SLN

Business Context and Reporting Period

Company: Silence Therapeutics plc (Silence Therapeutics)

Filing Type: Form 20-F (Annual Report)

Reporting Period: Fiscal year ended December 31, 2020

Business Overview: Silence Therapeutics is a biotechnology company focused on discovering and developing siRNA therapeutics to silence disease-associated genes in the liver. The company has no approved products and generates revenue primarily through strategic collaborations and licensing agreements. Key product candidates include SLN360 (cardiovascular disease) and SLN124 (hematology/rare diseases).

Key Financial Metrics

Note: Financial data is presented in thousands of British Pounds Sterling (£). The company reports under IFRS.

Material Changes vs. Prior Period

• Revenue Growth: Revenue increased significantly to £5.5 million in 2020 from £0.2 million in 2019. This was driven by collaboration revenue from Mallinckrodt (£3.8 million) and Takeda (£1.4 million), as well as royalty income from Alnylam.
• Increased Operating Loss: The operating loss widened to £35.8 million from £22.7 million. This was primarily due to a £6.9 million increase in R&D expenses (driven by consultant spend and proprietary programs) and a £4.3 million increase in administrative expenses (including £1.2 million in Nasdaq listing costs and higher share-based payments).
• Liquidity Position: Cash and cash equivalents increased to £27.4 million, with total liquid assets (including term deposits) reaching £37.4 million. This increase was supported by a £20 million upfront payment and a £20 million equity investment from AstraZeneca.
• Contract Liabilities: Significant increases in contract liabilities (deferred revenue) were recorded, totaling £68.4 million (£51.3 million non-current, £17.0 million current), reflecting upfront payments received from collaborators that are recognized over time.

Guidance, Outlook, and Risks

• Outlook: Management believes existing capital resources are sufficient to fund operations through the end of 2022. The company expects to continue incurring significant losses as it advances clinical trials for SLN360 and SLN124.
• Clinical Milestones:
  • SLN360: Initiated the APOLLO Phase 1 study in February 2021; data expected in H2 2021.
  • SLN124: Completed enrollment in the GEMINI Phase 1 study (healthy volunteers) in February 2021; initiated GEMINI II Phase 1b study in patients. Data expected in H1 and H2 2021 respectively.
• Collaborations:
  • AstraZeneca: Received $20 million upfront and $20 million equity investment in 2020. An additional $40 million unconditional payment is due in H1 2021.
  • Mallinckrodt: Expanded collaboration to three targets; received milestone payments totaling $6 million in 2020/early 2021.
• Key Risks:
  • Internal Controls: The company identified a material weakness in internal control over financial reporting related to the financial close and reporting process, specifically regarding revenue recognition and R&D expense accruals. Remediation is underway.
  • Capital Needs: The company has a history of net losses and will require additional capital to fund future operations, which may not be available on acceptable terms.
  • Development Risk: Success depends on the safety and efficacy of product candidates in clinical trials, which are uncertain.
  • COVID-19: The pandemic has caused delays in clinical trial enrollment and operations.

Investor Verification Checklist

• Internal Control Remediation: Verify the progress of remediation efforts for the identified material weakness in internal controls over financial reporting.
• Cash Runway: Confirm the sufficiency of the £37.4 million cash balance to fund operations through 2022 given the high burn rate (approx. £32.5 million net loss in 2020).
• Clinical Trial Timelines: Monitor the initiation and data readout dates for the APOLLO (SLN360) and GEMINI (SLN124) Phase 1 studies.
• Collaboration Payments: Track the receipt of the remaining $40 million unconditional payment from AstraZeneca and future milestone payments from Mallinckrodt.
• Revenue Recognition: Review the accounting policies for collaboration revenue to ensure proper recognition of upfront payments and milestones over the service period.