REG - Verici Dx PLC - 2023 Annual Results
30/05/2024 07:00
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RNS Number : 3597Q Verici Dx PLC 30 May 2024
Verici Dx plc
("Verici Dx" or the "Company")
2023 Annual Results
Strong delivery on key strategic objectives
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 2023.
Strategic progress
· Secured a global licensing and commercialisation agreement with One Lambda,
Inc., (a company within Thermo Fisher Scientific, Inc) ("Thermo Fisher
Scientific") in November 2023. This exclusive license grants Thermo Fisher
Scientific the rights to commercialise the assay for pre-transplant risk
assessment for further development as a Laboratory Developed Test ("LDT") in
its CLIA laboratory in the U.S., as well as the sole right, but not the
obligation, to manufacture, distribute and sell the assay worldwide.
· Granted Thermo Fisher Scientific a non-exclusive license for access to a
portion of the Company's urine samples, demonstrating the additional value in
Verici Dx's research assets (data and sample).
· Announced the successful clinical validation of Clarava(TM), the
pre-transplant prognosis test for the risk of early acute rejection ("EAR")
when in recipient of a kidney transplant from a deceased donor.
· Commercially launched Tutivia(TM), the post-transplant diagnostic focused upon
acute cellular rejection ("ACR") including sub-clinical rejection.
· Data from the successful international validation study for Tutivia(TM) was
peer reviewed and published in The American Journal of Transplantation in
December 2023.
· Completed enrolment for the longer duration clinical validation study for the
third product, Protega(TM), a liquid biopsy that aims to predict the risk of
fibrosis and long-term graft failure. Post year-end, the scheduled 12-months
post-transplant visits for enrolled patients were completed. To conclude the
study visits for the clinical trials, there will next be visits at 24-month
post-transplant to further support the long-term outcomes data. An interim
update on Protega(TM) is expected in the first half of 2025.
· Received confirmation and finalised pricing for both Tutivia(TM) and
Clarava(TM) from the Centers for Medicare & Medicaid Services ("CMS") at
the proposed $2,650 rates, effective from 1 January 2024
· Post period end, announced a collaboration with The Westmead Institute for
Medical Research based in Sydney, Australia, on a newly awarded, 4-year
federal research grant allowing the Company to contribute to significant
advancements in biomarker development and for Verici Dx to expand its reach in
Australia.
· Previous guidance and assumptions regarding the extended cash runway as a
result of the Thermo Fisher Scientific transaction and the successful equity
fundraise are unchanged. This is discussed further below.
Operational highlights
· Received further recognition for the clinical laboratory which has now
achieved CLIA certification in respect of samples from patients located in 51
states with the process underway for accreditation in the final state of New
York where there are several additional steps. This means clinicians at
transplant medical centres in these 51 states are now enabled to order Verici
Dx's transplant tests, expanding the Company's commercial reach.
· Gained accreditation for the laboratory from the internationally recognised
College of American Pathology (CAP).
· Secured additional protection of the Company's intellectual property,
registering two significant new patents in the United States. The patents
cover broad molecular methods for predicting and diagnosing subclinical and
clinical acute rejection, both pre- and post- kidney transplant by algorithmic
analysis of gene sets and underpin both of Verici Dx's lead products,
Tutivia™ and Clarava™, and provide protection until 2036 and 2039
respectively. The patents underpinning Tutivia™ have also been previously
granted in Europe, China and Australia.
· Achieved ISO 27001 certification for our Information Security Management
System demonstrating the robustness of the systems and processes.
Financial highlights
· Adjusted EBITDA(1) loss of $7.6m (2022: loss of $10.5m).
· Cash balance at 31 December 2023 of $2.6m (2022: $9.8m).
· Significantly strengthened our financial position going forward through both
the Thermo Fisher Scientific agreement and fundraising activities.
· Raised a total of £6.5m in gross proceeds (£6.0m net) through the issue of
72,222,222 new ordinary shares via a Placing and Retail Offer in early 2024.
· As a result of the Thermo Fisher Scientific transaction and the successful
equity fundraise, the Company forecasts the cash runway has been extended into
2026. This reflects a number of assumptions relating to the timing and/or
quantum of the additional milestone payments under the Thermo Fisher
Scientific transaction, the ongoing rollout of Tutivia(TM), as well as other
licensing revenues and research collaborations.
Business update and investor briefing
An update on progress across the Company's products, initiatives, and projects
will be provided in early Q3 together with an investor meeting at that point.
Further details will be announced in due course.
Commenting on the performance and outlook, Sara Barrington, Chief Executive
Officer, said:
"2023 was a transformational year for Verici Dx with excellent strategic
progress resulting in the successful transition from a research-focused entity
to a commercial-stage company, with two clinically validated products and
substantial opportunities for further value creation.
We believe the steps Verici Dx has taken to strengthen its balance sheet means
we are now very well positioned to progress our strategic ambitions. The focus
throughout the rest of 2024 is therefore to advance multiple growth and value
creation initiatives, whilst maintaining our strong financial discipline. I
look forward to providing further updates in due course."
Enquiries:
Verici Dx www.v (http://www.vericidx.com) ericidx (http://www.vericidx.com) .com
(http://www.vericidx.com)
Sara Barrington, CEO investors@vericidx.com
Julian Baines, Chairman
Singer Capital Markets (Nominated Adviser & Broker) Tel: +44 20 7496 3000
Aubrey Powell / Sam Butcher / Jalini Kalaravy
Footnotes:
1. Earnings before income tax, depreciation and amortisation, adjusted to
exclude exceptional items.
About Verici Dx plc www.vericidx.com (http://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, including through 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.
Chair's Statement
2023 stands out as a pivotal chapter in Verici Dx's history, reflecting a
period of excellent strategic progress and a transformative leap from a
research-focused entity to a commercial-stage company with two clinically
validated products and substantial opportunities for further value creation.
The year saw several significant achievements, foremost among them was
securing a global licensing and commercialisation agreement with One Lambda,
Inc., (a company within Thermo Fisher Scientific Inc.) ("Thermo Fisher") in
November 2023. This followed the successful clinical validation of Clarava™,
our pre-transplant prognosis test for the risk of early acute rejection
("EAR") in patients having received a kidney transplant from a deceased donor.
This exclusive license grants Thermo Fisher the rights to transfer and further
develop as appropriate the assay for pre-transplant risk assessment for
validation as a Laboratory Developed Test ("LDT") in its CLIA laboratory in
the U.S., as well as the sole right, but not obligation, to manufacture,
distribute and sell the assay worldwide. The license agreement includes an
upfront payment to the Company, along with a number of further payments
conditional upon operational deliverables related to technology transfer and
related publications. The initial upfront payment was received before year
end. In addition, Verici Dx granted Thermo Fisher a non-exclusive license for
access to a portion of the Company's urine samples, demonstrating the
additional value in the Company's data and sample assets for research. Under
the above arrangements, payment events for Verici Dx over the 12 months
following entry into that agreement are expected to total approximately US$5
million with a further milestone-linked payment thereafter, in addition to
ongoing royalties on tests sold.
Another highlight was announcing that, in December 2023, the data from the
Company's successful international validation study for Tutivia™ was peer
reviewed and published in The American Journal of Transplantation. This is
the official journal of both the American Society of Transplantation and the
American Society of Transplant Surgeons with a combined membership of
approximately 6,000 transplant professionals. Tutivia™ is our
post-transplant diagnostic test focused on acute cellular rejection ("ACR")
including sub-clinical rejection, which was commercially launched in January
2023 and which we are continuing to roll out.
We were also pleased to note that the pricing for both TutiviaTM and
ClaravaTM was confirmed and finalised by the Centers for Medicare &
Medicaid Services ("CMS") at the proposed rates of $2,650 per test, effective
from 1 January 2024. Coverage is the final stage for Medicare reimbursement
and the technical assessment file for coverage under the Local Coverage
Determination ("LCD") was submitted Q1 2024. It is expected that a coverage
determination will be obtained by the end of 2024.
Turning to our third product, ProtegaTM, at the start of the year we completed
enrolment for the longer duration clinical validation study. This is a liquid
biopsy that aims to predict the risk of fibrosis and long-term graft failure.
Together with Clarava™ and Tutivia™, this will allow Verici Dx to offer
end-to-end testing for kidney transplant patients and their clinicians. Post
year-end, the scheduled 12 months post operation visits for enrolled patients
were completed and, as planned following our recent fundraise, the clinical
trial protocol was extended to include a 24-month post-transplant visit for
participants to further support the long-term outcomes data. This is expected
to conclude the study visits for the clinical trial. Protega will be
assessed on an interim basis with these results expected in the first half of
2025.
This progress across all three of our lead tests reflects the Company's
strategic focus, clear product differentiation, and significant competitive
advantages. The tests are based upon RNA signatures which return high
performance in risk stratifying patients so that clinicians can proactively
tailor care pathways. The highly inclusive clinical trial, which was designed
to be as close to what would be found in clinical practice, also included
longitudinal sample collection and transcriptional sequencing across blood,
urine and tissue. This has yielded an unparalleled data and biorepository
asset for research use, including collaborations. This value is already being
recognised, as evidenced by the non-exclusive license fee paid by Thermo
Fisher for access to the urine samples. The Company will continue to build its
sample and data assets over time and expects further monetisation over time,
alongside the potential to enhance its own products and their positioning from
the insights obtained.
In addition, Verici Dx has also made strong operational progress, receiving
further recognition for our clinical laboratory which has now achieved CLIA
certification, allowing us to process tests from 51 states. This exemplifies
the Company's commitment to a quality-focused approach to providing advanced
kidney transplant diagnostics services to clinicians and patients in need. In
addition, the laboratory gained accreditation from the internationally
recognised College of American Pathology (CAP), further affirming our
commitment to operating at the highest standards expected by healthcare
providers, patients and regulatory bodies.
During 2023 we registered two significant new patents that extend our
intellectual property portfolio and protect our proprietary methods of
predicting and diagnosing sub-clinical and clinical acute kidney rejection.
Despite the challenging global financing environment, we have significantly
strengthened our financial position through both the Thermo Fisher agreement
in November 2023, as detailed above, and also the early 2024 equity fundraise
which raised a total of £6.5m in gross proceeds (£6.0 m net) through the
issue of 72,222,222 new ordinary shares. Verici Dx is grateful to its existing
shareholders for their continued support and delighted to welcome those new to
the register.
Together, these transactions, and our assumptions, extend our cash runway into
2026 and position us well as we continue to make progress during a busy 2024.
Our strategic focus this year will be to advance multiple growth initiatives
in parallel, with the potential to build greater value in the Company and we
have made a strong start to the year in this regard.
On behalf of the Board, I would like to thank our dedicated colleagues who
have contributed to the Company's success in the past year, the patients and
their caregivers who have taken, and are taking, part in our clinical trials
as we work towards our goal of improving patients' lives throughout the kidney
transplant journey, and our investors and partners for their continued support
throughout the year.
Julian Baines
Non-executive Chair
29 May 2024
Chief Executive Officer Report
At Verici Dx, we are driven by an unrelenting focus on improving potential
outcomes for all transplant patients, with an initial focus on kidney
transplants. We aim to do this by providing early predictive tests to cover
the full transplant lifecycle, from pre-transplant to late stage, thereby
meeting a critical need by enabling clinicians to make more informed treatment
decisions. To this end, 2023 has been a transformational year with the
delivery of many significant strategic objectives. These achievements relate
both to our products, where we benefit from our differentiated offering and
clear competitive advantages which are covered in detail below, and to our
laboratory and clinical operations where we see growing recognition for the
strength and quality of our platform.
Excellent progress across our lead products
By meticulously adhering to our disciplined cost management strategy, we
carefully selected our investments and allocated organisational resources
throughout the year. This focused approach directly contributed to measurable
advancements across our strategic plan which has continued to evolve with
access to further funding in early 2024.
Our first product is the post-transplant test, Tutivia(TM), which was
clinically validated in 2022 and commercially launched at the start of 2023.
During the year, we continued to work with leading US transplant centres to
support the adoption and integration of Tutivia(TM) into their clinical
pathways to encourage consistent and recurring utilisation. Following some
initial short-term delays by clinical centres as they analysed the potential
impact on the overall market of announcements made by CMS, we saw an
acceleration in the early adopter programme through the later part of 2023.
We were delighted to announce in December 2023 that the data from the
Company's successful pivotal international validation study for Tutivia(TM)
had been peer reviewed and published in The American Journal of
Transplantation, the official journal of both the American Society of
Transplantation and the American Society of Transplant Surgeons with a
combined membership of approximately 6,000 transplant professionals.
Publication in a leading scientific journal is a crucial step in the
commercialisation of a new product as the peer-review process supports the
verification of the reliability and credibility of the research, building
trust and confidence within the scientific community. Publication is also a
key element in the application by Verici Dx for Tutivia(TM) to obtain a local
coverage determination ("LCD") for Medicare reimbursement, opening the test up
for Medicare patients and increasing the likelihood of the test being adopted
by centres. The Technical Assessment ("TA") File for this was submitted post
year-end., an important step in the pathway for reimbursement coverage from
Medicare. We expect a period of review and questions during the course of 2024
and expect to have a determination by the end of the year. Submitting the TA
means that the Company will be able to apply for retrospective reimbursement
on tests used after the submission was made, once the subsequent LCD is
granted. The award of the LCD is also required before we can recognise
revenues.
Turning to our pre-transplant test, Clarava(TM), we announced the successful
results from our multi-centre clinical validation study in July 2023. The
study, which included a broad and diverse group of patients preparing to
receive a kidney transplant across 13 centres, demonstrated a statistically
significant result, identifying patients that are at increased risk for a
kidney rejection event in the critical first 60 to 90 days post-transplant
after receiving a kidney from a deceased donor. This equates to around 65,000
eligible patients per year. Study data analysis of the clinical performance of
Clarava(TM) determined that patients of high risk based on their test result
were approximately six times more likely to have a rejection than those of low
risk. As noted in the Chair's Statement, this in turn led to the signing of a
global licensing and commercialisation agreement with Thermo Fisher to further
develop an assay for pre-transplant prognostic testing for risk of early
kidney rejection which was announced on 15 November 2023.
It is worth noting that the Centers for Medicare & Medicaid Services
("CMS") finalised the Clinical Laboratory Fee Schedule ("CLFS") payment rate
of $2,650 for both Clarava(TM) and Tutvivia(TM), with the rate taking effect
for three years from 1 January 2024. Having a national payment rate
established by CMS represents another step toward securing reimbursement for
testing by Medicare.
Moving on to Protega(TM), this is the third blood-test product to emerge from
our platform of personalised, predictive RNA signature tests and completes our
proposed blood-based portfolio for end-to-end kidney transplant testing, from
pre-transplant to long-term damage. Enrolment into the longer duration
validation study was finalised in the first quarter of 2023. 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 this point and we
will provide further updates as appropriate.
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, enabling a meaningful risk stratification for care
pathways. A high-risk patient identified by Tutivia is six times more likely
to be having a rejection that a low-risk patient. In Clarava this increased
to seven times. 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 have accurate, data-driven clinical information,
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 risk stratify patients as early as the first week
post-transplant for all types of patients and all types of rejection. The
validation trial demonstrated that about 25% of patients were high risk and
with an odds (or hazard) ratio of 5.74 which indicated that these high-risk
patients were about 6 times more likely than the low-risk patients to be
having, or at imminent risk of having, an acute rejection. This therefore
enables clinicians to act proactively, rather than reactively, to rejection
events. Tutivia™ also demonstrated that it was not confounded by other
events such as the BK virus, which requires a different treatment care pathway
to that of rejection.
Another differentiating feature is that other currently available single blood
tests which 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 remain 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, in contrast to other tests, 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 and all
types of patients. We believe that Tutivia™ is the only product currently on
the market to have been validated so comprehensively. This broad testing
population compared with more targeted sub-populations will lead to a more
muted performance overall but still managed to return the highest performance
amongst its comparators for positive predictive value ("PPV") but not at the
statistical price of NPV, as the overall performance was well balanced with a
NPV of 79%.
Turning to our pre-transplant test, Clarava(TM), we announced the successful
results from our multi-centre clinical validation study in July 2023. The
study, which included a broad and diverse group of patients preparing to
receive a kidney transplant across 13 centres, demonstrated a statistically
significant result, identifying patients that are at increased risk for a
kidney rejection event in the critical first 60 to 90 days post-transplant
after receiving a kidney from a deceased donor. Importantly for a risk
assessment tool, the study data analysis of the clinical performance of
Clarava(TM) determined that patients of high risk based on their test result
were approximately seven times more likely to have a rejection than those of
low risk. This is based upon the patient's likely immune response to a
transplanted kidney from a deceased donor without knowing the condition of the
organ or its compatibility with the patient, and so is unique information for
the clinician.
Continued delivery of significant operational milestones
During the period, we successfully progressed our laboratory registration
status under the CLIA Certificate of Compliance by the Centers for Medicare
& Medicaid ("CMS") and are pleased to confirm that Verici Dx is now fully
accredited in 51 states. This enables us to test samples from patients based
in any of these states. We are currently working on reaching accreditation in
the last remaining state of New York and hope to receive this later in 2024.
We were pleased to receive confirmation that the Medicare price recommendation
of $2,650 was finalised for both Clarava(TM) and Tutivia(TM). This rate was
established through the "gapfill" process for both Tutivia(TM) (CPT 0320U) and
Clarava(TM) (CPT 0319U) and became effective as of 1 January 2024. Gapfill
pricing is a method used by CMS to establish a payment rate for clinical
diagnostic laboratory tests when no comparable test is priced on the CLFS and
involves setting the payment rate for the test at the median of rates
established by local Medicare contractors. Coverage determination for Tutivia
will be applied for through a technical assessment application under the Local
Coverage Determination ("LCD") in the Palmetto region of MolDx. Following
submission of this application in Q1 2024, the review process is now well
underway, and a determination is expected later in 2024. The Company is able
to make retrospective claims for any tests used following formal acceptance of
the application, once the LCD is granted.
In addition, registration for Medicaid has been approved in 15 states, as well
as with BlueCross Blue Shield of Tennessee, the largest health benefit plan
company in the state, with a further 12 states pending. Together, Medicaid and
Medicare patients account for 65% of all transplant recipients across the US.
The Company's intellectual property was further secured by the issuance of two
key US patents during the year. These support and protect the Company's core
technologies in RNA signature biomarker tests used for assessment of the
prognostic risk pre-transplant (Clarava(TM)) and post-transplant (Tutivia(TM))
risk of acute kidney transplant rejection, providing protection in the US
until 2039 and 2036 respectively. The patents underpinning Tutivia have also
been previously granted in Europe, China and Australia. 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 November 2023, we achieved ISO 27001 certification for our Information
Security Management System ("ISMS"). This demonstrates the robustness of our
systems and processes in maintaining the highest level of data protection for
our patients, clients, partners, and stakeholders.
Completion of partnerships and agreements
In November 2023, the Company announced an agreement for an exclusive license
granting Thermo Fisher the rights to transfer an assay for pre-transplant risk
assessment for further development as a Laboratory Developed Test ("LDT") in
its CLIA laboratory in the U.S., as well as the sole right, but not
obligation, to manufacture, distribute and sell the assay worldwide. The
license agreement included an upfront payment to the Company, along with a
number of further payments conditional upon operational deliverables related
to technology transfer and related publications. This initial upfront payment
was received before year end. In addition, Verici Dx has granted Thermo Fisher
a non-exclusive license for access to a portion of the Company's urine
samples, demonstrating the additional value in the Company's data and sample
assets for research. Under the above arrangements, payment events for Verici
Dx over the 12 months following entry into the license agreement are expected
to total approximately US$5 million with a further milestone-linked payment
thereafter, in addition to ongoing royalties on tests sold. A total of $2.8
million of the c.$5 million has been received to the date of this report.
In January 2024, the Company announced a collaboration with The Westmead
Institute for Medical Research based in Sydney, Australia, on a newly awarded,
4-year federal research grant. This forms part of the Australian Government's
Medical Research Future Fund (MRFF) "Genomics Health Futures Mission". The
collaboration between Verici Dx and The Westmead Institute for Medical
Research aims to improve the understanding of factors contributing to graft
loss in organ transplants, focusing on genetic differences between donor and
recipient beyond the well-known HLA(1) mismatches. By incorporating a broader
range of genetic data through multiple cohorts with varying ethnic
backgrounds, the goal is to enhance the prediction and management of risks
associated with organ transplants, ultimately leading to better outcomes for
patients. Verici Dx will use its CAP-accredited/CLIA-certified laboratory to
perform sequencing from blood samples across 3 sites, as well as apply its
existing biomarker tests to the samples to assess their use in this diverse
population.
Management and staff
As of 31 December 2023, the Company had 14 Full Time Equivalents ("FTE")
employees. At the time of this report, we have increased our headcount to 19
FTE as we augment our commercial and bioinformatics team. We are privileged to
have such a rich, diverse talent pool and the continued engagement and
commitment of our people is critically important.
Financials
Statement of Comprehensive Income
The Company recorded its first revenues in the year, arising from the license
agreement with Thermo Fisher, representing the transfer of the urine samples.
We also invoiced, and received payment by year-end, on a further $1,500,000 in
the year under this agreement, which is recorded as deferred income on the
balance sheet in accordance with IFRS revenue recognition requirements.
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$7,585,000 (2022 - US$10,497,000). The
reduction reflects the significant fall in research and development
expenditure to US$2,429,000 (2022 - US$4,832,000) as enrolment into our
clinical trials concluded, notwithstanding the increase in staff costs to
US$3,813,000 (2022 - US$2,889,000) as the full year impact of the 6 new hires
in 2022 is included. All research and development costs arise from third
parties, this does not include any allocation of internal costs. We started
the year with 15 full time employees, two left the business in the year and a
further hire joined in January 2023 meaning we ended the year with 14 full
time employees, both numbers excluding our non-executive directors. As noted
above, this number has since increased to 19 as of the date of this report.
Statement of Financial Position and Cash Flows
Cash balance at year end was US$2,645,000 (2022 - US$9,805,000). Cash outflow
from operations was US$7,160,000 (2022 - US$10,068,000) reflecting the lower
loss for the year, with cash outflow on additions to tangible and intangible
assets of US$231,000 (2022 - US$1,308,000). The biggest constituent of spend
on capital expenditure in 2022 was the construction of our CLIA laboratory in
Tennessee.
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
2023 the liability was US$161,000 (2022 - US$239,000). 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 2023, the liability was US$379,000 (2022 -
US$461,000). The largest balance within our accruals continues to be our
accruals for costs incurred at the clinical trial sites not yet invoiced being
US$772,000 (2022 - US$912,000). The deferred revenue of US$1,500,000 (2022 -
US$Nil) represents an amount invoiced, and received, in 2023 but to be
recognised in income once the conditions for recognition as revenue are
satisfied.
As of 31 December 2023, the Company had a cash balance of $2,645,000 (2022 -
$9,805,000).
At the time of the equity fundraise, we set out a number of strategic
priorities centred around the following key areas:
- Stepwise additions to headcount and marketing budgets to accelerate
product awareness and adoption for the core unlicensed portfolio, in
particular with regard to Tutivia opportunities and the first Protega product
validation;
- Further development of both the urine samples and the Living Donor
version of Clarava, utilising our own existing samples together with
additional external samples;
- Driving further value gains from the current and expanded research
asset (samples and data)
We have made a strong start on the highest priority initiatives and will
provide further updates on these as appropriate.
Outlook
The steps we have taken to bolster our financial position mean we are now very
well positioned to progress our strategic ambitions. The focus this year will
be to advance multiple growth and value creation initiatives over the short,
medium and longer term, whilst maintaining our strong financial discipline.
Over the remainder of 2024 and beyond, we will look to accelerate the
Tutivia(TM) commercial rollout with more leading US transplant centres and
expect to expand the revenue base. With additional sales personnel now in
place, the support of further analysis from our recently recruited in-house
bioinformaticians and further advocacy with key opinion leaders, we are primed
to promote commercial progress in the second half of the year. We are
continuing the longer duration Protega(TM) study and are also maintaining our
support to Thermo Fisher in their commercialisaton of Clarava(TM), with
updates to be provided at the appropriate times. As previously stated,
VericiDx is also looking at other licensing and collaborative opportunities.
We also have range of other opportunities to expand the product range,
monetise our data assets, and potentially expand into new areas going forward.
As previously indicated, there are additional research and product development
opportunities from the clinical trial samples and data for example we will be
assessing the role of urine based testing. We can review the performance of
tests being used in conjunction such as Clarava Deceased Donor and Tutivia or
the interactions with Protega or the urine tests. We are also looking to
develop a living donor recipient version of Clarava once we have identified
enough patient samples to power the validation study analysis.
We are also developing a health economics model to aid our commercialisation
efforts, which we expect to submit for publication by the end of the year.
On behalf of the Board, I would like to thank our shareholders for their
support in this transformational year. We look forward to delivering further
progress over the course of 2024 as we pursue our strategy of transforming
kidney transplant outcomes.
Sara Barrington
Chief Executive Officer
29 May 2024
Consolidated statement of profit or loss and other comprehensive income
Year to Year to
31 December 31 December
Note 2023 2022
US$'000 US$'000
Revenue 4 1,013 -
Administrative expenses 6 (8,598) (10,497)
Depreciation and amortisation (829) (640)
Exceptional expense - share based payments 21 (453) (318)
_________ _________
Loss from operations (8,867) (11,455)
Finance income 10 162 53
Finance expense 10 (29) (5)
_________ _________
Loss before tax (8,734) (11,407)
Tax expense 11 - -
_________ _________
Loss from continuing operations (8,734) (11,407)
Other comprehensive income:
Exchange gains / (losses) arising on translation of foreign operations 330 (2,016)
_________ _________
Total comprehensive loss (8,406) (13,423)
_________ _________
Earnings per share attributable to the 12
ordinary equity holders of the parent
Loss per share
Basic and diluted (US$) ($0.051) ($0.069)
_________ _________
Consolidated statement of financial position
Note 2023 2022
US$'000 US$'000
Assets
Current assets
Trade and other receivables 16 1,344 520
Cash and cash equivalents 2,645 9,805
_________ _________
3,989 10,325
_________ _________
Non-current assets
Property, plant and equipment 13 1,363 2,010
Intangible assets 14 2,091 1,970
_________ _________
3,454 3,980
_________ _________
Total assets 7,443 14,305
_________ _________
Liabilities
Current liabilities
Trade and other payables 17 (3,345) (2,096)
Lease liabilities 18 (163) (156)
Non-current liabilities 18 (377) (544)
_________ _________
NET ASSETS 3,558 11,509
_________ _________
Issued capital and reserves attributable to
owners of the parent
Share capital 19 219 219
Share premium reserve 20 32,946 32,946
Share-based payments reserve 20 4,306 3,853
Foreign exchange reserve (707) (1,037)
Retained earnings (33,206) (24,472)
_________ _________
TOTAL EQUITY 3,558 11,509
_________ _________
Consolidated statement of cash flows
Year to Year to
31 December 31 December
Note 2023 2022
US$'000 US$'000
Cash flows from operating activities
Loss before tax (8,734) (11,407)
Adjustments for:
Depreciation of property, plant and equipment 673 497
Amortisation of intangible fixed assets 156 143
Finance income (162) (53)
Finance expense 29 5
Share-based payment expense 453 318
_________ _________
(7,585) (10,497)
(Increase) / decrease in trade and other receivables (824) 136
Increase in trade and other payables 1,249 293
Income taxes paid - -
_________ _________
Net cash outflow from operating activities (7,160) (10,068)
_________ _________
Cash flows from investing activities
Purchases of property, plant and equipment (23) (1,040)
Purchase of intangibles (208) (268)
_________ _________
Net cash used in investing activities (231) (1,308)
Cash flows from financing activities
Issue of ordinary shares - 13,070
Expenses of share issue - (441)
Interest received 162 53
Interest paid (29) (5)
Repayment of lease liabilities (160) (3)
_________ _________
Net cash (outflow) / inflow from financing activities (27) 12,674
Net (decrease) / increase in cash and cash equivalents (7,418) 1,298
Cash and cash equivalents at beginning of year 9,805 10,340
Exchange gains / (losses) on cash and cash equivalents 258 (1,833)
_________ _________
Cash and cash equivalents at end of year 5 2,645 9,805
_________ _________
Consolidated statement of changes in equity
Share Share Share-based Foreign Retained Total Total
capital premium payment exchange earnings attributable equity
reserve reserve to equity
holders of
parent
US$ 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 period
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 37 12,592 318 - - 12,947 12,947
distributions to owners
_________ _________ _________ _________ _________ _________ _________
31 December 2022 219 32,946 3,853 (1,037) (24,472) 11,509 11,509
_________ _________ _________ _________ _________ _________ _________
Consolidated statement of changes in equity
Share Share Share-based Foreign Retained Total Total
capital premium payment exchange earnings attributable equity
reserve reserve to equity
holders of
parent
US$ US$ US$ US$ US$ US$ US$
1 January 2023 219 32,946 3,853 (1,037) (24,472) 11,509 11,509
Comprehensive income for the year
Loss - - - - (8,734) (8,734) (8,734)
Other comprehensive Income - - - 330 - 330 330
_________ _________ _________ _________ _________ _________ _________
Total comprehensive Income for the year - - - 330 (8,734) (8,406) (8,406)
_________ _________ _________ _________ _________ _________ _________
Contributions by and distributions to owners
Share-based payment - - 453 - - 453 453
_________ _________ _________ _________ _________ _________ _________
Total contributions by and - - 453 - - 453 453
distributions to owners
_________ _________ _________ _________ _________ _________ _________
31 December 2023 219 32,946 4,306 (707) (33,206) 3,558 3,558
_________ _________ _________ _________ _________ _________ _________
Notes forming part of the consolidated financial statements
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. The 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 2023,
which will be delivered to shareholders for approval at the Company's Annual
General Meeting. The independent auditors have reported on those financial
statements and their report is unqualified.
The financial statements have been prepared in accordance with UK adopted
International Accounting Standards ("UK IFRS"). The financial statements
of the Company for the year ended 31 December 2023 are prepared in accordance
with applicable law and UK Accounting Practice. Including FRS 101 "Reduced
Disclosure Framework" although no disclosure exemptions have been taken.
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
As at 31 December 2023, the Group had $2.6m of cash and cash equivalents. At
this stage of its development, the Group incurs operating cash outflows and is
reliant on existing cash resources and estimated cash inflows from the
commencement of the commercialisation of the Group's technology by the Group
and its license partners.
In November 2023, the Group announced the grant of an exclusive license to
Thermo Fisher of the rights to develop an assay for pre-transplant risk
assessment for further development as a laboratory developed test in its CLIA
laboratory in the U.S., as well as the sole right, but not obligation, to
manufacture, distribute and sell the assay worldwide. The license agreement
included an upfront payment to the Group, along with a number of further
payments conditional upon operational deliverables related to technology
transfer and related publications.
In February 2024, the Group completed an equity placing and retail offer which
provided an additional $7.6m after expenses.
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. 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.
Revenue
Revenue is recognised in accordance with the requirements of IFRS 15 'Revenue
from Contracts with Customers'. The Company recognises revenue to depict the
transfer of promised goods and services to customers in an amount that
reflects the consideration to which the Group expects to be entitled in
exchange for those goods and services.
Testing revenues
Diagnostic test revenues are recognised in the amount expected to be received
in exchange for diagnostic tests when the diagnostic tests are delivered. The
Company conducts diagnostic tests and delivers the completed test results to
the prescribing physician or patient, as applicable.
The fees for diagnostic tests are billed either to a third party such as
Medicare, medical facilities, commercial insurance payers, or to the
patient.
The Company estimates the transaction price, which is the amount of
consideration it expects to be entitled to receive in exchange for providing
services based on its historical collection experience, and the probability of
being paid at the time of delivering the test result.
Other revenues
Where a right of use license is entered into revenue is recognised when the
license is granted, unless there are conditions attached. Where conditions are
attached the revenue will only be recognised when all the performance
obligations have been satisfied.
Where a sales-based license is entered into which is conditional on future
performance criteria, revenue is recognised once the performance obligation to
which some or all of the sales-based has been allocated has been satisfied.
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
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.
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).
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.
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.
Impairment provisions are recognised when there is objective evidence (such as
significant financial difficulties on the part of the counterparty or default
or significant delay in payment) that the Company will be unable to collect
all of the amounts due under the term's receivable, the amount of such a
provision being the difference between the net carrying amount and the present
value of the future expected cash flows associated with the impaired asset.
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.
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.
Going concern
The preparation of cash flow forecasts for the Group requires estimates to be
made of the quantum and timing of cash receipts from future commercial
revenues and the timing of future expenditure, all of which are subject to
uncertainty.
4 Revenues
Revenues arose from the USA
Year to Year to
31 December 31 December
2023 2022
US$'000 US$'000
License revenue 1,013 -
_________ _________
Total 1,013 -
_________ _________
5 Financial instruments - Risk Management
The Group is exposed through its operations to the following financial risks:
Credit risk
Foreign exchange risk
Liquidity risk and
Capital disclosures
The Group is exposed to risks that arise from its use of financial
instruments. This note describes the Group's objectives, policies and
processes for managing those risks and the methods used to measure them.
Further quantitative information in respect of these risks is presented
throughout these financial statements.
(i) Principal financial instruments
The principal financial instruments used by the Group, from which financial
instrument risk arises, are as follows:
Cash and cash equivalents
Trade and other payables
(ii) Financial instruments by category
Financial asset
Group Group
Amortised Amortised
cost Cost
2023 2022
US$'000 US$'000
Cash and cash equivalents 2,645 9,805
Trade and other receivables 1,100 177
Amounts due from subsidiary - -
_________ _________
3,745 9,982
Total financial assets _________ _________
Financial liabilities
Group Group
Amortised Amortised
cost Cost
2023 2022
US$'000 US$'000
Trade and other payables 3,345 2,096
Leases 540 700
_________ _________
Total financial liabilities 3,885 2,796
_________ _________
(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. The Group's exposure to credit risk is on accounts receivable and
cash at bank. The Company only deposits cash with major banks with high
quality credit standing for amounts in excess of US$500,000.
Cash in bank and short-term deposits
The credit quality of cash has been assessed by reference to external credit
rating, based on Standard and Poor's long-term / senior issuer rating:
Group Group
2023 2023
Cash
Rating at bank
US$'000
Bank A A+ 787
Bank B 1,776
Bank C A+ 82
_________
2,645
_________
Group Group
2022 2022
Cash
Rating at bank
US$'000
Bank A A+ 9,345
Bank B 260
Bank C A+ 200
_________
9,805
_________
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 2023 assets held in Sterling amounted to US$113,000 (2022 -
US$270,000) and liabilities held in Sterling amounted to US$271,000 (2022 -
US$105,000).
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 an increase in
post-tax loss for the period and decrease of net assets of US$8,000 (2022 -
decrease and increase US$8,000). A 5% weakening in the exchange rate would,
on the same basis, have decreased post-tax loss and increased net assets by
US$8,000 (2022 - increased and decreased US$8,000).
Liquidity risk
Liquidity risk is the risk that the Group will encounter difficulty in meeting
its financial obligations as they fall due. This risk is managed by the
production of rolling cash flow projections. The Group's continued future
operations depend on its ability to raise sufficient working capital through
the issue of share capital and generating revenue.
The following table sets out the contractual maturities (representing
undiscounted contractual cash-flows) of financial liabilities which can all be
met from the cash resources currently available:
Between Between Between
Group Up to 3 3 and 12 1 and 2 2 and 5
months months years years
At 31 December 2023 US$'000 US$'000 US$'000 US$'000
Trade and other payables 523 - - -
Leases 37 126 180 197
_________ ________ ________ ________
Total 560 126 180 197
_________ ________ ________ ________
Between Between Between
Group Up to 3 3 and 12 1 and 2 2 and 5
months months years years
At 31 December 2022 US$'000 US$'000 US$'000 US$'000
Trade and other payables 960 - - -
Leases 45 111 167 377
_________ ________ ________ ________
Total 1,005 111 167 377
_________ ________ ________ ________
Capital Disclosures
The Group monitors capital which comprises all components of equity (i.e.
share capital, share premium, and accumulated losses).
The Group's objectives when maintaining capital are to safeguard the entity's
ability to continue as a going concern.
6 Expenses by nature
Year to Year to
31 December 31 December
2023 2022
US$'000 US$'000
Employee benefit expenses (see note 8) 3,813 2,889
Depreciation of property, plant and equipment 673 497
Amortisation of intangible assets 156 143
Research and development costs 2,429 4,832
Licenses 50 550
Professional costs 948 1,325
Share-based payment expense for non-employees 248 129
Foreign exchange loss / (gain) 272 36
Other costs 1,291 964
Costs of share issue - 90
_________ _________
Total 9,880 11,455
_________ _________
7 Auditors' remuneration
During the year the Group obtained the following services from the Company's
auditor:
Year to Year to
31 December 31 December
2023 2022
US$'000 US$'000
Fees payable to the Company's auditor for the audit of the parent Company and 55 48
consolidated financial statements
_________ _________
Total 55 48
_________ _________
8 Employee benefit expenses
Year to Year to
31 December 31 December
2023 2022
US$'000 US$'000
Employee benefit expenses (including directors) comprise:
Wages and salaries 3,036 2,279
Benefits 256 191
Share-based payment expense (note 21 (#_37._Share-based_payment) ) 205 189
Social security contributions and similar taxes 198 146
Pension contributions 118 84
_________ _________
3,813 2,889
_________ _________
Key management personnel compensation
Key management personnel are those persons having authority and responsibility
for planning, directing and controlling the activities of the Group, including
the Directors of the Company.
Year to Year to
31 December 31 December
2023 2022
US$'000 US$'000
Salary 655 493
Share based payment expense 9 7
_________ _________
664 500
_________ _________
The average number of employees (including Directors) in the Group in the year
was 19 (2022 - 16).
9 Segment information
The Group has one division being the development of prognostic and diagnostic
tests for kidney transplant patients.
10 Finance income and expense
Year to Year to
31 December 31 December
2023 2022
US$'000 US$'000
Finance income
Bank interest 162 53
_________ _________
Total finance income 162 53
_________ _________
Finance expense
Interest on lease liabilities 29 5
_________ _________
Total finance expense 29 5
_________ _________
11 Tax expense
Year to Year to
31 December 31 December
2023 2022
US$'000 US$'000
Current tax expense
Current tax on loss for the year - -
_________ _________
Total current tax - -
Deferred tax asset
On losses generated in the year - -
_________ _________
- -
_________ _________
The reasons for the difference between the actual tax charge for the year and
the standard rate of corporation tax in the United Kingdom applied to profits
for the year are as follows:
Year to Year to
31 December 31 December
2023 2022
US$'000 US$'000
Loss for the period (8,734) (11,407)
_________ _________
Tax using the Company's domestic tax rate of 19% (1,660) (2,167)
Expenses not deductible for tax purposes 15 79
Accelerated capital allowances 188 (251)
Unrecognised deferred tax assets 2,132 3,240
Different tax rates applied in overseas jurisdictions (675) (901)
_________ _________
Total tax expense - -
_________ _________
The unrecognised deferred tax relates to two elements: the unrecognised
deferred tax arising on share-based payments of US$124,000 (2022 - US$85,000)
and unrecognised deferred tax on taxable losses of US$2,008,000 (2022 -
US$3,155,000). Total taxable losses carried forward comprise of Federal US
losses of $11,074,000 (2022 - US$6,334,000) which do not expire but can only
offset against 80% of taxable profits from the same trade. In addition, US
tax losses of $15,427,000 (2022 - US$13,316,000) 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$2,106,000 (2022 -
US$1,449,000). No deferred tax asset is recognised for these losses due to
early stage in the development of the Group's activities.
12 Earnings per share
Year to Year to
31 December 31 December
2023 2022
Total Total
Numerator US$ US$
Loss for the period used in basic EPS (8,734,093) (11,407,527)
Denominator
Weighted average number of ordinary shares used in basic EPS 170,319,245 164,667,754
Resulting loss per share (US$0.051) (US$0.069)
The Company has one category of dilutive potential ordinary share, being share
options (see note 21). The potential shares were not dilutive in the period as
the Group made a loss per share in line with IAS 33.
13 Tangible assets
Leasehold Plant & machinery
Group property Total
US$'000 US$'000 US$'000
Cost or valuation
At 1 January 2022 - 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
Additions - 23 23
Foreign exchange movements - 27 27
_________ _________ _________
At 31 December 2023 1,288 1,652 2,940
_________ _________ _________
Accumulated depreciation and impairment
At 1 January 2022 - (420) (420)
Depreciation (76) (421) (497)
Foreign exchange movements - 37 37
_________ _________ _________
At 31 December 2022 (76) (804) (880)
Depreciation (240) (433) (673)
Foreign exchange movements - (24) (24)
_________ _________ _________
At 31 December 2023 (316) (1,261) (1,577)
_________ _________ _________
Net book value
At 31 December 2023 972 391 1,363
_________ _________ _________
At 31 December 2022 1,212 798 2,010
_________ _________ _________
Included in leasehold property at 31 December 2023 are right of use assets
with a cost of US$465,000 (2022 - US$465,000) and accumulated depreciation of
US$111,000 (2022 - US$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 (2022 -
US$238,000). The liability is secured against the asset.
14 Intangible assets
Group License and patents Total
US$'000 US$'000
Cost
At 1 January 2022 2,210 2,219
Additions 268 268
Foreign exchange movements (185) (185)
_________ _________
At 31 December 2022 2,302 2,302
Additions 208 208
Foreign exchange movements 84 84
_________ _________
At 31 December 2023 2,594 2,594
_________ _________
Accumulated amortisation and impairment
At 1 January 2022 (212) (212)
Amortisation charge (143) (143)
Foreign exchange movements 23 23
_________ _________
At 31 December 2022 (332) (332)
Amortisation charge (156) (156)
Foreign exchange movements (15) (15)
_________ _________
At 31 December 2023 (503) (503)
_________ _________
Net book value
At 31 December 2023 2,091 2,091
_________ _________
At 31 December 2022 1,970 1,970
_________ _________
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 2023.
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.
15 Subsidiary
The principal subsidiary of Verici Dx plc, which has been included in these
consolidated financial statements at a cost of US$10, is as follows:
Country of incorporation and Proportion of ownership
Name principal place of business interest at 31 December
2022 and 2023
Verici Dx Inc United States of America 100%
16 Trade and other receivables
Group Group
2023 2022
US$'000 US$'000
Accounts receivable 1,013 -
Prepayments 244 343
Other debtors 87 177
Amount due from wholly owned subsidiary undertaking - -
_________ _________
1,344 520
_________ _________
17 Trade and other payables
Group Group
2023 2022
US$'000 US$'000
Trade payables 475 960
Other payables 48
Deferred income 1,500 -
Accruals 1,322 1,136
_________ _________
Total trade and other payables 3,345 2,096
_________ _________
The carrying value of trade and other payables classified as financial
liabilities measured at amortised cost approximates fair value.
The only movements within financial liabilities relate to payments for payable
and leases within the Financial Instruments note.
18 Lease liabilities
Land and Plant and
Group buildings machinery Total
US$'000 US$'000 US$'000
At 1 January 2022 465 238 703
Interest expense 4 1 5
Repayments (8) - (8)
________ ________ ________
At 31 December 2022 461 239 700
________ ________ ________
Repayments (96) (93) (189)
Interest expense 14 15 29
________ ________ ________
At 31 December 2023 379 161 540
________ ________ ________
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.
2023 2022
US$'000 US$'000
Maturity of lease liabilities
Within 3 months 37 45
Between 3 - 12 months 126 111
Between 1 - 2 years 180 167
Between 2 - 5 years 197 377
________ ________
540 700
________ ________
19 Share capital
Issued and fully paid
2023 2023
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 on 11 March 2022 28,571,429 37,342
__________ __________
At 31 December 2022 and 2023 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). See note 23 for additions post year end.
20 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.
21 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
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
________ ________
Granted in the year 20.0 450,000
________ ________
Exercisable at 31 December 2023 14.34 6,828,066
________ ________
The exercise price of options outstanding at 31 December 2023 ranged
between 10p and 35p and their weighted average contractual life was 7.08
years.
The weighted average fair value of each option granted during the year was
3.75p. The weighted average fair value of the options outstanding at 31
December 2023 was 18.02p.
The fair value of each share option granted has been estimated using a
Black-Scholes model and has an assessment of 3.75p. The inputs into the model
are a share prices of 11p and exercise price of 20p and expected volatility of
62.14%, no expected dividend yield, contractual life of 10 years and a
risk-free interest rate of 3.09%. As of 31 December 2023, none of the granted
stock options have been exercised.
In addition, a reduction in the strike price to 10p was performed to
10,251,130 options leading to an increase in the fair value of such
instruments. The modification in the strike price had an effective date of
28 August 2023 and the weighted average incremental fair value was 2.49p as a
result.
The incremental fair value granted was measured as the difference between the
fair value of the modified options and that of the original options, both
computed at the modification's date, i.e., the fair values were measured right
before and after the modification.
The weighted average fair value before the modification is 1.06p and right
after the modification is 3.55p. The option pricing model used for the
estimations is the Black-Scholes model and the inputs to the model for both
valuations are a share price of 10.25p; a weighted average volatility of
80.15%; a weighted average life of 1.07 years; and a weighted average
risk-free rate of 5.41%. The exercise prices used right before the
modification are 10p, 20p, 40p, 45.5p, 48.5p, 50p, and 69.5p, while the strike
price used after the modification is 10p.
The expected volatility is estimated based on the Company's and a peer group's
annualized standard deviation of the continuously compounded rates of daily
return on share price history equal to the expected lifetime of the options.
The average volatility from the peers and Verici is used.
As of 31 December 2023, none of the modified stock options have been
exercised.
The Group recognised total expenses of US$453,000 (2022 - US$318,000) within
administrative expenses relating to equity-settled share-based payment
transactions during the period.
22 Related party transactions
In the year to 31 December 2023 an amount of US$21,000 (2022 - US$51,000) was
invoiced by Renalytix Plc as full reimbursement for expenses incurred on
behalf of the Company as a cost sharing arrangement for a quality management
software product. As of 31 December 2023, the amount owed to Renalytix Plc
was US$Nil (2022 - US$22,000).
In the year to 31 December 2023 an amount of US$50,000 (2022 - US$750,000) was
invoiced by Icahn School of Medicine at Mount Sinai for milestone fees due
under the license agreement described in the Admission Document. As of 31
December 2023, the amount owed to Icahn School at Medicine at Mount Sinai was
US$Nil (2022 - US$Nil).
In the year to 31 December 2023 an amount of US$Nil (2022 - US$17,000) was
invoiced by EKF Diagnostic Holdings Plc for services rendered in the year.
As of 31 December 2023, the amount owed to EKF Diagnostic Holdings Plc was
US$Nil (2022 - US$Nil).
23 Events after the reporting date
On 20 February 2024 the Company issued 72,222,222 ordinary shares at 9p per
share raising total gross proceeds of US$8,196,000 (GBP6,500,000).
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