Vernalis plc: Announcement of Results for year ended 31/12/12

Vernalis plc: Announcement of Results for year ended 31/12/12 
WINNERSH, UK -- (Marketwired) -- 04/10/13 --  *T 
10 April 2013
Announcement of Results for the year ended 31 December 2012 
Vernalis plc (LSE: VER) today announces its audited results for the
year ended 31 December 2012. 
Financial Highlights 
- Revenue up 20 per cent to GBP14.6 million (2011: GBP12.2 million)
driven by 65 per cent increase in research collaboration income 
* Research collaboration income was GBP8.7 million (2011: GBP5.3
  million) including milestone income of GBP2.6 million (2011: GBP1.1
* Frovatriptan royalty income was GBP5.7 million (2011: GBP6.5
  million) down 11% primarily due to exchange rates with underlying
  sales made by Menarini flat 
- Operating costs remain in-line with 2011 
- Pre-exceptional loss for the year reduced by 19 per cent 
- Balance sheet strengthened through GBP68.5 million of new equity
financing (March 2012) 
- Underlying net cash burn reduced to GBP4.5 million (2011: GBP6.0
Operational Highlights 
Cough Cold Commercial Pipeline: 
- Collaboration commenced March 2012 
- CCP-01 proof-of-concept achieved and milestone paid to Tris in
March 2013 
- First NDA filing anticipated mid-2014 
- Four further programmes now in active development at Tris,
with 505(b)(2) pathway based on comparative bioavailability confirmed
on all five with FDA 
- 2012-13 prescription cough cold season up substantially on
2011-12 with approximately 33.2 million prescriptions written in the 12
months to February 2013 
NCE Development Pipeline: 
Frovatriptan (marketed) (Migraine): 
- Underlying Menarini sales EUR26.5 million (2011: EUR27.1 million) 
- Menarini outlook for 2013 is for flat underlying sales vs 2012 
V81444 (CNS diseases) 
- Positive Phase I and Receptor Occupancy studies completed (May
and Dec 2012 respectively) 
- Plans underway to initiate Phase Ib/II POC study in H1 2013 
V158866 (Pain) 
- Positive results from Phase I study published at 14th World
Congress on Pain (August 2012) 
- Announced today, patients being recruited into a Phase II POC
study (April 2013) 
AUY922 (Cancer) 
- Continues in multiple Phase I and Phase II studies with
Novartis in a variety of cancers including breast, non-small-cell lung,
gastric, colon and colorectal cancers 
Tosedostat - CHR2797 (Cancer) 
- Phase II trials in AML and MDS continue through Chroma/Cell
Therapeutics, Inc 
- Anti-inflammatory study results announced by Verona Pharma
(March 2013) 
- Future development focussing on bronchodilator properties of
- Addition to pre-clinical NCE pipeline of first product
candidate from collaboration 
Research Collaborations: 
- New collaborations with Genentech and Servier (January 2012) 
- Ongoing collaboration with Servier extended again (March 2013) 
- Genentech milestones of $4.0 million in cash already earned in
Expected Newsflow: 
- Achieve multiple proofs-of-concept in cough cold pipeline 
- Progress CCP-01 towards NDA filing 
- AUY922 (Cancer) - Multiple Phase I and II study results
(Novartis) (timing not disclosed) 
- V81444 (CNS diseases) 
* Initiate Phase Ib/II POC study (H1 2013) 
* Complete Phase II POC study (H1 2014) 
- V158866 (Pain) - Complete Phase II POC study (H1 2014) 
- Tosedostat - CHR2797 (Cancer)- Phase II study results (Chroma)
- Achieve milestones under existing collaborations (undisclosed) 
- Secure new research collaborations (undisclosed) 
Ian Garland, Chief Executive Officer, commented, "We performed very
strongly in 2012, both financially and operationally, with significant
progress in all three elements of our strategy. Revenues were up
sharply and our loss and underlying cash burn were both reduced. We
delivered proof-of-concept in the most advanced of our cough cold
programmes and now have five active cough cold programmes in
development with a first NDA submission planned for the middle of next
year. We had a record 12 months in our research business, growing
revenue for the fifth consecutive year, and reported positive results
from two V81444 studies in our NCE pipeline. The outlook for 2013 and
beyond is strong as we continue to build our self-sustaining
pharmaceutical company." 
Presentation & Conference Call 
Vernalis management will host a presentation at 09.00am (UK) at
Brunswick's offices, 16 Lincoln's Inn Fields, London WC2A 3ED today. It
will also be available via webcast at and and via conference call, which can be joined by
dialling: +44 (0) 20 3139 4830, Passcode 13117720#. 
-- ends -- 
Vernalis Contacts:
Ian Garland, Chief Executive Officer   +44 (0) 118 938 0015
David Mackney, Chief Financial Officer 
Nomura Code Securities Limited:        +44 (0) 20 7776 1200
Juliet Thompson
Jonathan Senior 
Brunswick Group:                       +44 (0) 20 7404 5959
Jon Coles 
Notes to Editors 
About Vernalis 
Vernalis is a revenue generating development stage pharmaceutical
company with significant expertise in drug development. The Group has
one marketed product, frovatriptan for the acute treatment of migraine,
an exclusive licensing agreement to develop and commercialise multiple
novel products focussed on the US prescription cough/cold market as
well as seven programmes in its NCE development pipeline. Vernalis has
significant expertise in fragment and structure based drug discovery
which it leverages to enter into collaborations with larger
pharmaceutical companies. The Company's technologies, capabilities and
products are endorsed by collaborations with Endo, Genentech, Lundbeck,
Menarini, Novartis, Servier and Tris. 
For further information about Vernalis, please visit 
Vernalis Forward-Looking Statement 
This news release may contain forward-looking statements that reflect
the Company's current expectations regarding future events including
the clinical development and regulatory clearance of the Company's
products, the Company's ability to find partners for the development
and commercialisation of its products, as well as the Company's future
capital raising activities. Forward-looking statements involve risks
and uncertainties. Actual events could differ materially from those
projected herein and depend on a number of factors including the
success of the Company's research strategies, the applicability of the
discoveries made therein, the successful and timely completion ofclinical
studies, the uncertainties related to the regulatory process,
the ability of the Company to identify and agree beneficial terms with
suitable partners for the commercialisation and/or development of its
products, as well as the achievement of expected synergies from such
transactions, the acceptance of frovatriptan and other products by
consumers and medical professionals, the successful integration of
completed mergers and acquisitions and achievement of expected
synergies from such transactions, and the ability of the Company to
identify and consummate suitable strategic and business combination
Operational Review 
We have made excellent progress in the last year across all three tiers
of our strategy to build a diversified, self-sustaining pharmaceutical
company. One year on from our transformational licensing agreement and
financing, we now have a broad pipeline of late-stage low-risk drugs in
development, complementing our maturing pipeline of new chemical
entities (NCE) and our successful research group. 
A priority for 2012 was the implementation of the Tris Pharma
development and licensing deal under which we exclusively licensed Tris
Pharma's extended release liquid drug delivery technology for
application within the US prescription cough cold market. Under that
agreement, Tris Pharma is developing up to six novel long-acting
formulations of prescription cough cold products that we plan to
commercialise in the US. We announced in March 2013 that the most
advanced of these products, CCP-01, had achieved proof-of-concept and
has moved into the final stages of development, with a planned NDA
filing in mid 2014. In parallel with the development of this lead
product, we have progressed with Tris Pharma exploratory development of
up to nine more potential products, from which we have selected four
preferred products for further development. Tris Pharma will continue
development of these four products in 2013, aiming to achieve
proof-of-concept for all of them over the next 24 months. 
The commercial opportunity in the US prescription cough cold market for
the products being developed by Tris Pharma continues to be
significant. Following a mild cough cold season in 2011/2012, the
season so far in 2012/2013 has been moderately severe, with
prescriptions for cough cold products up 21 per cent in the eight
months to February 2013 compared to the same period in the prior year.
There were 33.2 million prescriptions in the 12 months to February 2013
indicating a potential US$2 billion market for extended-release liquid
In our NCE pipeline, we are continuing to pursue the early clinical
development of our adenosine A2A receptor antagonist, V81444 for CNS
diseases. Following successful completion of a Phase I study in May
2012, we initiated and successfully completed a receptor occupancy
study to confirm A2A target engagement in man. We are now moving this
programme into a Phase Ib/II POC study in an undisclosed CNS indication
that will be initiated in 2013, with data likely to be available in
2014. Our other priority in-house programme, a FAAH inhibitor, V158866,
is now recruiting patients into a Phase II proof-of-concept study to
treat neuropathic pain experienced by patients with spinal cord injury.
This study is also scheduled to report data in 2014. Our strategy is to
partner all of our new chemical entity programmes, including both of
these and our Phase I-ready Chk1 oncology programme. 
Our novel Hsp90 programme, AUY922, is already partnered with Novartis
and continues to be investigated in a number of Phase I and Phase II
cancer studies. Novartis is undertaking studies in a broad range of
cancers, including breast, non-small-cell lung, gastric, colon and
colorectal cancers. We remain very excited about the prospects for this
programme and, based on timelines indicated by Novartis on, hope to see news from these ongoing studies over
the coming two years. 
Our balanced approach to investment in research has been rewarded in
2012 with a record year in terms of revenue from research
collaborations. Leveraging our skills in the fragment- and
structure-based drug design field, we have collaborated successfully
with leading global pharmaceutical companies, earning both fees and
success milestones for our work. The most advanced of our
collaborations has a candidate in pre-clinical development which, if
successful, could enter Phase I clinical studies in 2013. We will
continue our balanced strategy in 2013 and aim to secure further
collaborations to add to those already in progress. 
Financially, we remain exceptionally strong with GBP81.6 million of cash
resources and no debt at the year end. We continue to receive a steady
royalty stream from frovatriptan under our collaboration with Menarini.
This income stream, together with the success-based structure of our
licensing agreement with Tris Pharma, and our balanced approaches to
NCE development and research, enabled us to limit our 2012 underlying
net cash burn to just GBP4.5 million. We will continue to manage costs
and cash tightly. 
In April 2012, the Company moved to AIM from the LSE Main Market as the
concentration of its shares among a few key investors meant that the
Company did not satisfy the "free float" requirements of the Main
Our outlook for 2013 is very encouraging with potential for further
significant progress in our Tris Pharma programmes and positive
developments in both our NCE and research operations. We would like to
thank our Board members and staff for their contributions during a
successful year and our shareholders for their continued support. 
Financial Review: 
Successful research collaborations drive 20 per cent overall revenue
Revenue from continuing operations totalled GBP14.6 million
(2011: GBP12.2 million) up 20 per cent year-on-year. Revenue included
GBP5.7 million from the supply of frovatriptan (2011: GBP6.5 million)
and GBP8.9 million (2011: GBP5.7 million) in respect of collaborations
and the release of deferred revenue. 
Research collaboration income (including milestones) increased 65 per
cent to GBP8.7 million (2011: GBP5.3 million). At the end of the year,
we had five active collaborations underpinning this growth. These
collaborations generated GBP6.1 million of FTE income (2011: GBP4.2
million) and a further GBP2.6 million of milestones (2011:
GBP1.1 million). Because of the long investment time horizons for these
activities, the goal for the last five years has been to make this part
of the business self-financing whilst delivering potential upside
through research and clinical milestones as well as royalties on
commercialisation. Following five years of growth in research
collaboration income (at a CAGR of 38 per cent), this goal was achieved
during 2012. 
Frovatriptan royalties flat in euros 
Underlying sales of frovatriptan by Menarini in Europe and Central
America were EUR26.5 million, flat compared to 2011 (2011: EUR27.1
million). Underlying volumes of tablet sales in 2012 were also flat
compared to 2011 at 9.6 million (2011: 9.4 million). Vernalis receives
25.25 per cent of Menarini sales via a royalty linked to the supply of
active pharmaceutical ingredients (API) so the reported royalties do
not necessarily track the underlying performance of Menarini in the
The reported Menarini frovatriptan royalties of GBP5.7 million were 11
per cent below 2011 (GBP6.5 million). Included in both years were three
batches of bulk API and one batch of tablets shipped to Menarini for
the Central American markets. The decrease in income is due primarily
to a weakening of the euro during 2012, as shipments are invoiced in
euros and then translated into sterling for financial reporting
purposes. The average euro:sterling exchange rate for 2012 was 1.2410,
down 9 per cent versus 1.1436 in 2011. 
External development costs focused on V158866 and V81444 
Research and development expenditure from continuing operations
decreased 5 per cent to GBP13.0 million (2011: GBP13.6 million) and
comprised GBP11.2 million (2011: GBP10.9 million) of internally funded
research and development costs and GBP1.8 million (2011: GBP2.7 million)
of external costs associated with the development pipeline. The external
costs remain focused on clinical development of V158866 and V81444 with
proof-of-concept studies being conducted during 2013. 
G&A expenditure continues to be tightly managed 
General and administrative expenditure before exceptional items was
GBP5.2 million (2011: GBP4.8 million), an increase of GBP0.4 million
for the year. Adjusting for one-off items for foreign exchange and Tris
Pharma related expenses, the underlying G&A was GBP4.8 million (2011:
GBP4.4 million), an increase of 9 per cent. This increase is largely
explained by the fluctuation in the share option charge which was
GBP0.3 million higher in 2012 (2012: GBP0.8 million; 2011: GBP0.5
million) following the introduction of the value builder plan in the
The 2011 exceptional item of GBP2.4 million included GBP1.9 million
related to aborted acquisition costs as well as an adjustment to the
existing vacant lease provision of GBP0.5 million. 
Operating loss reduced by 38 per cent on a pre-exceptional basis and 52
per cent on a post exceptional basis 
The operating loss for the year from continuing operations before
exceptional items was GBP5.2 million (2011: GBP8.3 million) a decrease
of 38 per cent year-on-year. The operating loss from continuing
operations after exceptional items was GBP5.2 million (2011: GBP10.7
million) a decrease of 52 per cent. 
Weakness in US dollar distorts finance costs and underlying trading
With the current economic uncertainty, we have minimised our exposure
operationally to foreign exchange movements by using forward contracts
for our euro income stream but also by matching the currency in which
our cash is held with our future obligations, where possible.
Immediately following the equity issue in March 2012, we purchased
US$100 million, to match our Tris Pharma and US commercial financing
requirements. As a consequence of holding these US dollar deposits,
there will be a financial reporting foreign exchange exposure on the
retranslation of the US dollar cash balances back into sterling at each
reporting date, but critically any changes in foreign exchange rates
between sterling and the US dollar will not impact our ability to
execute on the US commercial plan. 
At 31 December 2012, the US dollar had weakened against sterling,
compared to the purchased rate in March 2012 of 1.5763, creating a
GBP1.8 million unrealised retranslation loss for the year. Consequently
the finance cost and the loss for the year include this GBP1.8 million
unrealised retranslation loss. Excluding the impact of this foreign
exchange loss, finance expense for the year was flat at GBP0.2 million.
Since the year end the US dollar has strengthened significantly against
sterling eliminating this loss. 
R&D tax credit remains flat 
The tax credit of GBP1.6 million (2011: GBP1.7 million) represents
amounts that are expected to be received under current legislation on
research and development tax credits for small- and medium-sized
companies. The tax credit for the year was GBP1.4 million (2011: GBP1.6
million) and the balance of GBP0.2 million (2011: GBP0.1 million)
represents claims in relation to prior years. 
Pre-exceptional loss for the year reduced by 19 per cent 
The loss for the year before exceptional items was GBP5.2 million (2011:
GBP6.4 million), a reduction of 19 per cent. Excluding the impact of the
GBP1.9 million total exchange loss on all non-sterling cash balances,
the pre-exceptional loss for the year was GBP3.3 million, a reduction
of 48 per cent. 
The loss for the year from continuing operations after exceptional
items in 2011 was GBP8.9 million and the loss after discontinued
operations and exceptional items was GBP7.7 million. There were no
exceptional or discontinued items in the current year. 
Balance sheet 
Further strengthening of the balance sheet through GBP68.5 million new
equity issue 
Non-current assets increased to GBP6.9 million (2011: GBP4.3 million)
due to the US$5 million upfront payment to Tris Pharma on signing the
development and licensing agreement and in consideration for the
development of products. This increase was partially offset by the
continued amortisation of the frovatriptan intangible asset. 
Current assets increased to GBP88.6 million (2011: GBP32.4 million)
primarily due to the GBP65.9 million, net of expenses, equity issue in
March 2012. Total liabilities decreased to GBP10.1 million
(2011: GBP12.7 million) and, importantly, we remain debt free. 
Cash key to executing commercial strategy 
Cash resources, comprising held-to-maturity financial assets and cash
and cash equivalents increased by GBP56.9 million to GBP81.6 million
(2011: GBP24.7 million). 
Underlying net cash burn for the year (representing the movement in
cash resources but excluding one off items, discontinued operations and
milestones) was GBP6.3 million and GBP4.5 million excluding the impact
of the GBP1.8 million retranslation loss on US dollar denominated cash
deposits (2011: GBP6.0 million). The decrease in cash burn primarily
reflects reduced investment in our NCE pipeline during 2012 as well as
increased FTE income from our research collaborations. 
Outlook for 2013 and beyond 
Fully funded for future success 
The Company is now on an exceptionally strong financial footing with
GBP81.6 million of cash and no debt. The balance sheet has been
strengthened over the last 12 months through the equity fundraising and
the performance of the underlying business continues to be strong. The
Company has mitigated the risk of fluctuations in the US dollar by
buying US$100 million following the fundraising and consequently the
Company is very well positioned for 2013 and beyond as we build a
diversified, self-sustaining pharmaceutical company. 
Risks and Uncertainties 
Like all businesses we face risks and uncertainties, many of which are
inherent within any pharmaceutical development company looking to
establish commercial operations. Below are those principal risks and
uncertainties that we consider could have a material impact on our
operational results, financial condition and prospects. These risks are
not in any particular order of priority and there may be other risks
that are either currently unknown or not considered material which
could have a similar impact on our business in the future. Our risk
management process is explained in the corporate governance report. 
Clinical and regulatory risk 
There are significant inherent risks in developing drugs for
commercialisation due to the long and complex development process. Any
drug which we or our partners wish to offer commercially to the public
must be put through extensive research, pre-clinical and clinical
development all of which takes several years and is extremely costly.
We and/or our collaborators may fail to successfully develop a drug
candidate because of: 
- The failure of the drug in pre-clinical studies. 
- The inability of clinical trials to demonstrate the drug is safe
and effective in humans. 
- The failure of the drug in bioequivalence studies. 
- The failure to develop a viable formulation with differing
characteristics from existing drugs. 
- The failure to find a collaborator to take the drug candidate into
expensive later stage studies. 
- The failure to manufacture the drug substance in sufficient
quantities and at commercially acceptable prices. 
In addition, the complexity and multijurisdictional nature of the
regulatory processes could result in either delays 
in achieving regulatory approval or non-approval. If a product is
approved, the regulators may impose additional 
requirements, for example, restrictions on the products' indicated uses
or the levels of reimbursement receivable, that could impact on the
commercial viability of the drug. Once approved, the product and its
manufacture will continue to be reviewed by the regulators and may be
withdrawn or restricted in the future. 
Pricing, reimbursement and competition 
Our commercial success depends on the acceptance of our/and our
collaborators' products by the market, including physicians,
third-party payers and patients. We may be adversely affected by
third-party reimbursement and healthcare cost containment initiatives.
Third-party payers including government and private health insurers are
increasingly attempting to contain healthcare costs through measures
that are likely to impact the products we are developing, including: 
- Challenging the prices charged for healthcare products. 
- Limiting both coverage and the amount of reimbursement for new
therapeutic products. 
- Refusing to provide coverage when an approved drug is used in a
way that has not received regulatory marketing approval. 
- Moving towards a reference pricing model, particularly in Europe
where the amount of reimbursement is determined in light of
reimbursement levels for comparable drugs in other countries, which can
severely restrict the potential per unit price for many drugs unless
there is significant differentiation from existing products. 
These or other healthcare reforms that may be adopted in the future
could harm our business and, in particular, could have a material
adverse effect on the amounts that public and private payers will pay
for our or our collaborators' commercialised products. If we and/or our
collaborators develop products that are not covered by government or
third-party reimbursement schemes, are reimbursed at prices lower than
those expected or become subject to legislation controlling treatments
or pricing, we and/or our partners may not be able to generate
significant revenues or attain profitability for any products which are
approved for marketing. 
Our business faces intense competition from major pharmaceutical
companies and specialised biotechnology companies developing drugs for
the same market opportunities. Some factors that may affect the rate
and level of market acceptance of any of our or our collaborators'
products include: 
- The existence or entry into the market of superior competing
products or therapies. 
- Entry to the market of competing products earlier than our or our
collaborators' products. 
- The price of our or our collaborators' products compared to
competing products. 
- Public perception and publicity concerning the safety, efficacy
and benefits of our or our collaborators' products, compared to
competing products and therapies. 
- The effectiveness of the sale and marketing efforts of our sales
force (once established) or our collaborators' sales force. 
- Regulatory developments relating to manufacturing or use of our or
our collaborators' products. 
- The willingness of physicians to adopt a new treatment regime. 
Intellectual property 
Intellectual property protection remains fundamental to our strategy of
developing novel drug candidates. Our ability to stop others making a
drug, using it or selling the invention or proprietary rights by
obtaining and maintaining protection is critical to our success. We own
a portfolio of patents and patent applications which underpin our
research and development programmes. We invest significantly in
maintaining and protecting this intellectual property to reduce the
risks over the validity and enforceability of our patents. However, the
patent position is always uncertain and often involves complex legal
issues. Therefore, there is a risk that intellectual property may
become invalid and/or expire before, or soon after, commercialisation
of a drug product and we may be blocked by other companies' patents and
intellectual property. 
Manufacturing risk 
The supply of frovatriptan API to Menarini for the EU and Central
American markets is a substantial proportion of our income and so our
ability to manufacture and supply this product on schedule is critical.
In addition, our ability to successfully scale-up production processes
to viable clinical trial or commercial levels is vital to the
commercial viability of any product. Availability of raw materials is
extremely important to ensure that manufacturing campaigns are
performed on schedule and therefore dual sourcing is used where
possible. Product manufacture is subject to continual regulatory
control and products must be manufactured in accordance with good
manufacturing practice. 
Any changes to the approved process may require further regulatory
approval which may incur substantial cost and delays. These potential
issues could adversely impact on the results from operations and our
cash liquidity. 
In-licensing complementary products 
Our strategy is to augment the low-risk, late-stage Tris Pharma
portfolio of products through in-licensing complementary products to
our commercial pipeline. This is an extremely competitive area, with
many large and mid-sized pharmaceutical companies also looking to
execute a similar strategy, and consequently this may be difficult to
achieve with our current financial resources and infrastructure. A
failure to succeed in successfully in-licencing complementary products
may affect our ability to grow revenues and attain profitability. 
Financial risks 
Cash flow 
We have a history of operating losses which are anticipated to continue
in the near term. Following the GBP65.9 million (net of expenses) equity
fundraising announced in February 2012, the Company is well capitalised
to execute its transition into a profitable and cash generative
pharmaceutical company over time. However, the Group may need to seek
further capital through equity or debt financings in the future and if
this is not successful, the financial condition of the Group may be
adversely affected. 
Counterparty credit risk 
The Company is exposed to credit-related losses on cash deposits in the
event of non-performance by counterparties. 
With the current economic uncertainty, counterparty credit risk is a
key consideration when placing cash funds on deposit. The
creditworthiness of counterparties is assessed prior to placing funds
on deposit and is monitored through to maturity. Under the Company
treasury policy there is a maximum amount that can be placed with any
one counterparty. If any counterparty were to experience financial
difficulties this may impact the Company's liquidity in the future. 
Foreign exchange 
We record our transactions and prepare our financial statements in
sterling but almost all of our revenue is from licensing and
collaborative agreements and frovatriptan royalties which are received
in US dollars or euros. A proportion of our expenditure is incurred in
US dollars and other currencies, relating principally to clinical
trials and the Tris Pharma agreement. Our cash balances are
predominantly held in sterling, US dollars and euros. 
With the current economic uncertainty, we have minimised our exposure
operationally, to foreign exchange movements by matching the currency
in which our cash is held with our future obligations. Immediately
following the equity issue in March 2012, we purchased US$100 million,
to match our Tris Pharma and US commercial financing requirements. As a
consequence of holding these foreign currency deposits, we will have a
financial reporting foreign exchange exposure on the retranslation of
the US dollar cash balances back into sterling at each reporting date,
but critically any changes in foreign exchange rates between sterling
and the US dollar will not impact our ability to execute on the US
commercial plan. 
To the extent that income and expenditure in currencies other than
sterling and US dollars are not matched, fluctuations in exchange rates
between sterling and these currencies, principally euros, may result in
realised or unrealised foreign exchange gains and losses. Simple
derivative contracts have been used to mitigate the risk of
fluctuations in exchange rates where there has been certainty over the
amount and timing of the income. 
Where the timing and/or the amount to be received is uncertain, risk
management is more difficult but the Group has used derivatives where
possible and will continue to do so. To the extent that derivative
instruments are considered too costly, because of the flexibility
required or the time over which protection is sought, any fluctuations
in foreign exchange movements may have a material adverse impact on the
results from operations and our cash liquidity in the future. 
Return on investment 
As already mentioned, the drug development process is inherently risky
and because it is conducted over several years it can be extremely
costly. Many drug candidates fail in development due to the clinical
and regulatory risks, and even in those circumstances where drugs are
approved, sales levels can be disappointing due to competition,
healthcare regulation and/or intellectual property challenges. As a
result the returns achieved may be insufficient to cover the costs
incurred. The Group looks to mitigate the development and commercial
risk of its NCE pipeline by partnering drug candidates at an
appropriate stage. This partnering event crystallises part of the
programme's value, with the goal of retaining an attractive proportion
of the commercial upside through future milestones and an ongoing
royalty interest from commercial sales. 
Related Parties 
Related parties disclosures are given in note 10. 
Statement of directors' responsibilities 
Each of the directors, whose names and functions are listed in the
management and governance section of the annual report, confirm that,
to the best of their knowledge: 
- the Group financial statements, which have been prepared in
accordance with IFRSs as adopted by the EU, give a true and fair view
of the assets, liabilities, financial position and loss of the Group;
and- the directors' report contained on pages 30 to 33 of the annual
report includes a fair review of the development and performance of the
business and the position of the Group, together with a description of
the principal risks and uncertainties that they face. 
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