TIDMARIX
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION WITHIN THE MEANING OF THE EU
MARKET ABUSE REGULATION NO.596/2014
Arix Bioscience plc
Interim results for the six months ended 30 June 2019
LONDON, 28 August, 2019: Arix Bioscience plc ("Arix", LSE: ARIX) a global
venture capital company focused on investing in and building breakthrough
biotech companies, today announces its interim results for the period ended 30
June 2019.
Operational highlights
· GBP11.4 million commitment to Imara, a new portfolio company focused on
sickle cell disease and other hemoglobinopathies, with a novel drug candidate
in human trials
· $283 million of proceeds raised by Arix portfolio companies in the first
half of 2019
§ Harpoon (T cell engagers) raised net proceeds of $70.7 million in a Nasdaq
IPO, in which Arix invested $6.0 million (GBP4.7 million)
§ Autolus (CAR-T cell immunotherapy) completed a $108.8 million follow-on
financing in which Arix invested a further $5.0 million (GBP3.8 million)
§ Aura Biosciences (Choroidal Melanoma) completed a $40.0 million Series D
financing, in which Arix committed a further $4.5 million (GBP3.4 million)
§ Imara (Haematology) completed a $63.0 million Series B financing, in which
Arix committed $15.0 million (GBP11.4 million)
· Continued clinical progress in the portfolio, with 28 clinical trials
live as at 30 June 2019
§ Atox Bio completed enrolment of its Phase 3 ACCUTE study for necrotising soft
tissue infections (NSTI). The company has also moved the Phase 2 sepsis
associated acute kidney injury (AKI) study into a Phase 3 clinical trial,
following feedback from the FDA
§ Aura Biosciences presented further positive safety and efficacy data from the
ongoing AU-011 Phase 1b/2 study for choroidal melanoma
§ Autolus reported encouraging initial data from its AUTO1 programme in
paediatric acute lymphoblastic leukaemia (pALL) and adult acute lymphoblastic
leukaemia (aALL), as well as early results from its AUTO3 programme in diffuse
large B-cell lymphoma (DLBCL). In August, post period end, Autolus announced
the prioritisation of AUTO1 and goal of taking this into registration trials
for aALL by year end
§ Harpoon initiated the HPN536 Phase 1/2a clinical trial for the treatment
of ovarian cancer and other mesothelin-expressing solid tumours
§ Imara reported encouraging initial Phase 2 data from its IMR-687 clinical
study for patients with sickle cell disease
§ Pharmaxis initiated a Phase 1 clinical trial of an anti-fibrotic Lysyl
Oxidase (LOX) inhibitor focused on treating myelofibrosis and/or pancreatic
cancer
§ VelosBio initiated the VLS-101 Phase 1 clinical study for the treatment of
haematological cancers
§ Verona initiated a Phase 2b study with nebulized ensifentrine as add-on to
long-acting bronchodilator and a first Phase 2 study with metered-dose inhaler
formulation. In August 2019, post-period end, Verona reported positive Phase 2
data with dry powder inhaler formulation
Financial highlights
§ Net Asset Value of GBP231.8 million (December 2018: GBP270.2 million), 171 pence
per share (FY 2018: 200 pence per share). Equates to 14.5% decline in NAV per
share for the first six months of 2019 versus a 32% increase for in 2018
§ Net downward gross portfolio revaluation of GBP34.0 million[1] over the period,
predominantly due to a 51% decline in Autolus' share price, despite the
company's strong fundamentals
§ Gross Portfolio Value of GBP167.8 million (December 2018: GBP175.5 million)
§ GBP26.3 million of capital deployed into the gross portfolio during the period
(HY 2018: GBP12.6 million)
§ Half year loss before tax: GBP44.8 million (HY 2018: GBP29.3 million profit
before tax)
Key anticipated milestones
The company notes key milestones anticipated by its portfolio companies over
the next 18 months:
· Artios expects to file an investigational new drug (IND) application for
its lead programme Pol? by the end of 2020
· Atox Bio expects to announce results from the ACCUTE Phase 3 clinical
study in necrotising soft tissue infections in the fourth quarter of 2019
· Atox Bio expects to announce results from the REAKT Phase 3 clinical study
in acute kidney infections in the second half of 2020
· Aura Biosciences expects to initiate the AU-011 Phase 3 clinical study for
choroidal melanoma in the first half of 2020
· Autolus expects to initiate a Phase 2 registration trial of AUTO1 in aALL
in the fourth quarter of 2019 and present updated Phase 1 data at The American
Society of Hematology (ASH) in December 2019
· Autolus expects to present interim Phase 1 data for the Alexander study of
AUTO3 in DLBCL at ASH 2019 and initiate a Phase 2 trial in the second quarter
of 2020, pending regulatory feedback
· Autolus expects to present updated Phase 1 results for the CARPALL study
of AUTO1 in pALL at ASH 2019
· Autolus expects next generation (NG) programmes for AUTO1, AUTO2, AUTO3
and AUTO6 to enter the clinic in 2020
· Harpoon expects to present interim results from the HPN424 Phase 1
clinical study in metastatic castration resistant prostate cancer in the first
half of 2020
· Harpoon expects to present proof of concept data from its HPN536 Phase1/2a
clinical trial for ovarian and other mesothelin-expressing solid tumours in
2020
· Harpoon expects to initiate the HPN217 Phase 1 trial for the treatment of
multiple myeloma and the HPN328 Phase 1 clinical study in small cell lung
cancer in 2020
[1] Including FX
· Imara expects to announce updated results from its IMR-687 Phase 2
clinical study in sickle cell disease in the second half of 2019
· Imara expects to initiate a Phase 2 trial for thalassemia in the first
quarter of 2020
· Iterum expects to announce results from the SURE 2 Phase 3 clinical study
in complicated urinary tract Infections and the SURE 3 Phase 3 clinical study
in complicated intra-abdominal infections in the second half of 2019
· Iterum expects to announce results from its SURE 1 Phase 3 clinical study
in uncomplicated urinary tract infections in the first half of 2020
· LogicBio expects to initiate the LB-001 Phase 1/2 clinical study for the
treatment of methylmalonic acidemia in the first half of 2020
· Pharmaxis expects to announce Phase 1 results from its Systemic LOX
inhibitor for myelofibrosis and/or pancreatic cancer in the second half of 2019
· Pharmaxis partner Boehringer for AOC3 inhibitor expected to announce
results of Phase 2a trials in NASH in the second half of 2019 and diabetic
retinopathy in the first half of 2020
· Pharmaxis expects its Mannitol Business (Aridol and Bronchitol) to turn
profitable from 2020. If Bronchitol is approved by the FDA for patients in the
US, Pharmaxis will receive a US$10 million milestone payment on the commercial
launch of Bronchitol in the US and mid to high teen percentage royalties on in?
market net sales in the first quarter of 2020
· Verona expects to initiate a Phase 3 clinical study for nebulized
ensifentrine as maintenance treatment for COPD in 2020
· Verona expects to announce Phase 2 results from a pressurized metered-dose
inhaler (pMDI) formulation in the second half of 2019, with final data expected
in the first quarter of 2020
Joe Anderson, Chief Executive Officer of Arix Bioscience plc, commented:
"Over the period our portfolio has continued to make good progress, with a
number of companies reaching important clinical milestones and completing
additional financing rounds. The portfolio is well balanced and our companies
well capitalised to reach important inflection points.
"In the year ahead, we see key multiple clinical and development milestones
scheduled across the portfolio and we look forward to providing regular updates
on progress".
Conference Call and Presentation Information
Arix management will host a presentation and conference call today, 28 August,
at 12:30 pm BST/ 7:30am EST, to discuss the company's financial results and
operational update.
To listen to the webcast and view the accompanying slide presentation, please
go to: https://arixbioscience.com/investor-relations/events-presentations
[S]
Enquiries
For more information on Arix, please contact:
Arix Bioscience plc
Charlotte Parry, Head of Investor Relations
+44 (0)20 7290 1072
charlotte@arixbioscience.com
Optimum Strategic Communications
Mary Clark, Supriya Mathur
T: +44 (0) 203 950 9144
optimum.arix@optimumcomms.com
About Arix Bioscience plc
Arix Bioscience plc is a global venture capital company focused on investing in
and building breakthrough biotech companies around cutting edge advances in
life sciences.
We collaborate with exceptional entrepreneurs and provide the capital,
expertise and global networks to help accelerate their ideas into important new
treatments for patients. As a listed company, we are able to bring this
exciting growth phase of our industry to a broader range of investors.
www.arixbioscience.com
Arix Bioscience plc
Half-Yearly Report and Condensed Consolidated Interim Financial Statements
Six months ended 30 June 2019
CEO Statement
Overview
In the first half of 2019 the portfolio continued to make good progress, with a
number of companies reaching important clinical milestones and completing
additional financing rounds, as detailed below.
We invested GBP26.3 million into the gross portfolio in the period, including
co-leading a Series B financing round for new portfolio company Imara and
further investments into existing portfolio companies (Aura, Autolus and
Harpoon). In aggregate, our portfolio companies raised $283 million during the
six month period, putting them in a strong position to execute on their
important clinical development programmes.
Notwithstanding these positive developments, our Net Asset Value (NAV) declined
by 14.5% over the first six months of 2019 from 200p per share (GBP270.2 million
NAV) to 171p per share (GBP231.8 million NAV). This followed a strong FY 2018,
when our NAV per share increased by 32% (from 152p to 200p per share). The
reduction in NAV for the first half of 2019 was principally due to a reduction
in the share price of our largest quoted company, Autolus.
Portfolio Performance
Portfolio companies continued to make good clinical and financial progress.
Successful financing rounds with valuation uplifts were completed by Aura
(+33%) and Harpoon (+30% from November 2018 Series C to February 2019 IPO). In
addition, the share prices of portfolio companies that recently floated on the
Nasdaq generally performed well during the period, with LogicBio up 25% and
Iterum up 37%. However, the valuation increases at these companies and further
investments into the portfolio were outweighed by the decline in Autolus' share
price (-51%). Despite this, Autolus was still valued at 1.7 times cost at 30
June, given our early investment in this company before it was public (cost GBP
24.6 million, value GBP42.8 million). This underlines a key aspect of our
business model: recognising that biotech is a volatile, high risk sector, we
aim to invest in promising technologies early, at relatively low valuations and
manage a balanced portfolio. We also take a longer-term view, recognising that
real value is driven by clinical data and that along the way individual company
valuations can be highly volatile.
Operationally, there was good progress in the portfolio, with notable
highlights including positive data readouts from Autolus, Aura and Imara, along
with new trial initiations from VelosBio, Pharmaxis and Harpoon. The pipeline
also continued to expand, with 28 clinical trials now live across the portfolio
and multiple pre-clinical studies under way.
Key Portfolio Company Updates
Imara Therapeutics
During the period we co-led a $63.0 million Series B for new portfolio company
Imara, acquiring a 10% stake on a fully diluted basis and committing to invest
$15.0 million (GBP11.4 million), of which GBP9.3 million has been drawn to date.
Imara is developing novel therapeutics for the chronic treatment of sickle cell
disease (SCD) and other haemoglobinopathies. The lead programme, IMR-687, is
designed to be a disease-modifying therapy that acts on both red and white
blood cells with the potential to create better treatment outcomes for
patients. It has a differentiated clinical profile, including a dual mechanism
of action on red and white blood cells, once daily dosing, clean safety, and
potential impact on foetal haemoglobin.
Imara adds a new therapeutic area and expands the breadth of our portfolio into
non-oncology haematology and also adds another later-stage clinical asset to
the portfolio. Imara's lead programme, IMR-687, is at an exciting point in its
clinical development and is currently being evaluated in a Phase 2a study in
sickle cell patients. The company reported encouraging initial safety and
efficacy data in June, which demonstrated that treatment with IMR-687 in adult
patients was generally well tolerated. The data also support the dual mechanism
of action of IMR-687, with activity seen across both red and white blood cell
biomarkers. The company expects to report further Phase 2 data later this year
and initiate a Phase 2 trial for thalassemia in the first half of 2020.
Harpoon Therapeutics
Harpoon completed a significant milestone this year, raising net proceeds of
$70.7 million through a Nadsaq IPO. Arix invested a further $6.0 million (GBP4.7
million) in the IPO, resulting in a new ownership stake of 12.1% in Harpoon,
which was valued at GBP29.7 million at 30 June 2019. Proceeds from the IPO will
be used to advance Harpoon's pre-clinical and clinical trials.
The company continues to make good clinical progress, notably dosing the first
patient with HPN536, a mesothelin-targeting T cell engager, in a Phase 1/2a
clinical trial for ovarian and other mesothelin-expressing solid tumours. This
is the second programme that Harpoon has brought into the clinic, following
initiation of a trial in metastatic castration resistant prostate cancer last
year. The study is designed to evaluate the safety, tolerability,
pharmacokinetics and activity of HPN536.
Harpoon expects to report Phase 1 data from its HPN424 metastatic castration
resistant prostate cancer study in the first half of 2020 and advance HPN217
into the clinic for the potential treatment of multiple myeloma in the first
quarter of 2020.
Autolus Therapeutics
During the period, the company raised a further $108.8 million through a
follow-on financing. Arix invested $5.0 million (GBP3.8 million) in this round
and retains a stake of 7.6%. Autolus also reported encouraging initial data
from its AUTO1 programme in paediatric acute lymphoblastic leukaemia (pALL) and
adult acute lymphoblastic leukaemia (aALL), as well as positive early results
from its AUTO3 programme in diffuse large B-cell lymphoma (DLBCL).
Post period end, Autolus provided an update on its pipeline and anticipated
milestones, as well as confirming plans to initiate a Phase 2 registration
trial of AUTO1 in adult ALL in the fourth quarter of 2019. Data so far have
indicated that AUTO1 has the potential to be a best-in-class CAR T therapy in
ALL, showing a potentially differentiated safety profile and high level of
clinical activity, compared to the current standard of care. In pALL, Autolus
reported that, while its AUTO3 product has shown good clinical activity, data
suggest that AUTO1 may have greater durability in this indication, leading to
higher overall Event Free Survival. As a result, Autolus is transitioning its
focus in pALL to AUTO1 and AUTO1NG, a next generation version of AUTO1, but is
progressing AUTO3 in DLBCL where persistence is thought to be of less
importance.
Autolus has multiple upcoming milestones and will have data on several of its
programmes later this year, but manufacturing delays have impacted clinical
readouts on some programmes with data from these now expected in the first half
of 2020. Also in 2020 the company expects to progress Next Generation
programmes for AUTO1, AUTO2, AUTO3 and AUTO6 into the clinic.
Aura Biosciences
Aura completed a $40.0 million Series D financing in the period, in which Arix
committed a further $4.5 million (GBP3.4 million), to increase our stake to 7.7%.
The financing recognised a 33% uplift in the book value of Arix's Series C
investment in Aura, with Arix's total interest in Aura increasing to GBP8.6
million from GBP3.9 million on a fully committed basis.
Aura plans to use the proceeds from the Series D financing to support the late
stage clinical development of its lead asset, light-activated AU-011, for the
treatment of primary choroidal melanoma. The currently available treatments for
choroidal melanoma come with the risk of vision loss and other long-term
sequelae, especially for patients with melanomas located close to the fovea or
optic disk. The ongoing Phase 1b/2 study with light-activated AU-011 has shown
that the drug is well-tolerated, with clear evidence of tumour control and
preservation of visual acuity at long term follow up, even in high risk
patients. Aura has been granted Orphan Drug and Fast Track status from the U.S.
Food & Drug Administration (FDA) and expects to initiate a Phase 3 trial in
2020.
Atox Bio
Atox Bio completed enrolment of its Phase 3 ACCUTE study for necrotising soft
tissue infections (NSTI). This is a rare, life threatening response to
infection that results in significant tissue destruction and systemic disease
leading to multiple organ dysfunction, failure and death. Data from this study
is expected in the second half of this year, taking the company a step closer
to a potential cure for this devastating disease. The company has also moved
the Phase 2 REAKT clinical study for sepsis associated acute kidney injury
(AKI) into a Phase 3 clinical trial, following feedback from the FDA. Data from
this clinical study is expected in the second half of 2020.
VelosBio
VelosBio, a next-generation oncology company, developing novel antibody-drug
conjugates (ADCs) to treat haematological cancers and solid tumours, has made
rapid progress and dosed the first patient in its lead programme VLS-101 for
haematological cancers. ADCs are highly potent drugs designed as a targeted
therapy for the treatment of people with cancer. In contrast to traditional
chemotherapeutic drugs, ADCs only target cancer cells so that healthy cells are
less affected.
Elsewhere in the Core Portfolio, further trial initiations were seen from
Pharmaxis and Verona. Pharmaxis initiated a Phase 1 clinical trial of an
anti-fibrotic Lysyl Oxidase (LOX) inhibitor focused on treating myelofibrosis
and pancreatic cancer and Verona initiated a Phase 2b study with nebulized
ensifentrine as add-on to long-acting bronchodilator and a first Phase 2 study
with metered-dose inhaler formulation.
Discovery Portfolio
Along with these promising developments in our core portfolio companies, we
continue to work closely with a handful of very early stage companies in our
discovery portfolio. These are smaller investments in start-up technologies and
tend to be higher risk situations that we are building towards core companies.
Our financial commitments are therefore more modest than with our core
portfolio companies, which minimises the downside in the event that these
companies do not progress as hoped. In this context we have been working with
Mitoconix, which has struggled to reproduce early results in mitochondrial
biology. As a consequence, the company is now in liquidation. Arix invested GBP
0.8 million in the company and expects to receive at least GBP0.3 million
following the decision to wind up the company and return surplus cash to
shareholders. Elsewhere in the discovery portfolio, we continue to see exciting
potential, which we are aiming to translate into future core portfolio
companies.
Outlook
30 months on from our IPO I believe Arix is progressing well on its goal of
advancing innovation in medicine for the benefit of patients and investors. We
have built a promising portfolio of biotech companies developing highly
innovative therapies in important areas of medical need. The portfolio is
balanced and our companies well capitalised to reach important inflection
points. We are working closely with all our companies to help them develop
their clinical programmes, finances and options for value realisation. At the
same time our flow of new ideas remains strong and we continue to evaluate new
investment opportunities. We have an experienced team and Board, and close
relationships with pharmaceutical and academic partners.
Our portfolio companies have made significant progress in a relatively short
period of time and are moving towards key clinical and development milestones
in the year ahead. We expect data from a number of important clinical studies,
notably pivotal Phase 3 studies from Iterum and Atox Bio, Phase 2 data from
Imara and Phase 1 data from Autolus and Harpoon. Additionally we expect a
number of these companies to initiate further clinical studies, including Aura,
Harpoon, Imara and LogicBio.
As a listed venture capital company we provide institutional and retail
investors access to a balanced portfolio of cutting-edge life science
companies, led by some of the most ambitious and brightest minds in biotech. We
value the support of all of our shareholders and are working hard to ensure
progress across our portfolio companies to build our Net Asset Value per share
and, through this, to deliver returns for shareholders.
Joe Anderson, PhD
Condensed Consolidated Interim Statement of Comprehensive Income
Note Half Year to Half Year to
30 June 2019 30 June 2018
(unaudited) (unaudited)
GBP'000 GBP'000
Change in fair value of investments 7 (39,058) 34,869
Revenue 266 472
Administrative expenses (5,343) (5,425)
Operating (loss) / profit (44,135) 29,916
Net finance income 480 276
Foreign exchange gains 743 682
Impairment of right-of-use asset (485) -
Share-based payment charge 10 (1,411) (1,564)
(Loss) / profit before taxation (44,808) 29,310
Taxation 8 5,883 (3,636)
(Loss) / profit for the period (38,925) 25,674
Other Comprehensive Income
Exchange differences on translating 91 602
foreign operations
Taxation 8 - (113)
Total comprehensive (loss) / income (38,834) 26,163
for the period
Attributable to
Owners of Arix Bioscience plc (38,834) 26,163
Earnings per share
Basic earnings per share (GBP) 6 (0.30) 0.24
Diluted earnings per share (GBP) 6 (0.30) 0.22
The above condensed consolidated interim statement of comprehensive income
should be read in conjunction with the accompanying notes.
Condensed Consolidated Interim Statement of Financial Position
Note 30 June 2019 31 December
(unaudited) 2018
GBP'000 (audited)
GBP'000
ASSETS
Non-Current Assets
Investments held at fair value 7 171,082 183,981
Intangible assets 1,626 1,770
Property, plant and equipment 221 313
Right of use asset 213 -
Investment property 2 338 -
173,480 186,064
Current Assets
Cash and cash equivalents 19,647 31,009
Cash on long-term deposit 40,342 60,209
Trade and other receivables 1,037 2,174
Right of use asset 249 -
61,275 93,392
TOTAL ASSETS 234,755 279,456
LIABILITIES
Current liabilities
Trade and other payables (1,697) (3,399)
Lease liability (684) -
Deferred tax liability 8 - (5,883)
(2,381) (9,282)
Non-Current liabilities
Lease liability (601) -
TOTAL LIABILITIES (2,982) (9,282)
NET ASSETS 231,773 270,174
EQUITY
Share capital and share premium 9 188,585 188,585
Retained earnings 44,436 82,018
Other reserves (1,248) (429)
231,773 270,174
TOTAL EQUITY 231,773 270,174
The above Condensed Consolidated Interim Statement of Financial Position should
be read in conjunction with the accompanying notes.
Condensed Consolidated Interim Statement of Changes in Equity
For the six months ended 30 June 2019
Share Other Other Retained Total
Capital Equity Reserves Earnings GBP'000
and GBP'000 GBP'000 GBP'000
Premium
GBP'000
As at 31 December 2018 188,585 (1,211) 782 82,018 270,174
Loss for the period - - - (38,925) (38,925)
Other comprehensive - - 159 (68) 91
income
Share-based payment - - - 1,411 1,411
charge
Acquisition of own - (978) - - (978)
shares
Issue of own shares to - 14 (14) - -
employees
As at 30 June 2019 188,585 (2,175) 927 44,436 231,773
(unaudited)
Share Other Other Retained Total
Capital Equity Reserves Earnings GBP'000
and GBP'000 GBP'000 GBP'000
Premium
GBP'000
As at 31 December 2017 105,125 - (768) 42,088 146,445
Profit for the period - - - 25,674 25,674
Other comprehensive - - 554 (65) 489
income
Contributions of 83,460 - - - 83,460
equity, net of
transaction costs and
tax
Share-based payment - - - 1,564 1,564
charge
As at 30 June 2018 188,585 - (214) 69,261 257,632
(unaudited)
The above Condensed Consolidated Interim Statement of Changes in Equity should
be read in conjunction with the accompanying notes.
Condensed Consolidated Interim Statement of Cash Flows
For the six months ended 30 June 2019
Half Year to Half Year to
30 June 2019 30 June 2018
(unaudited) (unaudited)
GBP'000 GBP'000
Cash from operating activities (5,402) (7,215)
Tax paid - (28)
Net finance income received 479 275
Net cash from operating activities (4,923) (6,968)
Cash flows from investing activities
Purchase of equity investments (29,262) (14,320)
Disposal of equity and loan 4,254 -
investments
Purchase of property, plant and (5) (4)
equipment
Net cash received from / (placed on) 19,867 (40,000)
long-term deposit
Net cash from investing activities (5,146) (54,324)
Cash flows from financing activities
Net proceeds from issue of shares - 83,460
Purchase of own shares by Employee (978) -
Benefit Trust
Net cash from financing activities (978) 83,460
Net (decrease) / increase in cash and (11,047) 22,168
cash equivalents
Cash and cash equivalents at start of 31,009 74,938
period
Effect of exchange rate changes ( (315) 51
Cash and cash equivalents at end of 19,647 97,157
period
The above Condensed Consolidated Interim Statement of Cash Flows should be read
in conjunction with the accompanying notes.
Notes to the Financial Statements
1. General information
The principal activity of Arix Bioscience plc (the "Company") and together with
its subsidiaries (the "Arix Group" or "the Group") is to source, finance and
develop healthcare and life science businesses globally.
The Company is incorporated and domiciled in the United Kingdom. The Company
was incorporated on 15 September 2015 as Perceptive Bioscience Investments Ltd
and changed its name to Arix Bioscience Ltd. It subsequently re-registered as a
public limited company and changed its name to Arix Bioscience plc. The
registered office address is 20 Berkeley Square, London, W1J 6EQ. The
registered number is 09777975.
These condensed consolidated interim financial statements were approved for
issue on 28 August 2019.
These condensed consolidated interim financial statements do not comprise
statutory accounts within the meaning of section 434 of the Companies Act
2006. Statutory accounts for the year ended 31 December 2018 were approved by
the board of directors on 28 March 2019 and delivered to the Registrar of
Companies. The report of the auditors on those accounts was unqualified, did
not contain an emphasis of matter paragraph and did not contain any statement
under section 498 of the Companies Act 2006.
These condensed consolidated interim financial statements have been reviewed,
not audited.
2. Accounting policies
These condensed interim financial statements for the six months ended 30 June
2019 have been prepared on a going concern basis, in accordance with the
Disclosure Guidance and Transparency Rules of the Financial Conduct Authority
and with IAS 34, 'Interim financial reporting', as adopted by the European
Union. The condensed consolidated interim financial statements should be read
in conjunction with the annual financial statements for the year ended 31
December 2018, which have been prepared in accordance with IFRSs as adopted by
the European Union.
Taxes on income in the interim periods are accrued using the tax rate that
would be applicable to the expected total annual profit or loss.
The accounting policies adopted are consistent with those of the previous
financial year. Certain new or amended IFRSs became effective for the
financial year beginning on 1 January 2019.
IFRS16 'Leases'
The Group has adopted IFRS 16 Leases retrospectively from 1 January 2019, but
has not restated comparatives for the 2018 reporting period, as permitted under
the specific transitional provisions in the standard. The reclassifications and
the adjustments arising from the new leasing rules are therefore recognised in
the opening balance sheet on 1 January 2019.
On adoption of IFRS 16, the Group recognised lease liabilities in relation to
leases which had previously been classified as 'operating leases' under the
principles of IAS 17 Leases. These liabilities were measured at the present
value of the remaining lease payments. Right of use assets were measured at
the amount equal to the lease liability. There were no onerous lease contracts
that would have required an adjustment to the right of use assets at the date
of initial application, although one right-of-use asset has subsequently been
impaired, in line with IFRS 16.
Assessment for Impairment and Resulting Investment Property
The Group has assessed its right of use assets for impairment, in line with IAS
36 Impairment of Assets. During the period, the Group vacated its New York
office at 250 West 55th Street, with the intention of sub-letting that space;
all US-based staff have relocated to a more flexible and cost effective office
location where it continues to run all US-based operations.
The right of use asset at 250 West 55th Street has therefore been impaired to
its fair value, being the expected proceeds to the Group from sub-letting. As
the property no longer contributes to the Group's core business and is able to
produce its own independent cash flows it is considered its own cash generating
unit, and is therefore required to be classified as an investment property in
line with IAS 40 Investment Property. The property is held at its fair value,
being the expected proceeds to the Group from sub-letting.
3. Estimates
The preparation of interim financial statements requires management to make
judgements, estimates and assumptions that affect the application of accounting
policies and the reported amounts of assets and liabilities, income and
expense. Actual results may differ from these estimates.
In preparing these condensed consolidated interim financial statements, the
significant judgements and estimates made by management in applying the Group's
accounting policies and the key sources of estimation uncertainty were the same
as those that are set on page 106 of the consolidated financial statements for
the year ended 31 December 2018 and no retrospective adjustments were made.
4. Segmental Information
Information for the purposes of resource allocation and assessment of
performance is reported to the Arix Group's Chief Executive Officer, who is
considered to be the chief operating decision maker, based wholly on the
overall activities of the Arix Group. It has therefore been determined that
the Arix Group has only one reportable segment under IFRS 8 ('Operating
Segments'), which is that of sourcing, financing and developing healthcare and
life science businesses globally. The Arix Group's revenue, results and assets
for this one reportable segment can be determined by reference to the Condensed
Consolidated Interim Statement of Comprehensive Income and Condensed
Consolidated Interim Statement of Financial Position.
5. Financial Risk Management and Financial Instruments
The Arix Group's activities expose it to a variety of financial risks: market
risk (including currency risk, fair value interest rate risk, and cash flow
interest rate risk), credit risk and liquidity risk.
The condensed consolidated interim financial statements do not include all
financial risk management information and disclosures required in the annual
financial statements; they should be read in conjunction with the Group's
annual financial statements as at 31 December 2018. There have been no changes
in the risk management department or in any risk management policies since the
year end.
6. Earnings per Share
Basic earnings per share is calculated by dividing the profit/(loss)
attributable to equity holders of Arix Bioscience plc by the weighted average
number of unrestricted shares.
Potentially dilutive ordinary shares include options and conditional share
awards issued under the Company's long term incentive plans. As the Arix Group
has incurred a loss in the period, the diluted loss per share is the same as
the basic earnings per share as the loss has an anti-dilutive effect.
2019 2018
GBP'000 GBP'000
(Loss)/profit attributable to equity holders (38,834) 26,163
of Arix Bioscience plc
Weighted average number of shares in issue 129,418,083 110,060,821
Fully diluted weighted average number of 140,864,320 118,805,702
shares
Basic (loss)/earnings per share (GBP0.30) GBP0.24
Diluted (loss)/earnings per share (GBP0.30) GBP0.22
7. Investments
Level 1- Level 3 - Total
Quoted Unquoted GBP'000
Investments Investments
GBP'000 GBP'000
At 31 December 2018 113,683 70,298 183,981
Additions 8,485 20,777 29,262
Disposals - (4,254) (4,254)
Transfers 23,131 (23,131) -
Unrealised loss on (38,967) (91) (39,058)
investments
Foreign exchange gains 624 527 1,151
At 30 June 2019 106,956 64,126 171,082
Transfers from Level 3 to Level 1 reflects companies which have listed during
the period. Level 3 investments are valued with reference to milestone
analysis (GBP62.2m); net asset value (GBP1.9m); or by discounted cash flow (GBPnil);
the latter used a discount rate of 33%, a discount for marketability (16%) and
other assumptions relating to exit values and exit dates; these assumptions are
unchanged from those disclosed at 31 December 2018.
Level 1- Level 3 - Total
Quoted Unquoted GBP'000
Investments Investments
GBP'000 GBP'000
At 31 December 2017 2,846 68,485 71,331
Additions 8,769 5,551 14,320
Transfers 29,620 (29,620) -
Unrealised gain on 34,183 686 34,869
investments
Foreign exchange gains 659 602 1,261
At 30 June 2018 76,077 45,704 121,781
As permitted by IAS 28 'Investment in Associates' and in accordance with the
Arix Group accounting policy, investments are held at fair value even though
the Arix Group may have significant influence over the companies. Significant
influence is determined to exist when the Group holds more than 20% of the
holding or when less than 20% is held but in combination with a certain level
of board representation is deemed to be able to exert significant influence.
As at 30 June 2019, the Arix Group is deemed to have significant influence over
the following entities:
Company Country Registered Issued Net Assets / Profit / Date of
Address Share (Liabilities) (Loss) Financial
Capital Information
Held
Depixus SAS France 3-5 Impasse 20.7% EUR1,948k (EUR1,439k) 31 Dec 2017
(EUR) Reille, 75014
Paris
OptiKira, USA 20600 Chagrin 15.4% N/A N/A Not
LLC Blvd., Suite 210, publicly
Cleveland, OH available
44122
Quench Bio, USA 400 Technology 32.4% N/A N/A Not
Inc. Sq, Cambridge, MA publicly
02139 available
31 December Net Change in FX Movement 30 June 2019 Fully Funding Fully
2018 Value Investment Valuation GBPm Value Diluted Committed, Diluted
GBPm in Period GBPm GBPm Equity Not Yet Equity
GBPm Interest Invested Interest
% GBPm When Fully
Committed
%
Core Portfolio
Amplyx Pharmaceuticals 3.2 - - - 3.2 2.8% 1.8 3.7%
Artios Pharma 10.9 - - - 10.9 13.4% 4.3 12.4%
Atox Bio 3.2 3.2 - 0.2 6.6 6.4% 0.2 6.5%
Aura Biosciences 3.9 1.7 1.2 0.1 6.9 7.3% 1.7 7.7%
Autolus Therapeutics 81.5 3.8 (42.7) 0.1 42.7 7.6% - 7.6%
Harpoon Therapeutics 23.9 4.7 1.1 - 29.7 12.1% - 12.1%
Imara - 9.3 - 0.4 9.7 9.2% 2.1 9.9%
Iterum Therapeutics 4.3 - 1.5 0.1 5.9 7.8% - 7.8%
LogicBio Therapeutics 24.3 - 6.0 0.2 30.5 12.9% - 12.9%
Pharmaxis 6.4 - (0.2) - 6.2 11.1% - 11.1%
VelosBio 5.2 - - - 5.2 8.9% 3.4 11.3%
Verona Pharma 2.5 - (1.0) - 1.5 2.5% - 2.5%
CORE PORTFOLIO 169.3 22.7 (34.1) 1.1 159.0 - 13.5 -
Discovery Portfolio 6.2 3.6 (1.0) - 8.8 N/A - N/A
GROSS PORTFOLIO VALUE 175.5 26.3 (35.1) 1.1 167.8
Other Investments 8.5 (1.2) (4.0) - 3.3 N/A - N/A
TOTAL INVESTMENTS 184.0 25.1 (39.1) 1.1 171.1 13.5
8. Taxation
Half Year to Half Year to
30 June 2019 30 June 2018
(unaudited) (unaudited)
GBP'000 GBP'000
Current period tax charge
Current Tax - -
Deferred tax (6,824) 3,636
Total tax (credit)/charge (6,824) 3,636
Statement of Other Comprehensive Income - tax
charge
Current Tax - -
Deferred tax - 113
Total tax charge - 113
Reconciliation of tax charge
(Loss)/profit before tax (44,808) 29,310
Expected tax based on 19.00% (8,514) 5,568
Effects of:
Adjustments in respect of prior years 55 -
Expenses not deductible for tax purposes 1,039 83
Income not taxable (1,094) 69
Tax rate changes 809 (640)
Movement in share based payment deferred tax 191
Recognition of deferred tax asset previously - (1,616)
unrecognised
Rolled over gains 53 -
Deferred tax not recognised 1,578 172
Total tax (credit)/charge (5,883) 3,636
Recognised deferred tax (assets)/liabilities
Brought forward 5,883 -
Adjustment in respect of prior periods 55
Relating to Profit and Loss (5,938) 3,636
Relating to Other Comprehensive Income - 113
Carried forward - 3,749
9. Share Capital
As at 30 As at 31
June 2019 Dec 2018
Allotted and called up
Ordinary shares of GBP0.00001 each (#) 135,467,601 134,823,243
Ordinary shares of GBP0.00001 each (GBP'000) 1 1
49,671 Series C shares of GBP1 each (GBP'000) 50 50
10. Share Options
Executive Share Option Plan
On 8 February 2016, options were granted pursuant to the Executive Share Option
Plan to two directors at an exercise price of GBP1.80 per ordinary share. The
number of ordinary shares subject to the options are the requisite number of
ordinary shares as represents 5.43% of the fully diluted ordinary share capital
of the Company immediately following the end of the Company's stabilisation
period following admission to the London Stock Exchange. Restricted shares
with similar terms were awarded to the founders of the Company constituting
5.00% of the issued share capital of the Company after admission. As such, the
number of options granted for both management and founders was confirmed on 20
March 2017. All conditions are unchanged from those disclosed in the 31
December 2018 financial statements.
Executive Incentive Plan
On 22 February 2017, nil cost options were granted pursuant to the Executive
Incentive Plan to certain directors and members of staff. The options vested
on 22 February 2019 and may be exercised from this date until 21 February
2027. The options are contingent on remaining in employment with a company in
the Arix Group, and are subject to malus and clawback provisions.
On 26 May 2017, options were granted pursuant to the Executive Incentive Plan
to certain directors and members of staff. The options vest on 26 May 2020,
subject to the Company's share value growth over the three-year performance
period. The options are contingent on remaining in employment with a company
in the Arix Group, and are subject to malus and clawback provisions.
On 17 May 2018, options were granted pursuant to the Executive Incentive Plan
to certain directors and members of staff. The options vest on 17 May 2021,
subject to the Company's share value growth over the three-year performance
period. The options are contingent on remaining in employment with a company
in the Arix Group, and are subject to malus and clawback provisions.
On 9 May 2019, options were granted pursuant to the Executive Incentive Plan to
certain directors and members of staff. The options vest on 1 January 2022,
subject to the Company's share value growth and the Company's net asset value
growth over the three-year performance period. The options are contingent on
remaining in employment with a company in the Arix Group, and are subject to
malus and clawback provisions.
Share based payments
The fair value of options granted under the Executive Share Option Plan was
calculated using the Black-Scholes model. The assumptions used in this
calculation are unchanged from those disclosed in the 31 December 2018
financial statements.
As the 22 February 2017 options have no performance conditions, the share based
payment charge is calculated by reference to the Company's share price on the
grant date; the charge is recognised over the two-year vesting period.
The charge associated with the 26 May 2017 options have been calculated using a
Monte Carlo simulation, incorporating relevant assumptions for share price
(197.5p), expected volatility based on similar quoted companies (44%), risk
free interest rate (0.12%) and share option term (three years). The resultant
fair value is then spread over the three-year relevant vesting period.
The charge associated with the 17 May 2018 options have been calculated using a
Monte Carlo simulation, incorporating relevant assumptions for share price
(209.0p), expected volatility based on similar quoted companies (37%), risk
free interest rate (0.93%) and share option term (three years). The resultant
fair value is then spread over the three-year relevant vesting period.
The charge associated with the 9 May 2019 options relating to share price
growth have been calculated using a Monte Carlo simulation, incorporating
relevant assumptions for share price (157.5p), expected volatility based on
similar quoted companies (40%), risk free interest rate (0.72%) and time to
vesting (two years, eight months) rather than the performance period (three
years). The resultant fair value is then spread over the vesting period. The
options relating to net asset value growth have a fair value based upon the
share price at grant date (157.5p) and the expected likelihood of vesting
(currently considered to be 50%), spread across the vesting period, with a
true-up/down as the expected likelihood of vesting changes.
For the six months to 30 June 2019, a share based payment charge of GBP1,411,000
(30 June 2017: GBP1,564,000) has been recognised for a variety of share based
payment schemes offered by the Group.
Charges of GBP153,000 and GBP179,000 were recognised in relation to the management
options and founder incentive options respectively, granted under the Executive
Share Option Plan. A charge of GBP213,000 was recognised in relation to the 22
February 2017 Executive Incentive Plan award; GBP213,000 in relation to the 26
May 2017 award; GBP476,000 in relation to the 17 May 2018 award; GBP107,000 in
relation to the 9 May 2019 award; and GBP70,000 in relation to shares issued to
non-executive directors in accordance with the Company's Remuneration Policy
and the compensation agreed at their appointments.
11. Related Party Transactions
During the period, consultancy fees amounting to GBP130,262 (inclusive of VAT)
(30 June 2018: GBP374,400) were payable to Merlin Scientific LLP, a partnership
controlled by Sir Christopher Evans, a former director and substantial
shareholder of the Company. At 30 June 2019, no amount (inclusive of VAT) was
owed to Merlin Scientific LLP by the Company in respect of these fees (30 June
2018: GBPnil). All consultancy arrangements with Merlin Scientific have been
closed.
During the period, Arix Capital Management Limited, as manager of The Wales
Life Sciences Investment Fund LP, recognised management fee income totalling GBP
248,000 (six months to 30 June 2018: GBP454,000). Arix Capital Management
Limited is also a limited partner of the fund. As at 30 June 2019, GBP71,000 was
outstanding (30 June 2018: GBP409,000).
12. Events After the Reporting Period
On 19 August 2019, the Group concluded a renegotiation of its terms with
BioMotiv, LLC. Under the new arrangement, the Group has been released from its
ongoing commitment to BioMotiv, the undrawn element of which had stood at
$10,625,000. As part of the agreement, the Group's holding in BioMotiv has
been reduced from 2,500 units to 1,078 units. The Group retains visibility
over BioMotiv's pipeline and the right to fund BioMotiv projects which are
seeking third party investment.
END
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