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VERICI DX PLC
Quarterly Report • Jun 5, 2023
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Quarterly Report
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National Storage Mechanism | Additional information 
RNS Number : 5718B
Verici Dx PLC
05 June 2023
Verici Dx plc
("Verici Dx" or the "Company")
2022 Annual Results
Successful transition from a research to commercial-stage company
Verici Dx plc (AIM: VRCI), a developer of advanced clinical diagnostics for organ transplant, announces its audited final results for the year ended 31 December 2022 and provides a progress update since year end.
Strategic progress (including post-period end)
· Achieved full commercial launch of Tutivia™, the Company's first product for the detection of acute kidney transplant rejection, in January 2023, leading to first revenues being recognised in FY 2023.
· Expanded its validation trial on Clarava™, the Company's pre-transplant prognostic test, for a further six months following positive initial data announced in September 2022. This decision was taken to strengthen the publication appeal of the trial and demonstrate a statistically robust and clinically compelling case in support of the commercial rollout and adoption of the test. The full readout from this trial remains on track to be announced by the end of June 2023, in line with previous guidance.
· Patient enrolment for the multi-centre clinical validation study of our third product, Protega™, was completed in the first quarter of 2023, assessing long-term outcomes for kidney transplant patients.
· Extended cash runway until mid-2024; the Company has retained sufficient funding to achieve further key milestones in 2023 and the first half of 2024 which will support commercial adoption, including the publication of additional data and obtaining both Medicare and private payor pricing and coverage. A further commercial and operational update will be provided alongside the Clarava™ data readout.
Operational highlights (including post-period end)
· Announced positive results from the Tutivia™ clinical validation study in June 2022, for the detection of acute rejection following a kidney transplant.
· Granted CPT® Proprietary Laboratory Analyses ("PLA") codes for Clarava™ and Tutivia™ tests by the American Medical Association ("AMA"), providing the basis for coding and payment within the US healthcare market.
· In May 2023, a gapfill median rate of $2,650 was proposed for Tutivia™ for kidney transplant rejection by the Centers for Medicare & Medicaid Services ("CMS") in line with the Company's application.
· Obtained Medicaid approvals in 14 States and a further 11 States are pending.
· Two key patents granted in the United States underpinning Verici Dx's products.
· Achieved CLIA Certificate of Compliance for laboratory in Nashville, TN, USA, a key requirement to obtaining insurance reimbursement coverage under Medicare and allowing for expanded commercial launch of Tutivia™, in 45 US states.
· Completed analytical validation for Clarava™ and Tutivia™ in February 2022, an essential element of defining the performance characteristics and platform capabilities of in vitro diagnostic assays and a key milestone towards commercialisation.
· Announced a collaboration with Illumina, Inc., for early access to the Illumina Connected Analytics (ICA) platform to expedite the operational launch of data analysis processing and predictive artificial intelligence component of Verici's products in due course.
Financial highlights
· Adjusted EBITDA1 loss of $10.5m (2021: loss of $7.1m).
· Cash balance at 31 December 2022 of $9.81m (2021: $10.3m).
· Raised gross proceeds of £10.0m in March 2022 via Placing and Subscription.
· Cash runway extended to mid-2024.
Commenting on the performance and outlook, Sara Barrington, Chief Executive Officer, said:
"2022 was a transformational year for Verici Dx; we began the year as an R&D-stage company, and have now commercially launched our first product, Tutivia™, following pleasing validation study results.
"We are well placed to deliver further progress against our strategy in 2023, building on the initial rollout of Tutivia™ and we remain on track to announce the data read-out from the extended Clarava™ trial by the end of June. In addition, we are taking further steps towards reimbursement that will help accelerate commercial uptake of our lead products."
Investor briefing
As previously announced, an investor meeting covering the FY22 financial results will be provided following the data read-out from the extended Clarava™ trial, expected to be announced by the end of June.
Enquiries:
| Verici Dx | www.vericidx.com |
| Sara Barrington, CEO | Via Walbrook PR |
| Julian Baines, Chairman | |
| Singer Capital Markets (Nominated Adviser & Broker) | Tel: +44 20 7496 3000 |
| Aubrey Powell / Sam Butcher | |
| Walbrook PR Limited | Tel: +44 20 7933 8780 or [email protected] |
| Paul McManus / Stephanie Cuthbert Sam Allen / Phillip Marriage |
Mob: +44 7980 541 893 / +44 7796 794 663 +44 7502 558 258 / +44 7867 984 082 |
Footnotes:
1. Earnings before income tax, depreciation and amortisation, adjusted to exclude exceptional items.
About Verici Dx plc www.vericidx.com
Verici Dx is a developer of a complementary suite of leading-edge tests forming a kidney transplant platform for personalised patient and organ response risk to assist clinicians in medical management for improved patient outcomes. The underlying technology is based upon artificial intelligence assisted transcriptomic analysis to provide RNA signatures focused upon the immune response and other biological pathway signals critical for transplant prognosis of risk of injury, rejection and graft failure from pre-transplant to late stage. The Company also has a mission to accelerate the pace of innovation by research using the fully characterised data from the underlying technology and collaboration with medical device, biopharmaceutical and data science partners.
The foundational research was driven by a deep understanding of cell-mediated immunity and is enabled by access to expertly curated collaborative studies in highly informative cohorts in kidney transplant.
Verici Dx's two lead products are Tutivia™, a post-transplant test focused upon acute cellular rejection, including sub-clinical rejection and Clarava™, a pre-transplant prognosis test for the risk of early acute rejection. These products seek to measure how a patient is likely to respond, and is responding, to a kidney transplant. These products are underpinned by extensive patented and published scientific research from the leading Mount Sinai Medical Center, for which the Company holds an exclusive worldwide licence.
Chair Statement
I am pleased to report on the twelve months ended 31 December 2022 for Verici Dx plc. In what has been a very difficult macroeconomic environment, the team has successfully executed the Company's planned strategy in transitioning to a commercial-stage company following the initial launch of Tutivia™. This progress reflects the Company's clear product differentiation and competitive advantages.
The validation data for Tutivia™, the Company's post-transplant blood test focused on acute rejection including borderline and sub-clinical rejection, was presented to the clinical community at the American Transplant Congress (ATC) in June 2022. The results showed Tutivia's™ ability to provide actionable data to clinicians for the care management of their patients as early as the first week post-transplant, enabling them to react proactively to rejection events. Tutivia's™ significantly higher positive predictive value ("PPV") than currently available single kidney transplant blood tests, as well as the study design, was very well received by the scientific community and illustrated the significant potential of Tutivia™ to address the urgent clinical need for early intervention to minimise rejection post-kidney transplantation.
Tutivia™ was fully launched in January 2023. Whilst Verici Dx is still in the early phases of this commercial rollout, the Company is working closely with a number of leading US transplant centres, to support the integration of the test into their workflows and help the Verici Dx team better understand how they can encourage consistent and recurring utilisation going forwards as they look to accelerate the rollout in the coming months.
In addition, following the positive initial data announced in September 2022 on Clarava™, the Company's pre-transplant prognostic test, the Company chose to expand its validation trial in order to strengthen the publication appeal and demonstrate a statistically robust and clinically compelling case to support the commercial rollout and adoption of the test. The data read-out from this extended trial remains on track to be announced by the end of June, in line with previous guidance.
Patient enrolment for the multi-centre clinical validation study of our third product, Protega™, completed in the first quarter of 2023, assessing long-term outcomes for kidney transplant patients. The end points of the Protega™ validation study is expected to be reached in two years. Fibrosis develops after a patient has had acute rejection that may have caused antibodies to attack the kidney. Currently histology from biopsy is used to risk stratify the degree of fibrosis. Protega™ will utilize RNA gene signatures to more accurately risk stratify the potential outcome from fibrosis in a transplant patient. This can help clinicians determine the appropriate treatment to delay or reduce fibrosis progression.
The Company received CPT® Proprietary Laboratory Analyses ("PLA") codes for Tutivia™ and Clarava™ during the year, representing the first milestone towards commercial reimbursement for the two tests. Post year end the Company announced that a gapfill median rate of $2,650 has been proposed for Tutivia™ for kidney transplant rejection by the Centers for Medicare & Medicaid Services ("CMS"). Confirmation is expected in November 2023 and the finalised rate will apply for 3 years from 1 January 2024. The Company is currently applying for insurance reimbursement coverage for Tutivia™ under a Local Coverage Determination, issued by MolDx on behalf of Medicare, the US federal health insurance program, upon publication of the trial results.
In January 2022, the Company secured a collaboration with Illumina, Inc. (NASDAQ: ILMN), a leading developer, manufacturer and marketer of life science tools and integrated systems for large scale analysis of genetic variation and function, whereby Verici Dx integrated both its clinical and research products within Illumina Connected Analytics (ICA), Illumina's state-of-the-art software platform and strategic focus area. Verici Dx continues to work with Illumina, to further develop its research data into a collaborative asset within the ICA environment for future strategic opportunities.
In March 2022, Verici Dx successfully completed a fundraise, which raised gross proceeds of £10.0 million (c.$13.0 million), a significant achievement in a difficult fundraising environment, particularly for AIM-listed healthcare companies. This is testament to the potential of the platform in meeting the urgent clinical need to improve outcomes for kidney transplant patients. Verici Dx's year-end cash position of $9.81 million provides a cash runway until mid-2024, following recent steps taken by management to control costs and reduce cash burn. A further commercial and operational update will be provided alongside the Clarava™ data readout and strategic update.
On behalf of the Board, I would like to thank our employees, investors and partners for their continued support throughout the year, and we look forward to providing further updates on our progress over the course of 2023, as we scale up the Tutivia™ commercial rollout, and provide the data read-out from the extended Clarava trial later this month.
Julian Baines
Non-Executive Chairman
2 June 2023
Chief Executive Officer's Report
2022 and the post year-end period has been a time of exceptional progress for Verici Dx as the Company achieved the key strategic goal of moving from a research-only company to commerciality following the full launch of Tutivia™ in January 2023. In addition, we are on track to announce the data read-out from the extended Clarava™ trial by the end of June and completed enrolment for Protega.
The Company also achieved several other key operational milestones, particularly in reimbursement, achieving a code, a recommended price, and submitting the publication that will complete the application for coverage under the Local Coverage Determination ("LCD") from MolDx. CMS issued a clarification on reimbursement to limit coverage to a single biomarker test per patient encounter which strengthens the value of Tutivia as a single test demonstrating balanced accuracy in its clinical performance. We also made significant progress in promoting our research data for future strategic collaborations with our development work with Illumina, Inc. (NASDAQ: ILMN) utilizing their ICA environment.
This progress has continued as we moved into 2023 with the achievement of CLIA Certification of Compliance for our commercial clinical operations in Nashville, Tennessee, enabling us to test samples from 45 US states, applications for the remaining states are in progress and the intellectual property was further secured by the issuance of two key US patents.
Strong progress on commercial rollout
In June 2022, the data from our international, multi-centre validation study for Tutivia™ was presented, which demonstrated a significantly higher Positive Predictive Value ("PPV") than currently available kidney transplant single genetic expression blood tests, in order for the test to provide clinicians with an appropriate, reliable call to action to improve patient outcomes post-transplant. The trial also demonstrated that the test can be used as soon as the first week post-transplant and was not confounded by other common conditions such as BK nephropathy. The test's sensitivity when compared with clinically indicated biopsies in the first 60 days was 83% and overall patients were six times more likely to reject if they had a high-risk score from Tutivia™ than those with a low risk score Early reliable data from a single test gives Tutivia™ a well validated competitive advantage.
We commercially launched Tutivia™ in January 2023, with a number of US transplant centres under an early adopter program. This is in line with our strategic plan, and in these initial months we have been supporting these centres with the adoption and integration of Tutivia™ into their clinical pathways to encourage consistent and recurring utilisation. This is providing valuable information for us to make Tutivia™ as simple as possible for clinicians to use and interpret.
In addition, following the positive initial data announced in September 2022 on Clarava™, the Company's pre-transplant prognostic test, the Company chose to expand its validation trial for this lead product to strengthen the publication appeal and demonstrate a statistically robust and clinically compelling case to support the commercial rollout and adoption of the test. The data read-out from this extended trial remains on track to be announced by the end of June 2023, in line with previous guidance.
Protega™ enrolment was completed in the first quarter of 2023, an important milestone achieved in the completion of our platform offering end to end transplant testing, from pre-transplant to long-term damage. We expect that the final validation point will be completed after follow-up at the 24-month point for the last patient tested, which is expected to be in Q1 2025. The Company expects to be able to review interim data before that date.
Clear product differentiation and competitive advantages
Our portfolio of innovative kidney transplant tests use advanced next-generation sequencing to define a personalised risk profile for each patient using RNA signatures. This allows for the early prognosis of transplant rejection, deciphering the body's early genetic messages that are specific to acute rejection. This is a significant advantage over currently available tests, which detect evidence of damage already occurred and may be confounded by other conditions.
Our tests enable doctors to make accurate, data-driven clinical decisions, to assist their care decision-making for patients including choices made about immunosuppressive therapy protocols and may also inform other aspects of the post-transplant care pathway over time. This has not only near-term scope to reduce the unnecessary and serious consequences from over- or under-dosing for immunosuppression in conjunction with kidney transplant, but also to improve the longevity of transplanted kidneys and, by reducing the risk and rate of transplant failure, much broader potential to deliver huge health economic benefits by improving transplant outcomes.
Tutivia™ has a number of important differentiators from current biomarker tests. One is the ability to return results as early as the first week post-transplant for all types of patients. This enables clinicians to act proactively, rather than reactively, to rejection events. Tutivia™ is also able to detect sub-acute rejection (before there are other clinical signs) and is also able to distinguish between rejection and other confounding factors such as the BK virus.
Currently available single blood tests that look for signs of transplant damage typically have a high Negative Predictive Value ("NPV") but are non-specific. This means that if the blood test returns a negative result, clinicians can be confident that there is no current rejection occurring but uncertain whether a positive result is from a rejection or an infection, or physical trauma.
Consequently, these tests function primarily as a 'rule out' tool, but this is limiting for clinicians, who may need to know with some degree of confidence whether their patient requires further interventions.
Crucially, our validation study was a blinded 'all-comers' patient population across 13 international transplant centres. This means that we were able to test the power of Tutivia™ within a clinically realistic context that included all types of rejection. We believe that Tutivia™ is the only product currently on the market to have been validated so comprehensively.
Turning to the Company's second lead product, Clarava™, its initial validation results were announced in September 2022, and indicated that the test was able to identify pre-transplant patients most likely to experience a future kidney rejection event, which has broad implications for treatment planning and monitoring. The data read-out from the extended trial for Clarava remains on track to be announced by the end of June 2023.
Delivery of significant operational milestones
In January 2022, we received CPT® Proprietary Laboratory Analyses ("PLA") codes for Clarava™ and Tutivia™, from the American Medical Association, an important first step towards commercial reimbursement. CPT® codes offer health care professionals a uniform language for coding medical services and procedures and allow clinical laboratories to more specifically identify their tests when billing Medicare and commercial insurers.
In February 2022, we successfully completed analytical validation for Clarava™ and Tutivia™, an essential element of defining the performance characteristics and platform capabilities of in vitro diagnostic assays. Analytical validation is an important step towards reimbursement coverage assessment.
We announced in March 2023 that we had successfully progressed our laboratory registration status to Compliance Certification by the Centers for Medicare & Medicaid ("CMS'), allowing our commercial clinical operations to process samples from 45 US states. This followed an inspection by CMS of our clinical laboratory in Franklin, Tennessee, and represents a major milestone toward US Medicare reimbursement. The Company is now preparing its submission for Medicare insurance reimbursement coverage, which will be key to driving adoption. Eligibility for Medicaid has been approved in 14 states and submitted in a further 11 states. Eligibility has also been approved with BlueCross Blue Shield of Tennessee, the largest health benefit plan company in Tennessee, where the Company's clinical laboratory is located.
Also in March 2023, the Company announced it has been granted two key patents in the United States that support and protect the Company's core technologies in RNA signature biomarker tests used for assessment of the prognostic risk pre-transplant (Clarava™) and post-transplant (Tutivia™) of acute kidney transplant rejection. The protection of the Company's intellectual property is fundamental to our strategy of amassing full transcriptomic data from the biological systems and interactions associated with transplant rejection and, over the longer term, informing transplant analysis in other organs and in the broader field of immune-mediated diseases.
In May 2023, the price recommendation from MolDx was issued in line with Company expectations and highly indicative for the national listing at the end of the year following a period of public consultation, with a listed price then being valid for three years from January 2024.
Completion of partnerships and agreements
In January 2022 we entered into a collaboration with Illumina, granting us early access to Illumina Connected Analytics (ICA), Illumina's new software platform, which provides us with the ability to process large datasets in a streamlined manner. This supports our leading-edge technology approach and provides a foundation for future data science discovery, expansion and collaboration opportunities.
Collaborating with such a high-quality partner as Illumina is an indicator of the strength of our platform, and access to the ICA platform has materially enhanced our data processing capabilities, as well as boosted our ability to develop highly predictive products in the future. This partnership supports our wider goal of improving patient outcomes within organ transplantation, where there remains an urgent clinical need.
Management and staff
As of 31 December 2022, the Company had 15 Full Time Equivalents ("FTE") employees.
Financials
Statement of Comprehensive Income
The adjusted EBITDA loss, being the loss for the year, before the deduction of interest, taxation, amortisation and depreciation, and excluding the share-based payments charge, was US$10,497,000 (2021: US$7,151,000) The increase arises from the significant increase in clinical trial and associated costs, including the hiring of six new members of the team in the year, of which three were hired to commence the commercial launch of TutiviaTM. The largest items of expenditure remain staff costs of US$2,889,000 (2021: US$2,392,000) and research and development costs of US$4,832,000 (2021: US$3,344,000). All research and development costs arise from third parties, this does not include any allocation of internal costs. We started the year with 10 full time employees and ended the year with 15 full time employees, both numbers excluding our non-executive directors.
Statement of Financial Position and Cash Flows
Cash balance at year end was US$9,805,000 (2021: US$10,340,000). Cash outflow from operations was US$10,068,000 (2021: US$6,336,000) with cash outflow on additions to tangible and intangible assets of US$1,308,000 (2021: US$966,000). The biggest constituent of spend on capital expenditure being the construction of our CLIA laboratory in Tennessee. In March 2022 we concluded a share issue raising gross proceeds of GBP10.0m, which after costs generated a net cash inflow of US$12,629,000.
Within current and non-current liabilities, we entered a financing transaction in December 2022 to secure favourable terms on a new sequencer. At 31 December 2022 the liability was US$239,000 (2021: US$Nil). We also entered into a five-year lease on our new CLIA laboratory in Tennessee in September 2022 resulting in the recognition of a right of use asset and corresponding liability. At 31 December 2022 the liability was US$461,000 (2021: US$Nil). The largest balance within our accruals continues to be our accruals for costs incurred at the clinical trial sites not yet invoiced being US$912,000 (2021 - US$851,000).
As of 31 December 2022, the Company had a cash balance of $9.81m. The Company has closed the New York Laboratory, taken headcount reduction and clinical trial cost containment steps in recent months and, as a result, has extended the current cash runway to last until mid-2024. The Company is focused on early revenue generation during the first half of this year and will seek to extend and broaden its revenue streams from additional centres in the second half of 2023.
Outlook
Over the course of 2023, we will look to gradually accelerate the Tutivia™ commercial rollout with more leading US centres and expect to expand our first revenues. We expect to secure both Medicare and private payor pricing and coverage for Tutivia™ this year, which will be a key catalyst in enabling a more widespread adoption of the test. Following our receipt of the CLIA Certificate of Compliance, we will also look to receive full accreditation in the remaining five states that are not covered under the CLIA certification, including New York.
As announced on 31 May, the data read-out from the extended Clarava™ trial remains on track to be announced by the end of June 2023.
We are also looking to extend and broaden our revenue streams this year, which could include potential collaborations with pharmaceutical and medtech/data companies that could benefit from the application of the Company's transcriptomic analysis technology in different settings.
We are developing a health economics model to aid our commercialisation efforts, which we expect to submit for publication by the end of the year. We are also expected to engage in clinical utility and real-world evidence studies to further support adoption of our products both later this year and into next year.
On behalf of the Board, I would like to thank the shareholders for their support in this transformational year for the Company and we look forward to delivering further commercial progress over the course of 2023 as we continue to deliver on our strategy of transforming kidney transplant outcomes.
Sara Barrington
Chief Executive Officer
2 June 2023
Consolidated statement of profit or loss and other comprehensive income
for the year ended 31 December 2022
| Year to | Year to | ||
| 31 December | 31 December | ||
| Note | 2022 | 2021 | |
| US$'000 | US$'000 | ||
| Administrative expenses | 5 | (10,497) | (7,151) |
| Depreciation and amortisation | (640) | (438) | |
| Exceptional expense - share based payments | 20 | (318) | (740) |
| _________ | _________ | ||
| Loss from operations | (11,455) | (8,329) | |
| Finance income | 9 | 53 | - |
| Finance expense | 9 | (5) | - |
| _________ | _________ | ||
| Loss before tax | (11,407) | (8,329) | |
| Tax expense | 10 | - | - |
| _________ | _________ | ||
| Loss from continuing operations | (11,407) | (8,329) | |
| Other comprehensive income: | |||
| Exchange (losses) / gains arising on translation of foreign operations | (2,016) | (50) | |
| _________ | _________ | ||
| Total comprehensive income | (13,423) | (8,379) | |
| _________ | _________ | ||
| Earnings per share attributable to the ordinary equity holders of the parent |
11 | ||
| Loss per share | |||
| Basic and diluted (US$) | ($0.069) | ($0.059) | |
| _________ | _________ |
The results reflected above relate to continuing operations.
Consolidated statement of financial position
as at 31 December 2022
| Note | 2022 | 2021 | |
| US$'000 | US$'000 | ||
| Assets | |||
| Current assets | |||
| Trade and other receivables | 15 | 520 | 656 |
| Cash and cash equivalents | 9,805 | 10,340 | |
| _________ | _________ | ||
| 10,325 | 10,996 | ||
| _________ | _________ | ||
| Non-current assets | |||
| Property, plant and equipment | 12 | 2,010 | 786 |
| Intangible assets | 13 | 1,970 | 2,007 |
| _________ | _________ | ||
| 3,980 | 2,793 | ||
| _________ | _________ | ||
| Total assets | 14,305 | 13,789 | |
| _________ | _________ | ||
| Liabilities | |||
| Current liabilities | |||
| Trade and other payables | 16 | (2,096) | (1,804) |
| Lease liabilities | 17 | (156) | - |
| Non-current liabilities | 17 | (544) | - |
| _________ | _________ | ||
| NET ASSETS | 11,509 | 11,985 | |
| _________ | _________ | ||
| Issued capital and reserves attributable to | |||
| owners of the parent | |||
| Share capital | 18 | 219 | 182 |
| Share premium reserve | 19 | 32,946 | 20,354 |
| Share-based payments reserve | 19 | 3,853 | 3,535 |
| Foreign exchange reserve | (1,037) | 979 | |
| Retained earnings | (24,472) | (13,065) | |
| _________ | _________ | ||
| TOTAL EQUITY | 11,509 | 11,985 | |
| _________ | _________ |
Consolidated statement of cash flows
for the year ended 31 December 2022
| Year to | Year to | ||
| 31 December | 31 December | ||
| Note | 2022 | 2021 | |
| US$'000 | US$'000 | ||
| Cash flows from operating activities | |||
| Loss from operations | (11,407) | (8,329) | |
| Adjustments for: | |||
| Depreciation of property, plant and equipment | 497 | 295 | |
| Amortisation of intangible fixed assets | 143 | 143 | |
| Finance income | (53) | ||
| Finance expense | 5 | - | |
| Share-based payment expense | 318 | 740 | |
| _________ | _________ | ||
| (10,497) | (7,151) | ||
| Decrease / (increase) in trade and other receivables | 136 | (331) | |
| Increase in trade and other payables | 293 | 1,146 | |
| Income taxes paid | - | - | |
| _________ | _________ | ||
| Net cash outflow from operating activities | (10,068) | (6,336) | |
| _________ | _________ | ||
| Cash flows from investing activities | |||
| Purchases of property, plant and equipment | (1,040) | (618) | |
| Purchase of intangibles | (268) | (348) | |
| _________ | _________ | ||
| Net cash used in investing activities | (1,308) | (966) | |
| Cash flows from financing activities | |||
| Issue of ordinary shares | 13,070 | - | |
| Expenses of share issue | (441) | - | |
| Interest received | 53 | - | |
| Interest paid | (5) | - | |
| Repayment of lease liabilities | (3) | - | |
| Loan repayments | - | (74) | |
| _________ | _________ | ||
| Net cash inflow / (outflow) from financing activities | 12,674 | (74) | |
| Net increase / (decrease) in cash and cash equivalents | 1,298 | (7,376) | |
| Cash and cash equivalents at beginning of year | 10,340 | 17,751 | |
| Exchange (losses) / gains on cash and cash equivalents | (1,833) | (35) | |
| _________ | _________ | ||
| Cash and cash equivalents at end of year | 4 | 9,805 | 10,340 |
| _________ | _________ |
Consolidated statement of changes in equity
for the year ended 31 December 2022
| Share capital |
Share premium |
Share-based payment reserve |
Foreign exchange reserve |
Retained earnings |
Total attributable to equity holders of parent |
Total equity |
|
| US$ | US$ | US$ | US$ | US$ | US$ | US$ | |
| 1 January 2021 | 182 | 20,354 | 2,795 | 1,029 | (4,736) | 19,624 | 19,624 |
| Comprehensive income for the period | |||||||
| Loss | - | - | - | - | (8,329) | (8,329) | (8,329) |
| Other comprehensive Income | - | - | - | (50) | - | (50) | (50) |
| _________ | _________ | _________ | _________ | _________ | _________ | _________ | |
| Total comprehensive Income for the year | - | - | - | (50) | (8,329) | (8,379) | (8,379) |
| _________ | _________ | _________ | _________ | _________ | _________ | _________ | |
| Contributions by and distributions to owners | |||||||
| Share-based payment | - | - | 740 | - | - | 740 | 740 |
| _________ | _________ | _________ | _________ | _________ | _________ | _________ | |
| Total contributions by and distributions to owners |
- | - | 740 | - | - | 740 | 740 |
| _________ | _________ | _________ | _________ | _________ | _________ | _________ | |
| 31 December 2021 | 182 | 20,354 | 3,535 | 979 | (13,065) | 11,985 | 11,985 |
| _________ | _________ | _________ | _________ | _________ | _________ | _________ |
Consolidated statement of changes in equity
for the year ended 31 December 2022 (continued)
| Share capital |
Share premium |
Share-based payment reserve |
Foreign exchange reserve |
Retained earnings |
Total attributable to equity holders of parent |
Total equity |
|
| US$ | US$ | US$ | US$ | US$ | US$ | US$ | |
| 1 January 2022 | 182 | 20,354 | 3,535 | 979 | (13,065) | 11,985 | 11,985 |
| Comprehensive income for the year | |||||||
| Loss | - | - | - | - | (11,407) | (11,407) | (11,407) |
| Other comprehensive Income | - | - | - | (2,016) | - | (2,016) | (2,016) |
| _________ | _________ | _________ | _________ | _________ | _________ | _________ | |
| Total comprehensive Income for the year | - | - | - | (2,016) | (11,407) | (13,423) | (13,423) |
| _________ | _________ | _________ | _________ | _________ | _________ | _________ | |
| Contributions by and distributions to owners | |||||||
| Issue of share capital | 37 | 13,033 | - | - | - | 13,070 | 13,070 |
| Costs of share issue | - | (441) | - | - | - | (441) | (441) |
| Share-based payment | - | - | 318 | - | - | 318 | 318 |
| _________ | _________ | _________ | _________ | _________ | _________ | _________ | |
| Total contributions by and distributions to owners |
37 | 12,592 | 318 | - | - | 12,947 | 12,947 |
| _________ | _________ | _________ | _________ | _________ | _________ | _________ | |
| 31 December 2022 | 219 | 32,946 | 3,853 | (1,037) | (24,472) | 11,509 | 11,509 |
| _________ | _________ | _________ | _________ | _________ | _________ | _________ |
Notes forming part of the consolidated financial statements
for the year ended 31 December 2022
1 General information
The principal activity of Verici Dx plc (the "Company") is the development of prognostic and diagnostic tests for kidney transplant patients.
The Company is a public limited company incorporated in England and Wales and domiciled in the UK. The address of the registered office is Avon House, 19 Stanwell Road, Penarth, Cardiff CF64 2EZ and the company number is 12567827.
The Company was incorporated as Verici Dx Limited on 22 April 2020 as a private company and on 9 September 2020 the Company was re-registered as a public company and changed its name to Verici Dx plc.
2 Summary of significant accounting policies
The principal accounting policies adopted in the preparation of the historical financial information of the Company, which have been applied consistently to the period presented, are set out below:
Basis of preparation
Information in this preliminary announcement does not constitute statutory accounts of the Group within the meaning of section 434 of the Companies Act 2006. The annual financial information presented in this preliminary announcement is based on, and is consistent with, that in the Group's audited financial statements for the year ended 31 December 2022. Those financial statements will be delivered to the Registrar of Companies following the Company's Annual General Meeting. The financial statements of the Group are prepared in accordance with UK-adopted International Accounting Standards ("UK IFRS") and applicable law. The independent auditors' report on those financial statements is unqualified and does not contain any statement under section 498 (2) or 498 (3) of the Companies Act 2006. The independent auditors' report draws attention to the material uncertainty referred to below under 'Going concern'.
The functional currency and the presentational currency of the Company is United States dollars ("USD" or "US$") as this is the currency of the primary economic environment that the Company operates in.
New standards are not expected to impact the Company or Group as they are either not relevant to the Company's or Group's activities or require accounting which is consistent with the Company's and Group's current accounting policies. The Directors have considered those standards and interpretations which have not been applied in these financial statements but which are relevant to the Company's or Group's operations that are in issue but not yet effective and do not consider that they will have a material effect on the future results of the Company or Group.
Other
The Group does not expect any other standards issued by the IASB, but not yet effective, to have a material impact on the group.
Measurement convention
The financial information has been prepared under the historical cost convention. Historical cost is generally based on the fair value of the consideration given in exchange for assets.
The preparation of the financial information in compliance with IFRS requires the use of certain critical accounting estimates and management judgements in applying the accounting policies. The significant estimates and judgements that have been made and their effect is disclosed in note 3.
Basis of consolidation
Where the Company has control over an investee, it is classified as a subsidiary. The Company controls an investee if all three of the following elements are present: power over the investee, exposure to variable returns from the investee, and the ability of the investor to use its power to affect those variable returns.
Control is reassessed whenever facts and circumstances indicate that there may be a change in any of these elements of control.
The consolidated financial statements present the results of the Company and its subsidiaries ("the Group") as if they formed a single entity. Intercompany transactions and balances between group companies are therefore eliminated in full.
The consolidated financial statements incorporate the results of business combinations using the acquisition method. In the statement of financial position, the acquiree's identifiable assets, liabilities and contingent liabilities are initially recognised at their fair values at the acquisition date. The results of acquired operations are included in the consolidated statement of profit or loss and other comprehensive income from the date on which control is obtained. They are deconsolidated from the date on which control ceases.
Going concern
In view of the early stage of its commercial development the Group funds its activities from existing cash resources, the generation of cash receipts from commercial revenues in future periods and, if required, additional equity or debt funding for future working capital needs.
The Group did not generate any commercial revenue in the period but continues to execute the commercial introduction of Tutivia™, the first product for kidney transplant rejection. The Group will only expand its sales headcount if revenue demand exceeds current expectation and can also explore other strategic options to increase sales distribution of Tutivia and launch its second lead product, Clarava™ by the end of 2023. The Company retains sufficient funding to achieve further key milestones in 2023 and the first half of 2024, which will support commercial adoption including the publication of additional data and obtaining both Medicare and private payor pricing and coverage.
At 31 December 2022 the Group had available cash resources of $9.8 million (2021 - $10.3 million). The Group is focused on early revenue generation and first revenue is expected during the first half of 2023. The Group will seek to extend and broaden its revenue streams from additional medical centres in the second half of 2023. There are, however, uncertainties in relation to the quantum and timing of cash receipts from revenue. The Group has therefore taken headcount reduction and clinical trial cost containment steps in recent months and, as a result, has extended the current cash runway.
The Directors have prepared cash flow forecasts for the Group for a period of at least 12 months from the date of approval of these financial statements. Those forecasts include estimates of cash receipts from commercial revenues at levels in line with market expectations. The Directors have also prepared a number of reasonably possible sensitivity scenarios including reduced levels of cash receipts from revenues, and a scenario in which the Group receives no cash at all from commercial revenues in the going concern period, even though that is not considered to be a reasonably possible outcome.
Having considered the cash flow forecasts and sensitivity scenarios above and taken into account the information and estimates available at the date of approving these financial statements, the directors consider it is appropriate to adopt the going concern basis in preparing the financial statements for the group. Although the company's projections, including expected levels of revenue generation, indicate sufficient funds through to the second half of 2024, it is reasonably possible that the group will require additional funding during, or shortly after a period of 12 months from the date of approval of these financial statements. The directors will seek to put in place funding arrangements which may from time to time be required but such arrangements are not presently committed. This represents a material uncertainty in relation to the group's funding arrangements.
Taxation
Income tax expense represents the sum of the tax currently payable and deferred tax.
Current tax
Current tax payable is based on taxable profit for the year. Taxable profit differs from net profits as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Company's liability for current tax is calculated using tax rates that have been enacted or substantially enacted by the reporting end date.
Deferred tax
Deferred tax is the tax expected to be payable or recoverable on temporary differences between the carrying amounts of assets and liabilities in the historical financial information and the corresponding tax bases used in the computation of taxable profit and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary differences arise from goodwill or from the initial recognition of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.
The carrying amount of deferred tax assets is reviewed at each reporting end date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled, or the asset is realised. Deferred tax is charged or credited in the income statement, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset when the company has a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority.
Share-based payments
Where equity settled share options are awarded to employees, the fair value of the options at the date of grant is charged to the consolidated statement of comprehensive income over the vesting period. Non-market vesting conditions are taken into account by adjusting the number of equity instruments expected to vest at each reporting date so that, ultimately, the cumulative amount recognised over the vesting period is based on the number of options that eventually vest. Non-vesting conditions and market vesting conditions are factored into the fair value of the options granted. As long as all other vesting conditions are satisfied, a charge is made irrespective of whether the market vesting conditions are satisfied. The cumulative expense is not adjusted for failure to achieve a market vesting condition or where a non-vesting condition is not satisfied.
Where equity instruments are granted to persons other than employees, the consolidated statement of comprehensive income is charged with the fair value of goods and services received.
Foreign currency translation
a) Function and presentational currency
Items included in the financial statements of the Group are measured using USD, the currency of the primary economic environment in which the entity operates ('the functional currency'), which is also the Company's presentation currency.
b) Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates, of monetary assets and liabilities denominated in foreign currencies to USD, are recognised in the income statement.
Intangible assets
Intangible assets are measured at cost less accumulated amortisation and any accumulated impairment losses.
Patents are recognised at fair value at the acquisition date. Patents have a finite useful life and are subsequently carried at cost less accumulated amortisation and impairment losses.
The Company amortises intangible assets with a limited useful life on a straight-line basis. The following rates are applied:
Licence and patents - the shorter of the remaining life of the license and 15 years
Tangible assets
Tangible fixed assets are stated at cost net of accumulated depreciation and accumulated impairment losses. Costs comprise purchase costs together with any incidental costs of acquisition.
Depreciation is provided to write down the cost less the estimated residual value of all tangible fixed assets by equal instalments over their estimated useful economic lives on a straight-line basis. The following rates are applied:
Plant and machinery - 3 years
The assets' residual values, useful lives and depreciation methods are reviewed, and adjusted prospectively if appropriate, if there is an indication of a significant change since the last reporting date. Low value equipment including computers is expensed as incurred.
Impairment of tangible and intangible assets
At each reporting end date, the Company reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the Company estimates the recoverable amount of the cash-generating unit to which the asset belongs.
The recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit and loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.
Where an impairment subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit and loss.
Leases
All leases are accounted for by recognising a right-of-use asset and a lease liability except for:
· Leases of low value assets; and
· Leases with a duration of 12 months or less.
Lease liabilities are measured at the present value of the contractual payments due to the lessor over the lease term, with the discount rate determined by reference to the rate inherent in the lease unless (as is typically the case) this is not readily determinable, in which case the Company's incremental borrowing rate on commencement of the lease is used. Variable lease payments are only included in the measurement of the lease liability if they depend on an index or rate. In such cases, the initial measurement of the lease liability assumes the variable element will remain unchanged throughout the lease term. Other variable lease payments are expensed in the period to which they relate.
On initial recognition, the carrying value of the lease liability also includes:
· amounts expected to be payable under any residual value guarantee
· the exercise price of any purchase option granted in favour of the Company if it is reasonably certain to assess that option
· any penalties payable for terminating the lease, if the term of the lease has been estimated on the basis of termination option being exercised.
Right of use assets are initially measured at the amount of the lease liability, reduced for any lease incentives received, and increased for:
· lease payments made at or before commencement of the lease
· initial direct costs incurred; and
· the amount of any provision recognised where the Company is contractually required to dismantle, remove or restore the leased asset (typically leasehold dilapidations - see note 19).
Subsequent to initial measurement lease liabilities increase as a result of interest charged at a constant rate on the balance outstanding and are reduced for lease payments made. Right-of-use assets are amortised on a straight-line basis over the remaining term of the lease or over the remaining economic life of the asset if, rarely, this is judged to be shorter than the lease term.
When the company revises its estimate of the term of any lease (because, for example, it re-assesses the probability of a lessee extension or termination option being exercised) it adjusts the carrying amount of the lease liability to reflect the payments to make over the revised term, which are discounted using a revised discount rate. The carrying value of lease liabilities is similarly revised when the variable element of future lease payments dependent on a rate or index is revised, except the discount rate remains unchanged. In both cases an equivalent adjustment is made to the carrying value of the right-of-use asset, with the revised carrying amount being amortised over the remaining (revised) lease term. If the carrying amount of the right-of-use asset is adjusted to zero, any further reduction is recognised in profit or loss.
Financial instruments
The Company classifies financial instruments, or their component parts, on initial recognition as a financial asset, a financial liability or an equity instrument in accordance with the substance of the contractual arrangement. Financial assets and financial liabilities are recognised on the statement of financial position when the Company becomes a party to the contractual provisions of the instrument.
a) Financial assets
Financial assets are classified, at initial recognition, at amortised cost or carrying value. The classification of financial assets at initial recognition depends on the financial asset's contractual cash flow characteristics and the Company's business model for managing them.
The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition and re-evaluates this classification at every reporting date.
As at the reporting date, the Company did not have any financial assets subsequently measured at fair value.
b) Financial liabilities
All financial liabilities are initially measured at fair value and, in the case of loans and borrowings, net of directly attributable transaction costs. They are subsequently measured at amortised cost, where applicable, using the effective interest method, with interest expense recognised on an effective yield basis.
c) Cash and cash equivalents
Cash and cash equivalents comprise cash balances and deposits with a maturity of less than three months at balance sheet date.
Financing expenses
Financing expenses comprise interest payable. Foreign exchange gains and losses arising on foreign currency transactions are reported within administrative expenses in the statement of comprehensive income.
Interest payable is recognised in the statement of comprehensive income as it accrues, using the effective interest method.
Exceptional items
Items considered of such significance to enable the reader to better understand the results for the year are presented separately as exceptional items on the face of the statement of comprehensive income.
Research and development costs
Development costs and expenditure on pure and applied research and the clinical trials are charged to the Income Statement in the year in which they are incurred. Expenditure incurred on the development of internally generated products will be capitalised based on the recognition criteria set aside in IAS 38 "Intangible Assets".
Operating segments
The directors are of the opinion that the business of the Group comprises a single activity, that of the development of prognostic and diagnostic tests for kidney transplant patients. Consequently, all activities relate to this segment.
All the non-current assets of the Company are located in, or primarily relate to, the USA.
| 3 | Judgements and key sources of estimation uncertainty |
The preparation of the Company's historical financial information under UK IFRS requires the Directors to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities. Estimates and judgements are continually evaluated and are based on historical experience and other factors including expectations of future events that are believed to be reasonable under the circumstances. Actual results may differ from these estimates.
The Directors consider that the following estimates and judgements are likely to have the most significant effect on the amounts recognised in the financial information.
Carrying value of intangible assets, property, plant and equipment
In determining whether there are indicators of impairment of the Company's intangible assets, the Directors take into consideration various factors including the economic viability and expected future financial performance of the asset and when it relates to the intangible assets arising on a business combination, the expected future performance of the business acquired.
Carrying value of amounts owed by subsidiary undertaking
The operations of the wholly owned subsidiary, Verici Dx Inc, are funded by the parent company, Verici Dx Plc. As such a receivable balance arises reflecting the funds advanced. The recoverability of this balance is dependent upon the economic viability and expected performance of the Group's developed products.
| 4 | Financial instruments - Risk Management |
The Group is exposed through its operations to the following financial risks:
- Credit risk
- Foreign exchange risk
- Liquidity risk and
- Capital disclosures
The Group is exposed to risks that arise from its use of financial instruments. This note describes the Group's objectives, policies and processes for managing those risks and the methods used to measure them. Further quantitative information in respect of these risks is presented throughout these financial statements.
(i) Principal financial instruments
The principal financial instruments used by the Group, from which financial instrument risk arises, are as follows:
- Cash and cash equivalents
- Trade and other payables
(ii) Financial instruments by category
Financial asset
| Group | Company | Group | Company | ||
| Amortised | Amortised | Amortised | Amortised | ||
| cost | cost | cost | cost | ||
| 2022 | 2022 | 2021 | 2021 | ||
| US$'000 | US$'000 | US$'000 | US$'000 | ||
| Cash and cash equivalents | 9,805 | 9,345 | 10,340 | 10,024 | |
| Trade and other receivables | 177 | 18 | 250 | 17 | |
| Amounts due from subsidiary | - | 18,122 | - | 8,226 | |
| _________ | _________ | _________ | _________ | ||
| 9,982 | 9,363 | 10,590 | 10,041 | ||
| Total financial assets | _________ | _________ | _________ | _________ |
Financial liabilities
| Group | Company | Group | Company | ||
| Amortised | Amortised | Amortised | Amortised | ||
| cost | cost | cost | cost | ||
| 2022 | 2022 | 2021 | 2021 | ||
| US$'000 | US$'000 | US$'000 | US$'000 | ||
| Trade and other payables | 2,096 | 105 | 1,754 | 131 | |
| Leases | 700 | - | - | - | |
| _________ | _________ | _________ | _________ | ||
| Total financial liabilities | 2,796 | 105 | 1,754 | 131 | |
| _________ | _________ | _________ | _________ |
(iii) Financial instruments not measured at fair value
Financial instruments not measured at fair value includes cash and cash equivalents, trade and other receivables, and trade and other payables.
Due to their short-term nature, the carrying value of cash and cash equivalents, trade and other receivables, and trade and other payables approximates their fair value.
(iv) Financial instruments measured at fair value
General objectives, policies and processes
The Board has overall responsibility for the determination of the Group's risk management objectives and policies and, whilst retaining ultimate responsibility for them, it has delegated the authority for designing and operating processes that ensure the effective implementation of the objectives and policies to the Group's finance function.
The overall objective of the Board is to set policies that seek to reduce risk as far as possible without unduly affecting the Group's competitiveness and flexibility. Further details regarding these policies are set out below:
Credit risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations. Due to the absence of revenue, the Group's exposure to credit risk is on cash at bank. The Company only deposits cash with major banks with high quality credit standing for amounts in excess of US$500,000.
Cash in bank and short-term deposits
The credit quality of cash has been assessed by reference to external credit rating, based on Standard and Poor's long-term / senior issuer rating:
| Group | Group | Company | Company | ||
| 2022 | 2022 | 2022 | 2022 | ||
| Cash | Cash | ||||
| Rating | at bank | Rating | at bank | ||
| US$'000 | US$'000 | ||||
| Bank A | A+ | 9,345 | A+ | 9,345 | |
| Bank B | 260 | - | |||
| Bank C | A+ | 200 | - | ||
| _________ | _________ | ||||
| 9,805 | 9,345 | ||||
| _________ | _________ |
| Group | Group | Company | Company | ||
| 2021 | 2021 | 2021 | 2021 | ||
| Cash | Cash | ||||
| Rating | at bank | Rating | at bank | ||
| US$'000 | US$'000 | ||||
| Bank A | A+ | 10,024 | A+ | 10,024 | |
| Bank B | 316 | - | |||
| _________ | _________ | ||||
| 10,340 | 10,024 | ||||
| _________ | _________ |
Foreign exchange risk
Foreign exchange risk arises when individual Group entities enter into transactions denominated in a currency other than their functional currency. The Group's policy is, where possible, to allow group entities to settle liabilities denominated in their functional currency. In the period before commercial revenues US dollars are transferred from the Company to its US subsidiary to enable it to meet its local obligations. Currently the Group's liabilities are either US dollar or UK sterling. No forward contracts or other financial instruments are entered into to hedge foreign exchange movements, with funds being transferred from the Company to its US subsidiary using spot rates.
As at 31 December 2022 assets held in Sterling amounted to US$270,000 (2021 - US$3,538,000) and liabilities held in Sterling amounted to US$105,000 (2021 - US$131,000).
The effect of a 5% strengthening of the Sterling against US dollar at the reporting date on the Sterling denominated net assets carried at that date would, all other variables held constant, have resulted in a decrease in post-tax loss for the period and increase of net assets of US$8,000 (2021 - US$170,000). A 5% weakening in the exchange rate would, on the same basis, have increased post-tax loss and decreased net assets by US$8,000 (2021 - US$170,000).
Liquidity risk
Liquidity risk is the risk that the Group will encounter difficulty in meeting its financial obligations as they fall due. This risk is managed by the production of rolling cash flow projections. The Group's continued future operations depend on its ability to raise sufficient working capital through the issue of share capital and generating revenue.
The following table sets out the contractual maturities (representing undiscounted contractual cash-flows) of financial liabilities which can all be met from the cash resources currently available:
| Between | Between | Between | |||
| Group | Up to 3 | 3 and 12 | 1 and 2 | 2 and 5 | |
| months | months | years | years | ||
| At 31 December 2022 | US$'000 | US$'000 | US$'000 | US$'000 | |
| Trade and other payables | 960 | - | - | - | |
| Leases | 45 | 111 | 167 | 377 | |
| _________ | ________ | ________ | ________ | ||
| Total | 1,005 | 111 | 167 | 377 | |
| _________ | ________ | ________ | ________ |
| Between | |||
| Company | Up to 3 | 3 and 12 | |
| months | Months | ||
| At 31 December 2022 | US$'000 | US$'000 | |
| Trade and other payables | 19 | - | |
| _________ | _________ | ||
| Total | 19 | - | |
| _________ | _________ |
| Between | |||
| Group | Up to 3 | 3 and 12 | |
| Months | months | ||
| At 31 December 2021 | US$'000 | US$'000 | |
| Trade and other payables | 159 | - | |
| Leases | - | - | |
| _________ | _________ | ||
| Total | 159 | - | |
| _________ | _________ |
| Between | |||
| Company | Up to 3 | 3 and 12 | |
| Months | Months | ||
| At 31 December 2021 | US$'000 | US$'000 | |
| Trade and other payables | 16 | - | |
| _________ | _________ | ||
| Total | 16 | - | |
| _________ | _________ |
Capital Disclosures
The Group monitors capital which comprises all components of equity (i.e. share capital, share premium, and accumulated losses).
The Group's objectives when maintaining capital are to safeguard the entity's ability to continue as a going concern.
| 5 | Expenses by nature | ||
| Year to | Year to | ||
| 31 December | 31 December | ||
| 2022 | 2021 | ||
| US$'000 | US$'000 | ||
| Employee benefit expenses (see note 7) | 2,889 | 2,392 | |
| Depreciation of property, plant and equipment | 497 | 295 | |
| Amortisation of intangible assets | 143 | 143 | |
| Research and development costs | 4,832 | 3,344 | |
| Licenses | 550 | 250 | |
| Professional costs | 1,325 | 921 | |
| Share-based payment expense for non-employees | 129 | 309 | |
| Foreign exchange loss / (gain) | 36 | (182) | |
| Other costs | 964 | 857 | |
| Costs of share issue | 90 | - |
| 6 | Auditors' remuneration |
During the year the Group obtained the following services from the Company's auditor:
| Year to | Year to | ||
| 31 December | 31 December | ||
| 2021 | 2021 | ||
| US$'000 | US$'000 | ||
| Fees payable to the Company's auditor for the audit of the parent Company and consolidated financial statements | 48 | 43 | |
| Fees payable to the Company's auditor for other services: | |||
| Tax advisory and compliance services | - | 1 | |
| _________ | _________ | ||
| Total | 48 | 44 | |
| _________ | _________ |
| 7 | Employee benefit expenses | ||
| Year to | Year to | ||
| 31 December | 31 December | ||
| 2022 | 2021 | ||
| US$'000 | US$'000 | ||
| Employee benefit expenses (including directors) comprise: | |||
| Wages and salaries | 2,279 | 1,658 | |
| Benefits | 191 | 143 | |
| Share-based payment expense (note 20) | 189 | 431 | |
| Social security contributions and similar taxes | 146 | 104 | |
| Pension contributions | 84 | 56 | |
| _________ | _________ | ||
| 2,889 | 2,392 | ||
| _________ | _________ |
Key management personnel compensation
Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the Group, including the Directors of the Company.
| Year to | Year to | ||
| 31 December | 31 December | ||
| 2022 | 2021 | ||
| US$'000 | US$'000 | ||
| Salary | 493 | 560 | |
| Share based payment expense | 7 | - | |
| _________ | _________ | ||
| 500 | 560 | ||
| _________ | _________ |
The average number of employees (including Directors) in the Group in the year was 17 (2021 - 13).
| 8 | Segment information |
The Group has one division being the development of prognostic and diagnostic tests for kidney transplant patients.
| 9 | Finance income and expense | ||
| Year to | Year to | ||
| 31 December | 31 December | ||
| 2022 | 2021 | ||
| US$'000 | US$'000 | ||
| Finance income | |||
| Bank interest | 53 | - | |
| _________ | _________ | ||
| Total finance income | 53 | - | |
| _________ | _________ |
| Finance expense | |||
| - | - | ||
| Interest on lease liabilities | 5 | - | |
| _________ | _________ | ||
| Total finance expense | 5 | - | |
| _________ | _________ |
| 10 | Tax expense | ||
| Year to | Year to | ||
| 31 December | 31 December | ||
| 2022 | 2021 | ||
| US$'000 | US$'000 | ||
| Current tax expense | |||
| Current tax on loss for the year | - | - | |
| _________ | _________ | ||
| Total current tax | - | - | |
| Deferred tax asset | |||
| On losses generated in the year | - | - | |
| _________ | _________ | ||
| - | - | ||
| _________ | _________ |
The reasons for the difference between the actual tax charge for the year and the standard rate of corporation tax in the United Kingdom applied to profits for the year are as follows:
| Year to | Year to | ||
| 31 December | 31 December | ||
| 2022 | 2021 | ||
| US$'000 | US$'000 | ||
| Loss for the period | (11,407) | (8,329) | |
| _________ | _________ | ||
| Tax using the Company's domestic tax rate of 19% | (2,167) | (1,583) | |
| Expenses not deductible for tax purposes | 79 | 58 | |
| Accelerated capital allowances | (251) | (143) | |
| Unrecognised deferred tax assets | 3,240 | 2,328 | |
| Different tax rates applied in overseas jurisdictions | (901) | (660) | |
| _________ | _________ | ||
| Total tax expense | - | - | |
| _________ | _________ |
The unrecognised deferred tax relates to two elements: the unrecognised deferred tax arising on share-based payments of US$85,000 (2021 - US$199,000) and unrecognised deferred tax on taxable losses of US$3,155,000 (2021 - US$2,129,000). Total taxable losses carried forward comprise of Federal US losses of $6,334,000 (US$4,848,000) which do not expire but can only offset against 80% of taxable profits from the same trade. In addition, US tax losses of $13,316,000 (US$3,708,000) are carried forward as research and development taxable asset to be used against future profits from the same trade. Tax losses in the UK at US$1,449,000 (US$897,000). No deferred tax asset is recognised for these losses due to early stage in the development of the Group's activities.
| 11 | Earnings per share | ||
| Year to | Year to | ||
| 31 December | 31 December | ||
| 2022 | 2021 | ||
| Total | Total | ||
| Numerator | US$ | US$ | |
| Loss for the period used in basic EPS | (11,407,527) | (8,329,829) | |
| Denominator | |||
| Weighted average number of ordinary shares used in basic EPS | 164,667,754 | 141,747,816 | |
| Resulting loss per share | (US$0.069) | (US$0.059) |
The Company has one category of dilutive potential ordinary share, being share options (see note 19). The potential shares were not dilutive in the period as the Group made a loss per share in line with IAS 33.
| 12 | Tangible assets | |||
| Group | Leasehold property |
Plant & machinery | Total | |
| US$'000 | US$'000 | US$'000 | ||
| Cost or valuation | ||||
| At 1 January 2021 | - | 594 | 594 | |
| Additions | - | 618 | 618 | |
| Foreign exchange movements | - | (6) | (6) | |
| _________ | _________ | _________ | ||
| At 31 December 2021 | - | 1,206 | 1,206 | |
| Additions | 1,288 | 455 | 1,743 | |
| Foreign exchange movements | - | (59) | (59) | |
| _________ | _________ | _________ | ||
| At 31 December 2022 | 1,288 | 1,602 | 2,890 | |
| _________ | _________ | _________ | ||
| Accumulated depreciation and impairment | ||||
| At 1 January 2021 | - | (130) | (130) | |
| Depreciation | - | (295) | (295) | |
| Foreign exchange movements | - | 5 | 5 | |
| _________ | _________ | _________ | ||
| At 31 December 2021 | - | (420) | (420) | |
| Depreciation | (76) | (421) | (497) | |
| Foreign exchange movements | - | 37 | 37 | |
| _________ | _________ | _________ | ||
| At 31 December 2022 | (76) | (804) | (880) | |
| _________ | _________ | _________ | ||
| Net book value | ||||
| At 31 December 2022 | 1,212 | 798 | 2,010 | |
| _________ | _________ | _________ | ||
| At 31 December 2021 | - | 786 | 786 | |
| _________ | _________ | _________ |
Included in leasehold property at 31 December 2022 are right of use assets with a cost of US$465,000 and accumulated depreciation of $28,000 relating to the lease of the Company's laboratory in Tennessee. Included within plant and machinery is an asset financed under a leasing contract with a cost of US$238,000. The liability is secured against the asset.
| 12 | Tangible assets (continued) | ||
| Company | Plant & machinery | Total | |
| US$'000 | US$'000 | ||
| Cost or valuation | |||
| At 1 January 2021 | 568 | 568 | |
| Additions | - | - | |
| Foreign exchange movements | (6) | (6) | |
| _________ | _________ | ||
| At 31 December 2021 | 562 | 562 | |
| Additions | - | - | |
| Foreign exchange movements | (59) | (59) | |
| _________ | _________ | ||
| At 31 December 2022 | 503 | 503 | |
| _________ | _________ | ||
| Accumulated depreciation and impairment | |||
| At 1 January 2021 | (126) | (126) | |
| Depreciation | (191) | (191) | |
| Foreign exchange movements | 5 | 5 | |
| _________ | _________ | ||
| At 31 December 2021 | (312) | (312) | |
| Depreciation | (172) | (172) | |
| Foreign exchange movements | 37 | 37 | |
| _________ | _________ | ||
| At 31 December 2022 | (447) | (447) | |
| _________ | _________ | ||
| Net book value | |||
| At 31 December 2022 | 56 | 56 | |
| _________ | _________ | ||
| At 31 December 2021 | 250 | 250 | |
| _________ | _________ |
| 13 | Intangible assets | ||
| Group | License and patents | Total | |
| US$'000 | US$'000 | ||
| Cost | |||
| At 1 January 2021 | 1,839 | 1,839 | |
| Additions | 398 | 398 | |
| Foreign exchange movements | (18) | (18) | |
| _________ | _________ | ||
| At 31 December 2021 | 2,219 | 2,219 | |
| Additions | 268 | 268 | |
| Foreign exchange movements | (185) | (185) | |
| _________ | _________ | ||
| At 31 December 2022 | 2,302 | 2,302 | |
| _________ | _________ | ||
| Accumulated amortisation and impairment | |||
| At 1 January 2021 | (72) | (72) | |
| Amortisation charge | (143) | (143) | |
| Foreign exchange movements | 3 | 3 | |
| _________ | _________ | ||
| At 31 December 2021 | (212) | (212) | |
| Amortisation charge | (143) | (143) | |
| Foreign exchange movements | 23 | 23 | |
| _________ | _________ | ||
| At 31 December 2022 | 332 | 332 | |
| _________ | _________ | ||
| Net book value | |||
| At 31 December 2022 | 1,970 | 1,970 | |
| _________ | _________ | ||
| At 31 December 2021 | 2,007 | 2,007 | |
| _________ | _________ |
| 13 | Intangible assets (continued) | ||
| Company | License and patents | Total | |
| US$'000 | US$'000 | ||
| Cost | |||
| At 1 January 2021 | 1,722 | 1,722 | |
| Additions | 54 | 54 | |
| Foreign currency movements | (18) | (18) | |
| _________ | _________ | ||
| At 31 December 2021 | 1,758 | 1,758 | |
| Additions | 15 | 15 | |
| Foreign currency movements | (185) | (185) | |
| _________ | _________ | ||
| At 31 December 2022 | 1,588 | 1,588 | |
| _________ | _________ | ||
| Accumulated amortisation and impairment | |||
| At 1 January 2021 | (71) | (71) | |
| Amortisation charge | (124) | (124) | |
| Foreign exchange movements | 3 | 3 | |
| _________ | _________ | ||
| At 31 December 2021 | (192) | (192) | |
| Amortisation charge | (104) | (104) | |
| Foreign exchange movements | 23 | 23 | |
| _________ | _________ | ||
| At 31 December 2022 | (273) | (273) | |
| _________ | _________ | ||
| Net book value | |||
| At 31 December 2022 | 1,315 | 1,315 | |
| _________ | _________ | ||
| At 31 December 2021 | 1,566 | 1,566 | |
| _________ | _________ |
The licence was acquired from Renalytix AI Plc on 4 May 2020 pursuant to a purchase of business assets.. This license in turn was granted to Renaltix AI Plc by the Icahn School of Medicine at Mount Sinai for rights to intellectual property and data to support the FractalDx families of diagnostic assays. In addition amounts are spent on the prosecution and protection of patent applications.
The Group has tested the carrying value for impairment at 31 December 2022. The recoverable amount was assessed in the basis of value in use. The assessed value exceeded the carrying value and no impairment loss was recognised. The key assumptions in the calculation to assess value in use are future revenues and costs and the ability to generate future cash flows. Recent working capital projections approved by the Board were used as well as forecasts for a further four years, followed by an extrapolation of expected cash flows and the calculation of a terminal value.
| 14 | Subsidiary |
The principal subsidiary of Verici Dx plc, which has been included in these consolidated financial statements at a cost of US$10, is as follows:
| Country of incorporation and | Proportion of ownership | ||
| Name | principal place of business | interest at 31 December | |
| 2021 and 2022 | |||
| Verici Dx Inc | United States of America | 100% |
| 15 | Trade and other receivables | ||||
| Group | Company | Group | Company | ||
| 2022 | 2022 | 2021 | 2021 | ||
| US$'000 | US$'000 | US$'000 | US$'000 | ||
| Prepayments | 343 | 60 | 406 | 101 | |
| Other debtors | 177 | 18 | 250 | 17 | |
| Amount due from wholly owned subsidiary undertaking | - | 18,122 | - | 8,226 | |
| _________ | _________ | _________ | _________ | ||
| 520 | 18,200 | 656 | 8,344 | ||
| _________ | _________ | _________ | _________ |
| 16 | Trade and other payables | ||||
| Group | Company | Group | Company | ||
| 2022 | 2022 | 2021 | 2021 | ||
| US$'000 | US$'000 | US$'000 | US$'000 | ||
| Trade payables | 960 | 19 | 160 | 16 | |
| Accruals | 1,136 | 86 | 1,644 | 165 | |
| _________ | _________ | _________ | _________ | ||
| Total trade and other payables | 2,096 | 105 | 1,804 | 181 | |
| _________ | _________ | _________ | _________ |
The carrying value of trade and other payables classified as financial liabilities measured at amortised cost approximates fair value.
The only movements within financial liabilities relate to payments for payable and leases within the Financial Instruments note.
| 17 | Lease liabilities | ||||||||
| Land and | Plant and | ||||||||
| Group | buildings | machinery | Total | ||||||
| US$'000 | US$'000 | US$'000 | |||||||
| At 1 January 2021 | - | - | - | ||||||
| Interest expense | - | - | - | ||||||
| Repayments | - | - | - | ||||||
| ________ | ________ | ________ | |||||||
| At 31 December 2021 | - | - | - | ||||||
| ________ | ________ | ________ | |||||||
| Additions | 465 | 238 | 703 | ||||||
| Repayments | (8) | - | (8) | ||||||
| Interest expense | 4 | 1 | 5 | ||||||
| ________ | ________ | ________ | |||||||
| At 31 December 2022 | 461 | 239 | 700 | ||||||
| ________ | ________ | ________ | |||||||
The Company acquired an asset under capital lease financing arrangements.
The Company operates from one office which is rented under a lease agreement ending on 1 November 2027 under which rent is payable monthly.
| 2022 | 2021 | |
| US$'000 | US$'000 | |
| Maturity of lease liabilities | ||
| Within 3 months Between 3 - 12 months Between 1 - 2 years Between 2 - 5 years |
45 111 167 377 |
- - - - |
| ________ | ________ | |
| 700 | - | |
| ________ | ________ |
| 18 | Share capital | |||||
| Issued and fully paid | ||||||
| 2022 | 2022 | |||||
| Number | US$ | |||||
| Ordinary shares of £1 each | ||||||
| On incorporation | 1 | 1 | ||||
| __________ | __________ | |||||
| Ordinary shares of £0.001 each | ||||||
| Sub-division of existing shares into 1,000 ordinary shares | 1,000 | 1 | ||||
| Issue of new shares | 59,415,135 | 74,864 | ||||
| Issue of shares on conversion of Convertible Loan Notes | 9,831,681 | 12,771 | ||||
| Placing and offer of shares on admission to AIM | 72,500,000 | 93,978 | ||||
| __________ | __________ | |||||
| At 31 December 2021 | 141,747,816 | 181,614 | ||||
| Issue of new shares | 28,571,429 | 37,342 | ||||
| __________ | __________ | |||||
| At 31 December 2022 | 170,319,245 | 218,956 | ||||
| __________ | __________ | |||||
On 7 July 2020 the entire issued share capital of the Company was sub divided to create 1,000 ordinary shares of £0.001 each and 59,415,135 ordinary shares of £0.001 each were allotted pursuant to a dividend in specie by the then parent company, Renalytix AI Plc. Those 59,416,135 shares were then immediately reclassified as 59,416,134 A shares and one Golden Share and all A shares and the Golden Share converted into ordinary shares at the time of the Company's admission to AIM on 3 November 2020.
On 28 October 2020 pursuant to the conversion of the Convertible Loan Notes is issue at that time of $2,500,000, a further 9,831,681 new ordinary shares were issued.
On 3 November 2020 pursuant to the Company's shares being admitted to AIM, a market operated by the London Stock Exchange, 72,500,000 new ordinary shares were issued at an issue price of £0.20 per share raising gross proceeds of US$18,795,500 (£14,500,000).
On 11 March 2022 the Company issued 28,571,429 ordinary shares of £0.001 at an issue price of £0.35 per share raising gross proceeds of US$13,070,000 ((£10,000,000).
| 19 | Reserves |
The following describes the nature and purpose of each reserve within equity:
| Reserve | Description and purpose | |
| Share premium | Amount subscribed for share capital in excess of nominal value. | |
| Foreign exchange reserve | Gains/losses arising on retranslating the net assets of parent company operations into US dollars. | |
| Retained earnings | All other net gains and losses and transactions with owners (e.g. dividends) not recognised elsewhere. |
| 20 | Share-based payment |
On 28 October 2020, the Board adopted the Share Option Plan to incentivise certain of the Group's employees and Directors. The Share Option Plan provides for the grant of both EMI Options and non-tax favoured options. Options granted under the Share Option Plan are subject to exercise conditions as summarised below.
The Share Option Plan has a non-employee sub-plan for the grant of Options to the Company's advisors, consultants, non-executive directors, and entities providing, through an individual, such advisory, consultancy, or office holder services and a US sub-plan for the grant of Options to eligible participants in the Share Option Plan and the Non-Employee Sub-Plan who are US residents and US taxpayers.
With the exception of options over 10,631,086 shares, which vested immediately on grant in 2020, the options vest equally over twelve quarters from the grant date. If options remain unexercised after the date one day before the tenth anniversary of grant such options expire. The Options are subject to exercise conditions such that they shall, subject to certain exceptions, vest in equal quarterly instalments over the three years immediately following the date of grant, which vesting shall accelerate in full in the event of a change of control of the Company.
| Weighted | |||
| average | |||
| exercise | |||
| price (p) | Number | ||
| Outstanding at 22 April 2020 | - | - | |
| Granted during the period | 32 | 14,574,782 | |
| Exercised during the period | 20 | (10,631,086) | |
| ________ | _________ | ||
| Outstanding at 31 December 2020 | 32 | 3,943,696 | |
Granted during the year
62.61
990,000
| _________ |
| _________ |
Exercisable at 31 December 2021
26.03
4,933,696
________
_________
Cancelled in the year
(120,000)
Granted in the year
1,564,370
________
________
Exercisable at 31 December 2022
23.86
6,378,066
________
________
The exercise price of options outstanding at 31 December 2022 ranged between 20p and 69.5p and their weighted average contractual life was 3.85 years.
The weighted average fair value of each option granted during the year was 25.98p. The weighted average fair value of the options outstanding at 31 December 2022 was 23.86p.
The fair value of each share option granted has been estimated using a Black-Scholes model and ranges from 10p to 23p. The inputs into the model are a share prices of 20p, 40p,45.5p, 50p and 69.5p and exercise prices of 20p, 40p,45.5p, 50p and 69.5p and expected volatility of 52.34%, no expected dividend yield, contractual life of between 2.9 and 1.9 years and a risk-free interest rate of 0.925%. As of 31 December 2022, none of the granted stock options have been exercised.
| 20 | Share-based payment (continued) |
The Group recognised total expenses of $318,000 (2021 - $741,000) within administrative expenses relating to equity-settled share-based payment transactions during the period.
| 21 | Related party transactions |
The following items are included as disclosures in accordance with IFRS:
i. In the year to 31 December 2022 an amount of US$51,000 (2021 - US$352,000) was invoiced by Renalytix Plc as full reimbursement for expenses incurred on behalf of the Company as a cost sharing arrangement for a quality management software product. As of 31 December 2022 the amount owed to Renalytix Plc was US$22,000 (2021 - US$22,000).
ii. In the year to 31 December 2022 an amount of US$750,000 (2021 - US$35,000) was invoiced by Icahn School of Medicine at Mount Sinai for milestone fees due under the license agreement described in the Admission Document. As of 31 December 2022 the amount owed to Icahn School at Medicine at Mount Sinai was US$Nil (2021 - US$Nil).
iii. In the year to 31 December 2022 an amount of US$17,000 (2021 - US$Nil) was invoiced by EKF Diagnostic Holdings Plc for services rendered in the year. As of 31 December 2022 the amount owed to EKF Diagnostic Holdings Plc was US$Nil (2021 - US$Nil).
There are no additional AIM Rule 13 disclosures required in relation to these items.
| 22 | Events after the reporting date |
There have been no events subsequent to the year-end that require disclosure in these financial statements.
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