us to fund our clinical development
and research stage programmes to important value inflection points throughout
2023.
During the period, we increased investment in our research and development
(R&D) activities significantly, with overall R&D expenditure of £28.6
million (2021: £24.4 million) reflecting our growth as a clinical-stage
biotech and the strong progress made in our pipeline, with two assets now in
Phase 2 clinical studies.
As a clinical-stage biotechnology company, we are acutely aware of the
investment required to fully realise the potential of our pipeline and that we
will therefore need to raise additional capital in a timely manner. We believe
in the strength of our pipeline and that it provides an attractive opportunity
to investors but remain cognisant of the wider macroeconomic climate and the
uncertainty that it brings. The associated uncertainty, along with our
judgement in relation to the maturity of convertible loan notes, is discussed
in more detail in the basis of preparation of the Consolidated Financial
Statements.
Outlook
We have focused on progressing our pipeline, delivering against our strategy
and further establishing ourselves as a clinical-stage biotechnology company.
We are delighted that we now have two wholly-owned programmes in Phase 2
clinical development, and we are excited that we will start to see data from
these programmes throughout the next calendar year. There have also been some
extremely exciting developments in our pre-clinical pipeline during the
period, and we are looking forward to announcing more progress from our
discovery engine in 2023, including with RXC008 as it progresses towards the
clinic.
Global macroeconomic markets remain volatile and, as with any biotech company,
we continue to observe the equity markets to identify opportunities to help
secure our long-term financial security. Despite current market conditions, we
believe that we have the right strategy, team and asset portfolio which will
shape our ability to continue to secure future funding.
As well as thanking our Board whose experience and guidance is of huge
importance to the success of Redx and thereby safeguarding value creation for
our shareholders, I would like to take this opportunity to thank all of our
staff, whose expertise and commitment are the foundation of Redx.
I continue to be excited by our pipeline and our prospects - we have a
differentiated portfolio of assets which will address areas of significant
unmet medical need and have real commercial potential, we have a world-class
team and a strong balance sheet that position us for further growth. I look
forward to reporting on this progress in 2023.
Lisa Anson
Chief Executive Officer
Operational Review
The Directors present this Operational Review for the year ended 30 September
2022 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), Dr Richard Armer (Chief Scientific
Officer), Peter Collum (Chief Financial Officer), Dr James Mead (Chief
Operating Officer) and Dr Jane Robertson (Chief Medical Officer) have
continued in their positions throughout the year. Claire Solk joined as
General Counsel in January 2022.
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.
2022 2021 2020 2019
£m £m £m £m
Cash at year end 53.9 29.6 27.5 3.7
The Group made further significant progress in ensuring sufficient funding to
deliver its development plan, through $27 million (£20.3 million) of
milestone and partnering receipts, of which $3m was recognised in the prior
year, and £34.3m (gross) from the share placing. The year-end cash balance is
sufficient to fund the plan into 2024.
2022 2021 2020 2019
£m £m £m £m
Total operating expenditure 34.4 27.1 14.1 10.2
(excluding share based payment costs & exchange gains)
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.
2022 2021 2020 2019
£m £m £m £m
Net increase in cash and cash equivalents 24.3 2.0 23.8 (2.8)
(including certain one-off payments)
Significant positive cash flows continue to be achieved not only from
financing activities, but also importantly from business partnerships with
AstraZeneca and Jazz Pharmaceuticals. The inflows ensure that the Group has a
cash runway into 2024 that allows it to fund its business plan during that
period.
Financial Review
Financial position
At 30 September 2022, the Group had cash resources of £53.9 million (2021:
£29.6 million). In June 2022, the Group raised £34.3 million (gross) via a
placing of Ordinary shares, supported by both existing and new specialist
investors, further strengthening the Group position.
The partnership with AstraZeneca generated a further $9 million (£6.7
million) milestone payment in the year, and collaborations with Jazz
Pharmaceuticals yielded $18 million (£13.6 million) of cash receipts.
Exercises of share options by current and former staff generated £0.3
million.
This funding is sufficient to allow the Group to fund its business plan into
the calendar year 2024, based on currently budgeted levels of expenditure.
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
agreements with AstraZeneca and Jazz Pharmaceuticals (via milestone payments)
and both the research collaboration with, and provision of research and
preclinical development services to, Jazz Pharmaceuticals (covering both
continuing and discontinued targets). Milestone income from AstraZeneca and
Jazz Pharmaceuticals 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 5. 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 remain considerable as a consequence of the charging of a full
year's "effective interest" (calculated in valuing the lease liability and
convertible loan note liability under IFRS), on both the convertible loan
notes and the lease of our premises at Alderley Park in the current financial
year.
There was no actual cash interest paid in 2022 (2021: £nil).
Cash flows
Overall positive net cash flow for the year was £24.3 million, (2021: £2.0
million). See KPIs for details.
Taxation
The Group has prepared these financial statements on the basis that it will
continue to be claiming Research and Development expenditure credits rather
than R&D tax credits, as a result of the significant shareholding by Funds
managed by Redmile Group LLC.
Consolidated Statement of Comprehensive Loss
For the year ended 30 September 2022
Year ended Year ended
Note 30 September 30 September
2022 2021
£'000 £'000
Continuing operations
Revenue 3 18,690 10,035
Research and Development expenses (28,563) (24,445)
General and Administrative expenses (10,229) (6,492)
Exchange gains on translation 2,297 37
Other operating income 1,539 1,120
___________ ___________
Loss from operations (16,266) (19,745)
Finance income 187 13
Finance costs (1,725) (1,711)
___________ __________
Loss before taxation (17,804) (21,443)
Income tax (201) (133)
___________ __________
Loss attributable to owners of Redx Pharma Plc
(18,005) (21,576)
Other comprehensive income
Items that may subsequently be reclassified to profit or loss
Exchange difference from translation of foreign operations
31 29
Total comprehensive loss for the year attributable to owners of Redx Pharma
Plc
(17,974) (21,547)
======== ========
Loss per share
From continuing operations
Basic & diluted (pence) 4 (6.1) (8.4)
Consolidated Statement of Financial Position
At 30 September
2022
Company No. 07368089
Note 2022 2021
£'000 £'000
Assets
Non-current assets
Property, plant and equipment 2,699 3,325
Intangible assets 400 405
___________ __________
Total non-current assets 3,099 3,730
___________ __________
Current assets
Trade and other receivables 5,498 6,231
Current tax 26 32
Cash and cash equivalents 53,854 29,552
___________ __________
Total current assets 59,378 35,815
___________ __________
Total assets 62,477 39,545
___________ __________
Liabilities
Current liabilities
Trade and other payables 5,958 4,699
Contract liabilities 5 4,893 4,318
Borrowings 6 15,731 -
Lease liabilities 623 575
___________ __________
Total current liabilities 27,205 9,592
Non-current liabilities
Borrowings 6 14,247
Lease liabilities 1,951 2,574
___________ __________
Total liabilities 29,156 26,413
___________ __________
Net assets 33,321 13,132
======== =======
Equity
Share capital 7 3,349 2,753
Share premium 99,501 66,299
Share-based compensation 8,199 4,752
Capital redemption reserve 1 1
Exchange translation reserve 60 29
Convertible note reserve 3,524 3,524
Retained deficit (81,313) (64,226)
___________ __________
Equity attributable to shareholders 33,321 13,132
======== ========
Consolidated Statement of Changes in Equity
For the year ended 30 September 2022
Share Share Share based payment Capital Exchange translation Convertible Note Reserve Retained Total
capital premium £'000 Redemption Reserve £'000 Deficit Equity
Reserve £'000
£'000 £'000 £'000 £'000 £'000
At 1 October 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
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
Loss for the year - - - - - (18,005) (18,005)
Other comprehensive income
- - - - 31 - - 31
Total comprehensive loss for the year
- - - - 31 - (18,005) (17,974)
Transactions with owners of the Company
Issue of ordinary shares 596 33,972 - - - - - 34,568
Transaction costs on issue of ordinary shares
- (770) - - - - - (770)
Share based compensation - - 4,365 - - - - 4,365
Release of share options lapsed in the year
- - (918) - - - 918 -
Movement in year 596 33,202 3,447 - 31 - (17,087) 20,189
At 30 September 2022 3,349 99,501 8,199 1 60 3,524 (81,313) 33,321
Consolidated Statement of Cash Flows
For the year ended 30 September 2022
Year ended 30 September Year ended 30 September
2022 2021
£'000 £'000
Net cash flows from operating activities
Loss for the year (18,005) (21,576)
Adjustments for:
Income tax 201 133
Finance costs 1,725 1,711
Finance income (187) (13)
Depreciation and amortisation 886 633
Share based compensation 4,365 3,785
Profit on disposal of assets (13) -
Movements in working capital
Decrease/(increase) in trade and other receivables 7,631 (4,651)
(Decrease) in trade and other payables and provisions
(5,593) (1,414)
__________ __________
Cash used in operations (8,990) (21,392)
Tax credit received 333 -
Interest received 187 13
__________ __________
Net cash (used in) / generated by operations (8,470) (21,379)
__________ __________
Cash flows from investing activities
Sale of property, plant and equipment 21 -
Purchase of property, plant and equipment (262) (754)
__________ __________
Net cash used in investing activities (241) (754)
__________ __________
Cash flows from financing activities
Proceeds of share issues 34,568 25,980
Share issue costs (770) (1,051)
Payment of lease liabilities (816) (786)
__________ __________
Net cash generated by financing activities 32,982 24,143
__________ __________
Net increase in cash and cash equivalents 24,271 2,010
Cash and cash equivalents at beginning of the year
29,552 27,513
Foreign exchange difference 31 29
__________ __________
Cash and cash equivalents at end of the year 53,854 29,552
__________ __________
Consolidated Statement of Cash Flows (Cont'd)
For the year ended 30 September 2022
Reconciliation of changes in liabilities arising from financing activities
2022
£'000
IFRS 16 Lease liability
Balance b/fwd 3,149
Payment of lease liabilities (816)
Interest on lease liabilities 241
__________
Balance c/fwd (disclosed as current and non-current lease liabilities) 2,574
__________
Convertible loan notes
Balance b/fwd 14,247
Interest 1,484
___________
Balance c/fwd (disclosed as current borrowings) 15,731
___________
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 UK adopted International
Accounting Standards 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 2022 and 30 September
2021, 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 2021 have been
filed with the Registrar of Companies, and those for 2022 will be delivered
following the Company's Annual General Meeting. Auditors have reported on the
statutory accounts for 2022 and 2021. The audit report for 2022 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 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 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 30 September, 2022 the Group held £53.9 million of cash and cash
equivalents. The Group has a history of recurring losses from operations,
including a net loss of £18.0 million for the year ended 30 September, 2022
and an accumulated deficit of £81.3 million at that date. In addition
operational cash outflows continue to be driven by the ongoing focus on the
research, development and clinical activities to advance the programmes within
the Group's pipeline. The Group recorded a net increase in cash and cash
equivalents of £24.3 million for the year ended 30 September, 2022 as a
result of the receipt of milestones revenue on partnered programmes, plus the
proceeds of the June financing. On 7 June, 2022 the Group closed the sale of
58,070,956 Ordinary shares, resulting in gross proceeds of £34.3 million
(£33.5 million net of transaction costs).
As part of its approval of the Group's budget for the year ending 30 September
2023, the Board concluded that the Group holds sufficient cash and cash
equivalents to provide a cash runway into January 2024 at currently budgeted
levels and timings of expenditure and also on the assumption that the Group's
convertible loans will be converted into equity of the Group, or that there
will be an extension of the term of those convertible loans (see further
discussion below).
In undertaking the going concern review, the Board has reviewed the Group's
cash flow forecasts to 31 December, 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. Further funding is
required under the Board's long-term plan to continue to develop its product
candidates and conduct clinical trials, and the Group plans to raise
significant further finance within this period, either from existing or new
investors, and is exploring a number of different options to raise the
required funding. Given these plans and requirements, a review period of 12
months is considered appropriate.
The Board has identified and assessed downside risks and mitigating actions in
its review of the Group's cash flow forecasts. The potential requirement to
repay the convertible loan notes and the ability of the Group to raise further
capital are both circumstances outside the control of the directors.
Accordingly, the downside risks include severe but plausible scenarios where
external fund raising is not successful, where the Group underperforms against
the business plan, and where the convertible loan notes are recalled rather
than converted or extended. Mitigating actions include the delay of operating
expenditure for research activities and restriction of certain discretionary
expenditure including capital expenditure. In the event that the convertible
loan notes are not converted or extended, the stated mitigating actions would
be insufficient such that the Group would need to raise additional capital
within the going concern period and this is outside of the control of the
directors. Based on these conditions, the Group has concluded that the need to
raise further capital from either existing or new investors and the potential
need to repay the convertible loan notes represent material uncertainties
regarding the Group's ability to continue as a going concern.
Notwithstanding the existence of the material uncertainties, the Board
believes that the adoption of the going concern basis of accounting is
appropriate for the following reasons:
· the directors consider it highly unlikely that the convertible
loan notes will be repaid in August 2023 given that the conversion price of
15.5p represents a significant discount to the open market price of Redx
Pharma Plc share capital. This discount is around 74% when compared to the
share price at which the 7 June, 2022 equity fundraising was completed, in
which both convertible loan note holders participated.
· The directors do not currently expect the convertible loan notes
to be recalled in August 2023.
· 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
milestone payments which have the potential to increase the Group's cash
runway but are not included in the Directors' assessment given they are
outside the control of management.
· the Group retains the ability to control capital and other
discretionary expenditure and lower other operational spend.
There can be no assurance that the convertible loan notes will be converted or
extended rather than recalled. If the loan notes are not converted or
extended, the Group may not have sufficient cash flows to support its current
level of activities beyond the maturity date. While the Group has successfully
accessed equity and debt financing in the past, there can be no assurance that
it will be successful in doing so now or in the future. In the event the loan
notes are recalled, or additional financing is not secured, the Group would
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 programmes; 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 future business
operations and financial condition.
The accompanying financial statements do not include any adjustments that
would be required if they were not prepared on a going concern basis.
Accordingly, the 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. Revenue
2022 2021
£'000 £'000
Revenue from milestones on scientific programmes
10,693 5,009
Revenue from research collaboration 6,852 2,751
Revenue from research and preclinical development services
1,145 2,275
18,690 10,035
4. 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:
2022 2021
£'000 £'000
Loss for the period attributable to the owners of the Company (18,005) (21,576)
Number Number
Weighted average number of shares - basic and diluted 294,182,774 256,430,270
Pence Pence
Loss per share - basic and diluted (6.1) (8.4)
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 110,288,887 ordinary shares that could
potentially dilute basic earnings per share on conversion.
5. Contract liabilities
2022 2021
£'000 £'000
Contract liabilities 4,893 4,318
4,893 4,318
Reconciliation
Brought forward 4,318 7,069
Contract asset received 7,427 -
Transfer to revenue (6,852) (2,751)
Carried forward 4,893 4,318
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 £4.89
million as at 30 September 2022 (2021: £11.73 million) and is expected to be
recognised as revenue in future periods as follows:
2022 2021
£'000 £'000
Within 1 year 3,920 4,438
In the second to fifth years 973 7,297
4,893 11,735
The contract liability (net of contract asset) relates to a single research
collaboration contract. As a result of the discontinuance of one of the two
targets being researched under the contract, there were no further obligations
on the Group, and as amounts received to date are non-refundable, all
remaining contract liabilities with regard to the discontinued target have
been recognised as revenue (£5.52 million). The treatment of the remaining
target remains in accordance with the stated accounting policies. During the
year, the estimated time period for completion of obligations under the
research collaboration contract was increased by six months.
6. Borrowings
2022 2021
£'000 £'000
Convertible loan notes
Current 15,731 -
Non-current - 14,247
15,731 14,247
On 4 August, 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
£4.57million 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 £127k and a decrease to 7.5%
would increase the debt element by £129k.
Partial conversion
On 2 December, 2020 the Group announced that RM Special Holdings 3 LLC and
Sofinnova Crossover 1 SLP would convert £3.33 million and £1.75 million
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. As of 30 September, 2021, an aggregate of £17.1
million 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 £17.1 million has been discounted at the
effective interest rate determined on initial measurement, resulting in a
discounted liability of £15.7 million (2021: £14.2 million).
7. Share Capital
Note
2022 2021
Numbers Numbers
Number of shares in issue
In issue at 1 October 275,282,205 195,247,413
Issued for cash 58,070,956 45,833,641
Loan note conversion - 32,806,159
Exercise of share options 1,558,297 1,394,992
In issue at 30 September 334,911,458 275,282,205
£'000 £'000
Share Capital at par, fully paid
Ordinary shares of £0.01
At 1 October 2,753 1,952
Issued for cash 581 459
Loan note conversion - 328
Exercise of share options 15 14
At 30 September 3,349 2,753
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 19 May, 2022, the Group announced that it had conditionally raised £34.3
million (gross) by way of a placing of Ordinary shares at 59p per share. All
resolutions required to accomplish this were passed at a general meeting of
shareholders on 6 June, 2022, and accordingly 58,070,956 new Ordinary shares
were issued and admitted to trading on AIM on 7 June, 2022.
On 26 July, 2022, the Group announced the exercise of share options over
1,558,297 Ordinary shares. The exercise took place at prices ranging from
15.5p to 56p per Ordinary share. The gross amount received was £0.3 million
and the shares were admitted to trading on AIM on 27 July, 2022.
8. 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:
In March 2020, as a result of the purchase of shares by RM Special Holdings 3,
LLC ("Redmile"), it became a significant shareholder (>70%) and related
party. The Group issued £14.5 million convertible loan notes to Redmile on 4
August 2020 on terms summarised in note 6. Redmile further participated in the
placing of Ordinary shares in June 2022.
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. Sofinnova also participated in the placing of Ordinary
shares in June 2022.
On 2 December, 2020 the Group announced that RM Special Holdings 3 LLC and
Sofinnova Crossover 1 SLP would convert £3.33 million and £1.75 million
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 22 December,
2020. As of September 30, 2022, an aggregate of £17.1 million 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 £17.1 million has been discounted at the
effective interest rate determined on initial measurement, resulting in a
discounted liability of £15.7 million (note 6).
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.
2022 2021
Charges from related parties £'000 £'000
RM Special Holdings 3, LLC - convertible loan note interest
995 954
Sofinnova Crossover 1 SLP - convertible loan note interest
489 474
1,484 1,428
2022 2021
Amounts owed to related parties £'000 £'000
RM Special Holdings 3, LLC - loan note
10,284 9,289
Sofinnova Crossover 1 SLP - loan note
5,447 4,958
15,731 14,247
Amounts owed to/by related parties are disclosed in borrowings and the
convertible note reserve.
9. 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.
1 (#_ftnref1) KEYTRUDA® is a registered trademark of Merck Sharp &
Dohme LLC, a subsidiary of Merck & Co., Inc., Rahway, NJ, U.S.A.
2 (#_ftnref2) Loilome et al. 2014, Boulter et al. 2015
3 (#_ftnref3) Incidence data sourced from GlobalData Epidemiology data
(Major Markets: US, EU5, Japan, China)
4 (#_ftnref4) Clarivate, Crohn's disease disease landscape & forecast pg
39, Published Sep 2022
5 (#_ftnref5) Chan et al, 2018
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