Silence Therapeutics plc — 2021 Form 20-F
Reporting period: Fiscal year ended December 31, 2021. This is an annual report, not a standalone Q4 report. Financial statements are prepared under IFRS as issued by the IASB and presented in pounds sterling (£), unless noted otherwise.
Business context
Silence Therapeutics is a clinical-stage biotechnology company developing siRNA medicines using its liver-targeting mRNAi GOLD platform. It has no approved products and has not generated product-sales revenue. Its wholly owned clinical programs include SLN360, targeting elevated Lp(a), and SLN124, targeting TMPRSS6 for hematologic conditions. Partnered research programs include collaborations with AstraZeneca, Mallinckrodt and Hansoh.
Key financial metrics
| £ millions, except per-share data | 2021 | 2020 | Change |
|---|---|---|---|
| Revenue | 12.415 | 5.479 | +126.6% |
| Cost of sales | 7.456 | 3.762 | +98.2% |
| Gross profit | 4.959 | 1.717 | +188.8% |
| Gross margin | 39.9% | 31.3% | +8.6 percentage points |
| Research and development expense | 30.765 | 20.209 | +52.2% |
| General and administrative expense | 20.008 | 13.983 | +43.1% |
| Operating loss | (45.814) | (35.847) | Loss widened 27.8% |
| Net loss | (39.410) | (32.547) | Loss widened 21.1% |
| Basic and diluted loss per share | (44.3) pence | (39.8) pence | Loss per share increased |
Revenue was primarily collaboration income: £12.023 million, plus £0.392 million of royalties. No revenue came from product sales. Gross profit improved as collaboration revenue increased, but R&D and administrative costs rose as the company expanded and advanced its programs. The £6.446 million tax credit mainly reflects UK R&D tax credits; a £1.6 million China withholding tax on the Hansoh upfront payment was included in tax expense because recovery was uncertain.
Operating cash flow was a £6.806 million inflow, compared with a £10.776 million outflow in 2020; this reflected collaboration cash receipts and tax credits, rather than operating profitability. Investing cash flow was an £8.676 million inflow, including £10.0 million from term-deposit redemptions, partly offset by £1.311 million of capital expenditure. Financing cash flow was a £30.711 million inflow, principally from share issuance. Cash and cash equivalents at year-end were £73.537 million, up from £27.449 million; the company reported no term deposit balance at year-end.
There was no material conventional borrowing disclosed. Lease liabilities were £0.137 million. Year-end total equity was £8.526 million. Contract liabilities, representing deferred collaboration revenue, totaled £76.748 million, including £72.501 million non-current and £4.247 million current.
Material changes and notable events
- Revenue more than doubled, driven by progress under the Mallinckrodt and AstraZeneca collaborations and the new Hansoh collaboration. The company recognized £8.748 million from Mallinckrodt and £2.652 million from AstraZeneca in 2021.
- R&D expense rose to £30.765 million, including higher contracted development costs and personnel costs. General and administrative costs increased, including from share-based compensation and U.S. public-company compliance expenses.
- In February 2021, the company completed a $45 million private placement. AstraZeneca paid a further $40 million in May 2021, and Hansoh paid a $16 million upfront amount in December 2021, net of taxes as described in the filing.
- The company delisted its ordinary shares from AIM in November 2021; ADSs continued trading on the Nasdaq Global Market under SLN.
- At December 31, 2021, 89,784,720 ordinary shares were outstanding. The 2021 cash share issue and option exercises increased share capital; 8,052,699 ordinary-share options remained outstanding at year-end.
Outlook, commentary, risks and unusual items
- Liquidity and going concern: Management stated that available cash was expected to fund operations through early 2023. The audited financial statements identify a material uncertainty that may cast significant doubt on the company’s ability to continue as a going concern: the forecast indicates cash is sufficient only through the first quarter of 2023 and excludes unachieved collaboration milestones and future financing. The company said it may seek financing and noted potential milestones of up to $19 million over the following 15 months, contingent on objectives, as well as an authorized ATM program of up to $100 million.
- Clinical outlook reported after year-end: In February 2022, Silence reported topline SLN360 phase 1 results in 32 healthy adults: dose-dependent Lp(a) reductions of 46% to 98%, with reductions up to 81% persisting at 150 days, and no clinically important safety concerns reported. Longer follow-up was expected in Q3 2022; a phase 2 ASCVD study was planned for the second half of 2022, subject to regulatory discussions. These are post-period updates, not 2021 results.
- SLN124: 2021 healthy-volunteer data showed serum iron reductions of about 50% and hepcidin increases of up to about fourfold, sustained for at least two months, with no serious or severe treatment-emergent adverse events reported. After year-end, thalassemia study enrollment was completed with topline data expected in Q3 2022; further MDS enrollment was stopped in March 2022 because of recruitment challenges and spending prioritization. A PV phase 1 study was planned for the second half of 2022.
- Other unusual development item: The out-licensed QPI-1002 phase 3 AKI study failed to meet primary endpoints and was terminated in February 2021; no active development was reported.
- Key risks: Continued losses and need for additional capital; early-stage clinical and regulatory uncertainty; dependence on collaboration partners and third-party manufacturers/CROs; competition in RNAi and delivery technologies; intellectual-property challenges; and potential disruption from COVID-19, Brexit, currency movements and geopolitical events. Collaboration partners may terminate agreements, and milestone and royalty potential is not assured.
- Management and controls: Craig Tooman became CEO in February 2022, succeeding Mark Rothera; Rhonda Hellums became CFO. Material weaknesses in financial-close and reporting controls identified for 2020 were reported as remediated in 2021. Management concluded disclosure controls and internal control over financial reporting were effective at year-end; the auditor did not provide an internal-control attestation.
- Audit: PwC issued an unqualified opinion on the IFRS financial statements, while separately highlighting the material uncertainty related to going concern.
Important facts for investors to verify
- Reconcile the audited net loss of £39.410 million and audited loss per share of 44.3 pence with differing rounded or inconsistent figures elsewhere in the filing, including a 44.1-pence figure in the operating-results table.
- Review the going-concern forecast, expected cash runway, timing and conditions for the potential $19 million milestones, and possible use of the $100 million ATM facility.
- Track cash burn excluding collaboration receipts, the conversion of deferred collaboration revenue into recognized revenue, and the timing and concentration of partner funding.
- Assess full SLN360 and SLN124 clinical data, safety, durability, enrollment and subsequent trial milestones; distinguish post-year-end results and plans from 2021 performance.
- Monitor share dilution, including future equity financing and the 8.1 million ordinary-share options outstanding at year-end, as well as collaboration termination rights and milestone conditions.