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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Arix Bioscience Plc | LSE:ARIX | London | Ordinary Share | GB00BD045071 | ORD 0.001P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 142.00 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
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Arix Bioscience plc
Full year results for the year ended 31 December 2019
LONDON, 10 March 2020: Arix Bioscience plc ("Arix", LSE: ARIX) a global venture
capital company focused on investing in and building breakthrough biotech
companies, today announces its full year results for the year ended 31 December
2019.
Financial performance
* Net Asset Value (NAV) of GBP202 million (December 2018: GBP270 million), 149
pence per share (December 2018: 200 pence per share). Equates to a 25%
decline in NAV per share for the year versus a 32% increase in 2018
* Gross Portfolio valued at GBP149 million (December 2018: GBP175 million), and GBP
5m of cash realisations in the period
+ Uplifts including Aura (Series D), Harpoon (Nasdaq IPO), Quench Bio
(Series A) outweighed by volatility of public holdings, notably a 60%
decline in Autolus' share price
* GBP36 million of capital deployed into the Gross Portfolio during the period
* Cash of GBP55 million at 31 December 2019 (December 2018: GBP91 million)
Two new portfolio companies added to the portfolio:
* Co-led a $63.0 million Series B financing in new portfolio company Imara,
committing $15.0 million (GBP11.4 million) for a 9.9% stake
* Co-led a EUR20.0 million Series A in new portfolio company STipe
Therapeutics, committing EUR5.7 million (GBP4.9 million) for a 19.8% stake.
Christian Schetter, Arix Entrepreneur in Residence, appointed as STipe's
Executive Chairman
Funding continued growth in the portfolio
* 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 (ocular melanoma) completed a $40.0 million Series D
financing, in which Arix committed a further $4.5 million (GBP3.4 million)
Together with the two new portfolio companies, these companies raised $322
million in aggregate over the period.
Continued clinical progress in the portfolio, with 26 live clinical trials
Over the period a number of companies reached important clinical milestones,
notably:
* Aura presented further positive safety and efficacy data from the ongoing
AU-011 Phase 1b/2 study for choroidal melanoma
* Autolus reported encouraging data from its AUTO1 programme in adult acute
lymphoblastic leukaemia (aALL), as well as early results from its AUTO3
programme in diffuse large B-cell lymphoma (DLBCL)
* Amplyx announced positive interim Phase 2 data from its lead programme
APX001 in candidemia
* Harpoon initiated a Phase 1/2a clinical trial for HPN536, a
mesothelin-targeting T cell engager, for the treatment of ovarian cancer
and other mesothelin-expressing solid tumours
* Imara reported interim Phase 2a data from its IMR-687 clinical study for
patients with sickle cell disease, showing proof of concept clinical
activity
* VelosBio transitioned to a clinical stage company, initiating the VLS-101
Phase 1 clinical study for the treatment of haematological cancers
Post period end
Quench Bio launched from stealth with Series A financing
In January, Arix announced the Series A financing and launch of Quench Bio, a
company that Arix created and seeded with Atlas Venture in June 2018. The
Series A financing recognised a 40% uplift to the seed financing. Following the
financing Arix retains a 21.7% stake in the business. This is the first company
co-founded and formed by Arix from scratch, combining scientific discoveries
from professors in Germany with entrepreneurs and co-investors in Boston. It
encapsulates the benefits of Arix's transatlantic footprint and culture.
Autolus raised $72.4 million in a public offering and reported additional
encouraging data in AUTO3
In January, Autolus completed a follow-on financing raising net proceeds of
approximately $72.4 million. Following the offering Arix retains a 6.5%
ownership stake. This financing will enable Autolus to develop its lead
programme, AUTO1, in adult ALL through its Phase 2 trial and advance its next
generation of T cell therapies into the clinic.
Appointment of Dr. Roberto Iacone as Entrepreneur in Residence
Dr. Roberto Iacone has been appointed as the second Entrepreneur in Residence
at Arix. Roberto will focus on company creation, sourcing early stage European
opportunities with Arix partner, Takeda Ventures, Inc., the strategic venture
investing arm of Takeda Pharmaceuticals. This new role extends Arix's
collaboration with Takeda Ventures to identify opportunities for early stage
investment and create new biotechnology companies together.
Iterum raised $52 million through a private placement
Following the disappointing news, announced in Q4 2019, that results from its
Phase 3 trial in complicated intra-abdominal infections narrowly missed its
primary endpoint, Iterum completed a $51.9 million private placement with new
and existing investors in January 2020. This will enable the company to fund
the continued Phase 3 clinical development of sulopenem and the management of
regulatory filings. Arix agreed to invest $1.9 million (GBP1.5 million) in the
financing. This investment is in addition to Arix's existing stake of 7.3% in
Iterum (amounting to 1,089,903 ordinary shares).
Key anticipated milestones
The company notes key clinical milestones anticipated by its portfolio
companies in 2020:
* Artios expects to initiate a Phase 1 study in ATM-deficient tumours by the
end 2020
* Atox Bio expects to announce results from the ACCUTE Phase 3 clinical study
in necrotising soft tissue infections in H1 2020
* Aura expects to initiate the AU-011 Phase 3 clinical study for choroidal
melanoma in the H2 2020
* Amplyx expects to announce further Phase 2 data for APX001 in candidemia in
2020
* Autolus expects to initiate a Phase 2 registration trial of AUTO1 in adult
ALL in H1 2020 and present updated Phase 1 data in H1 and H2 2020
* Autolus expects to make a go/no go decision on Phase 2 initiation of AUTO3
in DLBCL in mid-2020
* Autolus expects to announce interim Phase 1 AUTO4 T cell lymphoma data in
H2 2020
* Autolus expects next generation (NG) programmes to enter the clinic in 2020
* Harpoon expects to present interim data from its HPN424 Phase 1 clinical
study in prostate cancer in H1 2020
* Harpoon expects to present data from its HPN536 Phase1/2a clinical trial
for ovarian cancer and other mesothelin-expressing solid tumours in H2 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
* Imara expects to announce updated results from its IMR-687 Phase 2a
clinical study in sickle cell disease (SCD) by the end of 2020
* Imara expects to initiate Phase 2b trials for SCD and beta thalassemia in
H1 2020
* Iterum expects to announce results from the SURE 1 Phase 3 clinical study
in uncomplicated urinary tract Infections and the SURE 2 Phase 3 clinical
study in complicated urinary tract infections in H1 2020
* Pharmaxis expects to announce Phase 1b results from its systemic LOX
inhibitor for myelofibrosis and/or pancreatic cancer in H1 2020
* VelosBio expects to announce Phase 1 data for VLS-101 in haematological
cancers in H2 2020
Joe Anderson, CEO, commented:
"We remain focused on driving realisable value in our portfolio, and in turn
our NAV, and I believe we are well positioned to do so through 2020 and beyond.
We have had a challenging year with our shareholder structure and volatility in
our public portfolio companies, but look ahead with confidence and see a
portfolio that is maturing and has the potential to deliver real value."
Conference Call and presentation Information
Arix will host a conference call today, 10 March at 12:15 pm GMT/ 7:15am 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
The call may also be accessed by dialling (0)330 336 9125 for U.K. and European
callers and +1 323-794-2588 for U.S. callers. Please reference conference ID
4517667.
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) 20 3950 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
Chairman's Statement
Good underlying progress in the portfolio with a focus on unlocking and
realising value for shareholders in 2020
2019 was a year of both progress and challenge for the Company.
The Arix portfolio now comprises 16 biotech companies addressing serious unmet
medical need, building on innovative science and led by successful
entrepreneurs in their respective areas. The portfolio saw positive clinical
data from four of these companies during the year and three raised additional
capital at valuation uplifts to the prior round. Harpoon was one of these
companies, the fourth in our portfolio to successfully list and raise capital
on Nasdaq.
Our strategic partnerships continue to play an important role in guiding and supporting our activities at Arix. We have built a strong dialog with our pharmaceutical partners Fosun, Ipsen, Takeda and UCB and benefit from their expertise as they also gain access to our pipeline and portfolio of emerging biotech companies. Our academic partnerships with Max Planck in Germany and Fred Hutch in Seattle are also beginning to bear fruit. Our first company incubated from Max Planck, Quench Bio, attracted leading new investors in its well supported Series A funding round shortly after year-end. The portfolio is reaching a point where investors can expect to start to see value realisations either through the strategic sale of portfolio companies to pharmaceutical or larger biotech companies or through the sale of publicly listed holdings. The executive team will be focused on this in 2020 as well as attracting additional investment to the company. During 2019, the book value of the portfolio was impacted significantly by Autolus, one of our listed companies whose stock price was riding high in the early part of the year but has come back significantly. However, we do continue to see good progress in this company's clinical programmes. An additional challenge during the year was the suspension in June 2019 of the Woodford Equity Income Fund, our largest shareholder with a 19.8% holding in Arix. We have been seeking to achieve an orderly transition of this holding to long-term supportive investors, and remove the distraction and consequent uncertainty that it has had on the share price in recent months. In the latter part of 2019 the Board held a strategy day to review the performance of the company and the portfolio and to agree the outline of a three year plan to deliver value for shareholders. We also reviewed options to further build the business as value is delivered over the next three years. From a governance perspective we have also started to build a more London centric Board with the skills and experience to guide the company through the next few critical years. In particular, Mark Breuer, who joined as a Non Executive in 2019 brings broad experience in UK capital markets and in advising public company Boards. Naseem Amin, who joined more recently, brings strong transatlantic industry experience in clinical development, business development and venture capital. With the added industry and financial experience of Giles Kerr, deep R&D expertise of Trevor Jones and the successful venture and industry track record of Art Pappas, the governance is in place to guide the company to take the actions needed to deliver value for shareholders. I would also like to take this opportunity to thank Franz Humer, James Rawlingson and Meghan Fitzgerald for their service as Board members and for their important contributions in the formative years as we created and built Arix. Arix has built a portfolio of companies pursuing breakthroughs in treating serious diseases for the benefit of patients. To continue this important work I look forward to 2020, where we start to achieve cash realisations to reinvest in new companies, to attract new investors and to deliver value for shareholders. I know Joe Anderson and the team at Arix are up to the challenge and have a portfolio that can deliver on this. Jonathan Peacock Chairman 9 March 2020 Chief Executive Officer's Review Developing the long term potential of the business We are working closely with our portfolio companies to build realisable value for our shareholders and see multiple clinical and scientific development milestones in the year ahead. We have made good progress since the IPO in February 2017. The portfolio is now well-balanced and diverse, with science that is showing significant promise and products that have progressed well in clinical trials. To date, we have invested GBP138 million in the Gross Portfolio, which was valued at GBP154m by year-end, including GBP5 million of realisations. The team at Arix has the right blend of experience and talent to make the most of the significant opportunities in the portfolio on behalf of shareholders. Despite this, and disappointingly, during 2019, the results for the period show a 25% decline in Net Asset Value (NAV) per share (down 51p per share) compared to a positive return of 32% (48p per share) a year earlier. Our results were particularly impacted by the volatility of our public stocks, which collectively fell by 38% in 2019, giving up strong gains made in the prior year. As a result, our reported NAV at year-end was GBP202 million (GBP1.49 per share) compared to GBP270 million (GBP2.00 per share) at December 2018. Most of our portfolio companies were small private companies at the time we first invested. As we reported last year, progress has been rapid and four of these have already made the transition to public companies following IPOs on the Nasdaq. An IPO is not necessarily an exit point for us, but rather a means for the portfolio company to access additional capital from the public markets to speed the development of new products through clinical testing. But the development of these medicines takes time; it is a competitive business and clinical trials in humans, rightly, are highly regulated and set very high standards for proving efficacy and safety before approval is achieved for new products to treat patients. As a result, public biotech company share prices can be volatile in the period between their listing and producing definitive data, as was seen with Arix's listed portfolio companies, which made up 44% of our NAV at the beginning of the year. Our view is that such fluctuations, although important to manage to the extent they can be, are less relevant to true value creation than is making solid progress with clinical development. On that count, during 2019 we saw meaningful progress in the clinical development plans of our portfolio companies. This is key to securing sustainable uplifts in our NAV and this remains our top priority. During 2019, we have had a particular focus on building start-up companies based on cutting edge science to balance our portfolio of later stage companies. Company creation involves substantial effort from our team, and yields high ownership of the resulting company for relatively modest investment of capital. We have started a programme of bringing accomplished life science entrepreneurs into Arix to help us with such work and recently the first results of this emerged in the shape of STipe, our new portfolio company, led by Christian Schetter, Arix Entrepreneur in Residence. Our investment team has also been busy helping to build Quench Bio - a company that emerged from stealth mode shortly after year-end. We are looking to extend these efforts in company creation and as part of this are pleased to have announced the appointment of Roberto Iacone as our second Entrepreneur in Residence in March 2020. The year ahead We remain focused on driving realisable value in our portfolio, and in turn our NAV, and I believe we are well positioned to do so through 2020 and beyond. We have had a challenging year with our shareholder structure and volatility in our public portfolio companies, which in the near term continues with the emergence of a new risk in the form of coronavirus, but look ahead with confidence and see a portfolio that is maturing and has the potential to deliver real value. I am privileged to lead such a talented and dedicated team, optimistic about the direction in which our business is heading and confident in the long-term value Arix can deliver. Joe Anderson Chief Executive Officer 9 March 2020 Financial Review Arix's core focus is to invest in and build breakthrough biotech companies, whilst maintaining disciplined capital allocation. 2019 has been a year of transition for Arix's finances, during which the Group implemented a leaner structure and lower ongoing cost base. Arix's portfolio companies have continued to progress, although this year's results are marked by volatility in the valuation of Arix's listed investments, which has led to a reduction in the Group's net asset value, and a loss for the financial year. At year-end, net asset value totalled GBP202.1 million, a reduction of GBP68.1 million compared to 2018's GBP270.2 million. This was predominantly driven by a net downward revaluation of Arix's investments of GBP58.6 million in the year (2018: GBP51.2 million positive revaluation). Arix ended the year with cash and deposits of GBP54.6 million (2018: GBP91.2 million), the reduction predominantly driven by strong investment activity, with GBP39.2 million deployed across both new and existing portfolio companies; partially offsetting this, some initial modest realisations were seen (GBP8.9 million of proceeds). Core Portfolio Arix added one new company to its Core Portfolio during the year, co-leading the $63 million Series B investment into Imara, with a commitment of $15.0 million (GBP11.3 million). In the first half of the year, Harpoon Therapeutics completed its Nasdaq IPO, in which Arix invested a further $6.0 million (GBP4.7 million); and Aura Biosciences successfully closed a Series D financing round, at a 33% uplift to the 2017 Series C, when Arix first invested in the company. Autolus Therapeutics also completed a follow-on financing, in April 2019, in which Arix invested a further GBP3.8 million. Investment pace slowed during the second half of the year, although milestone investments were made into Amplyx Pharmaceuticals, Aura Biosciences and Artios Pharma (the latter funded in January 2020), in line with existing commitments. The Core Portfolio incurred a net negative revaluation of GBP54.6 million during the year, arising almost exclusively from Arix's listed investments. The majority of the impact was from Autolus Therapeutics, with Arix's stake falling by GBP50.8 million, compared to a GBP55.9 million positive revaluation in 2018.
Other notable decreases in the value of listed stakes were seen with LogicBio
Therapeutics (GBP7.7 million) and Pharmaxis (GBP2.6 million). Arix's stake in
Harpoon Therapeutics increased in value by GBP6.1 million in the period, while
the unlisted investments in the Core Portfolio contributed GBP1.9 million.
Shortly prior to year-end, with the stock at all-time highs, Arix realised 11%
of its stake in Harpoon, at two times the average cost of investment, marking
the first modest proceeds received from the Core Portfolio.
Discovery Portfolio
Arix holds its earliest stage assets in the Discovery Portfolio. This acts as a
development pool for some of the most promising emerging areas of biotech, with
the companies often in the initial stages of research and development. One new
company was added to this portfolio in the year, as Arix co-led the EUR20 million
Series A financing of Stipe Therapeutics, committing EUR5.7 million (GBP4.8
million), for a 19.8% stake. Meanwhile, a decision was taken to wind down
Mitoconix Bio, in which Arix had invested GBP0.8 million. While it is always
disappointing when a company does not reach its potential, this highlights
Arix's risk-based approach, initially committing small amounts of capital split
into milestone-dependent tranches, meaning cash is preserved when necessary
levels of conviction are not achieved.
A positive development within the Discovery Portfolio was Quench Bio, which
emerged from stealth mode shortly after year-end, concluding its Series A
financing. Arix co-founded the company in 2018, alongside Atlas Venture,
incubating the investment within the Discovery Portfolio over the past 18
months.
Other Interests
Arix's Other Interests reflect legacy holdings, which continue to wind down.
Proceeds of GBP4.3 million were received during the year, while net writedowns of
GBP4.5 million were recognised; at year-end, the remaining positions total GBP2.7
million.
Cash Position
Cash and deposits totalled GBP54.6 million at year-end, compared to GBP91.2 million
the previous year. The reduction in the period was predominantly driven by
ongoing deployment into Arix's portfolio, with GBP39.2 million invested. This was
partially offset by the realisation of a portion of Arix's Harpoon holding, and
by the wind down of Arix's Other Interests, which cumulatively generated GBP8.8
million of proceeds during the year.
At year-end, amounts committed to portfolio companies, upon completion of
agreed milestones, totalled GBP8.5 million; this excludes 2019's GBP4.3 million
investment in Artios, the funds for which were transferred in January 2020.
Arix continues to take a prudent approach to cash management, reserving funds
for both the anticipated future requirements of the portfolio and the ongoing
costs of the business, leaving Arix well placed to continue supporting the
existing portfolio.
Consolidated Statement of Comprehensive Income
The largest component of Arix's Statement of Comprehensive Income is the change
in fair value of investments, which reduced by GBP58.6 million in the year (2018:
increase of GBP51.2 million). The significant movements in this balance are
discussed on the previous page.
Throughout 2019, Arix has been transitioning to a leaner organisational
structure and lower cost base. Significant changes were made to the management
team, with Sir Christopher Evans and James Rawlingson departing, and Jonathan
Peacock moving to a Non-Executive role. The previously announced premises
review resulted in the sub-letting of Arix's US office and a move to smaller
location. Despite incurring a number of one-off costs associated with these
changes during 2019, Administrative Expenses excluding Depreciation and
Amortisation were GBP1.5 million lower than the previous year, at GBP9.3 million.
Arix anticipates that these costs will be below GBP9.0 million in 2020.
As expected, Revenue decreased to GBP0.5 million (2018: GBP1.3 million), reflecting
The Wales Life Sciences Investment Fund's reducing contribution as the fund
enters the later years of its life. Interest income of GBP0.8 million (2018: GBP0.7
million) was earned on Arix's cash and deposits.
Other deductions in the period relate to foreign exchange losses of GBP4.4
million (2018: GBP4.6 million gain), predominantly arising from Arix's
increasingly US dollar denominated investment portfolio; a one-off GBP0.5 million
impairment relating to Arix's sub-let US property; a GBP0.8 million impairment to
intangible assets; and a share based payment charge of GBP2.8 million (2018: GBP3.3
million).
Taxation
Movements in Arix's tax balance to date have principally related to deferred
tax balances. Revaluations in Arix's investments are only taxable once
realised, but a deferred tax charge is recognised in the same period as an
unrealised revaluation. Where possible, Arix aims to take advantage of the UK's
Substantial Shareholding Exemption, which exempts taxable gains or losses
arising from the disposal of shares, where certain conditions are met.
Valuation Policy
Arix's investments are valued in accordance with International Private Equity
and Venture Capital Valuation Guidelines December 2018 ('IPEV Guidelines').
Quoted investments are marked-to-market at the period end. Unquoted investments
are valued with reference to the most recent funding round; milestones; or by
discounted cash flow.
Investment summary
Investment Value Investment Realisations Change in FX Value Fully Fully Fully
31 Dec in period in period Valuation Movement 31 Dec Diluted Committed, Funded.
18 GBPm GBPm GBPm GBPm 19 Equity Not Yet Fully
GBPm GBPm Interest Invested Diluted
GBPm GBPm Equity
Interest,
%
Core portfolio
Amplyx Pharmaceuticals 3.2 1.9 - - (0.2) 4.9 3.0% - 3.0%
Artios Pharma 10.9 4.3 - - - 15.2 12.4% - 12.4%
Atox Bio 3.2 3.2 - (1.2) (0.2) 5.0 6.4% 0.2 6.5%
Aura Biosciences 3.9 3.4 - 1.2 (0.2) 8.3 7.7% - 7.7%
Autolus 81.5 3.8 - (50.8) (0.7) 33.8 7.5% - 7.5%
Harpoon Therapeutics 23.9 4.7 (4.3) 6.1 (1.5) 28.9 10.4% - 10.4%
Imara - 9.3 - 1.4 - 10.7 9.2% 2.1 9.9%
Iterum Therapeutics 4.3 - - (0.6) - 3.7 7.3% - 7.3%
LogicBio Therapeutics 24.3 - - (7.7) (0.3) 16.3 13.0% - 13.0%
Pharmaxis 6.4 - - (2.6) (0.1) 3.7 11.1% - 11.1%
VelosBio 5.2 - - 0.5 (0.2) 5.5 8.9% 3.3 11.3%
Verona Pharma 2.5 - - (0.9) - 1.6 2.5% - 2.5%
169.3 30.6 (4.3) (54.6) (3.4) 137.6 5.6
Discovery portfolio 6.2 5.6 (0.3) 0.5 (0.4) 11.6 2.9
Gross portfolio 175.5 36.2 (4.6) (54.1) (3.8) 149.2 8.5
Other interests 8.5 3.0 (4.2) (4.5) (0.1) 2.7 -
Total Investments 184.0 39.2 (8.8) (58.6) (3.9) 151.9 8.5
Risk Management
The Group monitors a number of principal risks and uncertainties that may
impact the business. These include financial, non-financial, internal and
external concerns.
Risk management framework
The Directors are able to manage the business, and achieve its strategic
objectives, due to an effective risk management framework which features
multiple layers.
Board
Managing risk is a key responsibility of the Board, who set a strong tone, in
line with best practice corporate governance.
Key committees
The Audit and Risk Committee oversees the effectiveness of the risk management
processes.
The Remuneration Committee ensures incentives and reward are balanced and
appropriate for achieving the strategy.
The Nomination Committee addresses the need for continuing strength at the
senior levels of the Company and is responsible for succession planning.
Executive management
The management team is responsible for identifying, assessing and mitigating
the day-to-day operational risks.
Portfolio Company boards and independent assurance
The boards of our Portfolio Companies are responsible for ensuring they meet
key commercial objectives, and in this they are typically supported by senior
members of the Arix Bioscience team, who also sit on their boards.
Independent assurance is provided by industry experts when required. For
example, external advisors are engaged to provide regulatory compliance support
to the Board of Arix Capital Management, Arix Bioscience's FCA-regulated fund
management subsidiary.
Risks and Mitigants
The key risks to Arix have been assessed in light of the current environment;
these, along with the steps taken by Arix to manage such risks, are detailed
below.
Area Risk Impact Mitigation
1 Clinical Arix's portfolio Negative clinical Arix has an experienced team
trial risks typically trial read outs may responsible for identifying
comprises reduce the value of and developing portfolio
companies that the portfolio companies, resulting in a high
are engaged in company, potentially standard of due diligence
clinical trials. to nil. This would before the commitment of any
There is a risk therefore result in a capital. Post?investment, Arix
that the trials decrease in Arix's typically has representatives
may produce profitability, and on the company's board of
negative or reduce Arix's ability directors, ensuring it is
inconclusive to generate positive fully aware of business
results. cash flows from developments, and allowing for
future realisations. mitigation of possible issues
Inconclusive read as they arise.
outs may both reduce Arix funds a range of
the value of the portfolio companies and
portfolio company, continues to develop its
impacting Arix's portfolio across a range of
profitability, and therapeutic areas. Its diverse
require further portfolio means that Arix's
capital to fund financial performance is not
additional trials to overly reliant on any one
seek further clarity business.
in the results,
adversely impacting
Arix's cash flow.
2 Personnel Arix's success is The financial Arix's investment team have
predicated on the performance of Arix strong scientific backgrounds
quality of its depends on its and are experienced life
investment ability to identify sciences investors.
decisions, which and develop Arix has a market?appropriate
in turn is a outstanding portfolio remuneration scheme for its
product of the companies and, as senior employees. This
calibre of its such, is reliant on includes share incentive
investment team. its key personnel. schemes, which reward
There is a risk Loss of key personnel for long?term
of Arix being individuals could service and performance.
unable to attract reduce the quality of Arix has three management
or retain staff Arix's investment members making up the
of sufficient decision-making and Executive Committee performing
calibre. therefore negatively active day?to?day roles who
affect Arix's are able to provide emergency
financial performance cover for each other over a
and future prospects. short period.
Arix's Nomination Committee is
responsible for appropriate
succession planning.
3 Macroeconomic Adverse market An economic downturn, Arix's strategy is to deploy
conditions conditions may triggered by capital into innovative
impact Arix's macroeconomic factors businesses which have unique,
operational or a market shock high impact outcomes; Arix
model. such as coronavirus, believes that such businesses
may reduce are less susceptible to
opportunities for macroeconomic cycles.
Arix to realise Arix has funded portfolio
capital from companies across a range of
portfolio companies, geographies, including the UK,
affecting cash flow USA, Europe, Israel and
and financial Australia. As such, it is not
performance if overly reliant on a downturn
portfolio valuations or market shock in a single
are reduced. The geography.
availability of Arix monitors its availability
capital for any of capital closely, ensuring
external fundraising sufficient funds are available
by Arix or its for the investment and
portfolio companies operational needs of the
may also be affected. business.
4 Legislation & Changes to A change in Arix's portfolio is
regulation government policy government regulation diversified by geography, with
or regulation in (for example CFIUS in exposure to the UK, USA,
the research, the United States) Europe, Israel and Australia,
healthcare or may adversely affect protecting the Group from the
life sciences the profitability of adverse actions of any one
industries could the healthcare and government.
impact Arix or life sciences Arix's corporate team actively
its portfolio industry, resulting monitors changes to laws and
companies. in a reduction in the regulation, and where
number of investment considered necessary enlists
opportunities, the advice of relevant experts
availability of to consider any company or
external funding or portfolio impacts.
potential exit
opportunities for
portfolio companies.
5 Brexit Brexit may have Specific impacts Arix has the ability to
an impact beyond could include: withstand a depressed capital
the risks a depressed UK market, including but not
described above capital market that limited to the ability to
in terms of by does not support the dispose of a portion of its
severity of a raising of capital listed investments; withhold
downturn or the for the Group or its funds that are reserved for
nature of the UK-based portfolio the existing portfolio; or the
impact. companies; or ability to issue up to 10% of
a reduction in share capital to a new
government-funded investor. Arix also closely
research in biotech, monitors available capital and
leading to reduced holds cash reserves to cover
investment future operating costs.
opportunities. Both Arix's portfolio and
pipeline of future
opportunities has a broad
geographic spread, with
limited exposure to the UK
capital market and government
policy. As such, its financial
performance is not overly
reliant on the UK market.
Viability statement
The Board has assessed the prospects of Arix over a period greater than 12
months. We have considered a period of three years from the balance sheet date,
as the Board expects the majority of Arix's current commitments and new
proceeds raised to be committed over the next three years, and therefore
reflects the period over which the Group's cash flows are assessed internally.
A robust assessment of the principal risks and their mitigants has been carried
out. The Board assessed Arix's business model, particularly its approach to
future cash commitments to existing portfolio companies. Key judgements
reflected how future cash requirements may change from restrictive regulations,
and how the availability of capital may be impacted from the loss of key
personnel.
Having initially started with a base case scenario considering Arix's finances
over the assessment period, the estimated impacts on the Group's cash flow, as
described above, are modelled, creating a range of adverse scenarios. An
extreme downside case is then considered, reflecting the estimated cash flow
impact of all considered risks occuring concurrently. Finally, the analysis
considers the mitigating actions the Group could take to reduce the financial
impact of the noted risks.
Based on its review, and the consideration of any changes that had occurred
post year-end, the Board has a reasonable expectation that Arix will be able to
continue in operation and meet its liabilities as they fall due over a
three-year period from the date of this report and confirm that preparing the
financial statements on a going concern basis is appropriate.
Consolidated statement of comprehensive income
For the year ended 31 December 2019
Note 2019 2018
GBP'000 GBP'000
Change in fair value of investments 11 (58,642) 51,173
Revenue 3 506 1,328
Administrative expenses 6 (9,709) (11,698)
Operating (loss) / profit (67,845) 40,803
Net finance income 7 769 708
Foreign exchange (losses) / gains (4,443) 4,583
Impairment of right-of-use and intangible assets (1,259) -
Share-based payment charge 18 (2,790) (3,333)
(Loss) / profit before taxation (75,568) 42,761
Taxation 9 5,883 (5,883)
(Loss) / profit for the year (69,685) 36,878
Other comprehensive (expense) / income
Exchange differences on translating foreign operations (185) 1,269
Taxation 9 - -
Total comprehensive (expense) / income for the year (69,870) 38,147
Attributable to
Owners of Arix Bioscience plc (69,870) 38,147
Earnings per share
Basic earnings per share (p) 10 (53.8) 32.1
Diluted earnings per share (p) 10 (53.8) 29.7
The above consolidated statement of comprehensive income should be read in
conjunction with the accompanying notes.
Consolidated statement of financial position
As at 31 December 2019
Note 2019 2018
GBP'000 GBP'000
ASSETS
Non-current assets
Investments held at fair value 11 151,921 183,981
Intangible assets 12 688 1,770
Property, plant and equipment 13 160 313
Right of use asset 249 -
Investment property 366 -
153,384 186,064
Current assets
Cash and cash equivalents 15 54,638 31,009
Cash on long-term deposit 15 - 60,209
Trade and other receivables 14 1,106 2,174
Right of use asset 90 -
55,834 93,392
TOTAL ASSETS 209,218 279,456
LIABILITIES
Current liabilities
Trade and other payables 16 (6,154) (3,399)
Lease liability (685) -
Deferred tax liability 9 - (5,883)
(6,839) (9,282)
Non-Current Liabilities
Lease Liability (271) -
TOTAL LIABILITIES (7,110) (9,282)
NET ASSETS 202,108 270,174
EQUITY
Share capital and share premium 17 188,585 188,585
Retained earnings 15,718 82,018
Other reserves (2,195) (429)
TOTAL EQUITY 202,108 270,174
The accompanying notes form an integral part of the financial statements. The
financial statements were approved by the Board of Directors and authorised for
issue on 9 March 2020, and were signed on its behalf by
Joe Anderson
Chief Executive Officer
Consolidated statement of changes in equity
For the year 31 December 2019
Share Other Other Retained Total
Capital Equity Reserves Earnings GBP'000
and GBP'000 GBP'000 GBP'000
Premium
GBP'000
As at 1 January 2019 188,585 (1,211) 782 82,018 270,174
Loss for the year - - - (69,685) (69,685)
Other comprehensive (expense)/income - - (780) 595 (185)
Share-based payment charge - - - 2,790 2,790
Acquisition of own shares - (986) - - (986)
Issue of own shares to employees - 443 (443) - -
As at 31 December 2019 188,585 (1,754) (441) 15,718 202,108
For the year ended 31 December 2018
Share Other Other Retained Total
Capital Equity Reserves Earnings GBP'000
and GBP'000 GBP'000 GBP'000
Premium
GBP'000
As at 1 January 2018 105,125 - (768) 42,088 146,445
Profit for the year - - - 36,878 36,878
Other comprehensive income - - 1,550 (281) 1,269
Contributions of equity, net of 83,460 - - - 83,460
transaction costs and tax
Share-based payment charge - - - 3,333 3,333
Acquisition of own shares - (1,211) - - (1,211)
Issue of own shares to employees - - - - -
As at 31 December 2018 188,585 (1,211) 782 82,018 270,174
Consolidated statement of cash flows
For the year ended 31 December 2019
Note 2019 2018
GBP'000 GBP'000
Net cash from operating activities 19 (9,242) (11,018)
Finance income 769 -
Finance expenses - (12)
Tax paid - (28)
Net cash from operating activities (8,473) (11,058)
Cash flows from investing activities
Purchase of equity investments (34,858) (55,228)
Disposal of equity and loan investments 8,791 -
Purchase of property, plant and equipment (6) (2)
Net cash received from / (placed on) long-term deposit 60,209 (60,209)
Net cash from investing activities 34,136 (115,439)
Cash flows from financing activities
Net proceeds from issue of shares - 83,460
Purchase of own shares by Employee Benefit Trust (986) (1,211)
Net cash from financing activities (986) 82,249
Net increase/(decrease) in cash and cash equivalents 24,677 (44,248)
Cash and cash equivalents at start of year 31,009 74,938
Effect of exchange rate changes (1,048) 319
Cash and cash equivalents at end of year 54,638 31,009
Notes to the financial statements
1. General Information
The principal activity of Arix Bioscience plc (the 'Company') and its
subsidiaries (together the 'Arix Group' or 'the Group') is to invest in and
build breakthrough biotech companies around cutting edge advances in life
sciences.
The Company is incorporated and domiciled in the United Kingdom. Arix
Bioscience plc was incorporated on 15 September 2015 as Perceptive Bioscience
Investments Limited and changed its name to Arix Bioscience Limited. It
subsequently re-registered as a public limited company and changed its name to
Arix Bioscience plc. The address of its registered office is 20 Berkeley
Square, London, W1J 6EQ. The registered number is 09777975.
2. Accounting Policies
A. Basis of preparation
The consolidated financial statements of the Arix Group have been prepared in
accordance with International Financial Reporting Standards (IFRS) and
interpretations issued by the IFRS Interpretations Committee (IFRS IC)
applicable to companies reporting under IFRS as adopted by the European Union.
The financial statements comply with IFRS as issued by the International
Accounting Standards Board (IASB) as adopted by the European Union.
The financial statements have been prepared on a historical cost basis, except
for certain financial assets which have been measured at fair value. The
financial statements are presented in British pounds sterling, which is the
functional and presentational currency of the Company, and the presentational
currency of the Group; balances are presented in thousands of British pounds
sterling unless otherwise stated.
The Arix Group has applied all standards and interpretations issued by the IASB
that were effective at the period end date. The accounting policies set out
below have, unless otherwise stated, been applied consistently to all periods
presented.
Use of judgements and estimates
In preparing these financial statements, management has made judgements,
estimates and assumptions that affect the application of the Arix Group's
accounting policies and reported amounts of assets, liabilities, income and
expenses. Actual results may differ from those estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis.
Revisions to estimates are recognised prospectively.
Significant estimates are made by the Arix Group when determining the
appropriate methodology for valuing investments (see Note 2(i)) and share-based
payments (see Note 2(o) and Note 18).
In preparing these financial statements, the Directors have considered the
relationship that the Group has with The Wales Life Sciences Investment Fund
(the "WLSIF") and specifically as to whether the Group controls WLSIF. The
Directors note that while Arix Capital Management Limited (a 100% subsidiary of
Arix Bioscience plc), in its role as fund manager to WLSIF, and Arthurian Life
Sciences SPV GP Limited (a 100% subsidiary of Arix Bioscience plc) in its role
as general partner of the WLSIF, both exercise power over the activities of
WLSIF, they do not have sufficient exposure to variability of returns from
WLSIF to meet the definition of control and therefore acts as agents, rather
than principals of WLSIF. Accordingly, WLSIF has not been consolidated into
these financial statements.
B. Basis of consolidation
Subsidiaries
Subsidiaries are entities over which the Arix Group has control. The Arix Group
controls an entity when it is exposed to, or has the right to, variable returns
from its involvement with the entity and has the ability to affect those
returns through its power over the entity. Subsidiaries are fully consolidated
from the date on which control is transferred. They are deconsolidated from the
date that control ceases. The acquisition method of accounting is used to
account for business combinations by the Group.
The consolidated financial statements comprise a consolidation of the
subsidiary entities listed below. This table contains the disclosures required
by Section 409 of the Companies Act 2006 for subsidiaries.
Entity Country of Registered Address Ownership
Incorporation
Arix Bioscience Holdings England and 20 Berkeley Square, London, W1J 100%
Limited Wales 6EQ
Arix Bioscience, Inc United States 214 West 29th Street, 2nd Floor, 100%
New York NY 10001
Arix Capital Management England and Sophia House, 28 Cathedral Road, 100%
Limited Wales Cardiff, CF11 9LJ
Arthurian Life Sciences GP Scotland 16 Charlotte Square, Edinburgh, 100%
Limited EH2 4DF
ALS SPV Limited England and 20 Berkeley Square, London, W1J 100%
Wales 6EQ
Arthurian Life Sciences SPV England and Sophia House, 28 Cathedral Road, 100%
GP Limited Wales Cardiff, CF11 9LJ
Arix Bioscience plc Employee Jersey 26 New Street, St Helier, 100%
Benefit Trust Jersey, JE2 3RA
Arthurian Life Sciences Scotland 16 Charlotte Square, Edinburgh, 100%
Carried Interest Partner LP EH2 4DF
Arix Bioscience Pty Limited* Australia Level 27, AMP Centre, 50 Bridge 100%
Street, Sydney NSW 2000
All companies are involved in investing in and building breakthrough biotech
companies around cutting edge advances in life sciences, other than Arix
Capital Management and the Arthurian Life Sciences companies, which are engaged
in fund management activity, and Arthurian Life Sciences Carried Interest
Partner LP, which holds a financial interest in a limited partnership.
*Arix Bioscience Pty Limited, a dormant company, was deregistered on 8 January
2020.
Intercompany transactions, balances and unrealised gains on transactions
between Group companies are eliminated. Unrealised losses are also eliminated
unless the transaction provides evidence of an impairment of the transferred
asset.
Associates
Associates are entities over which the Group has significant influence, but
does not control, generally accompanied by a shareholding of between 20% and
50% of the voting rights.
No associates are presented on the Statement of Financial Position as the Group
elects to hold such investments at fair value through profit and loss. This
treatment is permitted by IAS 28 Investment in Associates and Joint Ventures,
which permits investments held by entities that are akin to venture capital
organisations to be excluded from its measurement methodology requirements
where those investments are designated, upon initial recognition, at fair value
through profit or loss and accounted for in accordance with IFRS 9 Financial
Instruments. Changes in fair value of associates are recognised in the
Statement of Comprehensive Income in the period in which the change occurs. The
Group has no interests in associates through which it carries on its business.
The disclosures required by Section 409 of the Companies Act 2006 for
associated undertakings are included in Note 11 to the financial statements.
Similarly, those investments which may not have qualified as an associate but
fall within the wider scope of significant holdings and so are subject to
Section 409 disclosure acts are also included in Note 11 to the financial
statements.
WLSIF is considered neither a subsidiary nor an associate, as detailed in Note
2(a).
C. Adoption of new and revised standards
Certain new accounting standards and interpretations have been applied by the
Group from 1 January 2019. The Group's assessment of the impact of these new
standards and interpretations is set out below.
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 year, the Group vacated its New York office
at 250 West 55th Street, and has sub-let that space. 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.
D. Revenue recognition
Revenue is generated from fund management fees, and from Non-Executive
Directors' fees. Fund management fees are earned as a percentage of funds
managed and are recognised in the period in which these services are provided.
Non-Executive Directors' fees are recognised on an accruals basis.
E. Foreign currency translation
The assets and liabilities of foreign operations are translated to Group's
presentational currency (British pounds sterling) at foreign exchange rates
ruling at the period-end date. The revenues and expenses of foreign operations
are translated at an average rate for the period where this rate approximates
to the foreign exchange rates ruling at the dates of the transactions. Exchange
differences arising from this translation of foreign operations are reported as
an item of other comprehensive income and accumulated in the translation
reserve.
F. Leases
As explained in Note 2(c) above, the Group has changed its accounting policy
for leases. Until 31 December 2018, leases of the Group's premises were
classified as as operating leases. Rents payable under operating leases were
charged against income on a straight-line basis over the lease term, even if
payments were not made on such a basis.
G. Exceptional items
Items that are material in size and unusual in nature are disclosed separately
to provide a more accurate indication of underlying performance.
H. Property, plant and equipment
Property, plant and equipment is stated at cost less accumulated depreciation
and any accumulated impairment losses. Cost includes expenditure that is
directly attributable to the acquisition of the asset.
Depreciation is calculated using the straight-line method over the estimated
useful lives of the related assets:
Office equipment Three years
Fixtures and fittings Five years
Office furniture Five years
Leasehold property Five years
I. Financial assets
The Arix Group classifies its financial assets as either at fair value through
profit or loss or amortised cost. The classification depends on the purpose for
which the financial assets have been acquired and is determined on initial
recognition.
Amortised cost assets are non-derivative financial assets with fixed or
determinable payments that are not quoted in an active market. They are
included in current assets, except for maturities greater than 12 months after
the end of the reporting period, which are classified as non-current assets.
The Arix Group's loans and receivables comprise trade and other receivables and
cash and cash equivalents in the Consolidated Statement of Financial Position.
Regular purchases and sales of financial assets are recognised on the trade
date - the date on which the Arix Group commits to purchase or sell the asset.
Financial assets are derecognised when the rights to receive cash flows from
the investments have expired or have been transferred and the Arix Group has
transferred substantially all risks and rewards of ownership.
Equity investments
Those investments in the Arix Group that are held with a view to the ultimate
realisation of capital gains are recognised as equity investments within the
scope of IFRS 9 and are classified as financial assets at fair value through
profit or loss. This includes investments in associated undertakings, as per
Note 11. When financial assets are initially recognised they are measured at
fair value. They are subsequently remeasured at their fair value if a valuation
event occurs.
Valuation of investments
The fair value of the Group's investments is determined using International
Private Equity and Venture Capital Valuation Guidelines December 2018 ('IPEV
Guidelines'), which comply with IFRS.
The fair value of quoted investments is based on bid prices at the period end
date.
Upon investment, the fair value of unlisted securities is recognised at cost.
Similarly, following a further funding round with participation by at least one
third party, the price of the funding round is generally considered to
represent the investment's fair value at the transaction date, although the
specific terms and circumstances of each funding round must always be
considered.
Following the transaction date, each investment is observed for objective
evidence of an increase or impairment in its value. This reflects the fact that
investments made in seed, start-up and early stage biotech companies often have
no current and no short-term future revenues or positive cash flows; in such
circumstances, it can be difficult to gauge the probability and financial
impact of the success or failure of development or research activities and to
make reliable cash flow forecasts. As such, the Group carries out an enhanced
assessment based on milestone analysis, which seeks to determine whether there
is an indication of a change in fair value based on changes to the company's
prospects. A milestone event may include, but is not limited to, technical
measures, such as clinical trial progress; financial measures, such as a
company's availability of cash; and market measures, such as licensing
agreements agreed by the company. Indicators of impairment might include
significant delays to clinical progress, technical complications or financial
difficulties. Often qualitative milestones provide a directional indication of
the movement of fair value. Calibrating such milestones may result in a fair
value equal to the transaction value. Any ultimate change in valuation reflects
the assessed impact of the progress against milestones and the consequential
impact on a potential future external valuation point, such as a future funding
round or initial public offering.
When forming a view of the fair value of its investment, the Arix Group takes
into account circumstances where an investment's equity structure involves
different class rights on a sale or liquidity event.
The valuation metrics used in these financial statements are discussed in Note
11.
Although the Directors use their best judgement, there are inherent limitations
in any valuation techniques. Whilst fair value estimates presented herein
attempt to present the amount the Arix Group could realise in a current
transaction, the final realisation may be different, as future events will also
affect the current estimates of fair value. The effects of such events on the
estimates of fair value, including the ultimate realisation of investments,
could be material to the financial statements.
Treatment of gains and losses arising on fair value
Realised and unrealised gains and losses on financial assets at fair value
through profit and loss are included in the Statement of Comprehensive Income
in the period in which they arise.
Recognition of financial assets
Purchases and sales of financial assets are recognised on trade-date, the date
on which the Group commits to purchase or sell the asset. Financial assets are
derecognised when the rights to receive cash flows from the financial assets
have expired or have been transferred and the Group has transferred
substantially all the risks and rewards of ownership.
Loans and receivables are subsequently carried at amortised cost using the
effective interest method.
Impairment of financial assets
At the end of each reporting period the Group assesses whether there is
objective evidence that its loans and other receivables are impaired. The
amount of the loss is measured as the difference between the asset's carrying
amount and the present value of estimated future cash flows discounted at the
financial asset's original effective interest rate. The asset's carrying amount
is reduced through the use of an allowance account and the amount of the loss
is recognised in the Statement of Comprehensive Income within administrative
expenses. If, in a subsequent period, the amount of the impairment loss
decreases and the decrease can be related objectively to an event occurring
after the impairment was recognised, the reversal of the previously recognised
impairment loss is recognised in the Statement of Comprehensive Income within
administrative expenses. The Group's financial assets that are subject to IFRS
9's expected credit loss model are its loans and receivables, cash and cash
equivalents and cash on long term deposit. The identified impairment loss is
considered immaterial.
Financial assets and liabilities are offset when there is a legally enforceable
right to offset the recognised amounts and there is an intention to settle on a
net basis, or realise the asset and settle the liability simultaneously. The
legally enforceable right must not be contingent on future events and must be
enforceable in the normal course of business and in the event of default,
insolvency or bankruptcy of the Arix Group or the counterparty. Where these
conditions are met, the net amount is reported in the Statement of Financial
Position.
J. Cash and cash equivalents and Cash on long-term deposit
Cash and cash equivalents comprise cash at bank and in hand, call deposits and
bank overdrafts. Cash on long-term deposit comprises cash held on term deposit
for a period of at least three months.
K. Goodwill and intangible assets
Intangibles were acquired by the Arix Group as part of the acquisition of Arix
Capital Management Limited and Arthurian Life Sciences SPV GP Limited.
It is the policy of the Arix Group to amortise these fair values over the
period in which the Arix Group is expected to obtain economic benefit from the
related intangible assets. The excess of consideration transferred over the
fair value of net identifiable assets acquired is recorded as goodwill. If
those amounts are less than the fair value of the net identifiable assets of
the business acquired, the difference is recognised directly in the Statement
of Comprehensive Income as a bargain purchase. The asset is assessed for
impairment periodically and marked down appropriately if an indication of
impairment is noted.
L. Share capital
Ordinary shares and Series C Shares are classified as equity. Equity
instruments issued by the Arix Group are recorded at the proceeds received, net
of direct issue costs.
Own shares represent shares of Arix Bioscience plc that are held by an employee
share trust for the purpose of fulfilling obligations in respect of various
employee share plans. Own shares are treated as a deduction from equity until
the shares are cancelled, reissued or disposed of. When they vest, they are
transferred from own shares to retained earnings at their weighted average
cost.
M. Trade payables
Trade payables are obligations to pay for goods or services that have been
acquired in the ordinary course of business from suppliers. Accounts payable
are classified as current liabilities if payment is due within one year or less
(or in the normal operating cycle of the business if longer).
If not, they are presented as non-current liabilities.
Trade payables are initially recognised at fair value, generally being the
invoiced amount and are subsequently measured at amortised cost, using the
effective interest method.
N. Current and deferred taxation
The tax expense for the year comprises deferred tax. Tax is recognised in the
Statement of Comprehensive Income, except to the extent that it relates to
items recognised directly in equity.
The current income tax charge is calculated on the basis of the tax laws
enacted or substantively enacted at the balance sheet date in the countries
where the Arix Group operates and generates taxable income. Management
periodically evaluates positions taken in tax returns with respect to
situations in which applicable tax regulation is subject to interpretation. It
establishes provisions where appropriate on the basis of amounts expected to be
paid to the tax authorities.
Deferred income tax is recognised on temporary differences arising between the
tax bases of assets and liabilities and their carrying amounts in the balance
sheets, using the liability method. However, the deferred income tax is not
accounted for if it arises from initial recognition of an asset or liability in
a transaction other than a business combination that at the time of the
transaction affects neither accounting nor taxable profit or loss. Deferred
income tax is determined using tax rates (and laws) that have been enacted or
substantially enacted by the Statement of Financial Position date and are
expected to apply when the related deferred income tax asset is realised or the
deferred income tax liability is settled.
Deferred income tax assets are recognised only to the extent that it is
probable that future taxable profit will be available against which the
temporary differences can be utilised.
Deferred income tax assets and liabilities are offset when there is a legally
enforceable right to offset current tax assets against current tax liabilities
and when the deferred income tax assets and liabilities relate to income taxes
levied by the same taxation authority on either the taxable entity or different
taxable entities where there is an intention to settle the balances on a net
basis.
O. Share-based payments
The Arix Group operates an equity incentive plan and an executive share option
plan in which the Group's founders also participate. Share options must be
measured at fair value and recognised as an expense in the Statement of
Comprehensive Income with a corresponding increase in equity. The fair value of
the option is estimated at the date of grant using a Black-Scholes Model or
Monte Carlo simulation and is charged as an expense in the Statement of
Comprehensive Income over the vesting period. Where relevant, the charge is
adjusted each year to reflect the expected and actual level of vesting.
Estimation uncertainty arises with this balance as the calculation incorporates
assumptions for share price, exercise price, expected volatility (based on
similar quoted companies), risk-free interest rate and share option term.
Further detail on Share-based Payments is available in Note 18.
P. Financial risk management
The Arix Group is exposed to market risk, interest rate risk, credit risk and
liquidity risk. The senior management oversees the management of these risks
and ensures that the financial risk taking is governed by appropriate policies
and procedures and that financial risks are identified, measured and managed in
accordance with the Arix Group's policies and risk appetite.
The Board of Directors review and agree the policies for managing each of these
risks, which are summarised below:
Market risk
Foreign exchange risk - the Arix Group operates internationally and is exposed
to foreign exchange risk arising from various currency exposures, primarily
with respect to the US dollar and euros. Foreign exchange risk arises from
future commercial transactions, recognised assets and liabilities and net
investments in foreign operations. The Arix Group has certain investments whose
net assets are exposed to foreign currency translation risk; at period-end the
Arix Group held US dollar-denominated assets valued at $126.5m;
euro-denominated assets valued at EUR4.7m; Canadian dollar-denominated assets
valued at C$0.2m; and Australian dollar-denominated assets valued at A$7.0m. A
10% appreciation in each currency would have a GBP9.4m negative impact on Arix's
Income Statement; a 10% depreciation would have a GBP11.5m positive impact on
Arix's income statement. The impact of foreign exchange on these holdings is
closely monitored.
Price risk - the Arix Group is exposed to equity securities price risk because
investments are held at fair value through profit or loss.
The Group's strategy is to deploy long term capital into innovative companies
which have novel, high-impact outcomes; Arix believes that such companies are
less susceptible to macroeconomic cycles. The Group monitors the availability
of its capital closely, ensuring sufficient balances are available for the
continuing operation of the business throughout the period assessed in the
viability statement.
Interest rate risk
Cash flow interest rate risk is the risk that the future cash flows of a
financial instrument will fluctuate because of changes in market interest
rates. Fair value interest rate risk is the risk that the fair value of a
financial instrument will fluctuate due to changes in market interest rates.
The Arix Group's income is substantially independent of changes in market
interest rates. Interest-bearing assets include only cash and cash equivalents,
which earn interest at variable rates. The Arix Group has a treasury policy to
manage cash and cash equivalents. In the year ended 31 December 2019, a 10%
change in underlying interest rates would have impacted Arix's Finance Income
by GBP71k.
Credit risk
Credit risk refers to the risk that a counterparty will default on its
contractual obligations resulting in financial loss to the Arix Group. The
major classes of financial assets of the Arix Group are cash and cash
equivalents (GBP54.6m (2018: GBP31.0m)); cash on long-term deposit (GBPnil (2018: GBP
60.2m)); and trade and other receivables (GBP1.1m (2018: GBP2.2m)).
Risk of counterparty default arising on cash and cash equivalents is controlled
within a framework of dealing with high-quality institutions.
As at 31 December 2019, 100% of cash and cash equivalents and cash on long-term
deposit was deposited with institutions that have a credit rating of at least
category A+, according to Fitch ratings.
No counterparty has failed to meet its obligations over the period. The maximum
exposure to credit risk is represented by the carrying amount of each asset.
Management does not expect any significant counterparty to fail to meet its
obligations.
Liquidity risk
The Arix Group manages liquidity risk by maintaining sufficient cash to enable
it to meet its operational requirements. The following table details the
Group's remaining contractual maturity for its financial liabilities based on
undiscounted contractual payments:
Within Total
one year GBP'000
GBP'000
Trade, Other Payables and Accruals (excluding 6,154 6,154
non-financial liabilities)
Capital risk management
The Arix Group manages its capital to ensure that it will be able to continue
as a going concern, whilst also maximising the operating potential of the
business. The capital structure of the Arix Group consists of equity
attributable to equity holders of the Arix Group, comprising issued capital and
retained earnings as disclosed in the Consolidated Statement of Changes in
Equity. The Arix Group is not subject to externally imposed capital
requirements.
3. Revenue
2019 2018
GBP'000 GBP'000
Fund management fee income 480 866
Other income 26 462
506 1,328
The total revenue for the Arix Group has been derived from its principal
activity of investing in and building breakthrough biotech companies around
cutting edge advances in life sciences. All of this revenue relates to trading
undertaken in the United Kingdom.
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. Although Arix makes investments globally,
these are considered by one Investment Committee and reported internally as a
single portfolio. 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 Consolidated Statement of
Comprehensive Income and Consolidated Statement of Financial Position.
5. (Loss)/Profit Before Taxation
2019 2018
GBP'000 GBP'000
Amortisation (287) (287)
Depreciation (159) (216)
Impairment of right of use asset (464) -
Impairment of intangible asset (795) -
Auditors' remuneration
Statutory audit services
Fees payable for the audit of the Arix Group accounts 141 135
Fees payable for the audit of the accounts of 48 40
subsidiaries of the Arix Group
Non-audit services
Other assurance and advisory services 36 195
Total auditors' remuneration 225 370
Non-audit services in the year relate to the Arix Bioscience plc interim review
(GBP30k) and an FCA Client Asset Report (GBP6k) (2018: capital raise GBP150k;
remuneration advice GBP10k; interim review GBP29k; FCA Client Asset Report GBP6k).
6. Administrative Expenses
The administrative expenses charge broken down by nature is as follows:
2019 2018
GBP'000 GBP'000
Employment costs 5,637 6,537
Recruitment costs 147 563
Consultancy fees 320 512
Other expenses 3,605 4,086
9,709 11,698
7. Net Finance Income/(Expenses)
2019 2018
GBP'000 GBP'000
Bank interest 769 720
Bank charges - (12)
769 708
8. Employee Costs
Employee costs (including Directors) comprise:
2019 2018
GBP'000 GBP'000
Salary and bonus 4,808 5,651
Social security costs 532 580
Pension and benefits costs 297 306
5,637 6,537
9. Income Tax
2019 2018
GBP'000 GBP'000
Current year tax charge
Current tax - -
Deferred tax - current year (5,760) 6,665
Deferred tax - effect of change in tax rates 687 (782)
Adjustment in respect of previous periods (810) -
Total tax (credit) / charge (5,883) 5,883
Reconciliation of tax charge
(Loss) / profit before tax (75,568) 42,761
Expected tax based on 19.00% (2018: 19.00%) (14,358) 8,124
Effects of:
Expenses not deductible for tax purposes 12,120 3,101
Adjustment in respect of previous periods (810) -
Income not taxable (9,808) (2,926)
Impact of rate between deferred tax and current tax 693 (777)
Recognition of items previously not recognised - (2,646)
Net gains / (losses) (6) -
Employee share options 116 23
Deferred tax not recognised 6,170 984
Total tax (credit) / charge (5,883) 5,883
Recognised deferred tax provisions
Brought forward 5,883 -
Relating to Profit and loss (5,883) 5,883
Relating to Other comprehensive income - -
Carried forward - 5,883
Represented by:
Unutilised tax losses (8) (2,835)
ACAs - (17)
Intangibles 276 325
Employee benefits (276) (373)
Investments 9 8,784
Other timing differences (1) (1)
- 5,883
Unrecognised deferred tax provisions
Unutilised tax losses (5,263) (996)
Priority profit share outstanding 69 -
Other timing differences (299) -
(5,493) (996)
10. (Loss)/Earnings per Share
On 4 January 2019, the Group issued 114,358 ordinary shares, in relation to
certain share awards. On 1 May 2019, 530,000 shares were issued, in relation to
certain share awards. On 2 July 2019, 84,249 shares were issued, in relation to
certain share awards. As at 31 December 2019, the Group had 135,551,850
ordinary shares in issue (2018: 134,823,243).
At the year-end date, 5,080,582 of the ordinary shares were subject to
restrictions. These shares are not entitled to vote, attend meetings or to
receive dividends or other distributions. Consequently, restricted shares have
been excluded from the calculation of the weighted average number of shares in
issue.
Basic earnings per share is calculated by dividing the profit attributable to
equity holders of Arix Bioscience plc by the weighted average number of
enfranchised shares (as adjusted for capital subscription in accordance with
the terms of the restrictive share agreement) in issue during the period.
No adjustment has been made to the basic loss per share in the year ended 31
December 2019, as the exercise of share options would have the effect of
reducing the loss per ordinary share, and therefore is not dilutive.
Potentially dilutive ordinary shares relate to contingently issuable shares
arising under the Group's Executive Incentive Plan.
As at As at
31 December 31 December
2019 2018
GBP'000 GBP'000
(Loss)/profit attributable to equity holders of Arix (69,870) 38,147
Bioscience plc
Weighted average number of shares in issue for the 129,948,773 118,787,412
purposes of basic earnings per share
Weighted average number of shares in issue for the 129,948,773 128,521,402
purposes of diluted earnings per share
Basic (loss)/earnings per share (53.8p) 32.1p
Diluted (loss)/earnings per share (53.8p) 29.7p
11. Investments
Equity Investments
Level 1 - Level 3 - Total
Quoted Unquoted GBP'000
Investments Investments
GBP'000 GBP'000
At 1 January 2019 118,982 64,999 183,981
Additions 8,485 30,681 39,166
Disposals (4,277) (4,514) (8,791)
Transfers 23,131 (23,131) -
Unrealised (loss)/gain on investments (56,475) (2,167) (58,642)
Foreign exchange losses (2,002) (1,791) (3,793)
At 31 December 2019 87,844 64,077 151,921
Transfers from Level 3 to Level 1 reflects companies which have listed during
the year. Level 3 investments are valued with reference to either the most
recent funding round (GBP37.6m, 2018: GBP33.4m); net asset value (GBP1.4m, 2018: GBP
4.5m); market-based write-up (GBP22.7m, 2018: GBP23.8m); discretionary write-down
(GBP2.4m, 2018: GBP3.2m); or by discounted cash flow (GBPnil, 2018: GBPnil). See Note 2
(I) for further details on the valuation of Level 3 investments.
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 31 December 2019, the Arix Group is deemed to have significant influence
over the following entities:
Company Country of Registered % of Net Assets/ Profit/ Date of
Incorporation Address Issued (Liabilities) (Loss) Financial
Share of Company of Information
Capital Company
Held
Depixus SAS (EUR) France 3-5 Impasse 20.7% 1,948 (1,439) 31 December
Reille, 75014 2017
Paris
Quench Bio, Inc USA 400 32.4% N/A N/A Not publicly
(USD) Technology available
Square,
Cambridge, MA
02139
Stipe Denmark Lyngsievvej 14.8% N/A N/A Not publicly
Therapeutics Aps 18, 8230 available
(EUR) Abyhoj
In addition, at 31 December 2019, the Group held the following investments in
companies where it is not considered to have significant influence:
Company Board % of
Seat? Issued
Share
Capital
Held
Amplyx Pharmaceuticals, Inc. Observer 3.0%
Artios Pharma Limited Y 12.4%
Atox Bio, Inc. Y 6.4%
Aura Biosciences, Inc. Y 7.7%
Autolus Therapeutics plc Y 7.5%
Harpoon Therapeutics, Inc. Y 10.4%
Imara, Inc. Y 9.2%
Iterum Therapeutics Limited Y 7.3%
LogicBio Therapeutics, Inc. Y 13.0%
OptiKira, LLC Y 13.3%
Pharmaxis Limited Y 11.1%
PreciThera, Inc N 13.9%
VelosBio, Inc. Y 8.9%
Verona Pharma plc N 2.5%
The Arix Group has an interest in one structured entity, The Wales Life
Sciences Investment Fund (registered address: Sophia House, 28 Cathedral Road,
Cardiff, Wales, CF11 9LJ). The fund has interests in Welsh life sciences
opportunities. A structured entity is an entity that is structured in such a
way that voting or similar rights are not the dominant factor in deciding who
controls the entity. The Arix Group is not deemed to have control over this
fund for the reasons disclosed in Note 2(a). The Group's interest is recognised
within both Investments and Receivables, and totals GBP1.7m at year-end (2018: GBP
5.5m); the Group's exposure is limited to the carrying value within Investments
and Receivables.
12. Intangible Assets
Year Ended Year
31 December Ended
2019 31
December
2018
Brought forward 1,770 2,057
Amortisation (287) (287)
Impairment in period (795) -
688 1,770
An intangible asset arose on Arix Bioscience plc's acquisition of Arthurian
Life Sciences entities, relating to management fees due to Arix Capital
Management Limited as a result of managing The Wales Life Sciences Investment
Fund. These fees are amortised over the remaining life of the fund. The
expected fees to be received over the remaining life of the fund have been
reduced, resulting in an impairment to the asset in the period.
13. Property, Plant and Equipment
Year ended 31 December 2019
Fixtures Leasehold Office Total
and Improvements Equipment GBP'000
Fittings GBP'000 GBP'000
GBP'000
As at 1 January 2019 258 25 30 313
Exchange translation adjustments - - - -
Additions - - 6 6
Depreciation charge (120) (10) (29) (159)
At 31 December 2019 138 15 7 160
Year ended 31 December 2018
Fixtures Leasehold Office Total
and Improvements Equipment GBP'000
Fittings GBP'000 GBP'000
GBP'000
As at 1 January 2018 410 34 79 523
Exchange translation adjustments 2 1 1 4
Additions - - 2 2
Depreciation charge (154) (10) (52) (216)
At 31 December 2018 258 25 30 313
14. Trade and Other Receivables
As at As at
31 31
December December
2019 2018
GBP'000 GBP'000
Trade receivables 771 1,734
Prepayments 264 359
VAT receivable 71 81
1,106 2,174
The maximum exposure to credit risk at the reporting date is the carrying value
of each asset class listed above. The Arix Group does not hold any collateral
as security.
15. Cash and Cash Equivalents and Cash on Long-Term Deposit
As at As at
31 December 31
2019 December
GBP'000 2018
GBP'000
Cash at bank and in hand 54,638 31,009
Cash on long-term deposit - 60,209
The carrying value of cash and cash equivalents and cash on long-term deposit
approximates to its fair value.
16. Trade and Other Payables
The carrying values of trade and other payables approximates their fair value.
As at As at
31 December 31
2019 December
GBP'000 2018
GBP'000
Trade payables 123 228
Accruals and other payables 6,031 3,171
6,154 3,399
17. Share Capital
As at As at
31 December 31
2019 December
GBP'000 2018
GBP'000
Allotted and called up
135,551,850 ordinary shares of GBP0.00001 each (2018: 1 1
134,823,243 shares)
49,671 Series C shares of GBP1 each (2018: 49,671 shares) 50 50
On 4 January 2019, the Group issued 114,358 ordinary shares, in relation to
certain share awards. On 1 May 2019, 530,000 shares were issued, in relation to
certain share awards. On 2 July 2019, 84,249 shares were issued, in relation to
certain share awards. As at 31 December 2019, the Group had 135,551,850
ordinary shares in issue (2018: 134,823,243).
At the year-end date, 5,080,582 of the ordinary shares were subject to
restrictions. These shares are not entitled to vote, attend meetings or to
receive dividends or other distributions. Consequently, restricted shares have
been excluded from the calculation of the weighted average number of shares in
issue. There are no Treasury Shares in issue.
18. Share Options
During 2019, share-based payment expenses have been recognised relating to a
range of share schemes operated by the Arix Group.
Year Ended Year
31 December Ended
2019 31
GBP'000 December
2018
GBP'000
Executive Incentive Plan 2017 430 430
Executive Incentive Plan 2018 883 427
Executive Incentive Plan 2019 448 -
2017 IPO Award 213 1,470
Executive Share Option Plan 567 582
Founder Incentive Shares 179 348
Non-Executive Director Awards 70 76
2,790 3,333
Executive Incentive Plan
The Arix Group operates an Executive Incentive Plan for Executive Directors and
certain employees of the Company.
In May 2017, the Executive Directors and certain employees were awarded options
or conditional awards which, in case of options will become exercisable at nil
cost and in the case of the conditional share awards, will vest at nil cost on
the third anniversary of their grant, on 26 May 2020, subject to performance
criteria. This requires the share price to have grown by a set percentage over
the assessment period, with the quantum of shares vesting dependent on the
level of share price growth; 1,486,747 options were unvested at year-end (2018:
1,486,747). In the year ended 31 December 2019, a share-based payment charge
of GBP430k (2018: GBP430k) was recognised in relation to the Executive Incentive
Plan.
In May 2018, the Executive Directors and certain employees were awarded options
or conditional awards which, in case of options, will become exercisable at nil
cost and, in the case of the conditional share awards, will vest at nil cost on
the third anniversary of their grant, on 17 May 2021, subject to performance
criteria. This requires the share price to have grown by a set percentage over
the assessment period, with the quantum of shares vesting dependent on the
level of share price growth; 2,290,499 options were unvested at year-end (2018:
2,290,499). In the year ended 31 December 2019, a share-based payment charge of
GBP883k (2018: GBP427k) was recognised in relation to the Executive Incentive Plan.
In May 2019, the Executive Directors and certain employees were awarded options
or conditional awards which, in case of options, will become exercisable at nil
cost and, in the case of the conditional share awards, will vest at nil cost at
the end of the three year performance period, subject to performance criteria.
This requires the share price to have grown by a set percentage over the
assessment period, on 1 January 2022, with the quantum of shares vesting
dependent on both the level of share price growth and the level of net asset
value growth; 2,524,661 were issued in the period, all of which are unvested at
year-end. In the year ended 31 December 2019, a share-based payment charge of GBP
448k (2018: GBPnil) was recognised in relation to the Executive Incentive Plan.
The charge relating to net asset value growth was calculated based upon the
share price at grant of GBP1.5750, and the assessed liklehood of vesting. The
charge relating to share price growth was calculated using a Monte Carlo
simulation model, using assumptions relating to share price at grant (GBP1.5750);
risk free interest rate (0.72%); time to vesting (3 years); and expected
volatility based on comparable listed investments (39.6%).
IPO Award
In February 2017, the Executive Directors and certain employees were awarded
one-off nil cost options or conditional awards in recognition of their
contribution to the Company's initial public offering. The options were granted
on 22 February 2017; all options vested after two years, on 22 February 2019.
1,409,166 options were unvested at the start of the period; all vested, of
which 439,799 were exercised at nil cost; 969,367 were unexercised at
year-end. In the year ended 31 December 2019, a share-based payment charge of
GBP213k (2018: GBP1,470k) was recognised in relation to the IPO Awards. The charge
was calculated as the total number of options granted, at the IPO share price
of GBP2.07, recognised across the two-year vesting period.
Executive Share Option Plan and Founder Incentive Shares
At the Arix Group's inception, an Executive Share Option Plan was in operation,
in which two Directors participated. Options were granted on 8 February 2016
with an original exercise price of GBP1.80 per ordinary share. This was
subsequently amended for one Director, with the exercise price reducing by GBP
0.18 per annum for a five year period from February 2019 to February 2024. The
number of ordinary shares subject to the options totals 5,520,559. The options
vested in four equal proportions on 8 February of 2017, 2018, 2019 and 2020.
The options may not be exercised after the tenth anniversary of the grant date
and it will lapse on that date if it has not lapsed or been exercised in full
before then. All options vest at the end of the vesting period relating to that
option or on the occurrence of a contingent event; these include a change of
control or cessation of employment in accordance with "good leaver" provisions.
No options have been exercised to date. In the year ended 31 December 2019, a
share-based payment charge of GBP567k (2018: GBP582k) was recognised in relation to
the Executive Share Option Plan, calculated using the Black-Scholes model.
Assumptions used in the model relating to the risk free interest rate and
expected volatility were unchanged from those used in the prior period.
Restricted shares with identical terms, including a GBP1.80 price for the lifting
of restrictions, were offered to the founders of the Company, totalling
5,080,582 shares. As these relate to a former Director, no longer employed by
Arix, the full remaining share based payment charge of GBP179k was recognised in
the year ended 31 December 2019 (2018: GBP348k). The charge was calculated using
the Black-Scholes model. Assumptions used in the model relating to the risk
free interest rate and expected volatility were unchanged from those used in
the prior period.
Non-Executive Director Awards
Pursuant to their respective letters of appointment, certain Non-Executive
Directors received a one-off share award during the year; a share based payment
charge of GBP70k (2018: GBP76k) was recognised during the period.
19. Net Cash From Operating Activities
Year Ended Year
31 December Ended
2019 31
GBP'000 December
2018
GBP'000
(Loss)/profit before income tax (75,568) 42,761
Adjustments for:
Change in fair value of investments 58,642 (51,173)
Foreign exchange losses/(gains) 4,443 (4,583)
Share-based payment charge 2,790 3,333
Depreciation and amortisation 446 503
Impairment of assets 1,259 -
Finance income (769) (708)
Changes in working capital
Decrease/(increase) in trade and other receivables 1,068 (908)
Decrease in trade and other payables (1,553) (243)
Cash used in operations (9,242) (11,018)
20. Financial Commitments
The Group has amounts committed to portfolio companies but not yet invested; at
31 December 2019 these totalled GBP8.5m (2018: GBP21.0m).
21. Financial Instruments
Financial Assets
The Arix Group has other receivables and cash that derive directly from its
operations. Financial assets at fair value through profit or loss are measured
as either Level 1 or Level 3 under the fair value hierarchy, as described in
Note 2(i) and disclosed in Note 11.
Year Ended Year
31 December Ended
2019 31
GBP'000 December
2018
GBP'000
Financial assets at fair value through profit or loss
Equity investments 151,921 183,981
Loans and receivables
Other receivables (excluding prepayments) 771 1,734
Long-term cash on deposit - 60,209
Cash and cash equivalents 54,638 31,009
The credit quality of financial assets that are neither past due nor impaired
can be assessed by reference to external credit ratings (if available) or to
historical information about counterparty default rates. The Arix Group's cash
and cash equivalents are deposited with A+ rated institutions. Investments and
other receivables do not have a credit rating. However, the Group does not
believe these to be past due nor impaired.
Financial Liabilities
The Arix Group's principal financial liabilities comprise trade and other
payables. The primary purpose of these financial liabilities is to finance the
operations.
Year Ended Year
31 December Ended
2019 31
GBP'000 December
2018
GBP'000
Trade, other payables and accruals (excluding 6,154 3,399
non-financial liabilities)
22. Guarantees
The Company has provided a rent deposit guarantee in respect of its former US
office, now classified as an Investment Property, for an amount of $261,657, (GBP
198,456), unchanged from 2018.
23. Related Party Transactions
Consultancy fees plus expenses amounting to GBP130,262 (inclusive of VAT) (2018:
GBP544,336) were payable to Merlin Scientific LLP during the period, a
partnership controlled by Sir Chris Evans, a former Director and substantial
shareholder of the Company. All contractual arrangements with Merlin Scientific
LLP have ceased. At 31 December 2019, GBPnil (inclusive of VAT) (2018: GBPnil) was
owed to Merlin Scientific LLP by the Company.
During the period, key management has comprised Executive Directors, whose
remuneration is disclosed in the Directors Remuneration Report; and other
members of the Executive Committee. These other members received short-term
employee benefits of GBP371,834 in the year, relating to the period in which they
were fulfilling key management responsibilities (2018: GBPnil).
24. Events After the Reporting Date
On 22 January 2020, a further $1.9m (GBP1.5m) was invested in Iterum Therapeutics
plc. The Arix Group's investment was in the form of convertible loan notes and
royalty-linked senior subordinated notes.
On 24 January 2020, the Arix Group participated in the Quench Bio, Inc. Series
A financing. Arix's aggregate commitment to the company now totals over $12.5m,
and the Group retains a stake in the company of over 20%.
On 27 January 2020, Autolus Therapeutics plc closed a public offering. The Arix
Group did not participate; its stake in the company now totals 6.5%.
On 5 February 2020, the Arix Group completed the sale of its direct holding in
Verona Pharma plc. Proceeds of GBP1.5m were received, in line with the
investment's valuation as at 31 December 2019.
On 25 February 2020, a further $2.7m (GBP2.1m) was invested in Imara, Inc., in
line with existing commitments. The Group's fully diluted stake in the company
now totals 9.9%.
ENDS
END
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