REG - ValiRx PLC - Final Results and Notice of AGM
15/05/2024 07:00
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RNS Number : 4463O ValiRx PLC 15 May 2024
15 May 2024
ValiRx PLC
("ValiRx" or the "Company")
Full Year Results and Notice of AGM
London, UK - ValiRx Plc (AIM: VAL), a life science company focusing on
early-stage cancer therapeutics and women's health, announces its audited
results for the year ended 31 December 2023.
Highlights
Operational Highlights:
· Initiation of Evaluation Agreement with StingRay Bio and expanded
evaluation agreement with Barcelona University
· Post-period initiation of evaluation agreements with Imperial College
London and Dundee University
· Launch of subsidiary Inaphaea BioLabs to conduct internal laboratory
based evaluation experiments and to offer external services; with first
revenue generating client contract signed
· Acquisition of scientific assets of Imagen Therapeutics, including a
biobank of patient derived cell models
Financial Highlights:
· Research and developments costs of £383,362 for the year ended 31
December 2023 as compared to £551,233 in 2022, a decrease of £167,871
· Administrative expenses of £1,886,401 for the year ended 31 December
2023 as compared to £1,502,355 in 2022, an increase of £384,046 reflecting
increased spending in the set-up of the laboratory facility
· Total comprehensive loss for the year ended 31 December 2023 of
£2,037,701 as compared to £2,366,488 in 2022, a decrease of £328,787 and a
loss per share of 2.01p as compared to 3.06p in 2022
· Cash balance at 31 December 2023 of £174,684 as compared to
£1,137,477 in 2022
Material uncertainty relating to going concern
The Auditors have drawn attention to the policy on Going Concern within note 2
to the financial statements, which indicates that the accounts have been
prepared on the going concern basis. The Board has referred to the fact that
the Group and Parent Company are reliant on future fund raisings to continue
their activities as budgeted. Should future fund raisings be unsuccessful,
this may cast significant doubt on the Group and parent Company's ability to
continue as a going concern. The Auditors opinion is not modified in respect
of this matter. The Auditor's report contained in the Company's Annual Report
is set out in full in note 4 further below.
Notice of AGM
The Company's Annual General Meeting ("AGM") will be held at 1:00 pm on 20
June 2024 at the offices of DAC Beachcroft LLP at The Walbrook Building, 25
Walbrook, London EC4N 8AF. A copy of the Company's annual report and accounts,
together with the Notice of AGM, have been posted to all shareholders and will
shortly be available on the Company's website www.valirx.com.
The information contained within this announcement is deemed by the Company to
constitute inside information as stipulated under the Market Abuse Regulations
(EU) No. 596/2014 as it forms part of UK Domestic Law by virtue of the
European Union (Withdrawal) Act 2018 ("UK MAR"). The Directors of the Company
take responsibility for this announcement.
For more information, please contact:
ValiRx plc Tel: +44 (0) 115 784 0026
www.valirx.com
Dr Suzanne Dilly, CEO Suzanne.Dilly@valirx.com (mailto:Suzanne.Dilly@valirx.com)
V Formation (Public Relations) +44 (0) 115 787 0206
www.vformation.biz (http://www.vformation.biz/)
Lucy Wharton - Senior PR Executive
Sue Carr - Director lucy@vformation.biz
sue@vformation.biz
Cairn Financial Advisers LLP (Nominated Adviser) Tel: +44 (0) 20 7213 0880
Liam Murray/Jo Turner/Ludovico Lazzaretti
Shard Capital Partners LLP (Sole Broker) Tel: +44 (0) 20 7186 9000
Damon Heath
Notes for Editors
About ValiRx
ValiRx is a life science company focused on early-stage cancer therapeutics
and women's health, accelerating the translation of innovative science into
impactful medicines to improve patient lives.
ValiRx provides the scientific, financial, and commercial framework for
enabling rapid translation of innovative science into clinical development.
Using its extensive and proven experience in research and drug development,
the team at ValiRx selects and incubates promising novel drug candidates and
guides them through an optimised process of development, from pre-clinical
studies to clinic and investor-ready assets.
ValiRx connects diverse disciplines across scientific, technical, and
commercial domains, with the aim of achieving a more streamlined, less costly,
drug development process. The team works closely with carefully selected
collaborators and leverages the combined expertise required for science to
advance.
Lead candidates from ValiRx's portfolio are out licensed or partnered with
investors through ValiRx subsidiary companies for further clinical development
and commercialisation.
ValiRx listed on the AIM Market of the London Stock Exchange in October 2006
and trades under the ticker symbol: VAL.
For further information, visit: www.valirx.com (http://www.valirx.com)
Chairman's Report for the year ended 31 December 2023
The last few years are widely acknowledged to have been challenging for the
biotech industry across the board and specifically for publicly listed
companies. Investor interest has significantly retreated, most likely driven
by a combination of geo-political events and the dramatic rise in interest
rates to tackle high inflation.
Not surprisingly, ValiRx has not been immune to these external factors,
further exacerbated by slower than expected progress in key projects, such as
VAL201 out-licencing and, to a lesser extent, protracted negotiations on
university-derived evaluation agreements.
The funds secured in January 2023 have enabled ValiRx to progress our
development pipeline and, importantly, to initiate the build-and-buy strategy
to establish our translational contract research organisation (tCRO®),
branded as Inaphaea Biolabs.
Since its incorporation in January 2023, Inaphaea has leased, equipped and
validated a new laboratory in Nottingham, recruited a highly qualified team
and is beginning to build a strong market presence in translational testing
services. Critically, the funding secured earlier in the year also placed
ValiRx in a strong position to respond rapidly to the offer for sale of the
liquidated assets of Imagen Therapeutics. This was a highly competitive
process and a quick response was imperative.
The acquired assets comprise a wide range of relevant analytical equipment and
a biobank of patient -derived cancer cells (PDCs) accumulated by Imagen over a
number of years. Ownership of the PDC biobank has given Inaphaea a clear
competitive advantage and will become a corner stone of the tCRO® concept.
Work is now underway to identify which cancers are of greatest market interest
to be able to prioritise full characterisation of the appropriate cells for
use in the provision of services and product sales. In addition, all ValiRx
in-house development projects have been transferred into Inaphaea and
benefitting from access to the PDCs. This has also resulted in considerable
cost savings relative to the use of external contractors.
After extensive business development activities for VAL401, we were pleased to
have entered into a letter of intent with Ambrose Healthcare for development
of this unique compound. With a focus on rare diseases and patients managed in
hospitals, we believe the team at Ambrose have the right skills and experience
to progress VAL401 into clinical studies when the necessary funding has been
secured.
In summary, despite significant challenges facing the biotech sector in 2023,
we were pleased to have secured sufficient investment to progress the dual
track strategy of developing a risk-balanced pre-clinical pipeline and
building a tCRO®, Inaphaea Biolabs, to generate 3rd party income.
With the recently announced Board changes, we look forward to continuing
commercial progress in 2024 and establishing Inaphaea as a leader in the use
of PDCs to enhance the translation of novel pre-clinical assets into clinical
development.
Kevin Cox
Chairman
13 May 2024
Chief Executive's Report for the year ended 31 December 2023
In this, my final Chief Executive's Report, I would like to take the
opportunity to reflect on progress by the Group not just over the past year,
but to include the context of the previous four years.
With the launch of Inaphaea BioLabs in Q1 of 2023, we progressed the ambitions
of the ValiRx group to move away from a wholly virtual biotech company and
towards a balanced, early-stage discovery and preclinical biotechnology group.
Although the virtual model was preferred for the Group as a "single asset"
group, as the expansion and risk diversification of the preclinical pipeline
continues, the value of controlling our own laboratory facility increases
proportionally. These early-stage assets need standardised experimental
procedures conducting for initial assessment and for advancing the biological
understanding of the drug candidate molecules. Access to both the expertise
within Inaphaea and the facilities enables a time and cost-efficient
turnaround.
The addition of the scientific assets from Imagen Therapeutics provided an
opportunity to launch our translational Contract Research Organisation
(tCRO®) with a truly valuable biobank of patient derived tumour cell models
(PDCs) - covering samples from over 500 tissue collections, grown into cell
models.
Work continues on the development, characterisation and optimisation of these
samples, but within months of on-boarding the biobank, Inaphaea had secured
the first service contract from an external client to screen a focussed
library of drug candidates against a PDC sample to seek anti-cancer
activity. Considerable interest has also been shown in the use of samples
from our biobank by other researchers, and we have developed commercial
frameworks to offer these samples under a range of different use categories,
including for preclinical research, for commercial incorporation into medical
devices and for provision in further specialist third party CRO assays.
The PDCs provide the capability to produce experimental procedures in the
Inaphaea facility that more closely model the human disease state compared to
fully immortalised cell lines. We minimise the use of non-human growth factors
and optimise selective growth conditions to ensure we retain both the
cancerous cells and, where appropriate, a proportion of the supportive
surrounding cells in the samples. These techniques enable us to provide a
differentiated and more translational service.
The tCRO® concept is built on the premise of providing a coherent network of
translational science, bridging a number of technologies to create a more
complete picture of the biological activity of a drug candidate. As part of
our process to further build the tCRO® service offering, we have commenced
assembling a range of related services via collaborative services agreements
with third party service providers. These providers have been selected
specifically with their relationship to the Inaphaea services in mind, and are
trusted partners with whom we would collaborate (and in many cases have done
so) on our own projects, and hence we recommend them to our clients.
The benefits of the collaborative services approach are many - from the client
perspective, the ability to access all the services seamlessly under a single
service agreement creates efficiency and, for Inaphaea, we can have confidence
that the upstream or downstream processes have been conducted in a manner and
with partners that we are confident in working with. Additional synergism is
seen through combined marketing, business development, and of course, our
exposure to their established client bases.
So, although we are building the Inaphaea customer base from a clean page, we
have the advantage of our collaborators networks to build on.
The pipeline of client prospects within Inaphaea is looking strong, with a
steady build of prospects throughout the second half of 2023. Although the
nature of our industry is of long-term research budget planning with
associated long lead times, our current pipeline of prospects is progressing
well. As the catalogue of characterised PDCs is developed we expect this to
grow further with product license as well as service opportunities.
The in-house research evaluation pipeline was boosted by two programmes within
2023, with the Barcelona agreement being expanded to encompass an additional
project, as well as an evaluation project initiated in Q4 on an asset from
StingRay Bio. The latter demonstrates our intent to work with innovators in
all capacities; we are not restricted to the university sector to source
innovative projects for development. We look forward to progressing both of
these projects to meet the timelines for a decision on in-licensing within
2024.
Post period two additional programmes from Dundee University and Imperial
College London have been secured into evaluation agreements, with Dundee
agreeing to an over-arching agreement to encompass future projects. On
reflection of our current pipeline of new projects, consisting of Cytolytix
plus four active evaluation agreements we have made significant steps towards
bringing a balanced pipeline to the Group.
The assets currently in the new pipeline include a mixture of peptides and
small molecules; cover a range of cancer types, and have a range of
characteristics of validated, novel or unknown target activities. Although
all early stage developments, this risk diversification across multiple
programmes enables a genuine scientific assessment of all, and a greater
chance of success with subsequent returns of value to shareholders. With
preclinical attrition rates in oncology programmes thought to be as high as
90%, further growth of the pipeline is required to truly balance the risk and
avoid the risks of any single project being inappropriately prioritised or of
being continued beyond the natural point of attrition.
The announcement of the Option Agreement for VAL401 with Ambrose Healthcare
was a key milestone in 2023, with the maximum Option term concluding within
2024. Ambrose's commitment to progress VAL401 through remaining clinical
development and commercialisation is an exciting development and I am looking
forward to progressing this partnership.
VAL201 remains under the Letter of Intent with TheoremRx and we noted towards
the conclusion of 2023 their progression towards a merger with Nasdaq company
EUDA, which marked a significant step forward in publicly revealing their
progression towards financing.
Outlook
2024 will see another year of significant evolution, with the changes to the
Board composition providing an opportunity to harness new expertise and skills
into the Group, enabling further honing of the strategy to promote growth and
development across all strands of the portfolio.
While 2023 witnessed the launch of the Inaphaea BioLabs facility, with the
Group shifting from being a wholly virtual biotech group to have in-house
capability to conduct our experiments in-house; we view 2024 as the stepping
stone to consolidate that growth. Anticipating conversion of the pipeline of
commercial opportunity into further sales within Inaphaea in 2024 thus
demonstrating the value of Inaphaea for both internal project progression and
revenue generation.
The evaluation project pipeline will also continue to expand, with two further
evaluation agreements executed post period, and research on these is already
underway in our facility. Further negotiations are ongoing for additional
projects, with a target of 1-2 further within 2024, with some of those
negotiation expected to carry into 2025.
Financial overview
Our financial results show the total comprehensive loss for the year ended 31
December 2023 of £2,037,701 (2022: £2,366,488) and a loss per share of 2.01p
(2022: Loss - 3.06p).
Research and developments costs were £383,362 for the year ended 31 December
2023 as compared to £551,233 in 2022, a reduction of £167,871. In addition,
total wage costs of £462,862 (2022: £254,050) were expended on research and
development during the year.
Administrative expenses were £1,886,401 (2022: £1,502,355) for the year
ended 31 December 2023 an increase of £384,046.
Cash at the bank at 31 December 2023 was £174,684 compared to £1,137,477 in
2022.
I would like to thank the staff and Board members for all their contributions
and shareholders for their continued support. With further evolution and
progression of the Company strategy under the new management team; the Company
offers potential for change and prospects for Company growth into the future.
Dr S J Dilly
Chief Executive Officer
13 May 2024
Consolidated Statement of Profit or Loss and Other Comprehensive Income for
the year ended 31 December 2023
2023 2022
£ £
CONTINUING OPERATIONS
TURNOVER 9,600
Cost of sales (1,440)
GROSS PROFIT 8,160
Research and developments (383,362) (551,233)
Administrative expenses (1,886,401) (1,502,355)
Share-based payment charge (36,936) (539,791)
OPERATING LOSS (2,298,539) (2,593,379)
Finance costs (4,419) (5,456)
LOSS BEFORE INCOME TAX (2,302,958) (2,598,835)
Income tax credit 175,173 192,671
LOSS AFTER INCOME TAX (2,127,785) (2,406,164)
Non-controlling interest 90,084 39,676
TOTAL COMPREHENSIVE LOSS FOR THE YEAR (2,037,701) (2,366,488)
LOSS PER SHARE - BASIC AND DILUTED (2.01p) (3.06p)
Consolidated Statement of Financial Position for the year ended
31 December 2023
2023 2022
£ £
ASSETS
NON-CURRENT ASSETS
Goodwill 1,602,522 1,602,522
Intangible assets 718,814 903,900
Property, plant and equipment 242,625 -
Right-of-use assets 5,561
2,563,961 2,511,983
CURRENT ASSETS
Inventory 69,002 -
Trade and other receivables 147,618 133,815
Tax receivable 175,173 192,671
Cash and cash equivalents 174,684 1,137,477
566,477 1,463,963
TOTAL ASSETS 3,130,438 3,975,946
EQUITY
SHAREHOLDERS' EQUITY
Called up share capital 9,707,266 9,695,120
Share premium 27,870,548 26,772,630
Merger reserve 637,500 637,500
Reverse acquisition reserve 602,413 602,413
Share option reserve 1,082,163 986,816
Retained earnings (36,681,340) (34,643,639)
3,218,550 4,050,840
Non-controlling interests (314,623) (224,539)
TOTAL EQUITY 2,903,927 3,826,301
LIABILITIES
NON-CURRENT LIABILITIES
Borrowings 11,857 22,070
Lease liabilities -
11,857 22,070
CURRENT LIABILITIES
Trade and other payables 204,441 111,933
Borrowings 10,213 9,962
Lease liabilities - 5,680
214,654 127,575
TOTAL LIABILITIES 226,511 149,645
TOTAL EQUITY AND LIABILITIES 3,130,438 3,975,946
Consolidated Statement of Changes in Equity for the year ended
31 December 2023
Share capital Share premium Merger reserve Reverse acquisition reserve Share-based payment reserve Non-controlling interest Retained earnings Total
£ £ £ £ £ £ £ £
Balance at 1 January 2022 9,669,995 24,490,618 637,500 602,413 491,219 (184,867) (32,292,507) 3,414,371
Changes in equity
Loss for the year - - - - - (39,676) (2,366,488) (2,406,164)
Issue of shares 25,125 2,462,250 - - - - - 2,487,375
Cost of shares issued - (209,076) - - - - - (209,076)
Lapse of share options and warrants - 28,838 - - (44,194) - 15,356 -
Movement in year 539,791 4 - 539,795
Balance at 31 December 2022 9,695,120 26,772,630 637,500 602,413 986,816 (224,539) (34,643,639) 3,826,301
Changes in equity
Loss for the year - - - - - (90,084) (2,037,701) (2,127,785)
Issue of shares 12,146 1,323,854 - - - - - 1,336,000
Cost of shares issued - (167,525) - - - - - (167,525)
Movement in year - (58,411) - - 95,347 - - 36,936
Balance at 31 December 2023 9,707,266 27,870,548 637,500 602,413 1,082,163 (314,623) (36,681,340) 2,903,927
Consolidated Statement of Cash Flows for the year ended 31 December 2023
2023 2022
Notes £ £
Cash flows from operations
Cash outflow from operations 1 (1,961,697) (1,841,443)
Interest paid (3,325) (4,215)
Tax credit received 192,671 133,413
Net cash outflow from operating activities (1,772,351) (1,712,245)
Cash flows from investing activities
Purchase of intangible fixed assets (15,000) -
Purchase of property, plant and equipment (291,181) -
Net cash inflow from financing activities (306,181) -
Cash flows from financing activities
Bank loan repayment (9,962) (13,249)
Repayment of lease liabilities (6,774) (9,000)
Share issue 1,300,000 2,487,375
Costs of shares issued (167,525) (209,076)
Net cash inflow from financing activities 1,115,739 2,256,050
Increase/(decrease) in cash and cash equivalents (962,793) 543,805
Cash and cash equivalents at beginning of year 2 1,137,477 593,672
Cash and cash equivalents at end of year 2 174,684 1,137,477
Notes to the Consolidated Statement of Cash Flows for the year ended
31 December 2023
1. RECONCILIATION OF OPERATING LOSS TO CASH GENERATED FROM OPERATIONS
2023 2022
£ £
Operating loss (2,298,539) (2,593,379)
Amortisation and impairment of intangible assets 200,086 204,216
Depreciation of right-of-use assets 5,561 7,717
Depreciation of property, plant and equipment 48,556
Increase in inventory (69,002)
Increase in trade and other receivables (13,803) (60,886)
Increase/(decrease) in trade and other payables 128,508 61,098
Share-based payments charge 36,936 539,791
Net cash outflow from operations (1,961,697) (1,841,443)
2. CASH AND CASH EQUIVALENTS
The amounts disclosed on the Statement of Cash Flows in respect of cash and
cash equivalents are in respect of these Statement of Financial Position
amounts:
31 December 2023 1 January 2023
£ £
Cash and cash equivalents 174,684 1,137,477
31 December 2022 1 January 2022
£ £
Cash and cash equivalents 1,137,477 593,672
Notes to the Consolidated Financial Statements for the year ended 31 December
2023
1. STATUTORY INFORMATION
ValiRx Plc is a company incorporated in the United Kingdom, which is listed on
the AIM market of the London Stock Exchange Plc. The address of its registered
office is Stonebridge House, Chelmsford Road, Hatfield Heath, CM22 7BD.
The registered number of the Company is 03916791.
The principal activity of the Group is the development of oncology
therapeutics and companion diagnostics.
The presentation currency of the financial statements is the Pound Sterling
(£).
The above information has been extracted from the annual report and accounts
for the year ended 31 December 2023 and, accordingly, references and page
numbers may not be complete. Shareholders should read the report and accounts
in full which will shortly be available from the Company's website.
2. ACCOUNTING POLICIES
Basis of preparation
The Group's financial statements have been prepared in accordance with
International Accounting Standards in conformity with the requirements of
the Companies Act 2006 as they apply to the financial statements of the
Group for the year ended 31 December 2023. The principal accounting policies
adopted by the Group and by the Company are set out in note 2. The Group
financial statements have been prepared under the historical cost convention
or fair value where appropriate.
Going concern
As part of their going concern review the Directors have followed the
guidelines published by the Financial Reporting Council entitled "Guidance on
the Going Concern Basis of Accounting and Reporting on Solvency Risks-
Guidance for directors of companies that do not apply the UK Corporate
Governance Code".
The Group and Parent Company are subject to a number of risks similar to those
of other development stage pharmaceutical companies. These risks include,
amongst others, generation of revenues in due course from the development
portfolio and risks associated with research, development, testing and
obtaining related regulatory approvals of its pipeline products. Ultimately,
the attainment of profitable operations is dependent on future uncertain
events which include obtaining adequate financing to fulfil the Group's
commercial and development activities and generating a level of revenue
adequate to support the Group's cost structure.
The current economic environment is challenging, and the Group has reported an
operating loss for the year. These losses are expected to continue in the
current accounting year to 31 December 2024.
The Directors have prepared detailed financial forecasts and cashflows looking
beyond 12 months from the date of the approval of these financial statements.
In developing these forecasts, the Directors have made assumptions based upon
their view of the current and future economic conditions that are expected to
prevail over the forecast period. The Directors estimate that the cash of
£174,684 held by the Group as at 31 December 2023 together with cash
receivable in January 2024 (see below) will be sufficient to support the
current level of activities for at least the next 12 months. The Directors are
continuing to explore sources of finance available to the Group and based upon
initial discussions with a number of existing and potential investors they
have a reasonable expectation that they will be able to secure sufficient cash
inflows for the Group to continue its activities beyond the 12 months from the
date of approval of these financial statements.
The Company carries out regular fund-raising exercises in order that it can
provide the necessary working capital for the Group. Further funds may be
required to finance the Group's work programme. The Board expects to continue
to raise additional funding as and when required to cover the Group's
development, primarily from the issue of further shares.
In January 2024, the Company raised approximately £1.8m, before expenses,
through the issue of new ordinary shares.
In the event that additional financing is not secured when it is required, the
Group would need to consider:
· reducing and/or deferring discretionary spending on one or more
research and development programmes; and/or
· restructuring operations to change its overhead structure.
Basis of consolidation
The Group financial statements consolidate the financial statements of the
Company and all its subsidiaries ("the Group"). Subsidiaries include all
entities over which the Group has the power to govern financial and operating
policies. The existence and effect of potential voting rights that are
currently exercisable or convertible are considered when assessing whether the
Group controls another entity. Subsidiaries are consolidated from the date on
which control commences until the date that control ceases. Intra-group
balances and any unrealised gains and losses on income or expenses arising
from intra-group transactions, are eliminated in preparing the consolidated
financial statements.
On 3 October 2006, ValiRx Bioinnovation Limited ('Bioinnovation') acquired
60.28% of the issued share capital of ValiPharma Limited ('ValiPharma') in
exchange for shares in Bioinnovation. Concurrently, the Company, ("ValiRx"),
acquired the entire issued share capital of Bioinnovation in a share for share
transaction. As a result of these transactions, the former shareholders of
ValiPharma became the majority shareholders in ValiRx. Accordingly, the
substance of the transaction was that ValiPharma acquired ValiRx in a reverse
acquisition. Under IFRS 3 "Business Combinations", the acquisition of
ValiPharma has been accounted for as a reverse acquisition.
In May 2008 the Company acquired the remaining 39.72% of the issued share
capital of ValiPharma, which is now wholly owned by the Group. This
acquisition was accounted for using the acquisition method of accounting.
In November 2013 ValiSeek Limited was formed to enable the company to enter
into a joint venture agreement. The company has a 55.5% holding in the issued
share capital of ValiSeek.
In October 2023 the Company acquired 60% of the issued share capital of
Cytolytix Limited.
3. LOSS PER SHARE
The loss and number of shares used in the calculation of loss per ordinary
share are set out below:
2023 2022
£ £
Loss for the financial period (2,127,785) (2,406,164)
Non-controlling interest 90,084 39,676
Loss attributable to owners of Parent Company (2,037,701) (2,366,488)
Basic:
Weighted average number of shares 101,570,021 77,301,896
Loss per share (2.01p) (3.06p)
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.
The outstanding share options and share warrants would have the effect of
reducing the loss per share and would therefore not be dilutive under IAS 33
'Earnings per Share'.
4. REPORT OF THE INDEPENDENT AUDITORS TO THE MEMBERS OF
VALIRX PLC
Opinion
We have audited the financial statements of ValiRx Plc (the 'Parent Company')
and its subsidiaries (the 'Group') for the year ended 31 December 2023 which
comprise the Group Statement of Comprehensive Income, the Group and Company
Statements of Financial Position, the Group Statement of Cash Flows, the Group
and Company Statements of Changes in Equity and the related notes, including a
summary of significant accounting policies. The financial reporting framework
that has been applied in their preparation is applicable law and UK adopted
International Accounting Standards, in conformity with the requirements of the
Companies Act 2006.
In our opinion:
- the financial statements give a true and fair view of the state of the
Group's and of the Parent Company's affairs as at 31 December 2023 and of
the Group's loss for the year then ended;
- the Group's financial statements have been prepared in accordance with UK
adopted International Accounting Standards in conformity with the requirements
of the Companies Act 2006;
- the Parent Company financial statements have been properly prepared in
accordance with UK adopted International Accounting Standards in conformity
with the requirements of the Companies Act 2006; and
- the financial statements have been prepared in accordance with the
requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing
(UK) (ISAs (UK)) and applicable law. Our responsibilities under those
standards are further described in the Auditors' responsibilities for the
audit of the financial statements section of our report. We are independent
of the Group and Parent Company in accordance with the ethical requirements
that are relevant to our audit of the financial statements in the UK,
including the FRC's Ethical Standard as applied to listed entities, and we
have fulfilled our other ethical responsibilities in accordance with these
requirements. We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our opinion.
Emphasis of Matter
We draw attention to the value of goodwill in the Consolidated Statement of
Financial Position and the value of investments in the Company Statement of
Financial Position. The value of investments represents the historic cost of
acquisition of investments less provisions for impairment. The value of
goodwill arises on consolidation and represents the excess between the value
of the underlying subsidiary on acquisition and the cost of investment, less
provisions for impairment.
Management's assessment of impairment includes a review of the net present
value of future potential cashflows of the underlying assets. The basis of
these valuations include a number of variables within the calculations that
are subjective and based on professional judgments of expectations and
estimates. This also includes the expected potential around the success of the
future development and commercialisation of the Group's products, VAL 201 and
VAL 401.
While we have assessed management's judgements and application of estimates in
their calculations and consider these to be reasonable, as set out in the key
audit risks below, there are several factors that could result in a material
change in the valuation of the underlying investments which could result in an
impairment of the investments and associated goodwill.
Our opinion is not modified in respect of this matter.
Conclusions relating to going concern
Material uncertainty relating to going concern
We draw your attention to the policy on Going Concern within note 2 to the
financial statements, which indicates that the accounts have been prepared on
the going concern basis. The Board has referred to the fact that the Group and
Parent Company are reliant on future fund raisings to continue their
activities as budgeted. Should future fund raisings be unsuccessful, this may
cast significant doubt on the Group and parent Company's ability to continue
as a going concern. Our opinion is not modified in respect of this matter.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were
of most significance in our audit of the financial statements of the current
period and include the most significant assessed risks of material
misstatement (whether or not due to fraud) we identified, including those
which had the greatest effect on: the overall audit strategy, the allocation
of resources in the audit; and directing the efforts of the engagement team.
These matters were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we do not
provide a separate opinion on these matters.
The key audit matters identified were:
Impairment of goodwill and intangibles
Area of focus
The Group has goodwill of £1.60 million and intangible assets of £0.72
million.
IAS 36 requires at least annual impairment assessments in relation to
goodwill, indefinite-lived intangible assets and intangible assets that are
not yet ready for use, with more regular assessments should an impairment
trigger be identified.
The determination of recoverable amount, being the higher of value-in-use and
fair value less costs of disposal, requires judgement on the part of
management in identifying and then estimating the recoverable amount for the
relevant CGUs.
Recoverable amounts are based on management's view of future cash flow
forecasts and external market conditions such as future pricing and the most
appropriate discount rate.
Management engaged an expert to assist them in performing an annual impairment
assessment which included the assumptions and estimates around the success of
the future development and commercialisation of its products VAL 201 and VAL
401. Changes in these assumptions might give rise to a change in the carrying
value of intangibles and goodwill.
How our audit addressed the area of focus
We obtained the report prepared by the expert and gained an understanding of
the key assumptions and judgements underlying the assessment. We assessed the
appropriateness of the methodology applied and tested the mathematical
accuracy of the models.
We obtained an understanding of the stage of product development and
management's expected timelines for product commercialisation, including
updates on the achievement of expected milestones.
We determined the judgement made by the Directors that no impairment was
required, and that the disclosures made in the financial statements to be
reasonable.
Going concern
area of focus
Refer to note 2 of the financial statements for the Directors' disclosures of
related accounting policies, judgements and estimates. The Directors have
concluded that they have a reasonable expectation that the Group will have
sufficient cash resources and cash inflows to continue its activities for not
less than twelve months from the date of approval of these financial
statements and have therefore prepared these financial statements on a going
concern basis.
The Group had cash and cash equivalents of £174,684 as at 31 December 2023.
Management produces a cash flow forecast based on the board plans.
The key judgements within the cash flow forecast that we particularly focused
on were:
- The continued availability of funding.
- The likely recovery of other receivables.
- Cash flows expected from research and development tax credits.- Flexibility
of development programme.
How our audit addressed the area of focus
We assessed the reasonableness and support for the judgments underpinning
management's forecast, as well as the sensitivity of projections to these
judgements.
We reviewed management's financing plans and considered the reasonableness of
the assumptions within management's proposed cost reduction actions, should
future fund raisings be lower than anticipated.
Our conclusion on management's use of the going concern basis of accounting is
included in the going concern section of the report above.
We reviewed management's financing plans and considered the reasonableness of
the assumptions within management's proposed cost reduction actions, should
future fund raisings be lower than anticipated.
Our conclusion on management's use of the going concern basis of accounting is
included in the going concern section of the report above.
Our application of materiality
When establishing our overall audit strategy, we set certain thresholds which
help us to determine the nature, timing and extent of our audit procedures and
to evaluate the effects of misstatements, both individually and on the
financial statements as a whole.
We consider materiality to be the magnitude by which misstatements, including
omissions, could influence the economic decisions of reasonable users that are
taken on the basis of the financial statements.
In order to reduce the probability that any misstatement exceeds materiality
to an appropriately low level, we use a lower materiality level, performance
materiality, to determine the extent of testing needed. Importantly,
misstatements below these levels will not necessarily be evaluated as
immaterial as we also take account of the nature of identified misstatements,
and the particular circumstances of their occurrence, when evaluating their
effect of the financial statements as a whole.
Based on our professional judgment, we determined materiality for the
financial statements as a whole and performance materiality as follows:
Group and Parent Company materiality were set at £168,200 and £125,000
respectively, based on 8% of loss before tax and amortisation. In our
professional judgement, this benchmark is considered appropriate as it
reflects the ongoing operational requirements of the business to develop and
build the business.
Group and Parent Company performance materiality were set at £126,200 and
£93,700 respectively, based on 75% of materiality. In setting the level of
performance materiality, we consider a number of factors including the control
environment, our testing strategy, the total value of known and likely
misstatement (based on past experience and other factors) and management's
attitude towards proposed adjustments.
Component materiality
For the purposes of our Group audit opinion, we set materiality for each
significant component of the Group based on a percentage of Group materiality,
dependent on the size and our assessment of the risk of material misstatement
of that component.
Reporting thresholds
We agreed with the Audit Committee that we would report to them all unadjusted
audit differences in excess of £5,000, as well as differences below this
threshold that, in our view, warranted reporting on qualitative grounds.
An overview of the scope of our audit
The audit was scoped to ensure that the audit team obtained sufficient and
appropriate audit evidence in relation to significant operations of the Group
during the year ended 31 December 2023. In particular, we looked at areas
involving significant accounting estimates and judgement by the Directors. We
also addressed the risk of management override of internal controls, including
an evaluation of whether there was evidence of bias by the Directors that
represented a risk of material misstatement due to fraud.
As part of our planning, we assessed the risk of material misstatement
including those that required significant auditor consideration at the
component and group level. Procedures were designed and performed to address
the risk identified and for the most significant assessed risks of material
misstatement, the procedures performed are outlined above in the key audit
matters section of this report.
Other information
The Directors are responsible for the other information. The other information
comprises the information in the Annual Report but does not include the
financial statements and our Report of the Auditors thereon.
Our opinion on the financial statements does not cover the other information
and, except to the extent otherwise explicitly stated in our report, we do not
express any form of assurance conclusion thereon.
Our opinion on the financial statements does not cover the other information
and, except to the extent otherwise explicitly stated in our report, we do not
express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility
is to read the other information and, in doing so, consider whether the other
information is materially inconsistent with the financial statements, or our
knowledge obtained in the audit or otherwise appears to be materially
misstated. If we identify such material inconsistencies or apparent material
misstatements, we are required to determine whether there is a material
misstatement in the financial statements or a material misstatement of the
other information. If, based on the work we have performed, we conclude that
there is a material misstatement of this other information, we are required to
report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
- the information given in the Group Strategic Report and the Report of the
Directors for the financial year for which the financial statements are
prepared is consistent with the financial statements; and
- the Group Strategic Report and the Report of the Directors have been
prepared in accordance with applicable legal requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the Group and the Parent
Company and its environment obtained in the course of the audit, we have not
identified material misstatements in the Group Strategic Report or the Report
of the Directors.
We have nothing to report in respect of the following matters where the
Companies Act 2006 requires us to report to you if, in our opinion:
- adequate accounting records have not been kept by the Parent Company, or
returns adequate for our audit have not been received from branches not
visited by us; or
- the Parent Company financial statements are not in agreement with the
accounting records and returns; or
- certain disclosures of Directors' remuneration specified by law are not
made; or
- we have not received all the information and explanations we require for
our audit.
Responsibilities of Directors
As explained more fully in the Statement of Directors' Responsibilities set
out on page 42, the Directors are responsible for the preparation of the
financial statements and for being satisfied that they give a true and fair
view, and for such internal control as the Directors determine necessary to
enable the preparation of financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are responsible for
assessing the Group's and the Parent Company's ability to continue as a going
concern, disclosing, as applicable, matters related to going concern and using
the going concern basis of accounting unless the Directors either intend to
liquidate the Group or the Parent Company or to cease operations, or have no
realistic alternative but to do so.
Auditors' responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial
statements as a whole are free from material misstatement, whether due to
fraud or error, and to issue a Report of the Auditors that includes our
opinion. Reasonable assurance is a high level of assurance but is not a
guarantee that an audit conducted in accordance with ISAs (UK) will always
detect a material misstatement when it exists. Misstatements can arise from
fraud or error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of these financial statements.
Irregularities, including fraud, are instances of non-compliance with laws and
regulations. We design procedures in line with our responsibilities, outlined
above, to detect material misstatements in respect of irregularities,
including fraud. The extent to which our procedures are capable of detecting
irregularities, including fraud, is detailed below.
We are not responsible for preventing irregularities. The primary
responsibility for the prevention and detection of fraud rest with both those
charged with governance of the entity and management.
Our approach to identifying and assessing the risks of material misstatement
in respect of irregularities, including fraud and non-compliance with laws and
regulations included, but was not limited to, the following:
- the engagement partner ensured that the engagement team collectively had
the appropriate competence, capabilities and skills to identify or
recognise non-compliance with applicable laws and regulations;
- we identified the laws and regulations applicable to the company through
discussions with the Directors and other management, and from our
commercial knowledge and experience of the medical research and
development sector;
- we focused on specific laws and regulations which we considered may have a
direct material effect on the financial statements or the operations of
the company, including the Companies Act 2006, taxation legislation and data
protection, anti-bribery, employment and health and safety legislation;
- we assessed the extent of compliance with the laws and regulations
identified above through making enquiries of management and inspecting
legal correspondence; and
- identified laws and regulations were communicated within the audit team
regularly and the team remained alert to instances of non-compliance
throughout the audit.
We assessed the susceptibility of the Company's financial statements to
material misstatement, including obtaining an understanding of how fraud might
occur, by:
- making enquiries of management as to where they considered there was
susceptibility to fraud, their knowledge of actual, suspected and alleged
fraud; and
- considering the internal controls in place to mitigate risks of fraud and
non-compliance with laws and regulations.
To address the risk of fraud through management bias and override of controls,
we:
- performed analytical procedures to identify any unusual or unexpected
relationships;
- tested journal entries to identify unusual transactions;
- assessed whether judgements and assumptions made in determining the
accounting estimates were indicative of potential bias; and
- investigated the rationale behind significant or unusual transactions.
In response to the risk of irregularities and non-compliance with laws and
regulations, we designed procedures which included, but were not limited to:
- agreeing financial statement disclosures to underlying supporting
documentation;
- reading the minutes of meetings of those charged with governance;
- enquiring of management as to actual and potential litigation and claims;
and
- reviewing correspondence with HMRC, relevant regulators including the
Health and Safety Executive, and the company's legal advisors.
Due to the inherent limitations of an audit, there is a risk that we will not
detect all irregularities, including those leading to a material misstatement
in the financial statements or non-compliance with regulation. This risk
increases the more that compliance with a law or regulation is removed from
the events and transactions reflected in the financial statements, as we will
be less likely to become aware of instances of non-compliance. The risk is
also greater regarding irregularities occurring due to fraud rather than
error, as fraud involves intentional concealment, forgery, collusion, omission
or misrepresentation.
A further description of our responsibilities for the audit of the financial
statements is located on the Financial Reporting Council's website at
www.frc.org.uk/auditorsresponsibilities. This description forms part of our
Report of the Auditors.
Use of our report
This report is made solely to the Company's members, as a body, in accordance
with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been
undertaken so that we might state to the Company's members those matters we
are required to state to them in a Report of the Auditors and for no other
purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Company and the Company's members as a
body, for our audit work, for this report, or for the opinions we have formed.
Caution regarding forward looking statements
Certain statements in this announcement, are, or may be deemed to be, forward
looking statements. Forward looking statements are identified by their use of
terms and phrases such as ''believe'', ''could'', "should" ''envisage'',
''estimate'', ''intend'', ''may'', ''plan'', ''potentially'', "expect",
''will'' or the negative of those, variations or comparable expressions,
including references to assumptions. These forward-looking statements are not
based on historical facts but rather on the Directors' current expectations
and assumptions regarding the Company's future growth, results of operations,
performance, future capital and other expenditures (including the amount,
nature and sources of funding thereof), competitive advantages, business
prospects and opportunities. Such forward looking statements reflect the
Directors' current beliefs and assumptions and are based on information
currently available to the Directors. While management believes that these
forward-looking statements are reasonable as and when made, there can be no
assurance that future developments affecting the Company will be those that it
anticipates.
Factors that could cause actual results to differ materially from those in the
forward-looking statements include risks relating to unanticipated costs,
liabilities or delays; failure or delays in research and development programs;
the safety and efficacy of the Company's product candidates and the likelihood
of clinical data to be positive and of such product candidates to be approved
by the applicable regulatory authorities; unanticipated changes relating to
competitive factors in the Company's industry; risks relating to the Company's
capitalisation, resources and ownership structure, the availability of
sufficient resources for company operations and to conduct or continue planned
clinical development programs; the outcome of any legal proceedings; risks
related to the ability to correctly estimate operating expenses; risks related
to the ability to project future cash utilisation and reserves needed for
contingent future liabilities and business operations; risks related to the
changes in market prices of the Company's ordinary shares; the Company's
ability to hire and retain key personnel; changes in law or regulations
affecting the Company; international, national or local economic, social or
political conditions that could adversely affect the Company and its business;
conditions in the credit markets; risks associated with assumptions the
Company makes in connection with its critical accounting estimates and other
judgments.
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