UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 6-K
___________________________________
REPORT OF FOREIGN PRIVATE ISSUER
Pursuant to Section 13a-16 OR 15d-16
of the Securities Exchange Act of 1934
for the Month of August 2024
Commission File Number: 001-40850
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Exscientia plc
(Translation of registrant’s name into English)
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The Schrödinger Building
Oxford Science Park
Oxford OX4 4GE
United Kingdom
(Address of principal executive office)
___________________________________
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:
☒ Form 20-F ☐ Form 40-F
OTHER EVENTS
On August 15, 2024, Exscientia plc (the “Company”) issued a press release announcing a business update as well as the Company’s second quarter and first half 2024 financial results. The Company’s unaudited condensed consolidated financial statements as of and for the period ended June 30, 2024 are attached as Exhibit 99.1 and are incorporated by reference herein. The Company’s Management’s Discussion and Analysis of Financial Condition and Results of Operations is attached as Exhibit 99.2 and is incorporated by reference herein. The press release is attached as Exhibit 99.3.
The information in the attached Exhibits 99.1 and 99.2 shall be deemed to be incorporated by reference into the Company’s registration statements on Form F-3 (File No. 333-278132) and Form S-8 (File Nos. 333-278128 and 333-260315) and the related prospectuses, respectively as such registration statements and prospectuses may be amended from time to time, and to be a part thereof from the date on which this report is filed, to the extent not superseded by documents or reports subsequently filed or furnished.
The information in the attached Exhibit 99.3 is being furnished and shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing made by the Company under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.
EXHIBIT INDEX
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorised on this 15th day of August, 2024.
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EXSCIENTIA PLC |
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By: | /s/ David Hallett |
Name: | David Hallett, Ph.D. |
Title: | Interim Chief Executive Officer |
Exhibit 99.1
Exscientia plc
| | |
Unaudited Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Loss for the three and six months ended June 30, 2024 and 2023 |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended June 30, | | Six months ended June 30, |
| | 2024 | | 2023 | | 2024 | | 2023 |
| Note | £’000 | | £’000 | | £’000 | | £’000 |
Revenue | 4 | 4,419 | | | 3,006 | | | 9,709 | | | 8,767 | |
Cost of sales | | (7,759) | | | (6,269) | | | (15,166) | | | (14,726) | |
Gross loss | | (3,340) | | | (3,263) | | | (5,457) | | | (5,959) | |
| | | | | | | | |
Research and development expenses | | (25,112) | | | (32,993) | | | (48,672) | | | (66,405) | |
General and administrative expenses | | (16,802) | | | (11,635) | | | (20,232) | | | (22,549) | |
Foreign exchange gains/(losses) | | 70 | | | (452) | | | 927 | | | (1,644) | |
Other income | 5 | 5,977 | | | 1,834 | | | 7,216 | | | 4,439 | |
Operating loss | 6 | (39,207) | | | (46,509) | | | (66,218) | | | (92,118) | |
| | | | | | | | |
Finance income | 7 | 3,866 | | | 4,214 | | | 7,704 | | | 7,777 | |
Finance expenses | | (302) | | | (273) | | | (562) | | | (536) | |
Share of loss of joint venture | 12 | (383) | | | (155) | | | (924) | | | (614) | |
Loss before taxation | | (36,026) | | | (42,723) | | | (60,000) | | | (85,491) | |
| | | | | | | | |
Income tax (charge)/benefit | 8 | (213) | | | 6,752 | | | 2,754 | | | 11,877 | |
Loss for the period | | (36,239) | | | (35,971) | | | (57,246) | | | (73,614) | |
| | | | | | | | |
Other comprehensive loss: | | | | | | | | |
Items that may be reclassified to profit or loss | | | | | | | | |
Foreign currency loss on translation of foreign operations | | (497) | | | (1,205) | | | (1,164) | | | (1,681) | |
Total other comprehensive loss for the period, net of tax | | (497) | | | (1,205) | | | (1,164) | | | (1,681) | |
| | | | | | | | |
Total comprehensive loss for the period | | (36,736) | | | (37,176) | | | (58,410) | | | (75,295) | |
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Basic and diluted loss per share (£) | 9 | (0.29) | | | (0.29) | | | (0.45) | | | (0.60) | |
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| | | | | | | | |
The above unaudited condensed consolidated statement of profit or loss and other comprehensive loss should be read in conjunction with the accompanying notes.
Exscientia plc
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Unaudited Condensed Consolidated Statement of Financial Position as at June 30, 2024 and December 31, 2023 |
| | | | | | | | | | | | | | |
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| June 30, 2024 | | December 31, 2023 |
| Note | £’000 | | £’000 |
ASSETS | | | | |
| | | | |
Non-current assets | | | | |
Goodwill | 10 | 6,048 | | | 6,186 | |
Other intangible assets, net | 10 | 25,736 | | | 28,459 | |
Property, plant and equipment, net | 11 | 44,078 | | | 48,954 | |
Investment in joint venture | 12 | 436 | | | 173 | |
Right-of-use assets, net | 13 | 17,736 | | | 18,513 | |
Other receivables | 14 | 657 | | | 663 | |
Investments in equity instruments | 15 | 2,145 | | | 2,145 | |
Deferred tax asset, net | | 749 | | | 690 | |
Total non-current assets | | 97,585 | | | 105,783 | |
| | | | |
Current assets | | | | |
Trade receivables | | 234 | | | 3,372 | |
Other receivables | 14 | 14,667 | | | 15,351 | |
Current tax assets | | 32,507 | | | 23,166 | |
Short term bank deposits | 15 | 153,457 | | | 103,586 | |
Cash and cash equivalents | | 139,327 | | | 259,463 | |
Total current assets | | 340,192 | | | 404,938 | |
| | | | |
Total assets | | 437,777 | | | 510,721 | |
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EQUITY AND LIABILITIES | | | | |
| | | | |
Capital and reserves | | | | |
Share capital | 16 | 64 | | | 63 | |
Share premium | | 364,658 | | | 364,639 | |
Capital redemption reserve | | 3 | | | 3 | |
Foreign exchange reserve | | (672) | | | 492 | |
Share-based payment reserve | | 35,975 | | | 46,984 | |
Fair value reserve | | (199) | | | (199) | |
Merger reserve | | 54,213 | | | 54,213 | |
Accumulated losses | | (158,007) | | | (110,469) | |
Total equity attributable to owners of the parent | | 296,035 | | | 355,726 | |
Exscientia plc
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Unaudited Condensed Consolidated Statement of Financial Position as at June 30, 2024 and December 31, 2023 (continued) |
| | | | | | | | | | | | | | |
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| June 30, 2024 | | December 31, 2023 |
| Note | £’000 | | £’000 |
LIABILITIES | | | | |
| | | | |
Non-current liabilities | | | | |
Loans | | 299 | | | 306 | |
Lease liabilities | 13 | 17,027 | | | 16,221 | |
Deferred tax liability, net | | 5,097 | | | 5,774 | |
Contract liabilities and other advances | 17 | 60,578 | | | 65,466 | |
Provisions | 18 | 1,364 | | | 2,157 | |
Total non-current liabilities | | 84,365 | | | 89,924 | |
| | | | |
Current liabilities | | | |
|
Trade payables | | 7,750 | | | 11,336 | |
Lease liabilities | 13 | 4,060 | | | 2,396 | |
Contract liabilities and other advances | 17 | 21,986 | | | 27,006 | |
Other payables | 19 | 23,581 | | | 24,333 | |
Total current liabilities | | 57,377 | | | 65,071 | |
| | | | |
Total liabilities | | 141,742 | | | 154,995 | |
| | | | |
Total equity and liabilities | | 437,777 | | | 510,721 | |
| | | | |
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The above unaudited condensed consolidated statement of financial position should be read in conjunction with the accompanying notes.
Exscientia plc
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Unaudited Condensed Consolidated Statement of Changes in Equity for the three months ended June 30, 2024 and 2023 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | |
| Share capital | Share premium | Capital Redemption Reserve | Foreign exchange reserve | Share-based payment reserve | Fair value reserve | Merger Reserve | Retained earnings/ (accumulated losses) | Total equity |
| £’000 | £’000 | £’000 | £’000 | £’000 | £’000 | £’000 | £’000 | £’000 |
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|
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As at March 31, 2023 | 62 | | 364,609 | | 3 | | 1,348 | | 40,741 | | (199) | | 54,213 | | (13,053) | | 447,724 | |
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|
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|
|
|
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Loss for the period | — | | — | | — | | — | | — | | — | | — | | (35,971) | | (35,971) | |
Foreign exchange loss on translation of subsidiaries | — | | — | | — | | (1,205) | | — | | — | | — | | — | | (1,205) | |
Total comprehensive loss for the period | — | | — | | — | | (1,205) | | — | | — | | — | | (35,971) | | (37,176) | |
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|
| |
|
|
|
|
|
|
Share-based payment charge | — | | — | | — | | — | | 6,836 | | — | | — | | — | | 6,836 | |
Exercise of share-based payment awards | — | | 9 | | — | | — | | (2,713) | | — | | — | | 2,592 | | (112) | |
As at June 30, 2023 | 62 | | 364,618 | | 3 | | 143 | | 44,864 | | (199) | | 54,213 | | (46,432) | | 417,272 | |
| | | | | | | | | |
| | | | | | | | | |
As at March 31, 2024 | 63 | | 364,648 | | 3 | | (175) | | 37,203 | | (199) | | 54,213 | | (125,165) | | 330,591 | |
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|
| | |
|
|
|
|
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Loss for the period | — | | — | | — | | — | | — | | — | | — | | (36,239) | | (36,239) | |
Foreign exchange loss on translation of subsidiaries | — | | — | | — | | (497) | | — | | — | | — | | — | | (497) | |
Total comprehensive loss for the period | — | | — | | — | | (497) | | — | | — | | — | | (36,239) | | (36,736) | |
|
|
| | |
|
|
|
|
|
Share-based payment charge | — | | — | | — | | — | | 2,317 | | — | | — | | — | | 2,317 | |
Exercise of share-based payment awards | 1 | | 10 | | — | | — | | (3,545) | | — | | — | | 3,397 | | (137) | |
As at June 30, 2024 | 64 | | 364,658 | | 3 | | (672) | | 35,975 | | (199) | | 54,213 | | (158,007) | | 296,035 | |
The above unaudited condensed consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
Exscientia plc
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Unaudited Condensed Consolidated Statement of Changes in Equity for the six months ended June 30, 2024 and 2023 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | |
| Share capital | Share premium | Capital Redemption Reserve | Foreign exchange reserve | Share-based payment reserve | Fair value reserve | Merger Reserve | Retained earnings/ (accumulated losses) | Total equity |
| £’000 | £’000 | £’000 | £’000 | £’000 | £’000 | £’000 | £’000 | £’000 |
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|
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As at January 1, 2023 | 61 | | 364,603 | | 3 | | 1,824 | | 35,267 | | (199) | | 54,213 | | 23,106 | | 478,878 | |
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Loss for the period | — | | — | | — | | — | | — | | — | | — | | (73,614) | | (73,614) | |
Foreign exchange loss on translation of subsidiaries | — | | — | | — | | (1,681) | | — | | — | | — | | — | | (1,681) | |
Total comprehensive loss for the period | — | | — | | — | | (1,681) | | — | | — | | — | | (73,614) | | (75,295) | |
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|
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|
|
|
|
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|
Share-based payment charge | — | | — | | — | | — | | 13,794 | | — | | — | | — | | 13,794 | |
Exercise of share-based payment awards | 1 | | 15 | | — | | — | | (4,197) | | — | | — | | 4,076 | | (105) | |
As at June 30, 2023 | 62 | | 364,618 | | 3 | | 143 | | 44,864 | | (199) | | 54,213 | | (46,432) | | 417,272 | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
As at January 1, 2024 | 63 | | 364,639 | | 3 | | 492 | | 46,984 | | (199) | | 54,213 | | (110,469) | | 355,726 | |
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Loss for the period | — | | — | | — | | — | | — | | — | | — | | (57,246) | | (57,246) | |
Foreign exchange loss on translation of subsidiaries | — | | — | | — | | (1,164) | | — | | — | | — | | — | | (1,164) | |
Total comprehensive loss for the period | — | | — | | — | | (1,164) | | — | | — | | — | | (57,246) | | (58,410) | |
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Share-based payment charge | — | | — | | — | | — | | (1,080) | | — | | — | | — | | (1,080) | |
Exercise of share-based payment awards* | 1 | | 19 | | — | | — | | (9,929) | | — | | — | | 9,708 | | (201) | |
As at June 30, 2024 | 64 | | 364,658 | | 3 | | (672) | | 35,975 | | (199) | | 54,213 | | (158,007) | | 296,035 | |
*includes amounts transferred from the share-based payment reserve to accumulated losses relating to vested share options that were forfeited during the period, see note 21.
The above unaudited condensed consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
Exscientia plc
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Unaudited Condensed Consolidated Statement of Cash Flows for the six months ended June 30, 2024 and 2023 |
| | | | | | | | | | | | | | |
| | | | |
| | June 30, 2024 | | June 30, 2023 |
| Note | £’000 | | £’000 |
Cash flows from operating activities | | | | |
Loss before tax | | (60,000) | | | (85,491) | |
Adjustments to reconcile loss before tax to net cash flows from operating activities: | | | | |
Depreciation of right-of-use assets | 6 | 1,916 | | | 1,775 | |
Depreciation of property, plant and equipment | 11 | 4,989 | | | 2,689 | |
Amortisation of intangible assets | 10 | 2,300 | | | 2,326 | |
Impairment of right-of-use assets | 13 | 1,619 | | | — | |
Impairment of plant and equipment | 11 | 1,958 | | | — | |
Loss recognised from joint venture | 12 | 924 | | | 614 | |
Finance income | 7 | (7,704) | | | (7,777) | |
Finance expenses | | 562 | | | 536 | |
R&D expenditure tax credits | 5 | (7,017) | | | (3,446) | |
Share-based payment (credit)/charge | 21 | (1,080) | | | 13,794 | |
Foreign exchange (gain)/loss | | (755) | | | 1,827 | |
| | | | |
Changes in working capital: | | | |
|
Decrease/(increase) in trade receivables | | 3,138 | | | (806) | |
Decrease/(increase) in other receivables and contract assets | | 885 | | | (988) | |
Decrease in contract liabilities and other advances | | (9,909) | | | (11,893) | |
Decrease in trade payables | | (2,139) | | | (15,295) | |
(Decrease)/increase in other payables | | (53) | | | 3,625 | |
Decrease in inventories | | — | | | 50 | |
| | | | |
Interest received | | 3,455 | | | 4,904 | |
Interest paid | | (3) | | | (9) | |
R&D expenditure tax credits received | | — | | | 1,881 | |
Income taxes received | | — | | | 7,015 | |
Income taxes paid | | (150) | | | — | |
Net cash flows used in operating activities | | (67,064) | | | (84,669) | |
| | | | |
Cash flows from investing activities | | | | |
Purchase of property, plant and equipment | | (4,461) | | | (19,264) | |
Purchase of intangible assets | 10 | (154) | | | (110) | |
Additional investment in joint venture | 12 | (1,175) | | | (623) | |
Redemption of short term bank deposits | 15 | 104,248 | | | 102,350 | |
Cash invested in short term bank deposits | 15 | (150,000) | | | (150,000) | |
Net cash flows used in investing activities | | (51,542) | | | (67,647) | |
Exscientia plc
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Unaudited Condensed Consolidated Statement of Cash Flows for the six months ended June 30, 2024 and 2023 (continued) |
| | | | | | | | | | | | | | |
| | June 30, 2024 | | June 30, 2023 |
| Note | £’000 | | £’000 |
Cash flows from financing activities | | | |
|
Proceeds from issue of share capital, net of transaction costs | | 20 | | | 16 | |
Cash paid on net settlement of share based payments | 21 | (223) | | | (121) | |
Payments of obligations under lease liabilities | | (1,623) | | | (1,498) | |
Net cash flows used in financing activities | | (1,826) | | | (1,603) | |
| | | | |
Net decrease in cash and cash equivalents | | (120,432) | | | (153,919) | |
Exchange gain/(loss) on cash and cash equivalents | | 296 | | | (2,440) | |
Cash and cash equivalents at the beginning of the year | | 259,463 | | | 404,577 | |
Cash and cash equivalents at the end of the period | | 139,327 | | | 248,218 | |
| | | | |
Supplemental non-cash investing information | | | | |
Change in capital expenditures recorded within trade payables | | (1,447) | | | (5,019) | |
Change in capital expenditures recorded within other payables | | (777) | | | 101 | |
The above unaudited condensed consolidated statement of cash flows should be read in conjunction with the accompanying notes.
Exscientia plc | | |
Notes to the unaudited condensed consolidated financial statements for the three and six months ended June 30, 2024 and 2023 |
1.General information
These unaudited condensed consolidated financial statements reflect the financial performance and position of Exscientia plc (the “Company”) and its subsidiaries (collectively the “Group” or “Exscientia”) for the three and six months ended June 30, 2024 and 2023.
Exscientia plc is a public company incorporated in England and Wales and has the following wholly owned subsidiaries: Exscientia (UK) Holdings Limited, Exscientia AI Limited (“Exscientia AI”), Exscientia Inc., Exscientia Ventures I, Inc., Exscientia Ventures II, Inc., Exscientia KK, Kinetic Discovery Limited and Exscientia GmbH as well as two 50% owned joint ventures: RE Ventures I, LLC (“RE Ventures”) and RE Ventures II, LLC. Exscientia KK was liquidated on April 4, 2024.
The principal activity of the Group is that of the application of artificial intelligence (“AI”) and machine learning (“ML”) to the discovery and design of novel therapeutic compounds. Exscientia’s technology platform combines the best of human and computational capabilities to accelerate the process of designing novel, safe and efficacious compounds for clinical testing in humans.
2.Accounting policies
a)Basis of preparation
These unaudited condensed consolidated financial statements for the three and six months ended June 30, 2024 and 2023 have been prepared in accordance with International Accounting Standard 34, “Interim Financial Reporting” (“IAS 34”) as issued by the International Accounting Standards Board. The accounting policies and methods of computation applied in the preparation of the unaudited condensed consolidated financial statements are consistent with those applied in the Group’s annual financial statements for the year ended December 31, 2023 except for the estimation of income tax (see note 8).
The financial statements do not include all of the information required for annual financial statements and should be read in conjunction with the consolidated financial statements of the Group for the year ended December 31, 2023.
The financial statements have been prepared on the historical cost basis, with the exception of certain financial instruments which are measured at fair value.
The financial statements and footnotes have been presented in pounds sterling. This is the functional currency of the Company, being the currency of the primary economic environment in which the Company operates, and the presentational currency of the Group. All values are rounded to the nearest thousand pound (“£’000”) except where otherwise indicated.
These unaudited condensed consolidated financial statements were prepared at the request of the Company’s Board of Directors (the “Board”) to meet regulatory and contractual commitments and were approved by the Board on August 14, 2024 and signed on its behalf by David Hallett, Ph.D., Interim Chief Executive Officer of the Company.
b)Basis of consolidation
These unaudited condensed consolidated Group financial statements consolidate the financial statements of Exscientia plc and all its subsidiary undertakings made up to June 30, 2024.
c)Going concern
Management has undertaken a detailed cash flow forecast to assess the Group’s ability to continue as a going concern. Management's base case scenario has a cash out date of early 2027 and a severe but plausible downside scenario forecasting sufficient liquidity well into 2026. As such on a standalone basis the Directors have a reasonable expectation that the Group has adequate resources to continue operating for the foreseeable future.
Exscientia plc | | |
Notes to the unaudited condensed consolidated financial statements for the three and six months ended June 30, 2024 and 2023 |
2.Accounting policies (continued)
On August 8, 2024, the Company entered into a transaction agreement with Recursion Pharmaceuticals, Inc., a Delaware corporation (“Recursion”), whereby, subject to conditions, Recursion will acquire the Company’s entire issued and to be issued share capital. While the board’s expectation is that the business combination will provide the combined Group with the resources, internal pipeline and portfolio of pharmaceutical partnerships to achieve continued success over the coming years, there is a lack of visibility over the future plans of the potential acquirer in relation to the continued existence of the current Group parent company, Exscientia plc, and as such the Directors have concluded that a material uncertainty exists which may cast significant doubt (or raise substantial doubt as contemplated by PCAOB standards) about that legal entity’s status as a going concern. The Directors continue to adopt the going concern basis in preparing the financial statements of the Group and the financial statements do not include any of the adjustments required if the Group were unable to continue as a going concern.
d)Application of new and revised International Financial Reporting Standards (IFRSs)
There have been no new or revised accounting standards that have had a material impact on the unaudited condensed consolidated financial statements relative to those applied within the consolidated financial statements of the Group for the year ended December 31, 2023. Any new accounting standards implemented were assessed and determined to be either not applicable or did not have a material impact on the interim financial statements or processes.
e)Material accounting policies
The material accounting policies are disclosed in the consolidated financial statements of the Group for the year ended December 31, 2023. There have been no significant changes to existing accounting policies for the three and six months ended June 30, 2024.
3.Critical accounting estimates and judgements
The preparation of the financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions. These judgements, estimates and assumptions affect the reported assets and liabilities as well as income and expenses in the financial period.
The estimates are based on information available when the consolidated financial statements are prepared, historical experience and various other factors which are believed to be reasonable under the circumstances, the results of which form the basis of making judgements about the carrying values of assets and liabilities that are not readily apparent from other sources.
The significant estimates and judgements made by management in applying the Group’s accounting policies are the same as those applied in the consolidated financial statements for the year ended December 31, 2023 with the exception of changes to the Group’s estimates in relation to UK research and development tax credits.
Existing circumstances and assumptions about future developments may change due to market changes or circumstances arising that are beyond the Group’s control. Hence, estimates may vary from the actual values.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or the period of revision and future periods if this revision affects both current and future periods.
Exscientia plc | | |
Notes to the unaudited condensed consolidated financial statements for the three and six months ended June 30, 2024 and 2023 |
3.Critical accounting estimates and judgements (continued)
UK research and development tax credits- R&D intensity
The Company has historically received income in the form of cash tax credits relating to the U.K. Research and Development Tax Credit Scheme that is applicable to small and medium sized companies (“SMEs”), recognised within income tax benefit. Research and development costs which are not eligible for reimbursement under the U.K. Research and Development Tax Credit scheme, such as expenditure incurred on research projects for which the group receives income, may be reimbursed under the U.K. R&D expenditure credit (“RDEC”) scheme. Amounts receivable under the RDEC scheme are presented within other income.
Under the U.K. Research and Development Tax Credit Scheme the Company is able to surrender some of its losses for a cash rebate of up to 18.6% of expenditures related to eligible research and development projects. Qualifying expenditures largely consist of employment costs for relevant staff, external workers provided by CROs, and software and consumables used in research and development projects. A higher rate of cash rebate, of up to 26.97% of qualifying research and development expenditure, could be available if the Group were to qualify as an “R&D intensive” SME for relevant periods (broadly, a loss making SME whose qualifying R&D expenditure represents 40% (or, from April 1, 2024, 30%) or more of its total expenditure for that accounting period.
During the three months ended March 31, 2024 it was estimated that the Group would not meet the requirements to be eligible for this higher rate in relation to either of its 2023 and 2024 claims due to the definition in the legislation of the relevant R&D expenditure (which has been restricted to exclude expenditure eligible under the RDEC scheme), and as such the Group’s income tax benefit for those periods was calculated at the lower, 18.6%, rate.
Based on updated guidance from His Majesty’s Revenue and Customs that claims including RDEC qualifying expenditure within the relevant R&D expenditure utilised within the eligibility calculations would be permitted, the Group now expects to qualify as R&D intensive for the year to December 31, 2023, and has recognised an additional income tax benefit of £3,961,000 during the three months ended June 30, 2024 in relation to its 2023 claim.
UK research and development tax credits- availability of the U.K. Research and Development Tax Credit Scheme
As disclosed in note 24, the Company entered into a transaction agreement with Recursion Pharmaceuticals, Inc., a Delaware corporation (“Recursion”) on August 8, 2024, whereby, subject to conditions, Recursion will acquire the Company’s entire issued and to be issued share capital. In accordance with the terms of the United Kingdom’s R&D tax credit regime, the Company will no longer qualify for the scheme during the accounting period in which the acquisition completes, with expenditure that would previously have been eligible for the R&D tax credit scheme instead being eligible for inclusion in the RDEC. It is the Company’s current best estimate that the transaction will complete by December 31, 2024, and as such the execution of the transaction agreement has been treated as an adjusting post balance sheet event for the purposes of second quarter 2024 financial statements, and the Company’s estimated income tax benefit and other income amounts attributable to the U.K. research and development tax credit and RDEC regimes have been adjusted on this basis. Were the acquisition by Recursion to complete after December 31, 2024 the Company would expect to be eligible to claim under the R&D tax credit regime in relation to spend incurred during calendar 2024.
The rules of the UK’s R&D regime are complex, and if a tax authority were to challenge or seek to disallow our claims (in whole or in part), for example by asserting that we do not (or the relevant expenditure does not) meet the technical conditions to be granted tax credits (or cash rebates), then such challenge or disallowance, if successful, could have a material impact on our cash-flow and financial performance.
4.Revenue
Revenue recognised during the three and six months ended June 30, 2024 and 2023 relates to collaboration agreements with Bristol Myers Squibb Company (“BMY”), Sanofi S.A. (“Sanofi”), Merck KGaA, Darmstadt, Germany (“Merck KGaA, Darmstadt, Germany”), Millennium Pharmaceuticals Inc. (“Millennium”) (an indirect wholly owned subsidiary of Takeda Pharmaceutical Company Limited), as well as legacy contracts operated by the Group’s Austrian subsidiary. The proportion of revenue by customer in each period is as follows:
Exscientia plc | | |
Notes to the unaudited condensed consolidated financial statements for the three and six months ended June 30, 2024 and 2023 |
4.Revenue (continued)
| | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended June 30, | | Six months ended June 30, |
| 2024 | | 2023 | | 2024 | | 2023 |
| % | | % | | % | | % |
BMY | 23 | | | 73 | | | 25 | | | 70 | |
Merck KGaA, Darmstadt, Germany | 24 | | | — | | | 19 | | | — | |
Sanofi | 53 | | | 27 | | | 46 | | | 29 | |
Others | — | | | — | | | 10 | | | 1 | |
| 100 | | | 100 | | | 100 | | | 100 | |
| | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended June 30, | | Six months ended June 30, |
| 2024 | | 2023 | | 2024 | | 2023 |
| £’000 | | £’000 | | £’000 | | £’000 |
Service fees | — | | | — | | | — | | | 104 | |
Licensing fees - upfront payments and research funding | 4,419 | | | 3,006 | | | 9,709 | | | 8,663 | |
Total Revenue | 4,419 | | | 3,006 | | | 9,709 | | | 8,767 | |
Revenue is recognised upon the satisfaction of performance obligations, which occurs when control of the goods or services transfers to the customer. For obligations discharged over time, the Group recognises revenue equal to recoverable costs incurred for new collaborations from their inception until such time as the collaboration is sufficiently progressed such that the Group can reliably estimate the level of profit that will be achieved from delivery of the related performance obligations. Where collaborations include significant variable consideration which is constrained at the inception of the arrangement this can lead to gross losses being recognised during the early stages of a contract.
All licensing revenue during the three and six months ended June 30, 2024 and 2023 relates to obligations discharged over time, and input methods are utilised in order to estimate the extent to which the performance obligations have been satisfied at the end of the reporting period based upon costs incurred, which can be internal or third party in nature.
Included within revenue for the six months ended June 30, 2024 is an amount of £1.0 million relating to an up-front payment received from Millennium in October 2020 following completion of the related collaboration contract term on March 31, 2024, at which time all related performance obligations have been deemed to be fully satisfied.
The Group has assessed its significant collaboration arrangements with commercial partners and determined that no provision for future operating losses is required as at June 30, 2024 taking into account expected future cash inflows and remaining contract liabilities amounts for each collaboration relative to the remaining unavoidable costs of meeting the contracts’ obligations in each instance.
5.Other Income
| | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended June 30, | | Six months ended June 30, |
| 2024 | | 2023 | | 2024 | | 2023 |
| £’000 | | £’000 | | £’000 | | £’000 |
Grant income | 182 | | | 362 | | | 199 | | | 993 | |
R&D expenditure credits | 5,795 | | | 1,472 | | | 7,017 | | | 3,446 | |
| 5,977 | | | 1,834 | | | 7,216 | | | 4,439 | |
Exscientia plc | | |
Notes to the unaudited condensed consolidated financial statements for the three and six months ended June 30, 2024 and 2023 |
5.Other Income (continued)
Grant income during the three and six months ended June 30, 2024 relates to grants with Open Philanthropy Project LLC and the Austrian Wirtshaftsservice. The former provides reimbursement for certain personnel, consumables and overhead costs incurred through research and development activities, whilst the latter provided funding in respect of capital investments made in the period from August 2020 to the end of February 2022. As of June 30, 2024 and December 31, 2023 all amounts relating to grants awarded to the Group had been received.
Income relating to R&D expenditure credits during the three and six months ended June 30, 2024 includes amounts expected to be claimable under the U.K. R&D expenditure credit (“RDEC”) scheme relating to qualifying research and development expenditure incurred in the first quarter of 2024 that had previously been assessed as eligible for inclusion with the Company’s claims under the UK R&D tax credit regime available to SMEs. See note 3 for further details.
6.Operating Loss
Operating loss for the three and six months ended June 30, 2024 and 2023 has been arrived at after charging/(crediting):
| | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended June 30, | | Six months ended June 30, |
| 2024 | | 2023 | | 2024 | | 2023 |
| £’000 | | £’000 | | £’000 | | £’000 |
Depreciation of property, plant and equipment | 2,504 | | | 1,616 | | | 4,989 | | | 2,689 | |
Depreciation of right-of-use assets | 978 | | | 883 | | | 1,916 | | | 1,775 | |
Amortisation of intangible assets | 1,147 | | | 1,154 | | | 2,300 | | | 2,326 | |
Research and development expenses | 25,112 | | | 32,993 | | | 48,672 | | | 66,405 | |
Foreign exchange (gain)/loss | (70) | | | 452 | | | (927) | | | 1,644 | |
Share-based payment charge/(credit) | 2,317 | | | 6,836 | | | (1,080) | | | 13,794 | |
Impairment of right-of-use assets | 1,619 | | | — | | | 1,619 | | | — | |
Impairment of plant and equipment | 1,958 | | | — | | | 1,958 | | | — | |
7.Finance Income
| | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended June 30, | | Six months ended June 30, |
| 2024 | | 2023 | | 2024 | | 2023 |
| £’000 | | £’000 | | £’000 | | £’000 |
Bank interest income | 3,866 | | | 4,214 | | | 7,704 | | | 7,777 | |
| 3,866 | | | 4,214 | | | 7,704 | | | 7,777 | |
8.Taxation
The Group’s income tax credit is recognised at an amount determined by multiplying the loss before taxation for the interim reporting period by the Group’s best estimate of the weighted average annual income taxation rate expected for the full financial year, adjusted for the tax effect of certain items recognised in full in the interim period. As such, the effective tax rate in the interim financial statements may differ from the Group’s estimate of the effective tax rate for the annual financial statements.
The Group’s consolidated effective tax rate in respect of continuing operations for the three and six months ended June 30, 2024 was (0.59)% and 4.59% (2023: 15.80% and 13.89%). The effective tax rate is impacted by the level of eligible research and development activity undertaken by the Company, as well as the changes in scheme eligibility described in note 3 above.
Exscientia plc | | |
Notes to the unaudited condensed consolidated financial statements for the three and six months ended June 30, 2024 and 2023 |
9.Loss per share
| | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended June 30, | | Six months ended June 30, |
| 2024 | | 2023 | | 2024 | | 2023 |
Basic and diluted loss for the period (£'000) | (36,239) | | | (35,971) | | | (57,246) | | | (73,614) | |
Basic and diluted weighted average number of shares | 126,594,358 | | | 123,748,524 | | | 126,285,033 | | | 123,504,575 | |
Basic and diluted loss per share (£) | (0.29) | | | (0.29) | | | (0.45) | | | (0.60) | |
Basic loss per share (“Loss per Share”) is calculated in accordance with IAS 33 based on earnings attributable to the Company’s shareholders and the weighted average number of shares outstanding during the period.
The Company issues performance options, share options, restricted share units (“RSUs”) and performance share units (“PSUs”) to employees, upon the exercise of which ordinary shares are issued. Inclusion of these awards would have an anti-dilutive effect on the loss per share due to the loss incurred during the period, therefore basic and diluted loss per share are the same.
10.Goodwill and other intangible assets
During the six months ended June 30, 2024 the Group acquired assets at a cost of £154,000 relating to computer software. There were no disposals in the period. The amortisation charge for the period of £2,300,000 consisted of £38,000 relating to computer software, £7,000 relating to patents and £2,255,000 relating to acquired intellectual property. The residual movement in the net book value of goodwill and intangible assets relates to the foreign currency translation of assets relating to the Group’s Austrian business.
No impairment charge was recognised in the period.
11.Property, plant and equipment
During the six months ended June 30, 2024, the Group acquired assets at a cost of £2,237,000, of which £242,000 were additions to leasehold improvement and £1,836,000 were additions to plant and equipment, primarily laboratory equipment. The depreciation charge for the period was £4,989,000.
During the six months ended June 30, 2024, £430,000 was transferred from assets under construction to leasehold improvements which constituted costs relating to the fit-out of premises leased by the Group. An additional £3,054,000 was transferred from assets under construction to plant and equipment for assets now installed, primarily at our premises in Milton Park.
Disposals of property plant and equipment with a total cost and net book value of £968,000 and £26,000 respectively were made during the six months ended June 30, 2024.
On May 21, 2024, the Company announced cost saving and efficiency measures targeting some areas of target identification, precision medicine, experimentation, engineering and infrastructure. Following these measures the Company has performed an impairment review to identify property, plant and equipment which, as at June 30, 2024, have a carrying value in excess of their recoverable amounts. As a result of this review the Company has recognised an impairment charge of £795,000 in relation to plant and equipment and £1,200,000 in relation to leasehold improvements during the three months ended June 30, 2024.
12.Investments in joint ventures and joint operations
During the six months ended June 30, 2024, the Group made £1,175,000 in capital contributions to its joint venture with RallyBio, RE Ventures (six months to June 30, 2023: £623,000). The Group’s share of the loss incurred by the joint venture during the three and six months ended June 30, 2024 totalled £383,000 and £924,000 respectively (June 30, 2023: £155,000 and £614,000). There were no transactions with the Group’s other joint venture with RallyBio, RE Ventures II, LLC, during the six months ended June 30, 2024 (six months to June 30, 2023: £nil).
Exscientia plc | | |
Notes to the unaudited condensed consolidated financial statements for the three and six months ended June 30, 2024 and 2023 |
12. Investments in joint ventures and joint operations (continued)
The Group’s interests in joint operations are disclosed in the consolidated financial statements for the year ended December 31, 2023. See note 24 for details in relation to the termination of the Group’s collaboration with GT Apeiron Therapeutics Inc. (“Apeiron”) on July 17, 2024.
13.Leases
All right-of-use assets relate to leased premises. As at January 1, 2024, the Group had right-of-use assets relating to ten pre-existing lease agreements pertaining to four properties in the United Kingdom, three properties in the United States of America and one in Austria.
On June 26, 2024 the Group reached agreement with the landlord of its headquarters in Oxford, United Kingdom in relation to updated lease rentals following completion of contractually required rent reviews as per the terms of the underlying lease agreements for that premises. Based on the revised lease rentals, the related ROU assets and lease liabilities were revised upwards by £2,540,000 from that date.
In December 2022, the Group entered into a lease arrangement in relation to premises in Miami, Florida, United States. The lease term commenced on February 26, 2024, being the date at which the landlord made the premises available to the Group, resulting in the recognition of a right of use asset of £2,125,000. The lease expires on June 1, 2034. In the fourth quarter of 2023, as a result of the Group's cost containment measures, the decision was taken not to occupy these premises, and instead to lease smaller premises nearby. The Group has engaged an agent to assist in arranging the subleasing of the original leased premises to a third party, and has estimated that the present value of the unavoidable costs of meeting the Group’s obligations under the contract exceed the expected benefits to be received from subletting the space by £807,000 as at both December 31, 2023 and June 30, 2024 respectively, with such amount recorded as a provision during the year ended December 31, 2023 and subsequently recognised as an impairment of the right-of-use (“ROU”) asset upon its capitalisation in February 2024.
The Group entered into two seven-year lease arrangements in relation to laboratory and office space in Vienna, Austria on September 3, 2021. Annually from January, 1 each year lease payments are indexed based on the consumer price index rate as published by STATISTIK AUSTRIA at September of the preceding year, being 10.6% in September 2022 and 6.0% in September 2023 respectively. The impact of this change in index rate is reflected when the adjustment to the lease payments takes effect in accordance with IFRS 16 paragraph 42(b), with the change in lease rentals from January 2024 resulting in reductions of £442,000 and £532,000 to the lease liabilities and related ROU assets for the laboratory and office space respectively at that date.
As part of the impairment review described in note 12 above, the Company has recognised an impairment charge of £911,000 in relation to these premises during the three months ended June 30, 2024.
During the second quarter of 2024, the Group engaged in discussions with the landlord of one of its leased premises in Oxford, United Kingdom, the result of which was an agreement, subsequently executed on August 12, 2024, to return the lease in question to the landlord from that date. A payment of £700,000 was made upon the return of the lease, representing settlement of all outstanding obligations in relation to the premises. This agreement constitutes an adjusting post balance sheet event, and accordingly the Group has recorded an impairment to the ROU asset relating to the leased premises of £707,000 within these financial statements.
The undiscounted lease liability contractual maturities as at June 30, 2024 and December 31, 2023 are as follows:
| | | | | | | | | | | |
| June 30, 2024 | | December 31, 2023 |
| £'000 | | £'000 |
Within one year | 5,197 | | | 3,399 | |
One to five years | 16,162 | | | 14,707 | |
More than 5 years | 3,611 | | | 4,003 | |
| 24,970 | | | 22,109 | |
Exscientia plc | | |
Notes to the unaudited condensed consolidated financial statements for the three and six months ended June 30, 2024 and 2023 |
14.Other receivables
Current other receivables
| | | | | | | | | | | |
| June 30, 2024 | | December 31, 2023 |
| £’000 | | £’000 |
VAT recoverable | 1,711 | | | 3,356 | |
Prepayments | 6,294 | | | 5,961 | |
Accrued bank interest | 607 | | | 412 | |
Other receivables | 6,055 | | | 5,622 | |
| 14,667 | | | 15,351 | |
Non-current other receivables
| | | | | | | | | | | |
| June 30, 2024 | | December 31, 2023 |
| £’000 | | £’000 |
Other receivables | 657 | | | 663 | |
| 657 | | | 663 | |
15.Fair value measurement of financial instruments
This note provides an update on the judgements and estimates made by the Group in determining the fair values of financial instruments since the last annual financial report.
Nature of financial instruments recognised and measured at fair value
Apeiron shares
During the six months ended June 30, 2024 the Group’s only financial instrument measured at fair value consisted of 9,173,021 ordinary shares with a par value of $0.00001 each and 1,549,942 Series Pre-A preferred shares with a par value of $0.00001 each that the Group holds in Apeiron, which were acquired in March 2021 and in relation to which the Group has taken the election provided within IFRS 9 to recognise fair value gains and losses within Other Comprehensive Income.
On July 17, 2024 the Group and Apeiron entered into an Asset Purchase Agreement, IP Assignment Agreement, Subscription Agreement and Share Surrender Agreement, pursuant to which the Group now owns the full rights to the intellectual property in GTAEX617. As part of the consideration for the transaction, the Group surrendered its shares in Apeiron; see note 24 for further details.
Fair value measurements using significant unobservable inputs (level 3)- equity investments at FVOCI
| | | | | |
| Unlisted equity securities |
| £’000 |
Opening balance as at January 1, 2024 | 2,145 | |
Gain recognised in other comprehensive income | — | |
Closing balance as at June 30, 2024 | 2,145 | |
The Group did not measure any financial assets or financial liabilities at fair value on a non-recurring basis as at June 30, 2024. There have been no transfers between levels 2 and 3 and changes in valuation techniques during the period.
Exscientia plc | | |
Notes to the unaudited condensed consolidated financial statements for the three and six months ended June 30, 2024 and 2023 |
15. Fair value measurement of financial instruments (continued)
Other financial instruments
On January 19, 2024 the Group invested £150,000,000 into a six-month short term deposit with an F1-rated financial institution. This short term deposit accrued interest at a rate of 5.1% and has been classified as a financial asset at amortised cost. The deposit was redeemed inclusive of accrued interest on July 19, 2024.
On July 19, 2024 the Group invested £125,000,000 into a six-month deposit with an F1-rated financial institution. This short term deposit accrued interest at a rate of 5.1% and has been classified as a financial asset at amortised cost. On the same date the Group invested a further £28,837,000 into a three-month deposit with the same financial institution, also at a rate of 5.1%. This deposit has been classified as a cash equivalent.
The Group measures expected credit losses over cash and cash equivalents as a function of individual counterparty credit ratings and associated 12 month default rates. Expected credit losses over cash and cash equivalents and third-party financial derivatives are deemed to be immaterial and no such loss has been experienced during the three and six months ended June 30, 2024.
The Group also has a number of other financial instruments which are not measured at fair value in the balance sheet consisting of trade receivables, trade and other payables and other loans. For these instruments, the fair values are not materially different to their carrying amounts, since the interest receivable/payable is either close to current market rates or the instruments are short-term in nature.
16.Share capital
| | | | | | | | | | | |
| June 30, 2024 | | December 31, 2023 |
| £ | | £ |
Issued and fully paid share capital | | | |
127,017,710 (2023: 125,702,396) Ordinary shares of £0.0005 each | 63,509 | | 62,851 |
| 63,509 | | 62,851 |
Shares authorised and issued (number)
| | | | | | | | | | | |
| December 31, 2023 | Exercise of share-based payment awards | June 30, 2024 |
Ordinary shares | 125,702,396 | | 1,315,314 | | 127,017,710 | |
| 125,702,396 | | 1,315,314 | | 127,017,710 | |
A total of 1,315,314 shares were issued upon the exercise of share-based payment awards during the six months ended June 30, 2024; see note 21 for further details.
Rights of share classes
Holders of ordinary shares are entitled to one vote per share at a show of hands meeting of the Company and one vote per share on a resolution on a poll taken at a meeting and on a written resolution.
17.Contract liabilities and other advances
| | | | | | | | | | | | | | | | | | | | |
| Within one year | More than one year |
| June, 30 | | December 31, | June, 30 | | December 31, |
| 2024 | | 2023 | 2024 | | 2023 |
| £’000 | | £’000 | £’000 | | £’000 |
Contract liabilities | | | | | | |
Revenue generating collaborations | 20,215 | | | 25,036 | | 60,578 | | | 65,466 | |
Total contract liabilities | 20,215 | | | 25,036 | | 60,578 | | | 65,466 | |
| | | | | | |
Other advances | | | | | | |
Grants | 1,771 | | | 1,970 | | — | | | — | |
Total other advances | 1,771 | | | 1,970 | | — | | | — | |
| | | | | | |
Total contract liabilities and other advances | 21,986 | | | 27,006 | | 60,578 | | | 65,466 | |
A reconciliation of the movement in contract liabilities and other advances for the six months ended June 30, 2024 is as follows:
| | | | | | | | | | | | | | | | | |
| January 1, 2024 | Additions | Recognised in the income statement | Foreign exchange | June 30, 2024 |
| £’000 | £’000 | £’000 | £’000 | £’000 |
Grants | 1,971 | | — | | (199) | | — | | 1,771 | |
Revenue generating collaborations | 90,501 | | — | | (9,708) | | — | | 80,793 | |
Total contract liabilities and other advances | 92,472 | | — | | (9,907) | | — | | 82,564 | |
The Group expects to recognise its contract liabilities relating to revenue generating collaborations over the terms of the related collaborations, the longest of which extends to December 2027. As at December 31, 2023 the Group expected to recognise its contract liabilities relating to revenue generating collaborations over the period to December 2027. The ageing presented above reflects the Group's best estimate of when contract liability and other advance amounts will be utilised based upon when the underlying costs to be incurred in the delivery of the related projects are expected to be incurred.
A reconciliation of the movement in contract liabilities and other advances for the year ended December 31, 2023 is as follows:
| | | | | | | | | | | | | | | | | | | | |
| January 1, 2023 | Additions | Recognised in the income statement | Transferred to other creditors | Foreign exchange | December 31, 2023 |
| £’000 | £’000 | £’000 | £’000 | £’000 | £’000 |
Grants | 959 | | 2,141 | | (1,127) | | — | | (2) | | 1,971 | |
Revenue generating collaborations | 87,884 | | 22,655 | | (20,038) | | — | | — | | 90,501 | |
Joint operations | 9,139 | | — | | (2,033) | | (7,106) | | — | | — | |
Total contract liabilities and other advances | 97,982 | | 24,796 | | (23,198) | | (7,106) | | (2) | | 92,472 | |
18.Provisions
At June 30, 2024 a provision of £1,364,000 existed in respect of the Group’s obligation to restore alterations made on leased space within three of the Group’s leasehold properties. The required work for the spaces is expected to be completed between 2026 and 2031.
As at December 31, 2023, the Group held an onerous contract provision of £807,000 relating to one of the Group’s leased properties in Miami, Florida. The amount had been recorded as a provision because the lease term on the property had yet to commence as of December 31, 2023, and as such no right of use asset had been recorded as at that date. The lease term commenced on February 26, 2024, and as such the onerous contract provision was de-recognised at that date, and an impairment of the right of use asset recorded in its place (see note 13).
19.Other payables
Current other payables
| | | | | | | | | | | |
| June 30, 2024 | | December 31, 2023 |
| £’000 | | £’000 |
Accruals | 13,016 | | | 16,238 | |
Other payables | 5,253 | | | 2,087 | |
Other taxation and social security | 5,120 | | | 5,897 | |
Corporation tax | 192 | | | 111 | |
| 23,581 | | | 24,333 | |
20.Related party transactions
Following the Group’s IPO on October 5, 2021 the Group has no related parties in accordance with the IAS 24 definition who are not key management personnel of the Group (whose remuneration is disclosed annually) or joint ventures, and as such there are no disclosable related party transactions during either the six months ended June 30, 2024 or 2023 relating to such parties.
See note 12 for details of the Group’s transactions with joint ventures during the six months ended June 30, 2024 and 2023.
21.Share based payments
From April 2022 the Company has issued all share options, performance share options, RSUs and PSUs to employees and non-employee members of the Board of Directors under the 2021 Equity Incentive Plan (“EIP”). All awards prior to that date were issued under the following legacy plans:
–Enterprise Management Incentive (“EMI”) Scheme
–Company Share Ownership Plan (“CSOP”)
–Unapproved Share Ownership Plan (“USOP”)
Total share-based remuneration expenses relating to share options, performance share options, RSUs, PSUs and the equity securities issued upon the acquisition of a subsidiary undertaking amounted to a net credit of £(1,080,000) during the six months ended June 30, 2024 (expense for the six months ended June 30, 2023: £13,794,000).
Total share-based remuneration expenses for the three months ended June 30, 2024 amounted to £2,317,000 (three months ended June 30, 2023: £6,836,000).
21.Share based payments (continued)
Included within the net credit for the six months ended June 30, 2024 are amounts totalling £5,935,000 that were released to profit and loss as a result of the forfeiture of unvested options held by our previous CEO on their exit from the Group in February 2024. Transfer of a further £3,289,000 from the share based payment reserve to accumulated losses was made in relation to awards that had vested prior to the forfeiture date.
The following table represents the share-based payment expense/(credit) by award type for the three and six months ended June 30, 2024 and 2023:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended June 30, | | Six months ended June 30, |
| 2024 | | 2023 | | 2024 | | 2023 |
| £’000 | | £’000 | | £’000 | | £’000 |
Share options | 1,622 | | | 4,495 | | | 1,546 | | | 8,587 | |
Performance share options | 277 | | | 441 | | | (3,719) | | | 1,311 | |
PSUs | 36 | | | 184 | | | 235 | | | 329 | |
RSUs | 269 | | | 1,157 | | | 634 | | | 2,455 | |
Clawback shares | 113 | | | 559 | | | 224 | | | 1,112 | |
| 2,317 | | | 6,836 | | | (1,080) | | | 13,794 | |
Share Options
Share options are granted to employees and non-executive directors of the Group. These options typically vest in tranches over four years, with the only vesting condition relating to continued employment by the Group. Information with respect to share options for the six months ending June 30, 2024 is as follows:
| | | | | | | | |
| Number of share options | Weighted average exercise price |
Options held as at January 1, 2024 | 9,457,972 | £ | 0.08 | |
Granted | 2,281,670 | | £ | 0.00 | |
Exercised | (1,167,399) | | £ | 0.02 | |
Forfeited | (1,729,312) | £ | 0.07 | |
Options held as at June 30, 2024 | 8,842,931 | £ | 0.07 | |
| | |
Exercisable as at June 30, 2024 | 4,166,771 | £ | 0.13 | |
A Black-Scholes model has been used to calculate the fair value of the share options as at the grant date, with the following weighted average values for the six months ended June 30, 2024:
| | | | | |
Exercise price | £ | 0.0005 | |
Expected life | 6.0 years |
Expected volatility | 90.1 | % |
Risk-free rate | 3.83 | % |
Expected dividend rate | — | |
Fair value | £ | 3.74 | |
21.Share based payments (continued)
The fair value of the underlying ordinary shares is equal to the closing share price at the grant date converted at the prevailing exchange rate at that date. The risk-free rate is determined by reference to the rate of interest obtainable from U.S. government bonds over a period commensurate with the expect term of the options. Expected volatility has been set with reference to the Company’s own share price volatility over the period from the Company’s IPO to the award grant date and peer group analysis. The expected life of the options has been set equal to the mid-point between the vesting date and the expiry date of the award in question.
Performance Share Options
Performance share options are granted to certain executive officers of the Company on an annual basis, and contain market based performance conditions relating to total shareholder return as well as a continued employment vesting requirement. These awards vest in tranches over three years. Information with respect to performance share options for the six months ending June 30, 2024 is as follows:
| | | | | | | | |
| Number of share options | Weighted average exercise price |
Options held as at January 1, 2024 | 1,949,690 | | £ | 0.00 | |
Granted | 726,233 | | £ | 0.00 | |
Forfeited | (1,525,129) | | £ | 0.00 | |
Options held as at June 30, 2024 | 1,150,794 | £ | 0.00 | |
| | |
Exercisable as at June 30, 2024 | — | | £ | 0.00 | |
A Monte Carlo model has been used to calculate the fair value of the performance options as at the grant date, with the following weighted average values for the six months ended June 30, 2024:
| | | | | |
Exercise price | £ | 0.0005 | |
Expected life | 3.0 years |
Expected volatility | 87.6 | % |
Risk-free rate | 4.78 | % |
Expected dividend rate | — | |
Fair value | £ | 3.28 | |
The fair value of the underlying ordinary shares is equal to closing share price at the grant date converted at the prevailing exchange rate at that date. The risk-free rate is determined by reference to the rate of interest obtainable from US Government Bonds over a period commensurate with the expect term of the options. Expected volatility has been derived as the weighted average volatility of comparator companies who have been listed for a period commensurate with the expected term prior to the grant date, and the expected life of the options has been set equal to the mid-point between the vesting date and the expiry date of the award in question.
Performance Share Units
Performance share options are granted to certain executive officers of the group on an annual basis, and contain market based performance conditions relating to total shareholder return as well as a continued employment vesting requirement. These awards vest in tranches over three years. Information with respect to performance share units for the six months ending June 30, 2024 is as follows:
21.Share based payments (continued)
| | | | | |
| Number of PSUs |
PSUs held as at January 1, 2024 | 488,833 | |
Granted | 427,539 | |
PSUs held as at June 30, 2024 | 916,372 |
A Monte Carlo model has been used to calculate the fair value of the performance share units as at the grant date, with the same model inputs as detailed for the performance share options above.
Restricted Share Units
The Group operates a RSU scheme, whereby certain employees and directors receive RSUs held over ordinary shares in the Company. These units are non-transferable and subject to forfeiture for periods prescribed by the Company. These awards are valued at the market value of the underlying shares at the date of grant and are subsequently amortised over the periods during which the restrictions lapse, typically four years. The awards expire on the cessation of the participant’s employment with the Group. Information with respect to restricted share units for the six months ending June 30, 2024 is as follows:
| | | | | |
| Number of RSUs |
RSUs held as at January 1, 2024 | 1,019,186 |
Granted | 615,954 |
Exercised | (282,261) | |
Forfeited | (212,444) | |
RSUs held as at June 30, 2024 | 1,140,435 |
The weighted average grant date fair value per unit of the RSUs granted in the three and six months to June 30, 2024 was £3.74. The weighted average remaining contractual life of the outstanding awards as at June 30, 2024 was 9.2 years.
During the six months ended June 30, 2024, 106,699 awards were released via a net settlement arrangement, with 53,979 shares issued and £223,000 paid by the Company in order to settle related employee tax obligations. The payments made have been recognised within retained earnings. During the six months ended June 30, 2023, 53,566 awards were released via a net settlement arrangement, with 27,098 shares issued and £121,000 paid by the Company in order to settle related employee tax obligations. The payments made have been recognised within retained earnings.
22.Commitments and contingent liabilities
The Group has capital expenditure contracted for but not recognised as liabilities as at June 30, 2024. The expenditure is as follows:
| | | | | |
| June 30, 2024 |
| £’000 |
Plant and equipment | 22 | |
Computer software | 15 | |
Computer equipment | — | |
Leasehold improvements | 25 | |
Office Furniture and equipment | 19 | |
| 81 | |
22. Commitments and contingent liabilities (continued)
Gates Foundation private placement commitment
Concurrent with the Company’s IPO on October 5, 2021, the Company completed a private placement to the Gates Foundation as detailed in note 21 of the consolidated financial statements of the Group for the year ended December 31, 2023. Under the terms of the Company’s agreement with the Gates Foundation, the Group is committed to spending $70,000,000 over a four-year period to the research, discovery, and development of small molecule anti-infective therapeutics for future pandemic preparedness, with a specific focus on developing therapeutics that can be applied against multiple species of coronaviridae, influenza, and paramyxoviridae (the “Pandemic Preparedness Program”).
The Group had incurred £11,075,000 relating to the Pandemic Preparedness Program as at June 30, 2024 (December 31, 2023: £9,697,000), with a total outstanding commitment of £40,411,000 (December 31, 2023: £41,789,000).
In the event that the Group is in breach of certain terms within the agreement, the Gates Foundation has the right to sell, or require the Company to buy-back any shareholdings in the Company held by the Foundation at the higher of the public offering price and the market value of the shares at the date of default. Should such a breach occur or should the Company enter bankruptcy the Gates Foundation also has the exclusive right to utilise an exclusive global license granted as part of the agreement in relation to any IP generated by the Group pertaining to the Pandemic Preparedness Program for the benefit of people in certain developing countries. The default conditions are within the control of the Group and the license in question cannot be utilised unless such a default occurs or the Group enters bankruptcy. As such no fair value has been assigned to this license.
FFG Guarantee
Prior to its acquisition by the Group, the Company’s subsidiary, Exscientia GmbH (which was formally known as Allcyte GmbH), received grant funding totalling €2,485,000 and a €353,000 loan from the Austrian Research Promotion Agency (“FFG”) between July 2018 and December 2021, with the loan due for repayment on September 30, 2026. The provision of this funding was contingent upon certain conditions, inclusive of the continuation of research and development activities at Allcyte’s Vienna site, with the period over which the associated conditions are applicable extending to late 2025 for a portion of the funding.
In previous periods the likelihood of any repayment in relation to these amounts has been considered to be remote. In the current period the Group has re-assessed the probability of some repayment being required as a result of changes to business activities following the Group’s recent re-organisation, and deemed that while it is still unlikely that any repayment will be required, the likelihood is now deemed to be more than remote and as such is disclosing this amount as a contingent liability as at June 30, 2024.
23.Ultimate Parent and Controlling Party
Exscientia plc is the ultimate parent Company of the Group. There is no ultimate controlling party.
24.Events occurring after the reporting period
On July 17 2024, a subsidiary of the Company, Exscientia AI, and Apeiron announced that they had entered into an Asset Purchase Agreement, IP Assignment Agreement, Subscription Agreement and Share Surrender Agreement, pursuant to which Exscientia AI acquired the full rights to the intellectual property in GTAEX617 and took full operational control of the CDK7 inhibitor programme (the “IP Rights”) for the purpose of continuing Exscientia AI’s own independent research, development and commercialisation efforts. Concurrent to the transaction, Exscientia AI and Apeiron terminated the Collaboration Agreement, dated July 1, 2021, by and between the Exscientia AI and Apeiron.
24. Events occurring after the reporting period (continued)
As consideration for the IP Rights, Exscientia AI made an upfront payment to Apeiron in the amount of $10 million and forgave Apeiron of all outstanding debt, totalling $6.4 million. The Company also issued Apeiron $10 million of the Company’s equity in the form of restricted American Depositary Shares, each representing one ordinary share, nominal value £0.0005 per share. In addition, Exscientia AI surrendered 9,173,021 ordinary shares with a par value of $0.00001 each and 1,549,942 Series Pre-A preferred shares with a par value of $0.00001 each that Exscientia AI holds in Apeiron Therapeutics, Inc. with no consideration being due from Apeiron to Exscientia AI or the Company.
Pursuant to the Asset Purchase Agreement, Exscientia AI will pay Apeiron a single digit royalty, net of any applicable withholding taxes, if Exscientia AI or a third party commercialises GTAEX617. Exscientia AI will take on all development costs and shall also pay Apeiron a single digit percentage of any outlicensing income received by Exscientia AI or its affiliates if Exscientia AI enters into an outlicensing agreement with a third party.
On August 8, 2024, the Company entered into a transaction agreement with Recursion. The transaction agreement provides that, subject to customary closing conditions (including the requisite approval of each of the Company’s shareholders and Recursion’s stockholders) Recursion will acquire the Company’s entire issued and to be issued share capital pursuant to a scheme of arrangement under Part 26 of the United Kingdom Companies Act 2006.
On August 12, 2024, the Group reached an agreement with the landlord of one of its leased premises to return the lease in question from that date. A payment of £700,000 has been made upon the return of the lease, representing settlement of all outstanding obligations in relation to the premises. This agreement constitutes an adjusting post balance sheet event, and accordingly the Group has recorded an impairment to the ROU asset relating to the leased premises of £707,000.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
You should read the following discussion and analysis of our financial condition and results of operations together with our unaudited condensed consolidated interim financial statements and the related notes to those statements included as Exhibit 99.1 to the Report of Foreign Private Issuer on Form 6-K, or the Current Report, submitted to the Securities and Exchange Commission, or the SEC, on August 15, 2024 and our consolidated financial statements and the related notes to those statements included in our Annual Report on Form 20-F filed with the SEC on March 21, 2024, or the Annual Report. The following discussion is based on our financial information prepared in accordance with the International Financial Reporting Standards, or IFRS, as issued by the IASB, which may differ in material respects from generally accepted accounting principles in other jurisdictions, including U.S. GAAP. Some of the information contained in this discussion and analysis or set forth elsewhere in this Current Report, including information with respect to our plans and strategy for our business, includes forward-looking statements that invoice risks and uncertainties that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. You should review the sections in our Annual Report titled “Special Note Regarding Forward-Looking Statements” and “Risk Factors” for a discussion of the important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.
We maintain our books and records in pounds sterling. For the convenience of the reader, we have translated pound sterling amounts as of and for the period ended June 30, 2024 into U.S. dollars at the noon buying rate of the Federal Reserve Bank of New York on June 28, 2024, which was £1.00 to $1.264. These translations should not be considered representations that any such amounts have been, could have been or could be converted into U.S. dollars at that or any other exchange rate as of that or any other date.
Unless otherwise indicated or the context otherwise requires, all references to “Exscientia”, the “Company”, “we”, “our”, “us”, or similar terms refer to Exscientia Plc and its wholly owned subsidiaries.
Overview
We are a drug design company using artificial intelligence, or AI, and other technologies to efficiently design and develop differentiated medicines for diseases with high unmet patient need. The focus of our platform is to improve the probability of successful drug development by identifying and resolving likely points of failure using our AI design technology, translational systems and clinical modelling. We have demonstrated our platform can achieve design goals beyond current industry standards by advancing multiple development candidates with differentiated properties, four of which are currently in clinical trials. Our internal pipeline is primarily focused on oncology, but we also use our design capabilities with partners to expand our pipeline and generate income.
We believe many drug candidates fail due to predictable drug design issues. For more than a decade, we have been utilising AI to overcome these design issues and create better quality medicines. We also integrate novel experimental and automation systems in order to test and validate our AI-based simulations. Our closed loop of virtual design and physical experimentation is a critical advantage in learning quickly, generating data that would not be available externally, cost effectiveness and reproducibility.
Our technology platform spans generative AI, active learning, machine learning, physics-based systems, large language models and many other predictive systems. However, the output of our technology is always a measurable drug. We have over 20 drug programmes advancing, including at least two with expected clinical milestones in 2024. Each drug we create needs to have a meaningful design advantage over known competitors that is expected to have clinical benefit and can be clearly measured.
Our lead wholly-owned candidate, a CDK7 inhibitor known as GTAEXS617 (‘617), is currently in a Phase 1/2 trial with initial data expected in the second half of this year. We expect to transition to the dose expansion phase of ELUCIDATE in the second half of 2024 or early in 2025, starting with the evaluation of ‘617 in HR+/HER2‐ breast
cancer in combination with a selective estrogen receptor degrader. ‘617 was precision designed to manage the potential toxicities associated with CDK7 as well as to optimise pharmacokinetics for maximising on-target efficacy.
We also designed a PKC-theta inhibitor for Bristol Myers Squibb that they then in-licensed and are currently testing in Phase 1 clinical trials, with positive early results. Despite PKC-theta being a target of high interest with more than a dozen companies having attempted to design compounds for the target, no competitors had been potent and selective and our candidate has the potential to be first-in-class. We have ongoing milestones and royalties associated with the programme.
We have two additional internal programmes in IND-enabling studies targeting LSD1 and MALT1. Both of these candidates were designed to mitigate known toxicities that have been seen in competitive programmes. By understanding the origin of these toxicities and designing against them we believe we have produced two candidates that will have an improved probability of success in clinical development. By the end of 2024, we expect to submit an IND for our LSD1 candidate and a CTA for our MALT1 candidate, and we anticipate initiating Phase 1/2 clinical trials for each of these candidates in 2025.
Over time, we believe our transformational way of designing and developing drugs can change the industry's underlying pharmacoeconomic model, what we call 'shifting the curve'. We aim to demonstrate that it is simultaneously possible to improve probability of success through designing better quality drugs while also reducing investment requirements through improved technologies and process.
Recent Developments
On February 7, 2024, we announced the initiation of EXCYTE-2, an observational clinical study in acute myeloid leukaemia, or AML, to investigate the relationship between ex vivo drug response, measured in primary blood or bone marrow samples and actual patient clinical response. The EXCYTE-2 study will collect blood and bone marrow samples from first-line patients with AML, with an option to expand to second-line patients. In addition, the study allows for the evaluation of activity of ‘539, our LSD1 inhibitor, in a large clinically annotated sample set.
On February 13, 2024, our board of directors terminated the employment of Andrew Hopkins as our Chief Executive Officer and Principal Executive Officer, and appointed David Hallett, our Chief Scientific Officer, as Interim Chief Executive Officer and Interim Principal Executive Officer. Dr. Hopkins was also removed from his role as a member of the board of directors, and Dr. Hallett was appointed to serve as a member of the board of directors on an interim basis. Dr. Hopkins’ conduct did not impact our consolidated financial statements or our internal controls over financial reporting, and his termination is unrelated to our operational or financial performance.
On April 26, 2024, a putative class action complaint was filed in the U.S. District Court for the District of New Jersey against Exscientia plc, Andrew Hopkins, Ben R. Taylor and David Nicholson (Case 1:24-cv-05692). On June 21, 2024, a separate complaint was filed against the same defendants in the U.S. District Court for the District of New Jersey (Case 1:24-cv-07181). Both complaints allege that the defendants violated federal securities laws by, among other things, making materially false and misleading statements regarding our business, operations, and prospects. The complaints seek unspecified compensatory damages, as well as an award of reasonable attorneys’ fees and other costs, on behalf of persons and/or entities which purchased our securities between March 23, 2022 and February 12, 2024. On June 25, 2024, plaintiff Frank Campanile filed a motion asking the court to consolidate both cases, appoint Campanile as Lead Plaintiff, and appoint Campanile’s attorneys as Lead Counsel for the class. That motion remains pending. The parties have stipulated and the court has ordered that within 14 days of the court appointing Lead Plaintiff and Lead Counsel, the parties will submit a proposed schedule for the filing of an amended complaint and defendants’ response(s) to the complaint. We dispute the claims and intend to defend against the claims accordingly.
On May 21, 2024, we announced cost saving and efficiency measures, which include an expected headcount reduction in the range of 20-22% to be completed by the end of 2024, targeting some areas of target identification, precision medicine, experimentation, engineering and infrastructure. The initiative is expected to result in severance and termination-related costs of approximately £5.9 million, all of which were recognised within administrative expenses in the second quarter of 2024, with £4.4 million recorded within other payables as at June 30, 2024.
On August 8, 2024, the Company entered into a transaction agreement with Recursion Pharmaceuticals, Inc., a Delaware corporation (“Recursion”). The transaction agreement provides that, subject to terms and conditions including the requisite approval of each of the Company’s shareholders and Recursion’s stockholders, Recursion will acquire the Company’s entire issued and to be issued share capital pursuant to a scheme of arrangement under Part 26 of the United Kingdom Companies Act 2006. Subject to the satisfaction or waiver of the closing conditions, the transaction is expected to close by early 2025.
Components of Results of Operations
Revenue
We generate revenue broadly from two streams that relate to our principal activities:
•Licensing fees: We receive licensing fees from partnered programmes where we develop intellectual property on behalf of a collaboration partner. These agreements either assign all of the designated intellectual property to the partner from inception or grant an exclusive option to the partner to acquire rights to the future development and commercialisation of the intellectual property. As part of these agreements, we may receive future milestone and royalty payments upon achievement of clinical, regulatory and commercial milestones; and
•Service fees: We generate service fees from drug discovery collaboration agreements where we are utilising our proprietary technology to develop novel intellectual property on behalf of the collaboration partner, but do not have any rights to future milestones and royalties as a direct result of the agreement. We also generate service revenues through our Exscientia GmbH entity related to collaboration agreements that existed with Exscientia GmbH at the time of our acquisition, which we expect to discontinue at the earliest commercially viable point.
We receive four types of payments within the two revenue streams:
•Upfront payments, which are generally payable upon execution of the collaboration agreement or on initiation of a project;
•Research funding (including term extension payments), which is generally payable throughout the collaboration at defined intervals that are set out in the agreement (e.g., quarterly or at the beginning of a specific phase of work) and is intended to fund research (internal and external) to develop the drug compound that is the subject of the collaboration;
•Milestone payments, which are linked to the achievement of events that are defined in the agreement, such as clinical and regulatory milestones; and
•Opt-in payments, which are similar in principle to milestone payments, but are payable when the partner exercises its option to take ownership of the designated intellectual property. These payments only exist where we initially retained ownership of the designated intellectual property.
In addition to the payments described above, we may also receive milestone payments upon the first commercial sale of a product, if and when approved, the amount of which is based on the territory the sale occurs in, and royalties based on worldwide net sales. These amounts have not been included within the transaction price for any contract as of June 30, 2024 and 2023. We have only recognised revenue in respect of non-cancellable, non- refundable payments and achieved milestones due under executed collaboration contracts. Any payments which relate to future milestones or options under the control of our collaboration partners have not been recognised.
Cost of Sales
Cost of sales relate to costs from third-party contract research organisations, or CROs, as well as internal labour and absorbed overhead incurred in relation to collaboration arrangements and drug discovery agreements for third parties which have been designated as contracts with customers in accordance with IFRS 15. External CRO costs are the main driver for our cost of sales, representing 60% and 56% compared to 64% and 67% of total cost of sales during
the three and six months ended June 30, 2024 and 2023, respectively. The reduction is primarily a result of increased activity in relation to our collaboration with Sanofi, where a higher proportion of internal costs are incurred, in addition to the transition of projects to strategic CRO partners in lower cost jurisdictions.
We expect our cost of sales to increase in the future as we commence additional collaboration projects.
Gross Loss
Gross loss represents revenue less cost of sales. Gross margin is gross loss expressed as a percentage of revenue. Our gross margin may fluctuate from period to period as a result of our drug discovery collaboration activities. For example, the revenue associated with collaboration up-front payments is recognised over time and is adjusted due to changes in the estimated costs to be incurred in satisfying the related performance obligation, while certain opt-in and milestone payments are recognised when assessed to be highly probable, which is generally upon achievement.
For obligations in which revenue is recognised at a point in time, that point in time is the date at which the satisfaction of the performance obligation is mutually agreed with our customer. For obligations discharged over time the Group recognises revenue equal to recoverable costs incurred for new collaborations from their inception until such time as the collaboration is sufficiently progressed such that the Group can reliably estimate the level of profit that will be achieved from delivery of the related performance obligations. Revenue from potential milestones or royalties are typically not recognised at the initiation of a contract. Upfront payments that include performance obligations are recognised as those obligations are satisfied. As a result of this, until total costs and time to completion can be reliably estimated, a gross loss may be recognised on individual customer contracts despite the expectation that the relevant contract will be profitable overall.
Therefore, we believe that gross loss is not currently a helpful predictor of the future performance of our business.
Research and Development Expenses
Research and development expenses consist of internal and co-owned drug discovery programme costs and costs incurred for the ongoing development of our technology platform. All research and development costs are expensed as incurred due to scientific and technological uncertainty. These costs primarily consist of:
•internal personnel-related expenses, including salaries, benefits, bonuses and stock-based compensation for employees engaged in research and development functions;
•external expenses incurred under agreements with CROs and other consultants involved in our research and development;
•facilities, depreciation and amortisation, insurance and other direct and allocated expenses incurred as a result of research and development activities; and
•costs associated with operating our digital infrastructure, including allocated software, computing capacity costs, and laboratory-related costs, including laboratory equipment depreciation.
All direct external research and development expenditures are tracked on a programme-by-programme basis and consist primarily of fees paid to CROs relating to wholly and jointly operated discovery programmes in the later stages of drug discovery, including lead optimisation, preclinical and clinical studies, and are assigned to the individual programmes. We utilise internal employee time and cost data to allocate internal research and development expenses, such as employee costs, laboratory supplies, facilities, depreciation, or other indirect costs, to specific programmes because these costs are deployed across multiple programmes.
We expect our research and development expenses to remain relatively flat over the next few years, as increased costs relating to advancing certain programmes through the clinic are offset by strategic pipeline rationalisation and efficiency savings including the use of our automation facility in Milton Park. While drug development generally becomes more costly as programmes advance into later stages, as these trials typically require a higher number of patients enrolled and sites operated, we cannot determine with certainty the completion costs of current or future clinical trials of our drug candidates due to the inherently unpredictable nature of drug development. At this time, we cannot reasonably estimate or know the nature or timing of the efforts that will be necessary to complete the
development and commercialisation of any drug candidates that we develop from our programmes. As a result, our research and development expenses may vary substantially from period to period based on the timing of our research and development activities. All of our programmes are at an early stage of development, and we may experience numerous unforeseen events during, or as a result of, the clinical trial process that could delay or prevent commercialisation of our drug candidates and result in a significant change in the costs and timing associated with the development of programmes.
General and Administrative Expenses
General and administrative expenses consist of personnel-related expenses associated with our executive, legal, finance, human resources, information technology and other administrative functions, including salaries, benefits, bonuses and stock-based compensation. General and administrative expenses also include professional fees (including fees relating to external legal, accounting and consulting services), allocated overhead costs, including depreciation charges associated with our information technology, facilities and other administrative functions.
We expect that our general and administrative expenses will remain relatively flat in the near to mid-term.
Share-based Compensation
Share-based compensation expenses/(credits) are recorded within either research and development expenses or administrative expenses depending on the activities of the employees to which they relate.
Our share-based compensation relates to share awards granted to employees and non-employee members of the Board of Directors in connection with Exscientia’s share-based compensation plans. Share-based payment awards primarily consist of service based awards, some of which also have market-based performance conditions. We measure the fair value of service based awards at the grant date using the Black-Scholes option pricing model, whilst the fair value of those awards also containing market-based performance conditions is determined at the grant date using a Monte Carlo simulation model. These models incorporate various assumptions including the expected volatility of our ordinary shares, the expected term of the awards and a risk-free interest rate. We amortise the fair value over the vesting term on a straight-line basis. At each statement of financial position date, the Group revises its estimate of the number of awards that are expected to become exercisable based on forfeiture rates, and with the exception of changes in the estimated probability of achieving market-based performance conditions, adjustments are made such that at the end of the vesting period the cumulative charge is based on the number of awards that eventually vest. If any of the assumptions used in the models change significantly for future grant valuations, share-based compensation expense may differ materially in the future from that recorded in the current period.
We expect that our share-based compensation expenses will increase in the future relative to the credit for the six months ended June 30, 2024 , which has been impacted by the cost and efficiency measures described above in addition to amounts totalling £5.9 million that were released to profit and loss as a result of the forfeiture of awards held by our previous CEO on his exit from the Group in February 2024.
Other Income
Other income consists of income from grants, tax credits receivable from the United Kingdom’s R&D tax credit regime and Austrian R&D tax credits.
Grant income during the three and six months ended June 30, 2024 relates to grants with Open Philanthropy Project LLC and the Austrian Wirtshaftsservice. The former provides reimbursement for certain personnel, consumables and overhead costs incurred through research and development activities, whilst the latter provided funding in respect of capital investments made in the period from August 2020 to the end of February 2022.
As of June 30, 2024 and December 31, 2023, all amounts relating to grants awarded to the Group had been received.
The other component of other income relates to certain R&D tax credits received by the Group as follows:
•UK R&D tax credits receivable in relation to eligible expenditures that are not eligible for cash rebates, as discussed below under the section entitled Income Tax Benefit. These costs are claimed under the general UK R&D tax credit scheme, which offers an “above the line” tax credit of up to 20% for qualifying expenditures.
•An Austrian Research Premium in relation to eligible research and experimental development expenditures. The research premium is accounted for within other income at a rate of 14%.
Foreign Exchange Gains/(losses)
Foreign exchange gains/(losses) arise primarily on the translation of our non-pounds sterling denominated cash and cash equivalents, in addition to outstanding monetary non-pounds sterling financial assets and liabilities, including trade receivables.
Finance Income
Finance income arises primarily from interest income on cash, cash equivalents and short-term bank deposits.
Finance Expenses
Finance expenses consist of interest expenses related to lease liabilities as recognised under the accounting standard IFRS 16 ‘Leases’, interest in relation to unwinding the discounting of restoration provisions recognised in relation to the Group’s leased premises and loan and bank interest payable.
Share of Loss of Joint Venture
Share of loss of joint ventures consists of our share of costs incurred by RE Ventures I, LLC, the joint venture entity we own equally with RallyBio.
Income Tax Benefit
Our income tax benefit is comprised of research and development tax credits recoverable in the United Kingdom offset by income tax payable in the United States and Austria. We are subject to corporation taxation in the United Kingdom. Exscientia AI Limited’s wholly owned U.S. subsidiaries, Exscientia, Inc., Exscientia Ventures I, Inc. and Exscientia Ventures II, Inc. are subject to corporation taxation in the United States. Exscientia AI Limited’s wholly owned subsidiary Exscientia GmbH is subject to corporation tax in Austria. Due to the nature of our business, we have generated losses since inception. Exscientia, Inc., and Exscientia GmbH generate taxable profits due to intercompany transfer pricing arrangements.
Under the U.K. Research and Development Tax Credit Scheme the Company is able to surrender some of its losses for a cash rebate of up to 18.6% of expenditures related to eligible research and development projects, with the cash rebate recognised within income tax benefit. Qualifying expenditures largely consist of employment costs for relevant staff, external workers provided by CROs, and software and consumables used in research and development projects. A higher rate of cash rebate, of up to 26.97% of qualifying research and development expenditure, could be available if the Group were to qualify as an “R&D intensive” SME for relevant periods (broadly, a loss making SME whose qualifying R&D expenditure represents 40% (or, from April 1, 2024, 30%) or more of its total expenditure for that accounting period.
During the three months ended March 31, 2024 it was estimated that the Group would not meet the requirements to be eligible for this higher rate in relation to either of its 2023 and 2024 claims due to the definition in the legislation of the relevant R&D expenditure (which has been restricted to exclude expenditure eligible under the RDEC scheme), and as such the Group’s income tax benefit for those periods was calculated at the lower, 18.6%, rate.
Based on updated guidance from His Majesty’s Revenue and Customs that claims including RDEC qualifying expenditure within the relevant R&D expenditure utilised within the eligibility calculations would be permitted, the Group now expects to qualify as R&D intensive for the year to December 31, 2023, and has recognised an additional income tax benefit of £3,961,000 during the three months ended June 30, 2024 in relation to its 2023 claim.
The Company entered into a transaction agreement with Recursion on August 8, 2024, whereby, subject to conditions, Recursion will acquire the Company’s entire issued and to be issued share capital. In accordance with the terms of the United Kingdom’s R&D tax credit regime, the Company will no longer qualify for the scheme during the accounting period in which the acquisition completes, with expenditure that would previously have been eligible instead being eligible for inclusion in the RDEC. It is the Company’s current best estimate that the transaction will complete by December 31, 2024, and as such the execution of the transaction agreement has been treated as an adjusting post balance sheet event for the purposes of second quarter 2024 financial statements, and the Company’s estimated income tax benefit and other income amounts attributable to the U.K. research and development tax credit and RDEC regimes have been adjusted on this basis. Were the acquisition by Recursion to complete after December 31, 2024 the Company would expect to be eligible to claim under the R&D tax credit regime in relation to spend incurred during calendar 2024.
The rules of the UK’s R&D regime are complex, and if a tax authority were to challenge or seek to disallow our claims (in whole or in part), for example by asserting that we do not (or the relevant expenditure does not) meet the technical conditions to be granted tax credits (or cash rebates), then such challenge or disallowance, if successful, could have a material impact on our cash-flow and financial performance.
Segmented and Enterprise Wide Information
We manage our operations as a single operating segment for the purposes of assessing performance and making operating decisions. Our focus is on the discovery and development of small molecule drug candidates.
Results of Operations
Comparison of the Three and Six Months ended June 30, 2024 and 2023
The following table summarises our Consolidated Statement of Comprehensive Loss for each period presented (in thousands): | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended June 30, | | Six months ended June 30, |
| 2024 | | 2023 | | 2024 | | 2023 |
Revenue | $ | 5,586 | | | £ | 4,419 | | | £ | 3,006 | | | £ | 9,709 | | | £ | 8,767 | |
Cost of sales | (9,807) | | | (7,759) | | | (6,269) | | | (15,166) | | | (14,726) | |
Gross loss | (4,221) | | | (3,340) | | | (3,263) | | | (5,457) | | | (5,959) | |
Research and development expenses | (31,742) | | | (25,112) | | | (32,993) | | | (48,672) | | | (66,405) | |
General and administrative expenses | (21,238) | | | (16,802) | | | (11,635) | | | (20,232) | | | (22,549) | |
Foreign exchange gains/(losses) | 88 | | | 70 | | | (452) | | | 927 | | | (1,644) | |
Other income | 7,555 | | | 5,977 | | | 1,834 | | | 7,216 | | | 4,439 | |
Operating loss | (49,558) | | | (39,207) | | | (46,509) | | | (66,218) | | | (92,118) | |
Finance income | 4,887 | | | 3,866 | | | 4,214 | | | 7,704 | | | 7,777 | |
Finance expenses | (382) | | | (302) | | | (273) | | | (562) | | | (536) | |
Share of loss of joint venture | (484) | | | (383) | | | (155) | | | (924) | | | (614) | |
Loss before taxation | (45,537) | | | (36,026) | | | (42,723) | | | (60,000) | | | (85,491) | |
Income tax (charge)/benefit | (269) | | | (213) | | | 6,752 | | | 2,754 | | | 11,877 | |
Loss for the period | $ | (45,806) | | | £ | (36,239) | | | £ | (35,971) | | | £ | (57,246) | | | £ | (73,614) | |
Revenue
The following table presents our revenue for the years indicated (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended June 30, | | Six months ended June 30, |
| 2024 | | 2023 | | 2024 | | 2023 |
Service fees | $ | — | | | £ | — | | | £ | — | | | £ | — | | | £ | 104 | |
Licensing fees - upfront payments and research funding | 5,586 | | | 4,419 | | | 3,006 | | | 9,709 | | | 8,663 | |
Total Revenue | $ | 5,586 | | | £ | 4,419 | | | £ | 3,006 | | | £ | 9,709 | | | £ | 8,767 | |
All licensing revenues during the three and six months ended June 30, 2024 and 2023 relate to obligations discharged over time, and input methods are utilised in order to estimate the extent to which the performance obligations have been satisfied at the end of the reporting period based upon costs incurred, which can be internal or third party in nature.
Included within revenue for the six months ended June 30, 2024 is an amount of £1.0 million relating to an up-front payment received from Millennium in October 2020 following completion of the related collaboration contract term on March 31, 2024, at which time all related performance obligations have been deemed to be fully satisfied.
The Group has assessed its significant collaboration arrangements with commercial partners and determined that no provision for future operating losses is required as at June 30, 2024 taking into account expected future cash inflows and remaining contract liabilities amounts for each collaboration relative to the remaining unavoidable costs of meeting the contracts’ obligations in each instance.
Cost of Sales
The following table presents our cost of sales for the periods indicated (in thousands): | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended June 30, | | Six months ended June 30, |
| 2024 | | 2023 | | 2024 | | 2023 |
External CRO costs | $ | 5,842 | | | £ | 4,622 | | | £ | 4,039 | | | £ | 8,553 | | | £ | 9,812 | |
Internal labour and overheads | 3,965 | | | 3,137 | | | 2,230 | | | 6,613 | | | 4,914 | |
Total cost of sales | $ | 9,807 | | | £ | 7,759 | | | £ | 6,269 | | | £ | 15,166 | | | £ | 14,726 | |
Cost of sales for the three and six months ended June 30, 2024 were £7.8 million and £15.2 million respectively, as compared to £6.3 million and £14.7 million for the same periods ended June 30, 2023. The increase in cost of sales relative to the prior year is primarily the result of an increase in the number of active partnership projects being delivered during 2024, offset by cost savings from cost efficiency measures.
Research and Development Expenses
The following table presents our research and development expenses for the periods indicated (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended June 30, | | Six months ended June 30, |
| 2024 | | 2023 | | 2024 | | 2023 |
GTAEXS617 | $ | 774 | | | £ | 612 | | | £ | 632 | | | £ | 1,209 | | | £ | 1,383 | |
Other research projects | 2,951 | | | 2,335 | | | 8,931 | | | 4,872 | | | 18,134 | |
Total external research and development expense | 3,725 | | | 2,947 | | | 9,563 | | | 6,081 | | | 19,517 | |
Headcount related expenses | 16,180 | | | 12,801 | | | 18,210 | | | 25,649 | | | 35,413 | |
Laboratory consumables and equipment | 1,550 | | | 1,226 | | | 1,046 | | | 2,821 | | | 2,852 | |
Software and data | 2,689 | | | 2,127 | | | 2,145 | | | 4,349 | | | 4,700 | |
Amortisation of acquired IP | 1,418 | | | 1,122 | | | 1,140 | | | 2,255 | | | 2,304 | |
Depreciation and amortisation | 3,408 | | | 2,696 | | | 2,235 | | | 5,346 | | | 3,446 | |
Impairment of property, plant and equipment | 2,475 | | | 1,958 | | | — | | | 1,958 | | | — | |
R&D consultants | 913 | | | 722 | | | 525 | | | 1,232 | | | 1,229 | |
Other | 655 | | | 518 | | | 434 | | | 1,032 | | | 1,344 | |
Total internal research and development expenses | 29,288 | | | 23,170 | | | 25,735 | | | 44,642 | | | 51,288 | |
Reimbursements from collaboration partners | (1,271) | | | (1,005) | | | (2,305) | | | (2,051) | | | (4,400) | |
Total research and development expenses | $ | 31,742 | | | £ | 25,112 | | | £ | 32,993 | | | £ | 48,672 | | | £ | 66,405 | |
Reimbursements from collaboration partners represents amounts recharged to partners in relation to our joint arrangement agreements.
Research and development expenses for the three and six months ended June 30, 2024 were £25.1 million and £48.7 million respectively, as compared to £33.0 million and £66.4 million for the same period ended June 30, 2023. The decrease on the prior period is a result of cost reductions relating to pipeline prioritisation activities implemented during the second half of 2023 and cost savings from operational efficiencies, including achieving faster cycle times and lower outsourcing costs, offset to a degree by increased depreciation expenses resulting from our continued investment in plant and equipment, including in relation to our automation laboratory in Milton Park, Oxfordshire and charges totalling £2.0 million following an impairment review relating to the Group’s recent corporate reorganisation activities.
General and Administrative Expenses
General and administrative expenses for the three and six months ended June 30, 2024 were £16.8 million and £20.2 million respectively, as compared to £11.6 million and £22.5 million for the same periods ended June 30, 2023. The current quarter increase on the prior year relates primarily to severance and termination-related costs totalling £5.9 million relating to the cost saving and efficiency measures announced in May 2024. The decrease in general and administrative expenses for the six months ended June 30, 2024 relative to the same period in the prior year is due to cost savings from operational efficiencies as well as £5.9 million that was credited on the forfeiture of equity awards held by our previous CEO upon his exit from the Company in February 2024.
Foreign Exchange Gains/(Losses)
Foreign exchange gains for the three and six months ended June 30, 2024 were £0.1 million and £0.9 million respectively, as compared to losses of £0.5 million and £1.6 million for the same periods ended June 30, 2023. The current period gains are due to the impact of pounds sterling weakening against the U.S dollar on our foreign currency denominated cash deposits.
Other Income
Other income for the three and six months ended June 30, 2024 was £6.0 million and £7.2 million respectively, as compared to £1.8 million and £4.4 million for three and six months ended June 30, 2023. The increase in other income as compared to the same periods ended June 30, 2023 was primarily due to increases in the UK R&D expenditure credit following the estimated change in the Group’s eligibility to claim under the R&D tax credit regime relating to the proposed acquisition of the Company by Recursion.
Net Finance Income
Net finance income for the three and six months ended June 30, 2024 were a net income of £3.6 and £7.1 million as compared to net finance income of £3.9 million and £7.2 million during the three and six months ended June 30, 2023.
Share of Loss of Joint Venture
Our share of loss on joint ventures for the three and six months ended June 30, 2024 was £0.4 million and £0.9 million respectively, as compared to £0.2 million and £0.6 million for the three and six months ended June 30, 2023.
Income Tax (Charge)/Benefit
The income tax (charge)/benefit for the three and six months ended June 30, 2024 was £(0.2) million and £2.8 million respectively, as compared to £6.8 million and £11.9 million for the same periods ended June 30, 2023. Our income tax benefit balance largely consists of research and development tax credits with the decrease in benefit due to the expectation that the Group will no longer be eligible to claim under the U.K. R&D tax credit scheme in the current year assuming its acquisition by Recursion completes during calendar 2024.
Liquidity and Capital Resources
Sources of Liquidity
Since our inception, we have not generated any revenue from the commercialisation of drug candidates and have instead financed our operations through sales of the Company’s ordinary and preferred shares in addition to research funding and milestone payments resulting from our partnered programmes. We had cash, cash equivalents and short term bank deposits of £292.8 million and £363.0 million as of June 30, 2024 and December 31, 2023, respectively.
Our primary uses of capital are, and are expected to continue to be, research and development expenses, compensation and related personnel expenses, and other operating expenses, including facilities. Cash used to fund operating expenses is impacted by the timing of when we pay expenses, as reflected in the change in our outstanding accounts payable and accrued expenses. We expect to incur substantial expenses in connection with the advancement of our drug candidates through the phases of clinical development.
The following table summarises the primary sources and uses of cash for each period presented (in thousands):
| | | | | | | | | | | | | | | | | |
| Six months ended June 30, |
| 2024 | | 2023 |
Cash and cash equivalents at beginning of the period | $ | 327,961 | | | £ | 259,463 | | | £ | 404,577 | |
Net cash flows used in operating activities | (84,769) | | | (67,064) | | | (84,669) | |
Net cash flows used in investing activities | (65,149) | | | (51,542) | | | (67,647) | |
Net cash flows used in financing activities | (2,308) | | | (1,826) | | | (1,603) | |
Net decrease in cash and cash equivalents | $ | (152,226) | | | £ | (120,432) | | | £ | (153,919) | |
Exchange gain/(loss) on cash and cash equivalents | $ | 374 | | | £ | 296 | | | £ | (2,440) | |
Cash and cash equivalents at the end of the period | $ | 176,109 | | | £ | 139,327 | | | £ | 248,218 | |
Supplemental disclosure of total cash inflow information
| | | | | | | | | | | | | | | | | |
| Six months ended June 30, |
| 2024 | | 2023 |
Decrease in cash and cash equivalents | $ | (152,226) | | | £ | (120,432) | | | £ | (153,919) | |
Increase in short term bank deposits | 63,038 | | | 49,872 | | | 50,702 | |
Exchange gain/(loss) on cash and cash equivalents | 374 | | | 296 | | | (2,440) | |
Net decrease in cash, cash equivalents and short term bank deposits including foreign exchange gains/(losses) on cash and cash equivalents | $ | (88,814) | | | £ | (70,264) | | | £ | (105,657) | |
Net decrease in cash, cash equivalents and short-term bank deposits including foreign exchange gains/(losses) on cash and cash equivalents is not a measure defined by IFRS. We believe that the above disclosure is useful to investors as it illustrates the movement in our cash and short-term bank deposits during the period.
As a result, you should not consider the above in isolation from, or as a substitute analysis for, our results reported in accordance with IFRS.
Supplemental disclosure of operating cash inflow information
| | | | | | | | | | | | | | | | | |
| Six months ended June 30, |
| 2024 | | 2023 |
Cash flow from collaborations | $ | 5,668 | | | £ | 4,484 | | | £ | 910 | |
Amounts invoiced during the period | (1,646) | | | (1,302) | | | (1,740) | |
Foreign exchange (gains)/losses on trade receivables | (56) | | | (44) | | | 24 | |
Increase in trade receivables | $ | 3,966 | | | £ | 3,138 | | | £ | (806) | |
Operating Activities
Net cash outflows from operating activities totalled £67.1 million for the six months ended June 30, 2024 as opposed to £84.7 million for the six months ended June 30, 2023, primarily as a result of decreased R&D expenditure and working capital movements.
We expect that our cash inflows will continue to be highly variable from period to period, primarily due to the structure of our collaboration agreements. These agreements generally include payments to us at inception of the contract and also upon the achievement of milestones, the timing and achievement of which are highly uncertain and difficult to predict.
Investing Activities
Net cash used in investing activities for the six months ended June 30, 2024 was £51.5 million, as compared to £67.6 million for the six months ended June 30, 2023. The majority of the current period outflow relates to the investment of £150.0 million into a 6 month fixed term bank deposit on January 19, 2024, offset by amounts totalling £104.2 million received during the period upon the maturity of short term bank deposits placed during 2023.
Financing Activities
Net cash used in financing activities for the six months ended June 30, 2024 was £1.8 million as compared to net cash provided of £1.6 million for the six months ended June 30, 2023. The majority of the current period financing cash outflow relates to payments of obligations under lease liabilities.
Funding Requirements
Since our inception, we have incurred significant losses due to our research and development expenses. We expect to continue to incur significant losses in the foreseeable future and expect our expenses to increase in connection with our ongoing operations, particularly as we advance our product candidates into clinical development and commercialisation.
We believe that our existing cash, cash equivalents and short term bank deposits will be sufficient to fund our operations and capital expenditure requirements well into 2027.
We may need to obtain additional financing to fund our future operations, including completing the development and commercialisation of our drug candidates. We are subject to risks related to the development and commercialisation of pharmaceutical products, and we may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may adversely affect our business. Our forecast of sufficient financial runway to support our operations is a forward-looking statement and involves risks and uncertainties, and actual results could vary as a result of a number of factors. Our future capital requirements will depend on many factors, including, but not limited to:
•progress, timing, scope and costs of our clinical trials, including the ability to timely initiate clinical sites, enrol subjects and manufacture drug candidates for our ongoing, planned and potential future clinical trials;
•time and costs required to perform research and development to identify and characterise new drug candidates from our research programmes;
•time and costs necessary to obtain regulatory authorisations and approvals that are required to execute clinical trials or commercialise our products;
•our ability to successfully commercialise our drug candidates, if approved;
•our ability to have clinical and commercial products successfully manufactured consistent with the regulations of the U.S. Food and Drug Administration, the European Medicines Agency and other applicable regulatory authorities;
•amount of sales and other revenues from drug candidates that we may commercialise, if any, including the selling prices for such potential products and the availability of adequate third-party coverage and reimbursement for patients;
•sales and marketing costs associated with commercialising our products, if approved, including the cost and timing of building our marketing and sales capabilities;
•terms and timing of any revenue from our existing and future collaborations;
•costs of operating as a public company;
•time and cost necessary to respond to technological, regulatory, political and market developments;
•costs of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights;
•costs associated with, and terms and timing of, any potential acquisitions, strategic collaborations, licensing agreements or other arrangements that we may establish; and
•inability of clinical sites to enrol patients as healthcare capacities are required to cope with geopolitical conflict, natural disasters (that could be a result of climate change) or other health system emergencies such as the COVID-19 pandemic.
The outcome of any of these or other variables with respect to the development of any of our current and future drug candidates could significantly change the costs and timing associated with the development and commercialisation of that drug candidate. Furthermore, our operating plans may change in the future, and we may need additional funds to meet operational needs and capital requirements associated with such operating plans.
Known Trends, Events and Uncertainties
While the long-term economic impact of the wars in Ukraine and Israel is difficult to assess or predict, each of these events has caused significant disruptions to and increased volatility in the global financial markets. Furthermore, the United States and the United Kingdom continue to face increased risk of inflation, which may result in increased
operating costs (including labour costs) and may affect our operating budgets. Although we do not believe that inflation has had a material impact on our financial position or results of operations to date, we may experience increases in the near future (especially if inflation rates continue to rise) on our operating costs, including our labour costs and research and development costs, due to supply chain constraints, consequences associated with the ongoing wars in Ukraine and Israel, and employee availability and wage increases, which may result in additional stress on our working capital resources. If the disruptions and instability deepen or persist, we may not be able to access our cash as needed or to raise additional capital on favourable terms, or at all, which could in the future negatively affect our financial condition and our ability to pursue our business strategy.
On August 8, 2024, the Company entered into a transaction agreement with Recursion, whereby, subject to conditions, Recursion will acquire the Company’s entire issued and to be issued share capital. While the board’s expectation is that the business combination will provide the combined Group with the resources, internal pipeline and portfolio of pharmaceutical partnerships to achieve continued success over the coming years, there is a lack of visibility over the future plans of the potential acquirer in relation to the continued existence of the current Group parent company, Exscientia plc, and as such the Directors have concluded that a material uncertainty exists which may cast significant doubt (or raise substantial doubt as contemplated by PCAOB standards) about that legal entity’s status as a going concern.
Critical Accounting Policies and Significant Judgements and Estimates
Our unaudited condensed consolidated financial statements for the three and six months ended June 30, 2024 and 2023 are prepared in compliance with IAS 34, as issued by the IASB. The preparation of the consolidated financial statements in accordance with IFRS requires the use of estimates and assumptions that affect the value of assets and liabilities — as well as contingent assets and liabilities — as reported on the statement of financial position date, and revenues and expenses arising during the reporting period. We describe our significant accounting policies and judgements in Note 2e, “Significant accounting policies” and Note 3 “Critical Accounting estimates and judgements” in our unaudited condensed consolidated financial statements for the three and six months ended June 30, 2024.
Exscientia Business Update for Second Quarter and First Half 2024
Entered into definitive agreement to combine with Recursion to create a global technology-enabled drug discovery leader with end-to-end capabilities
Acquired full rights to GTAEXS617 (CDK7 inhibitor), with initial Phase I monotherapy data expected in 2H24
Launched AWS AI-powered platform to advance drug discovery
LSD1 and MALT1 inhibitor programmes continue to progress towards the clinic, on track for 2H24 IND/CTA submissions
OXFORD, U.K. – (BUSINESS WIRE) – Exscientia plc (Nasdaq: EXAI): Recent advancements in the Company’s pipeline, collaborations and operations, as well as financial results for the second quarter and first half 2024, are summarised below.
“Last week, we announced that Exscientia entered into a definitive agreement to combine with Recursion Pharmaceuticals,” said David Hallett, Ph.D., interim Chief Executive Officer and Chief Scientific Officer of Exscientia. “When we bring together our platforms at closing, our world class scientists and Exscientia’s best-in-class focused precision oncology internal pipeline with Recursion’s first-in-class focused pipeline, we believe we will be able to discover better drugs for patients faster and at a lower cost.”
“In the first half of 2024, we believe we have made important progress across our AI-powered pipeline and progress towards autonomous drug design as well as deepening our technology and pharma partnerships,” continued David Hallett, Ph.D. “We made the strategic decision to fully invest in our CDK7 inhibitor GTAEXS617 (‘617) by acquiring full rights to the programme, which we believe is highly differentiated and demonstrates the power of our design capabilities. We look forward to sharing topline data later this year.”
Key Business Updates
Transaction with Recursion
●Earlier this month, Exscientia entered into a definitive agreement to combine with Recursion Pharmaceuticals in a transaction that will create a company positioned to leverage the latest life sciences and technology advances to deliver better, novel treatments to patients, faster and at a lower cost relative to traditional drug discovery and development methods
oThis combination will bring together Recursion’s scaled biology exploration and translational capabilities with Exscientia’s precision chemistry design and small molecule automated synthesis capabilities to create, at closing, a leading technology-first, end-to-end drug discovery platform
Internal Precision Oncology Pipeline
●The Company continues to enrol patients with advanced solid tumours in its Phase 1/2 ELUCIDATE trial evaluating ‘617, a potential best-in-class CDK7 inhibitor
○In July, the Company announced that it reached an agreement to acquire the full rights to ‘617 from its partner GT Apeiron - with GT Apeiron retaining an interest via an increased ownership stake in Exscientia
○The Company remains on track to announce topline pharmacokinetic, pharmacodynamic and safety data from the dose escalation phase of ELUCIDATE in the second half of this year
○Exscientia expects to transition to the dose expansion phase of ELUCIDATE in the second half of this year or early next year, starting with the evaluation of ‘617 in HR+/HER2- breast cancer in combination with a selective estrogen receptor degrader (SERD)
●EXS74539 (‘539), Exscientia’s highly differentiated, brain penetrant LSD1 inhibitor, continues to advance towards the clinic, with an IND expected to be submitted later this year. The Company expects to initiate a Phase 1/2 clinical trial in early 2025
●Exscientia remains on track to submit a CTA for EXS73565 (‘565), the Company’s potential best-in-class MALT1 inhibitor, in the second half of 2024. The Company expects to initiate a Phase 1/2 clinical trial of ‘565 in B-cell malignancies, including chronic lymphocytic leukaemia (CLL), in early 2025
Collaborations & Partnerships
●The Sanofi partnership, with a primary focus on immunology and inflammation, continues to advance with multiple potential near-term milestones
●Exscientia continues to make progress in its collaboration with Merck KGaA, Darmstadt, Germany with multiple programmes already in early discovery
●In July 2024 the Company announced a collaboration with READDI, a non-profit biotechnology initiative funded by the National Institute of Allergy and Infectious Disease (NIAID), to evaluate and improve a range of AI-designed antiviral compounds for pandemic preparedness
○Exscientia will use its generative AI capabilities to design novel compounds to fight coronaviruses with READDI providing antiviral expertise as well as funding testing and analyses
Drug Discovery Platform
●Exscientia announced the expansion of its work with Amazon Web Services (AWS) to use the cloud provider’s artificial intelligence and machine learning services to power its platform for end-to-end drug discovery and automation
oExscientia’s state-of-the-art platform, built using AWS technologies, integrates generative AI drug design and robotic lab automation to further accelerate drug development at a lower cost
oThe Company’s closed loop “Design-Make-Test-Learn” facility is now fully online and the first compounds have rolled off the production line. These were designed using Exscientia’s proprietary synthesis aware GenAI and manufactured and tested using the Company’s in-house state-of-the-art automation facility
Leadership Updates
●Marie-Louise Fjallskog, M.D., Ph.D., was appointed interim Chief Medical Officer, bringing extensive oncology drug development expertise to execute robust clinical strategy on Exscientia’s internal oncology pipeline
●Nicola Richmond, Ph.D., will be joining Exscientia in September as Chief Scientist, AI. Holding a Ph.D. in mathematics, she brings over 20 years’ experience operating at the intersection of drug discovery and technology. Dr. Richmond will be leading efforts in developing AI solutions for the Company’s drug discovery efforts
Second Quarter and First Half 2024 Financial Results
For the convenience of the reader, the Company has translated pound sterling amounts to U.S. dollars at the rate of £1.000 to $1.2640, which was the noon buying rate of the Federal Reserve Bank of New York on June 28, 2024.
Revenue: Revenue for the three and six months ended June 30, 2024 was $5.6 million and $12.3 million, compared to $3.8 million and $11.1 million for the three and six months ended June 30 2023. The increase in revenue year over year was primarily due to an increase in the number of active projects in the first half of 2024 relative to the prior period.
Research and development expenses (R&D): R&D expenses for the three and six months ended June 30, 2024 were $31.7 million and $61.5 million respectively, as compared to $41.7 million and $83.9 million for the same period ended June 30, 2023. The decrease in research and development expenses was primarily due to cost reductions relating to pipeline prioritisation activities implemented during the second half of 2023 and cost savings from operational efficiencies.
General and administrative expenses (G&A): G&A expenses for the three and six months ended June 30, 2024 were $21.2 million and $25.6 million, respectively, or 34% and 24% of total operating expenses. For the three months ended June 30, 2024, G&A expenses increased by $6.5 million compared to the prior year, primarily driven by current quarter severance and termination-related costs totalling $7.5m relating to the cost saving and efficiency measures announced in May 2024. For the six months ended June 30, 2024, G&A expenses decreased by $2.9 million compared to the prior year due to credits totalling $7.5 million relating to amounts recognised in February 2024 on the forfeiture of share options held by the Company’s prior CEO upon his exit from the Company.
Cash inflows: For the second quarter 2024, Exscientia received $1.4 million in cash inflows from its collaborations as compared to $0.7 million during the second quarter 2023.
Net operating cash flow and cash balance: For the three and six months ended June 30, 2024, net operating cash outflows were $45.8 million and $84.8 million respectively, in comparison to $52.2 million and $107.0 million for the three and six months ended June 30, 2023. Cash, cash equivalents and short-term bank deposits as of June 30, 2024 were $370.1 million, as compared to $458.9 million as of December 31, 2023 using the June 28, 2024 constant currency rate.
SELECTED CONSOLIDATED STATEMENT OF OPERATIONS, CONSTANT CURRENCY CONVERSION (unaudited)
($ millions, except per share data, at the rate of £1.000 to $1.2640)
| | | | | | | | | | | | | | |
| Three months ended June 30, | Six months ended June 30, |
| 2024 | 2023 | 2024 | 2023 |
Revenue | 5.6 | 3.8 | 12.3 | 11.1 |
Cost of sales | (9.8) | (7.9) | (19.2) | (18.6) |
Research and development expenses | (31.7) | (41.7) | (61.5) | (83.9) |
General and administrative expenses | (21.2) | (14.7) | (25.6) | (28.5) |
Operating expenses | (62.7) | (64.3) | (106.3) | (131.0) |
Foreign exchange (losses)/gains | 0.1 | (0.6) | 1.2 | (2.1) |
Other income | 7.6 | 2.3 | 9.1 | 5.6 |
Operating loss | (49.4) | (58.8) | (83.7) | (116.4) |
Net finance income | 4.5 | 5.0 | 9.0 | 9.1 |
Share of loss on joint ventures | (0.5) | (0.2) | (1.2) | (0.8) |
Loss before taxation | (45.4) | (54.0) | (75.9) | (108.1) |
Income tax (charge)/benefit | (0.3) | 8.5 | 3.5 | 15.0 |
Loss for the period | (45.7) | (45.5) | (72.4) | (93.1) |
Net loss per share | (0.36) | (0.37) | (0.57) | (0.75) |
Weighted average shares outstanding (basic and diluted) | 126,594,358 | 123,748,524 | 126,285,033 | 123,504,575 |
SELECTED CONSOLIDATED BALANCE SHEET, CONSTANT CURRENCY CONVERSION (unaudited)
($ millions, except per share data, at the rate of £1.000 to $1.2640)
| | | | | | | | |
| June 30, 2024 | December 31, 2023 |
Cash, cash equivalents and short term deposits | 370.1 | 458.9 |
Total assets | 553.4 | 645.6 |
Total equity | 374.2 | 449.7 |
Total liabilities | 179.2 | 195.9 |
Total equity and liabilities | 553.4 | 645.6 |
SELECTED CONSOLIDATED STATEMENT OF CASH FLOWS, CONSTANT CURRENCY CONVERSION (unaudited)
($ millions, except per share data, at the rate of £1.000 to $1.2640)
| | | | | | | | |
| Six months ended June 30, 2024 | Six months ended June 30, 2023 |
Net cash outflows from operating activities | (84.8) | (107.0) |
Net cash flows used in investing activities | (65.1) | (85.6) |
Net cash used in financing activities | (2.3) | (2.0) |
Net decrease in cash and cash equivalents | (152.2) | (194.6) |
Exchange gain/(loss) on cash and cash equivalents | 0.4 | (3.1) |
Net decrease in cash, cash equivalents and short-term bank deposits* | (88.8) | (133.6) |
* Includes both increases in short term bank deposits and foreign exchange gains/(losses) on cash and cash equivalents
About Exscientia
Exscientia is a technology-driven drug design and development company, committed to creating more effective medicines for patients, faster. Exscientia combines precision design with integrated experimentation, aiming to invent and develop the best possible drugs in the most efficient manner. Operating at the interfaces of human ingenuity, artificial intelligence (AI), automation and physical engineering, we pioneered the use of AI in drug discovery as the first company to progress AI-designed small molecules into a clinical setting. We have developed an internal pipeline focused on oncology, while our partnered pipeline extends to many other therapeutic areas. By leading this new approach to drug creation, we believe we can change the underlying economics of drug discovery and rapidly advance the best scientific ideas into medicines for patients.
For more information visit us on www.exscientia.com or follow us on LinkedIn @ex-scientia and X @exscientiaAI.
Forward-Looking Statements
This press release contains certain forward-looking statements within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. Words such as “anticipates,” “believes,” “expects,” “intends,” and “projects” or similar expressions are intended to identify forward-looking statements. These forward-looking statements, include statements with regard to Exscientia’s expectations regarding: the initiation, timing and progress of, and data collected during and reported from, the Company’s and its partners’ clinical trials, as well as expectations with respect to the outcome or benefit of such trials; the progress of Exscientia’s collaborations and partnered programmes; the onboarding of a new executive; and the closing of the transaction contemplated by the agreement between the Company and Recursion Pharmaceuticals, including the successful creation of a combined company and the ability of such combined company to provide patients with better novel medicines. Such statements are subject to a number of risks, uncertainties and assumptions, including those related to: the initiation, scope and progress of Exscientia’s and its partners’ planned and ongoing preclinical studies and clinical trials and ramifications for the cost thereof; clinical, scientific, regulatory and technical developments; the development and deployment of new technology and facilities; the process of discovering, developing and commercialising product candidates that are safe and effective for use as human therapeutics and the endeavour of building a business around such product candidates;
and the process of creating a combined company with Recursion Pharmaceuticals and subsequent activities by any such combined company. In light of these risks and uncertainties, and other risks and uncertainties that are described in the Risk Factors section and other sections of Exscientia’s Annual Report on Form 20-F, filed with the Securities and Exchange Commission (SEC) on March 21, 2024, and other filings that Exscientia makes with the SEC from time to time (which are available at https://www.sec.gov/), the events and circumstances discussed in such forward-looking statements may not occur, and Exscientia’s actual results could differ materially and adversely from those anticipated or implied thereby. Although Exscientia’s forward-looking statements reflect the good faith judgement of its management, these statements are based only on facts and factors currently known by the Company. As a result, investors are cautioned not to rely on these forward-looking statements. Exscientia undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by law.
Additional Information and Where to Find It
The proposed transaction between Exscientia and Recursion will become the subject of a joint proxy statement to be filed by Exscientia and Recursion with the SEC. The joint proxy statement will provide full details of the proposed combination and the attendant benefits and risks, including the terms and conditions of the scheme of arrangement and the other information required to be provided to Exscientia’s shareholders under the applicable provisions of the U.K. Companies Act 2006. This communication is not a substitute for the joint proxy statement or any other document that Exscientia or Recursion may file with the SEC or send to their respective security holders in connection with the proposed combination. Security holders are urged to read the definitive joint proxy statement and all other relevant documents filed with the SEC or sent to Exscientia’s shareholders or Recursion’s stockholders as they become available because they will contain important information about the proposed combination. All documents, when filed, will be available free of charge at the SEC’s website (www.sec.gov). You may also obtain these documents by contacting Exscientia’s Investor Relations department at investors@exscientia.ai. This communication does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval.
INVESTORS AND SECURITY HOLDERS ARE URGED TO READ THE PROXY STATEMENT (WHICH WILL INCLUDE AN EXPLANATORY STATEMENT IN RESPECT OF THE SCHEME OF ARRANGEMENT OF EXSCIENTIA, IN ACCORDANCE WITH THE REQUIREMENTS OF THE U.K. COMPANIES ACT 2006) AND ANY OTHER RELEVANT DOCUMENTS THAT MAY BE FILED WITH THE SEC, AS WELL AS ANY AMENDMENTS OR SUPPLEMENTS TO THESE DOCUMENTS, CAREFULLY AND IN THEIR ENTIRETY IF AND WHEN THEY BECOME AVAILABLE BECAUSE THEY CONTAIN OR WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED COMBINATION.
Participants in the Solicitation
Exscientia, Recursion, and their respective directors and executive officers may be deemed to be participants in any solicitation of proxies in connection with the proposed combination of the two companies.
Information about Exscientia’s directors and executive officers is available in Exscientia’s Annual Report on Form 20-F dated March 21, 2024. Information about Recursion’s directors and executive officers is available in Recursion’s proxy statement dated April 23, 2024, for its 2024 Annual Meeting of Stockholders. Other information regarding the participants in the proxy solicitation and a description of their direct and indirect interests, by security holdings or otherwise, will be contained in the joint proxy statement and all other relevant materials to be filed with the SEC regarding the proposed combination when they become available. Investors should read the joint proxy statement carefully when it becomes available before making any voting or investment decisions.
Investor Relations:
Sara Sherman / Chinedu Okeke
investors@exscientia.ai
Media:
David Keown
media@exscientia.ai
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