The director presents the strategic report for the year ended 30 June 2021.
Since June 2016 until the Brexit date of 31 December 2020, the core focus of CLINUVEL (UK) Ltd was to facilitate the distribution of its commercial pharmaceutical product called SCENESSE. As the European entity for the CLINUVEL Group of companies prior to Brexit, it held the European marketing authorisation licen c e to distribute SCENESSE® in Europe. Upon Brexit, the license to distribute SCENESSE® was transferred to another CLINUVEL entity residing in the EU. A s a result of the transfer of the marketing authorisation licen c e,
commercial sales of SCENESSE® in Europe recorded by CLINUVEL (UK) Ltd totalled £4.5 million for 2020/21, compared to £13.5 million for 2019/20, £14.5 million in 2018/19 and £12.2 million for 2017/18. Unit sales decreased by 68% year on year. All sales after the Brexit date of 31 December 2020 were recorded in a new European subsidiary. Ignoring the change in reporting entities, unit sales in Europe increased 9% year on year.
The price of SCENESSE® remained constant throughout 2020/21, in line with CLINUVEL’s policy to charge a uniform price across all European countries. EPP Expert Centres in Europe continued to prescribe SCENESSE®to existing and new patients receptive to the treatment.
However CLINUVEL (UK) Ltd continues to be a critical function in the CLINUVEL Group of companies. It:
1. Continues to be responsible for many of the commitments agreed with the European Medicines Agency (EMA) to operate a risk management plan, as well as performing Quality, Pharmacovigilance and Market Access functions for the new European entity to support EU sales.
2. Provides communications, branding and marketing services for the CLINUVEL Group of companies .
3. Employs personnel who manage the clinical affairs of the SCENESSE development program .
Notwithstanding the change of licen c e holder resulting in loss of sales by CLINUVEL (UK) Ltd, the commitments made by the CLINUVEL Group to operate a long-term risk management plan under the supervision of the EMA has remained the responsibility of CLINUVEL (UK) Ltd. The commitments made under the risk management plan include conducting an ongoing non-interventional study whereby anonymised patient data is entered into a disease registry and the results provided to the EMA at least annually.
The Company is assisted by third parties to support the commitments made under the risk management plan to monitor long-term safety and it will continue to invest in existing and new personnel with the appropriate skills and expertise to maintain the ongoing requirements of the post-authorisation program in Europe. This has been demonstrated by the entity headcount increasing from 16 at July 2019 to 24 at June 2021. These ongoing requirements will remain in place until such time the EMA decides they are no longer necessary. The company may continue to increase staff numbers as more pricing agreements per country are established with pay e rs allowing more patients to be treated and increasing the effort required to fulfil the commitments under the long-term risk management plan.
A reference price for SCENESSE® as part of a uniform pricing strategy has been established with several countries across Europe, including both state and private insurance groups. The UK is currently not one of these countries. During the year, first sales were made to sites in Slovenia, and a pricing agreement was established with the Scottish NHS. In addition to regulatory affairs and market access, CLINUVEL (UK) Ltd personnel are also engaged to fulfil Quality and Pharmacovigilance responsibilities on behalf of the new European entity licen c e holder.
As a result of CLINUVEL (UK) Ltd incurring expenses and engaging in activities to directly support the operations of the new European subsidiary entity wh ich is now responsible for selling the goods into Europe, CLINUVEL (UK) Ltd derives a revenue stream by service charging the European sister subsidiary on an at - arm ' s length principle.
The CLINUVEL group has identified the UK as having the necessary talent pool to establish a Communications, Marketing and Branding division. This division is responsible for the Group’s global communication and branding activities which includes the branding of new products currently under development by related parties. These activities also generate an at-arm ' s length service charges to its global parent.
Additionally, the Group of companies is expanding its overall research and development capabilities to further investigate the use of SCENESSE® in other disease indications, as a means of organically growing the company .
During 2020/21, the UK employed more R&D staff and made strong progress in identifying and recruiting hospital sites in Europe, North Africa and the US for future clinical studies. These clinical activities are performed on behalf of other CLINUVEL entities and are also service-charged out under at-arm ' s length principles.
Ultimately, the long-term financial objective of the Clinuvel (UK) Ltd is to achieve and maintain sustainable profitability to the benefit of the wider CLINUVEL Group. Key to longer-term profitability is to ensure a highly efficient and skilled workforce is operating to directly support the increase in Group sales of SCENESSE® in countries across Europe who have not yet agreed to the uniform price and to also reach new patients and increase the market penetration in those countries currently receiving SCENESSE®. Further successful research and development and commercialisation of SCENESSE® to treat other disease states and the commercialisation of the portfolio of assets across the CLINUVEL Group will also by integral to achieving this financial objective.
Hence management supports the ongoing operations of CLINUVEL (UK) Ltd.
The following specific business risks are reviewed continually by the Board of the company and its management, as they have the potential to affect its achievement of the business goals detailed above. This list is not exhaustive.
Technology – there is a risk that despite obtaining marketing authorisations, that SCENESSE® may ultimately prove not to be safe and/or of clinical benefit.
Supply – there is a risk that the manufacturing process may not result in product batches meeting minimum specification levels, that raw material components could not be sourced to specification, that the manufacturing process may encounter process issues not previously identified and controlled, and of non-controllable disruptions to the operations of the products’ contract manufacturers. These factors may lead to non-supply of product and/or adverse regulatory outcomes.
Clinical & Regulatory – there is a risk that clinical trials of SCENESSE®, whether or not the trials are sponsored by Clinuvel (UK) Ltd or by another Clinuvel entity, will not yield the expected and desired results for the investigational medicinal product(s) to obtain further regulatory approvals.
Drug pricing – there is a risk that third-party payors will not provide coverage or will not be willing to accept the prices agreed with other third-party payors, adversely affecting revenues and profitability. Furthermore, reductions in government insurance programs may result in lower prices for SCENESSE® and could materially adversely affect our ability to operate profitably or to sustain profitability.
Intellectual Property (IP) and market entry – future sales could be impacted to the extent that there is not sufficiently robust patent protection around SCENESSE® that will prevent competitors from entering the marketplace to compete. Also, competitors infringing the Group’s IP rights may adversely impact the Group’s ability to maximise the value to be made from product commercialisation.
Funding – cash outflows from its operations over the long term may be higher than cash inflows over the long term across the CLINUVEL Group, and this could impact its ability to ensure its subsidiary entities such as CLINUVEL (UK) Ltd to be adequately funded. Therefore, the ability of the Group to successfully bring its products to market and achieve a state of consistent positive cash flow is dependent on its ability to maintain a revenue stream and to access sources of funding while containing its expenditures.
Management – the success of the company could be impacted adversely if it was not able to retain its specialised knowledge and areas of expertise, of its key management personnel and members of staff over the longer term.
Foreign exchange – there is a risk that movements in exchange rates of foreign currencies against the British Pound could adversely impact the recognition of sales and expenses when translated from their functional currency to the presentation currency of CLINUVEL (UK) Ltd.
On behalf of the board
The director presents his annual report and financial statements for the year ended 30 June 2021.
The director who held office during the year and up to the date of signature of the financial statements was as follows:
The results for the year are set out on page 10.
No ordinary dividends were paid. The director does not recommend payment of a final dividend.
In accordance with the company's articles, a resolution proposing that Moore Kingston Smith LLP be reappointed as auditor of the company will be put at a General Meeting.
Basis for opinion
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the director's use of the going concern basis of accounting in the preparation of the financial statements is appropriate.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the company's ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the director with respect to going concern are described in the relevant sections of this report.
Other information
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of our audit :
the information given in the Strategic Report and the Director's R eport for the financial year for which the financial statements are prepared is consistent with the financial statements ; and
the Strategic Report and the Director's Report have been prepared in accordance with applicable legal requirements.
As explained more fully in the Director's R esponsibilities S tatement, the director is responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the director determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements , the director is responsible for assessing the company ' s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the director either intends to liquidate the company or to cease operations, or has no realistic alternative but to do so.
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance , but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements .
As part of an audit in accordance with ISAs (UK) we exercise professional judgement and maintain professional scepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purposes of expressing an opinion on the effectiveness of the company’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors.
Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the company to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
Explanation as to what extent the audit was considered capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below.
The objectives of our audit in respect of fraud, are; to identify and assess the risks of material misstatement of the financial statements due to fraud; to obtain sufficient appropriate audit evidence regarding the assessed risks of material misstatement due to fraud, through designing and implementing appropriate responses to those assessed risks; and to respond appropriately to instances of fraud or suspected fraud identified during the audit. However, the primary responsibility for the prevention and detection of fraud rests with both management and those charged with governance of the company.
Our approach was as follows:
We obtained an understanding of the legal and regulatory requirements applicable to the company and considered that the most significant are the Companies Act 2006, UK financial reporting standards as issued by the Financial Reporting Council, and UK taxation legislation.
We obtained an understanding of how the company complies with these requirements by discussions with management and those charged with governance.
We assessed the risk of material misstatement of the financial statements, including the risk of material misstatement due to fraud and how it might occur, by holding discussions with management and those charged with governance.
We inquired of management and those charged with governance as to any known instances of non-compliance or suspected non-compliance with laws and regulations.
Based on this understanding, we designed specific appropriate audit procedures to identify instances of non-compliance with laws and regulations. This included making enquiries of management and those charged with governance and obtaining additional corroborative evidence as required.
There are inherent limitations in the audit procedures described above. We are less likely to become aware of instances of non-compliance with laws and regulations that are not closely related to events and transactions reflected in the financial statements. Also, the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery or intentional misrepresentations, or through collusion.
Use of our report
This report is made solely to the company's member in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company's member those matters we are required to state to the member in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's member for our audit work, for this report, or for the opinions we have formed.
The Profit and Loss Account has been prepared on the basis that all operations are continuing operations.
Clinuvel (UK) Limited is a private company limited by shares incorporated in England and Wales . The registered office is Devonshire House, 60 Goswell Road, London, EC1M 7AD.
The financial statements are prepared in sterling , which is the functional currency of the company. Monetary a mounts in these financial statements are rounded to the nearest £.
The company has taken advantage of the exemption under section 399 of the Companies Act 2006 not to prepare consolidated accounts , on the basis that the group of which this is the parent qualifies as a small group . The financial statements present information about the company as an individual entity and not about its group .
The gain or loss arising on the disposal of an asset is determined as the difference between the sale proceeds and the carrying value of the asset, and is credited or charged to profit or loss .
Other financial assets, including investments in equity instruments which are not subsidiaries, associates or joint ventures, are initially measured at fair value, which is normally the transaction price. Such assets are subsequently carried at fair value and the changes in fair value are recognised in profit or loss , except that investments in equity instruments that are not publicly traded and whose fair values cannot be measured reliably are measured at cost less impairment.
Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the company transfers the financial asset and substantially all the risks and rewards of ownership to another entity, or if some significant risks and rewards of ownership are retained but control of the asset has transferred to another party that is able to sell the asset in its entirety to an unrelated third party.
Debt instruments that do not meet the conditions in FRS 102 paragraph 11.9 are subsequently measured at fair value through profit or loss. Debt instruments may be designated as being measured at fair value though profit or loss to eliminate or reduce an accounting mismatch or if the instruments are measured and their performance evaluated on a fair value basis in accordance with a documented risk management or investment strategy.
Financial liabilities are derecognised when the company’s contractual obligations expire or are discharged or cancelled.
Equity instruments issued by the company are recorded at the proceeds received, net of transaction costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the company.
Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recognised in profit or loss immediately, together with any changes in the fair value of the hedged asset or liability that are attributable to the hedged risk.
In the application of the company’s accounting policies, the director is required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
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 where the revision affects only that period, or in the period of the revision and future periods where the revision affects both current and future periods.
The following judgements (apart from those involving estimates) have had the most significant effect on amounts recognised in the financial statements.
The company has significant tax losses for which no deferred tax asset has been recognised in the financial statements. The director and management do not consider that there is sufficient certainty on either the timing of any future profits or the future availability of these losses.
The estimates and assumptions which have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities are as follows.
Certain of the company's employees are eligible for incentives including the award of equity settled transactions in respect of shares in the parent company. The company recognises a cost in respect of these transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted with a equal and opposite adjustment to the capital contribution reserve. The fair value is determined by using either a binomial or trinomial model on a group basis and recharged to the company. The total expense is accounted for over the vesting period which requires judgements associated with the timing and probability of the vesting conditions.
An analysis of the company's turnover is as follows:
Exceptional costs recognised in 2020 related to unpaid employers national insurance on employee share options. The company made a voluntary disclosure to HMRC for these costs which was accepted and subsequently paid. No further expenses have arisen.
The average monthly number of persons employed by the company during the year was:
Their aggregate remuneration comprised:
The actual charge for the year can be reconciled to the expected credit for the year based on the profit or loss and the standard rate of tax as follows:
These financial statements are separate company financial statements for Clinuvel (UK) Limited
Details of the company's subsidiaries at 30 June 2021 are as follows:
There is a fixed charge in favour of HSBC UK Bank Plc for a total of £41,000 in respect of a legal case in which Clinuvel (UK) Limited is the plaintiff.
The company operates a defined contribution pension scheme for all qualifying employees. The assets of the scheme are held separately from those of the company in an independently administered fund.
At the reporting end date the company had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:
The ultimate controlling party is Clinuvel Pharmaceuticals Limited, a company incorporated in Australia, by virtue of holding the entire share capital of Clinuvel (UK) Limited. The parent is registered at Level 11, 535 Bourke Street, Melbourne, VIC 3000.
The accounts of Clinuvel (UK) Limited are included within the publicly available consolidated accounts of Clinuvel Pharmaceuticals Limited.