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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 ClaravaTM, 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 TutiviaTM, the post-transplant diagnostic focused upon acute cellular rejection ("ACR") including sub-clinical rejection. |
· | Data from the successful international validation study for TutiviaTM 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, ProtegaTM, 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 ProtegaTM is expected in the first half of 2025. |
· | Received confirmation and finalised pricing for both TutiviaTM and ClaravaTM 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 EBITDA1 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 TutiviaTM, 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 | |
Sara Barrington, CEO | investors@vericidx.com |
Julian Baines, Chairman |
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Singer Capital Markets (Nominated Adviser & Broker) | Tel: +44 20 7496 3000 |
Aubrey Powell / Sam Butcher / Jalini Kalaravy | |
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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, 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, TutiviaTM, 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 TutiviaTM 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 TutiviaTM 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 TutiviaTM 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, ClaravaTM, 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 ClaravaTM 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 ClaravaTM and TutviviaTM, 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 ProtegaTM, 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, ClaravaTM, 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 ClaravaTM 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 ClaravaTM and TutiviaTM. This rate was established through the "gapfill" process for both TutiviaTM (CPT 0320U) and ClaravaTM (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 (ClaravaTM) and post-transplant (TutiviaTM) 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 HLA1 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 TutiviaTM 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 ProtegaTM study and are also maintaining our support to Thermo Fisher in their commercialisaton of ClaravaTM, 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$'000 |
| | | |
Revenue | 4 | 1,013 | - |
| | | |
Administrative expenses | 6 | (8,598) | (10,497) |
Depreciation and amortisation | | (829) | (640) |
Exceptional expense - share based payments | 21 | (453) | (318) |
| | | |
| | _________ | _________ |
| | | |
Loss from operations | | (8,867) | (11,455) |
| | | |
Finance income | 10 | 162 | 53 |
Finance expense | 10 | (29) | (5) |
| | _________ | _________ |
| | | |
Loss before tax | | (8,734) | (11,407) |
| | | |
Tax expense | 11 | - | - |
| | _________ | _________ |
| | | |
Loss from continuing operations | | (8,734) | (11,407) |
| | | |
Other comprehensive income: | | | |
| | | |
Exchange gains / (losses) arising on translation of foreign operations | | 330 | (2,016) |
| | _________ | _________ |
Total comprehensive loss | | (8,406) | (13,423) |
| | _________ | _________ |
| | | |
Earnings per share attributable to the ordinary equity holders of the parent | 12 | | |
| | | |
Loss per share | | | |
Basic and diluted (US$) | | ($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$'000 |
Cash flows from operating activities | | | |
Loss before tax | | (8,734) | (11,407) |
Adjustments for: | | | |
Depreciation of property, plant and equipment | | 673 | 497 |
Amortisation of intangible fixed assets | | 156 | 143 |
Finance income | | (162) | (53) |
Finance expense | | 29 | 5 |
Share-based payment expense | | 453 | 318 |
| | _________ | _________ |
| | | |
| | (7,585) | (10,497) |
| | | |
(Increase) / decrease in trade and other receivables | | (824) | 136 |
Increase in trade and other payables | | 1,249 | 293 |
Income taxes paid | | - | - |
| | _________ | _________ |
| | | |
Net cash outflow from operating activities | | (7,160) | (10,068) |
| | _________ | _________ |
Cash flows from investing activities | | | |
Purchases of property, plant and equipment | | (23) | (1,040) |
Purchase of intangibles | | (208) | (268) |
| | _________ | _________ |
| | | |
Net cash used in investing activities | | (231) | (1,308) |
| | | |
Cash flows from financing activities | | | |
Issue of ordinary shares | | - | 13,070 |
Expenses of share issue | | - | (441) |
Interest received | | 162 | 53 |
Interest paid | | (29) | (5) |
Repayment of lease liabilities | | (160) | (3) |
| | _________ | _________ |
| | | |
Net cash (outflow) / inflow from financing activities | | (27) | 12,674 |
| | | |
Net (decrease) / increase in cash and cash equivalents | | (7,418) | 1,298 |
Cash and cash equivalents at beginning of year | | 9,805 | 10,340 |
Exchange gains / (losses) on cash and cash equivalents | | 258 | (1,833) |
| | _________ | _________ |
| | | |
Cash and cash equivalents at end of year | 5 | 2,645 | 9,805 |
| | _________ | _________ |
Consolidated statement of changes in equity
| Share capital | Share premium | Share-based payment reserve | Foreign exchange reserve | Retained earnings | Total attributable to equity holders of parent | Total equity |
| US$ | 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 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 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 |
| _________ | _________ | _________ | _________ | _________ | _________ | _________ |
Consolidated statement of changes in equity
| 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 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 distributions to owners | - | - | 453 | - | - | 453 | 453 |
| _________ | _________ | _________ | _________ | _________ | _________ | _________ |
| | | | | | | |
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$'000 |
| Fees payable to the Company's auditor for the audit of the parent Company and consolidated financial statements | 55 | 48 |
| | _________ | _________ |
| | | |
| Total | 55 | 48 |
| | _________ | _________ |
8 | Employee benefit expenses | | |
| | | |
| | Year to | Year to |
| | 31 December | 31 December |
| | 2023 | 2022 |
| | US$'000 | US$'000 |
| Employee benefit expenses (including directors) comprise: | | |
| | | |
| Wages and salaries | 3,036 | 2,279 |
| Benefits | 256 | 191 |
| Share-based payment expense (note 21) | 205 | 189 |
| Social security contributions and similar taxes | 198 | 146 |
| Pension contributions | 118 | 84 |
| | _________ | _________ |
| | | |
| | 3,813 | 2,889 |
| | _________ | _________ |
Key management personnel compensation
Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the Group, including the Directors of the Company.
| | | |
| | Year to | Year to |
| | 31 December | 31 December |
| | 2023 | 2022 |
| | US$'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$0.069) |
The Company has one category of dilutive potential ordinary share, being share options (see note 21). The potential shares were not dilutive in the period as the Group made a loss per share in line with IAS 33.
13 | Tangible assets | | | |
|
Group | Leasehold property | Plant & machinery |
Total |
| | US$'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 Between 3 - 12 months Between 1 - 2 years Between 2 - 5 years | 37 126 180 197 | 45 111 167 377
|
| |||||
| ________ | ________ |
| |||||
| | |
| |||||
| 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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