XLON:HEMO ESEF Annual Report

HEMOGENYX PHARMACEUTICALS PLC (XLON:HEMO)

ESEF Annual Report 2023-06-20 For: 2022-12-31

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Added on September 22, 2026

Contents

	Page

Company Information	1

Chairman's Statement	3

Board of Directors and Senior Management	6

Directors' Strategic Report	8

Directors' Report	19

Governance Report	24

Directors' Remuneration Report	31

Independent Auditor's Report	37

Consolidated Statement of Comprehensive Income	44

Consolidated Statement of Financial Position	45

Company Statement of Financial Position	46

Consolidated Statement of Changes in Equity	47

Company Statement of Changes in Equity	48

Consolidated Statement of Cash Flows	49

Company Statement of Cash Flows	50

Notes to the Financial Statements	51

	Men	Women

Organisation as a whole	8	8

Executive management team	2	-

Board	3	1

▪	Led the discovery and development of many successful cancer treatments including Herceptin/trastuzumab - annual sales exceed $6.5 billion worldwide
▪	Received Harvard Medical School's prestigious Warren Alpert Prize in recognition of contributions to the field of cancer treatment research
▪	Founded NewBiotics, Inc., acquired by Kiadis Pharma
▪	Founded BioLogix, acquired by Symphogen

▪	Hematology Chief and Director of the Wesley Center for Immunotherapy at University Hospitals Seidman Cancer Center
▪	Professor of Medicine at NYP-Weill Cornell College of Medicine
▪	Developed novel methods of transplantation for those patients who lack matching donors
▪	>200 publications in peer reviewed journals
▪	Editor in Chief of the journal Leukemia and Lymphoma

▪	Health and Safety - ensuring the safety and well-being of our staff
▪	Environment - managing our environmental impact areas of waste, energy and water
▪	Employees - supporting our people to develop and flourish within the business
▪	Community - positive interaction with the communities in which we operate
▪	Ethical Standards - operating to the highest ethical standards

	bone marrow for the transplant of HSC. This allows transplanted cells to engraft in the recipient; and
▪	it could potentially help to eradicate the source of malignancy.

•	Governance - The organisation's governance around climate-related risks and opportunities
•	Strategy - The actual and potential impacts of climate-related risks and opportunities for an organisation's businesses, strategy, and financial planning
•	Risk Management - The processes used by the organisation to identify, assess, and manage climate-related risks; and
•	Metrics and Targets - The metrics and targets used to assess and manage relevant climate-related risks and opportunities.

TCFD Pillar	Recommended Disclosure		Hemogenyx Pharmaceuticals Summary
Governance	•	Board's oversight of climate-related risks and opportunities	As a development stage biopharmaceutical business, the Group's operations are at a relatively small scale and so therefore is its environmental impact. Nevertheless, the Board recognises its responsibility to protect the environment (particularly as the business scales up). The Board has oversight of climate-related matters (which include risks and opportunities). The board is supported by the Audit Committee, which is responsible for keeping under review the adequacy and effectiveness of the Group's internal control and risk management systems, which consider climate-related risks.
	•	Management's role in assessing and managing climate-related risks and opportunities

▪	Delays in securing clinical investigators or clinical study sites;
▪	Delays in securing any regulatory authority, hospital ethics committee, or institutional review board approval or approvals necessary to commence a clinical study;
▪	Delays or failure to recruit a sufficient number of clinical study participants in accordance with the clinical study protocol;
▪	Difficulty or inability to monitor subjects adequately during or after treatment;
▪	Inability to replicate in Phase 3 controlled studies any safety and efficacy data obtained from controlled Phase 2a/2b clinical studies;
▪	Difficulty or inability to secure clinical investigator compliance to follow the approved clinical study protocol; and
▪	Unexpected adverse events or any other safety or related issues.

	Date Appointed	Date Resigned
Professor Sir Marc Feldmann	9 April 2018	-
Dr Vladislav Sandler	4 October 2017	-
Alexis Sandler	4 October 2017	-
Peter Redmond	29 July 2015	-

Director	At 31 December 2022	At 31 December 2021
Professor Sir Marc Feldmann	-	-
Peter Redmond*	5,596,270	5,596,270
Dr Vladislav Sandler	41,544,677	41,544,677
Alexis Sandler	75,090,685	75,090,685

		Options
	Number of	Options granted		Number of
	options at start	or acquired	Options lapsed	options at end of
Date of grant	of year	during year	during year	year

Professor Sir
Marc Feldmann
9 Apr 2018	18,002,568	-	-	18,002,568
	18,002,568	-	-	18,002,568
Dr Vladislav Sandler
20 August 2020	5,000,000	-	-	5,000,000
	5,000,000	-	-	5,000,000

Peter Redmond
13 July 2020	2,200,000	_-	_-	2,200,000
	2,200,000	-	-	2,200,000

Party Name	Number of Ordinary Shares	% of Share Capital
Alexis Sandler	75,090,685	6.58
Vladislav Sandler	41,544,677	3.64

•	Select suitable accounting policies and then apply them consistently;
•	Make judgments and accounting estimates that are reasonable and prudent;
•	State whether applicable UK-adopted international accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements; and
•	Prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.

	•	the group and company financial statements have been prepared in accordance with UK-adopted international accounting standards, and give a true and fair view of the assets, liabilities, financial position and loss of the Group; and
	•	the Annual Report and financial statements, including the Business review, includes a fair review of the development and performance of the business and the position of the Group and parent company, together with a description of the principal risks and uncertainties that they face.

	▪	The Code requires that a smaller company should have at least two Independent Non-Executive Directors. As at 31 December 2022 the Board consisted of an Executive Director and three Non-Executive Directors. The Non-Executive Directors are interested in either ordinary shares in the Company, options over ordinary shares in the Company, or both, and cannot therefore be considered fully independent under the Code. The remuneration of the Non-Executive Directors includes options and this is contrary to best practice, and thus the Company is not in full compliance. However, the Directors consider the present structure and arrangements to be adequate given the size and stage of development of the Company, and all are considered to be independent in character and judgement.
	▪	Directors appointed by the Board are subject to election by shareholders at the Annual General Meeting of the Company following their appointment and thereafter are subject to re-election in accordance with the Company's articles of association. The terms and conditions of appointment of Non-Executive Directors will be made available upon written request.

Issue		Action
•	Accounting policies	The Committee reviewed and discussed the significant accounting policies with management and the external auditor and reached the conclusion that each policy was appropriate to the Group.
•	Carrying value of investment in Hemogenyx Pharmaceuticals LLC	The Committee reviewed the impairment assessment report prepared by management and agreed that given the reasonable expectation that the Group will achieve its milestone targets over the next 18 months no impairment to the value of the investment in Hemogenyx Pharmaceuticals LLC was required as at 31 December 2022.
•	Carrying value of licensed intangible assets	The Committee reviewed the impairment assessment report prepared by management and agreed that given the reasonable expectation that the Group will achieve its milestone targets over the next 18 months no impairment to the value of licensed intangible assets, being rights to certain intellectual property of Cornell University and Eli Lilly and Company, was required as at 31 December 2022.
•	Going concern review	The Committee considered the ability of the Group to operate as a Going Concern considering cash flow forecasts for the next 12 months and milestone achievements. It was determined by the Committee that it was reasonable to expect that the Group has or will have access to sufficient funding in order to achieve its 12-month milestone targets and that it was appropriate for the Financial Statements to be prepared on a going concern basis.
•	Review of audit and non-audit services and fees	The external auditor is not engaged by the Group to carry out any non-audit work in respect of which it might, in the future, be required to express an audit opinion. The Committee reviewed the fees charged for the provision of audit and non-audit services and determined that they

Issue	Action
	were in line with fees charged to companies of similar size and stage of development. The Committee considered and was satisfied the external auditor's assessment of its own independence.

	•	Attended the 2022 AGM and prepared to answer any questions raised by shareholders;
	•	Arranged meetings with certain stakeholders to provide them with updates on the Company's research and development activities and other general corporate updates;
	•	Made presentations at conferences and published recordings and slide decks on the Company's

•	The Company's overall strategy;
•	Financial statements and dividend policy;
•	Management structure including succession planning, appointments and remuneration; material acquisitions and disposal, material contracts, major capital expenditure projects and budgets;
•	Capital structure, debt and equity financing and other matters;
•	Risk management and internal controls;
•	The Company's corporate governance and compliance arrangements; and
•	Corporate policies

Attendance at Board meetings
	Number held and	Number
	entitled to attend	attended
Dr Vladislav Sandler	9	8
Professor Sir Marc Feldmann	9	7
Alexis Sandler	9	7
Peter Redmond	9	9

		research and development;
	•	Evaluated the relationships with the Company's various collaborators through management and identified ways to strengthen relationships and arrangements with key collaborations; and
	•	Monitored company culture and engaged with employees on efforts to continuously improve company culture and morale.

	^■	to determine and agree with the Board the framework or broad policy for the remuneration of the Company's chairman, chief executive, the executive directors, the company secretary and such other members of the executive management as it is designated to consider;
	^■	in determining such policy, take into account all factors which it deems necessary including relevant legal and regulatory requirements, the provisions and recommendations of the UK Corporate Governance Code (the “Code”) and associated guidance. The objective of such policy shall be to ensure that members of the executive management of the Company are provided with appropriate incentives to encourage enhanced performance and are, in a fair and responsible manner, rewarded for their individual contributions to the success of the Company;
	^■	recommend and monitor the level and structure of remuneration for senior management;
	^■	when setting remuneration policy for directors, review and have regard to the remuneration trends across the Company, and review the on-going appropriateness and relevance of the remuneration policy;
	^■	obtain reliable, up-to-date information about remuneration in other companies. To help it fulfil its obligations the Committee shall have full authority to appoint remuneration consultants and to commission or purchase any reports, surveys or information which it deems necessary, within any budgetary restraints imposed by the Board;
	^■	be exclusively responsible for establishing the selection criteria, selecting, appointing and setting the terms of reference for any remuneration consultants who advise the Committee;
	^■	approve the design of, and determine targets for, any performance related pay schemes operated by the Company and approve the total annual payments made under such schemes;
	^■	review the design of all share incentive plans for approval by the Board and shareholders. For any such plans, determine each year whether awards will be made, and if so, the overall amount

		of such awards, the individual awards to executive directors, company secretary and other designated senior executives and the performance targets to be used;
	^■	ensure that contractual terms on termination, and any payments made, are fair to the individual, and the Company, that failure is not rewarded and that the duty to mitigate loss is fully recognised; and
	^■	oversee any major changes in employee benefits structures throughout the Company.

Name		Date of
	Position	appointment
Peter Redmond	Chairman	5 October 2017
Alexis Sandler	Member	5 October 2017

	●	Base salaries
	●	Pension and other benefits
	●	Annual bonus
	●	Share incentive arrangements

	Date of service	Notice period by	Notice period by
Name	agreement	Company (months)	Director (months)
Dr Vladislav Sandler	4 October 2017	6	6

			Notice	Notice
		Current	period by	period by
	Date of service	term	Company	Director	Date of
Name	agreement	(years)	(months)	(months)	resignation
Alexis Sandler	4 October 2017	1	3	3	-
Peter Redmond	4 October 2017	1	3	3	-
Professor Sir Marc Feldmann	9 April 2018	-*	3	3	-

	Basic salary	Pension	Total
	2022	2022	2022
Executive Directors	£'000	£'000	£'000
Dr Vladislav Sandler	276	6	282

Total	276	6	282

	Basic salary	Total
	2021	2021
	£'000	£'000
Alexis Sandler	45	45
Peter Redmond	50	50
Professor Sir Marc Feldmann	15	15
Total	110	110

	Distributions to	Total employee	Operational cash
	shareholders	pay (including	outflow
	£	stock based	£
		compensation)
		£
Year ended 31 December 2022	_-	1,424,301	2,910,604
Year ended 31 December 2021	_-	1,007,817	2,627,298
Percentage change	N/A	41.3%	10.8%

	●	the financial statements give a true and fair view of the state of the group's and of the parent company's affairs as at 31 December 2022 and of the group's loss for the year then ended;
	●	the group financial statements have been properly prepared in accordance with UK-adopted international accounting standards;
	●	the parent company financial statements have been properly prepared in accordance with UK-adopted international accounting standards and as applied in accordance with the provisions of the Companies Act 2006; and
	●	the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.

Key Audit Matter	How our scope addressed this matter

Carrying value of the intangible assets (Group – Note 2 and Note 14)
The carrying value of intangible assets in the Group Statement of Financial Position was £441k	We performed the following procedures to address this identified risk
as at 31 December 2022. There is a risk that the carrying value is impaired. The intangibles are patent rights and therefore this will ultimately result in the main source of income for the group.	●	Confirmed that the cost of intangibles is correctly recorded by agreeing price to the supporting documentation;
The directors concluded that no impairment was required, and amortisation will commence once these products are ready for marketing.	●	Reviewed the directors' annual assessment for indicators of impairment and challenging the underlying assumptions used; and
	●	Reviewed the events after the year-end for indicators of impairment; and
	●	Evaluated product development progress and ensured the Directors' judgments are reasonable.
	Through the performance of the above testing, we obtained sufficient assurance that the carrying value of the intangible assets was not impaired, and no indicators of impairment existed at year-end.
Carrying value of investments in, and loans to, subsidiary undertakings (Parent company – Note 2, Note 16 and Note 15 )
Investments held by the parent company in subsidiaries, as at 31 December 2022, totalled	We performed the following procedures to address this identified risk:
£8.0m in the Company Statement of Financial Position. Loans to those subsidiaries, as at 31 December 2022, are reported as £14.5m.	●	Reviewed the directors' assessment of the carrying value of investments and loans

These are significant balances due to the parent company. If the subsidiary undertakings		subsidiary undertakings, and their conclusions thereof;
are unable to generate sufficient future profits or gains in the foreseeable future, there is a risk that both the investment and loans held in those entities are overstated.	●	Reviewed the subsidiary's financial performance and development progress to corroborate the directors' assessment of recoverability;
	●	Reviewed and assessed the current state of development, and scientific and commercial progress of the products under development;
	●	Reviewed board minutes for any indications of changes in investments held by the parent company;
	●	Agreed ownership documents of all the subsidiaries in the group; and
	●	Reviewed the market capitalisation of the group to provide further assurance of the carrying value of the investments and loans to subsidiary undertakings subsequent to the year end.
	Through the performance of the above testing, we obtained sufficient assurance that the carrying value of investments in, and loans to, subsidiary undertakings are reasonable.

●	the information given in the strategic report and the directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
●	the strategic report and the directors' report have been prepared in accordance with applicable legal requirements.

●	adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or
●	the parent company financial statements and the part of the directors' remuneration report to be audited are not in agreement with the accounting records and returns; or
●	certain disclosures of directors' remuneration specified by law are not made; or
●	we have not received all the information and explanations we require for our audit.

●	Directors' statement with regards the appropriateness of adopting the going concern basis of accounting and any material uncertainties identified set out on page 28;
●	Directors' explanation as to their assessment of the group's prospects, the period this assessment covers and why the period is appropriate set out on page 30;
●	Directors' statement on whether they have a reasonable expectation that the group will be able to continue in operation and meet its liabilities set out on page 55;
●	Directors' statement that they consider the annual report and the financial statements, taken as a whole, to be fair, balanced and understandable set out on page 22;
●	Board's confirmation that it has carried out a robust assessment of the emerging and principal risks set out on page 15;
●	The section of the annual report that describes the review of effectiveness of risk management and internal control systems set out on page 28; and
●	The section describing the work of the audit committee set out on page 24.

●	We obtained an understanding of the group and parent company and the sector in which they operate to identify laws and regulations that could reasonably be expected to have a direct effect on the financial statements. We obtained our understanding in this regard through discussions with management and application of our cumulative audit knowledge and experience of the sector.
●	We determined the principal laws and regulations relevant to the group and parent company in this regard to be those arising from the Companies Act 2006, FCA Listing Rules, the Disclosure Guidance and Transparency Rules Sourcebook, the UK Corporate Governance Code and US Food and Drug Administration.
●	We designed our audit procedures to ensure the audit team considered whether there were any indications of non-compliance by the group and parent company with those laws and regulations. These procedures included, but were not limited to:
	o	Enquiries of management;
	o	Review of board and audit committee minutes; and
	o	Review of RNS publications.
●	As in all of our audits, we addressed the risk of fraud arising from management override of controls by performing audit procedures which included, but were not limited to: the testing of journals; reviewing accounting estimates for evidence of bias; and evaluating the business rationale of any significant transactions that are unusual or outside the normal course of business.

David Thompson (Senior Statutory Auditor)	15 Westferry Circus
For and on behalf of PKF Littlejohn LLP	Canary Wharf
Statutory Auditor	London E14 4HD

*27 April 2023*