E-therapeutics Regulatory News (ETX)

e-therapeutics plc

("e-therapeutics" or the "Company")

Final results for the year ended 31 January 2023

Successful year executing the Company's strategy resulting in the creation of a rapidly growing in-house pipeline of promising preclinical candidates

London, UK, 4 May 2023- e-therapeutics plc (AIM: ETX; OTCQX; ETXPF), a company integrating computational power and biological data to discover life-transforming RNAi medicines, announces its audited results for the year ended 31 January 2023.

Operational highlights

· RNAi strategy delivering a rapidly growing in-house pipeline of early first-in-class candidates, against target genes discovered using our HepNetTM computational platform. Comprehensive in vivo proof-of-concept data packages being generated.

· Active across a variety of areas of high unmet medical need, including cardiovascular disease, non-alcoholic steatohepatitis ("NASH") and haematology. Investing in the cardiometabolic space as a key focus area.

· Expansion of world's most comprehensive knowledge base of hepatocyte-centric biology to capture and model complex biological processes in the liver and tissues influenced by the liver, completing proprietary curation of 100s of data sources.

· Increased integration of HepNetTM functionality and continued validation of our tools, in particular our hepatocyte-specific knowledge graph and proprietary target identification approaches.

· Mapping of human genetic validation of potential targets completed for more informed target triage.

· Integration of large language models ("LLMs"), such as OpenAI's GPT model, to radically enhance computational capabilities and transform HepNetTM into a dynamic knowledge resource.

· Expansion of artificial intelligence ("AI") approaches that learn from experimental data deployed into siRNA (short interfering RNA) drug design.

· Sustained intellectual property ("IP") activity with patent applications filed on eight further inventions arising from the Company's proprietary GalNAc-siRNA technology, GalOmicTM.

· New collaboration with iTeos Therapeutics in immuno-oncology announced on 5 April 2022. Several milestone payments received since, in addition to upfront consideration, following the successful identification of potential targets and small molecule compounds.

· Successful completion of Galapagos NV collaboration in idiopathic pulmonary fibrosis ("IPF"), with all near-term milestones achieved demonstrating our ability to effectively identify potential therapeutic strategies and targets.

Post Period Highlights

· Filing of four new patent applications to protect innovation around novel gene targets and associated disease relevant biology as well as proprietary siRNA stabilisation chemistries.

· Additional milestone achieved in collaboration with iTeos Therapeutics, resulting in an additional payment to the Company.

Financial Highlights

· Successful fundraise of £13.5 million announced in September 2022

· Cash and short-term investment bank deposits at 31 January 2023 of £31.7 million (2022: £26.4 million)

· Revenues of £0.5 million (2022: £0.5 million)

· R&D spend of £7.2 million (2022: £6.1 million)

· Operating loss of £10.2 million (2022: £9.6 million)

· Loss for the year of £8.3 million (2022: £8.1 million)

· £1.5 million R&D tax credit receivable (2022: £1.5 million)

Ali Mortazavi, Chief Executive Officer of e-therapeutics, commented: "2022/23 was a pivotal year for e-therapeutics as we made significant progress towards realising our goal of Computing the Future of Medicine. Through our innovative computational approach and RNAi-based therapeutic modality, we were able to rapidly identify and pursue promising targets in multiple disease areas. We are now well-positioned to advance our pipeline of first-in-class preclinical RNAi candidates, making significant progress in just one year.

By placing LLMs at the core of our computation and harnessing GPT-4's capabilities, we can now create specialised LLM "agents" which will transform HepNetTM into a dynamic knowledge resource. GPT-4 and LLM integration will provide a unifying framework from which to drive every aspect of our pipeline and position e-therapeutics as a global leader in hepatocyte biology and related diseases.

Our long-term vision is to fully automate the preclinical drug discovery process, using GPT-4 and LLMs to access real-time information and interface with external applications, ultimately accelerating the development of life-saving treatments. Through our computational approach, we have been able to generate a multitude of potential target hypotheses and progress an in-house pipeline. Given our established position in computational drug discovery, we are ideally positioned to capitalise on this opportunity and look forward to the future with great confidence".

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014 as it forms part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018 ('MAR'). Upon the publication of this announcement via a Regulatory Information Service, this inside information is now considered to be in the public domain.

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About e-therapeutics plc

e-therapeutics plc ("ETX") integrates computational power and biology information to discover life-transforming RNAi medicines. The Company's technology uses computation to capture and model human biology, identify novel targets, and develop RNAi medicines against those targets that can be rapidly progressed to the clinic.

ETX's proprietary HepNetTM platform enables the generation and analysis of biological network models, providing a novel and mechanistic approach to drug discovery. This approach explicitly considers the true complexity of biology to make more reliable predictions from large complex data sets and ETX's proprietary hepatocyte knowledgebase - the world's most comprehensive and integrated hepatocyte-centric data resource.  The Company generates, prioritises and tests millions of hypotheses in silico to identify better therapeutic targets with higher confidence. 

GalOmicTM, ETX's proprietary RNAi platform, enables the targeted delivery to hepatocytes in the liver and the specific silencing of novel disease-associated genes, identified by HepNetTM.  The focus on hepatocytes offers the opportunity to tackle a wide variety of diseases. The liver is a highly metabolically active organ which performs a key role in many biological processes and vital functions crucial for human health. ETX's GalOmicTM constructs have demonstrated compelling in vivo performance in terms of depth of gene silencing and duration of action. 

The Company is progressing a pipeline of first-in-class preclinical RNAi candidates across several high unmet medical needs in cardiometabolic indications and targeting promising hepatocyte-expressed targets with effects in other disease areas. ETX has also partnered with biopharma companies such as Novo Nordisk, Galapagos NV and iTeos Therapeutics using its computational network biology approach across a diverse range of drug discovery projects.

The Company is based in London, UK and listed on the Alternative Investment Market of the London Stock Exchange ("AIM"), with ticker symbol ETX. E-therapeutics is also traded on the OTCQX Best Market (OTCQX) in the United States, under ticker symbol ETXPF. 

Chair's Statement

I am pleased to report a year of significant progress across all elements of the business culminating in the rapid establishment of an in-house pipeline of RNAi candidates and the continued advancement of our highly differentiated computational tools and approach.

Our RNAi focus

The focus on RNAi as a modality of choice enables the Company to realise some key advantages associated with this ground-breaking technology which include:

· High specificity against their target gene, thus minimising potential off-target effects

· No druggability issues, being able to silence virtually any gene in the genome

· Long duration of action, supporting infrequent administration and reduced patient burden

· Reversible effects (no changes to DNA)

· Good safety profile

The recent strategic focus on RNAi, together with the use of sophisticated computational approaches to identify novel therapies, has resulted in a frenetic period of innovation which is outlined throughout this report.

Our hepatocyte expertise

Whilst our methodology is applicable to a wide range of diseases, our focus is specific to diseases associated with the liver.  Hepatocytes are highly metabolically active cells, and their targeting enables the Company to develop therapeutic strategies in a broad variety of therapeutic areas including cardiovascular, metabolic, renal, and rare diseases.

Developing and protecting a pipeline

During the year the Company has further leveraged its HepNetTM computational biology platform to identify novel gene targets resulting in the initiation of our own in-house therapeutic pipeline. This represents a move away from earlier stage partnering towards prosecuting our own ideas where we believe there is greater potential for later-stage higher value commercial opportunities.

The in-house pipeline contains a number of novel targets undergoing advanced experimental evaluation and prosecution. Behind this sits a large portfolio of additional target ideas being discovered and assessed in silico as well as experimentally.

Importantly, we continue to protect our innovation through patent applications for Intellectual Property Rights around novel gene targets and associated disease relevant biology discoveries as well as proprietary siRNA stabilisation chemistries. During the reported year, and continuing into the new financial year, we have filed a series of patent applications to protect 17 inventions. 

Board and governance

As an AIM-quoted company we have chosen to apply the 2018 Quoted Companies Alliance Corporate Governance Code (the "QCA Code"). The Board remains committed to high standards of corporate governance that ensure the Company operates in a transparent and ethical way that delivers value for employees, shareholders and stakeholders. This includes activities undertaken during the period across the areas of risk management control, financial planning, organisational structure and resource allocation.

People and culture 

The Board is committed to building a diversified inclusive workplace and creating a thriving culture of integrity and trust where people can freely innovate. During the period we have sought ways to further develop initiatives that promote employee wellbeing and engagement. We continue to seek and attract high calibre talent with plans to add further expert resource to the existing team in the year ahead.

Our move from Oxford to London has been completed successfully and places us in a position to access a larger pool of talent attracted by the opportunity to work in a popular vibrant international city without losing our close proximity to the centres of excellence in Oxford and Cambridge. 

Financial position

Through the activities of the Audit Committee, the Board and the Executive Management Team the Company continues to implement and maintain robust financial controls and reporting. 

Via a £13.5m fundraise announced in September 2022 we strengthened our financial position which provides us with the capital to support the execution of our immediate strategy. The fundraising also provided an important endorsement of our differentiated approach and expertise in integrating computational power and biological data to accelerate the discovery of novel RNAi medicines. I would like to acknowledge and thank our shareholders for their continued support.

I am delighted to represent this dynamic and progressive company as its Chair. We are in a strong position financially, making good progress scientifically and committed to creating value for all our stakeholders.

Prof Trevor M Jones CBE FMedSci

Independent Non-Executive Chair

4 May 2023

Chief Executive's Statement

2022/23 was a pivotal year for e-therapeutics as we made significant progress towards realising our goal of Computing the Future of MedicineTM. Through our innovative computational approach and RNAi-based therapeutic modality, we were able to rapidly identify and pursue promising targets in multiple disease areas. We are now well-positioned to advance our pipeline of first-in-class preclinical RNAi candidates across multiple therapeutic areas, making significant progress in just one year.

Pivot from small molecules to RNAi: GalOmicTM

The opportunity to pivot into RNAi as a modality of choice to prosecute our novel target ideas presented several key advantages. In particular, focussing on GalNAc-conjugated siRNA, using our proprietary GalOmicTM platform, allows us to leverage the existing safety and performance precedent of a commercial-stage technology and take more biological risks by pursuing novel targets. In addition, RNAi enables rapid and comparatively inexpensive candidate generation once a target is selected. This allows us to have multiple 'shots on goal' for the same cost as a single small molecule programme with a much higher probability of success. Critically, domain knowledge of the RNAi therapeutics space is extremely niche, and I believe that the previous experience in the field of our senior leadership team will prove to be a crucial component of our success.

We have now shown across multiple targets that we can design and synthesise lead GalNAc-conjugated siRNAs in approximately 6 months and at a cost of c. $500K (including healthy in vivo pharmacology). This capability has enabled us to generate and progress drug candidates at a greatly accelerated pace and scale compared to more traditional modalities, and we believe that RNAi-based therapeutics have the potential to transform the treatment landscape across multiple disease areas.

Significant progress in RNAi IP, drug design and speed of execution

During the year, we have also made significant progress in our intellectual property ("IP") portfolio, with the filing of multiple patent applications to protect both our RNAi platform (GalOmicTM) inventions and novel targets. We have gained significant new know-how whilst optimising our drug design process and reducing the associated timelines. These include the protection of siRNA chemical modification "stamps" thereby reducing the number of permutations and combinations in our screening cascades as well as predictive methodologies to reduce the number of sequences that need to be tested for in vivo studies.

This is part of our goal to apply computation across all aspects of our business, eventually allowing us to confidently predict the attributes of our siRNA molecules without the need for cell-based or in vivo screening. This will allow us to progress our siRNA molecules from in silico drug design straight to in vivo experiments, increasing our speed of execution. In addition, following the success of the mRNA-based COVID-19 vaccines, we have noted a significant change in policy from regulators to use compelling computational data to help reduce preclinical timelines and start first in human ("FIH") clinical trials as quickly as possible. We believe, given that computation and data is used at every step of our drug discovery efforts, ETX is extremely well-positioned to take advantage of the changing regulatory landscape going forward.

HepNetTM: Our computational solution to human biology modelling and novel target ID

We continue to make significant strides in our expansion of HepNetTM, the most comprehensive hepatocyte data and analytics resource in the world. HepNetTM enables generation and analysis of biological network models, providing a novel and mechanistic approach to drug discovery that explicitly considers the true complexity of biology. Our computational network models represent, as closely as possible, the biological systems ETX is seeking to impact. The approach allows us to identify, prioritise and test millions of hypotheses in silico to make more reliable predictions with higher confidence and generate gene target hypotheses based on large complex data sets.

HepNetTM was built on the Company's previously established proprietary network biology knowledge, tools and algorithms to model and interrogate human biology. This powerful modular platform was originally cell type agnostic. Extensive work has recently been undertaken to extend its capability and to leverage the focus on a single modality, RNAi, to create the most comprehensive and integrated proprietary hepatocyte-centric data resource.

We have invested in the licensing and generation of a range of proprietary liver omics data resources to support disease related process and target discovery, particularly in the realm of cardiometabolic disorders. The Company's proprietary hepatocyte-focused Knowledge Graph has been further enhanced with additional data derived from both experimental Natural Language Processing ("NLP") approaches and through AI-driven predictive approaches to knowledge inference. This allows the discovery of hidden relationships in data whilst providing the capability to impute missing information. Furthermore, the application of robust standards of validation for all our tools and approaches remains an important focus, and this rigour will continue to be a critical part of our development going forward.

In terms of scalability, the HepNetTM platform and data resources are now entirely cloud-based, ushering in a new era of effectively unlimited computational power and data storage. Using cutting-edge technologies we have been able to speed up our analytical pipelines by orders of magnitude, reducing compute times from weeks or months to a few hours. This has enabled the development of proprietary large-scale statistical approaches to analysis that were previously unfeasible.

HepNetTM has been instrumental in enabling us to develop a deep understanding of hepatocyte biology and giving us the ability to identify novel targets for potential drug candidates. We have continued to build on the platform, generating proprietary data inputs, exploring additional datasets of interest and keeping our data foundation updated. Through this, we have been able to generate a multitude of potential target hypotheses, enabling us to rapidly prosecute many high conviction, computationally-derived gene targets in relevant disease areas as possible.

Target nomination and pipeline

We believe that we now have a robust process to assess and prosecute any hepatocyte gene target from idea to FIH studies. In addition, we are continually refining and improving our methodologies, algorithms, datasets and implementing one of the fastest cascades in preclinical drug development. This has resulted in the Company having a number of high conviction therapeutic target-indication pairs which can be prosecuted at speed, dependent on our capital position.

Our preclinical pipeline has progressed at a rapid rate and we have initiated preclinical activities for additional targets while continuing to pursue previous projects. We expect to nominate our first candidate for IND/CTA enabling studies before the end of 2023, while we continue to advance projects through construct design and in vitro studies into in vivo testing. Cardiometabolic indications continue to be a key focus, but we remain open to pursuing promising hepatocyte-expressed targets identified by our computational methods that have effects in other disease areas, as exemplified by our active haematology programmes.

Through this pipeline, we aim to translate our discoveries into real-world, highly specific, and effective medicines in record time. We have also continued to nominate new targets, with a key pipeline priority being targets within cardiometabolic indications, such as cardiovascular disease ("CVD") and non-alcoholic steatohepatitis ("NASH"). We have active programmes in these areas, and we plan to continue to add projects across metabolic syndrome indications.

Non-dilutive funding opportunities via collaborations/partnerships remains a key component of the Company's strategy. Future collaborations will be in line with our current liver and RNAi focus, with an expectation for later-stage partnerships that maximise value retention and reflect the development of ETX's early in-house RNAi pipeline. A balance will be found between preclinical assets to partner and assets that the Company will progress to early clinical trials to reach a more significant value inflection point.

Large Language Models and GPT-4

I believe that the most significant development at e-therapeutics over the past year occurred during Q4 2022, when we began investigating the integration of large language models ("LLMs") and GPT-4 as a core component and enabling technology within all of our computational efforts. The drug discovery landscape is on the brink of a transformative revolution, driven by LLMs such as GPT-4. As I have already stated, e-therapeutics has made remarkable progress in multiple discovery programs, transitioning from small molecule discovery to hepatocyte-targeted GalNAc-siRNA drugs and our HepNetTM proprietary platform for insights and predictions.

Nevertheless, a weakness in our computation has been the immaturity of NLP algorithms to couple large corpora of text alongside our machine learning ("ML") and statistical approaches. However, LLMs, such as GPT-4, now offer a unique opportunity to revolutionise e-therapeutics' text capabilities and materially enhance HepNetTM's capabilities.

By placing LLMs at the core of our computation and harnessing GPT-4's capabilities, we can create specialised LLM "agents" and transform HepNetTM into a dynamic knowledge resource. Integration of GPT-4 and LLMs integration will provide a unifying framework from which to drive every aspect of our pipeline and position e-therapeutics as a global leader in hepatocyte biology and related diseases. Our long-term vision is to fully automate the preclinical drug discovery process, using GPT-4 and LLMs to access real-time information and interface with external applications, ultimately accelerating the development of life-saving treatments.

Immediate use cases for LLMs include our "Straight to In Vivo" project, target identification, patent extraction and an in silico cell type delivery project. We aim to create a robust pipeline and business model leveraging GPT-4 and LLMs' full potential, ensuring our place at the forefront of the AI-driven drug discovery revolution. By integrating GPT-4 and LLMs, e-therapeutics will continue to break new ground in drug discovery, create novel therapeutic strategies, and improve patient outcomes. Central to this vision is the ongoing advancement of our RNAi chemistry platform (GalOmicTM) for developing hepatocyte targeted GalNAc-siRNA drugs. These cutting-edge AI technologies hold the key to unlocking new treatments for various diseases and conditions, transforming the future of medicine.

In conclusion, integrating GPT-4 and LLMs into our drug discovery pipeline will revolutionise hepatocyte biology, RNAi chemistry, and the development of novel therapeutics. By harnessing these AI technologies, we can accelerate the development of life-saving treatments, improve patient outcomes and realise our vision of computing the future of medicine.

Collaborations

In April, we announced a new collaboration with iTeos Therapeutics. We are using our unique computational methodology to enable the discovery of highly differentiated novel immuno-oncology therapeutics. The work is progressing well against pre-defined plans and milestones. As well as receiving near-term cash payments material to the revenue of the Company, we are eligible to receive undisclosed milestone payments through preclinical and clinical development, in addition to regulatory milestones, per programme. Several milestone payments have been received since we first announced this collaboration and, after the period, we have achieved an additional success milestone associated with a further cash payment to the Company.

The collaboration with Galapagos NV ("Galapagos") in idiopathic pulmonary fibrosis ("IPF") has now successfully concluded and offers further evidence and third-party validation of our ability to effectively identify potential therapeutic strategies and targets computationally. We achieved all near-term milestones resulting in several cash payments to the Company. The future of the identified hits and targets will be determined by Galapagos according to its strategic priorities. If progressed, we are eligible to receive further milestones throughout development and commercial stages.

Capital Raise

2022/23 was an extremely difficult year for the biotechnology sector. However, in September 2022 we successfully raised £13.5m through a share placing and subscription with M&G Investments which we believe is a recognition of our unique business model. This capital injection enables us to continue our growth and development. I would like to take this opportunity to thank M&G for their continued support.

Conclusion

In conclusion, I believe that 2022/23 will be seen as a transformative year for e-therapeutics. Through our computational approach, we have been able to generate a multitude of potential target hypotheses and progress an in-house pipeline of preclinical RNAi candidates across multiple therapeutic areas. I would like to reiterate that we believe that LLMs such as GPT-4 are a new enabling technology that will completely transform our business. Given our established position in computational drug discovery, we are ideally positioned to capitalise on this opportunity and look forward to the future with great confidence.

Ali Mortazavi

Chief Executive Officer

4 May 2023

CFO's Review

This has been another year of significant progress towards building and populating an internal pipeline of high-conviction early RNAi assets. In addition, the Company raised net proceeds of £13.4m through an equity issue in order to fund its ongoing R&D activities, including expansion of the Company's GalOmicTM and HepNetTM computational platform capabilities.

Revenue

Revenue of £0.5m for the year (2022: £0.5m) relates mainly to the recognition of upfront payments and the achievement of milestones under the immuno-oncology collaboration agreement with iTeos in addition to a remaining milestone payment with Galapagos on successful conclusion of the collaboration in idiopathic pulmonary fibrosis.

We are actively generating valuable data packages for several target genes and indications and currently also have live targets progressing through in vivo studies and disease models, together with three additional targets in earlier stages. In addition, we continue target identification and triaging, continuously generating additional targets ready for project initiation. This is further validation of the Company's ultimate goal of developing a highly differentiated in-house RNAi pipeline with future scope for early-stage partnering and revenue generation.

Fundraise

An equity fundraise of £13.4m (gross £13.5m less related costs and commissions of £0.1m) was announced in September by way of a direct subscription by funds managed by M&G Investment Management Limited. The net proceeds are being used to expand the Company's platform capabilities and RNAi asset pipeline.

R&D expenditure

R&D expenditure totalled £7.2m this year (2022: £6.1m). Significant progress has been made in further developing the Company's RNAi therapeutics platform and we have now filed patent applications to protect 17 inventions, including around stabilising chemical modifications enabling specific hepatocyte (liver cell) targeting. The Company has also continued to advance its HepNetTM computational platform and to leverage the focus on a single modality, RNAi, to create the most comprehensive and integrated proprietary hepatocyte-centric data resource. This platform enables generation and analysis of biological network models, providing a novel and mechanistic approach to drug discovery that explicitly considers the true complexity of biology.

Administrative expenditure

Administrative expenditure for the year totalled £3.5m (2022: £3.9m) inclusive of a share-based payment employee option charge of £0.2m (2022: £0.5m). The decreased administration cost is mainly due to a reduction of the share-based payment charge which results from a significant number of options lapsing in relation to employee leavers during the year.

Operating loss

The operating loss for the year of £10.2m is £0.6m higher than that in the prior year. This is mainly attributable to increased R&D expenditure reflecting further progress and development of our business strategy of computing the future of medicine.

Interest and investment income

Interest and investment income for the year amounted to £0.5m (2022: £0.1m). The increase includes interest income higher by £0.2m on higher cash deposit balances and improved deposit rates, coupled with receipt of a £0.2m dividend from a non-operating subsidiary which was dissolved in the year and following which the Company no longer has any subsidiaries.

R&D tax credits and loss for the year

The income statement includes an R&D tax credit of £1.5m (2022: £1.5m) in relation to the current year, bringing down the loss for the year to £8.3m (2022: £8.1m). The R&D tax credit claim has not yet been submitted to HM Revenue and Customs, but historically the amounts received have been materially in line with our calculated tax receivable estimate included at the year end.

Cash flow

Year-end cash and short term investment bank deposits amounted to £31.7m, which is £5.1m higher than at the previous year end. The increase reflects an equity fundraise inflow of £13.4m, together with R&D tax credits received of £1.5m, partially offset by an underlying net outflow cash burn of £9.6m. That cash burn relates mainly to operating losses exclusive of non-cash charges in respect of share-based payment employee option costs of £0.2m, and depreciation, amortisation and impairment costs of £0.5m. In addition, £0.2m was spent on the acquisition of capital equipment and capitalised patents and IP during the year.

Financial outlook

In the coming financial year, we will drive forward with our strategic plans for nomination and execution of pre-clinical targets using our GalOmicTM platform. Non-dilutive funding opportunities via collaborations/partnerships remains a key component of the Company's strategy and a balance will be found between preclinical assets to partner and assets that the Company will progress to early clinical trials.

Our budget, which has been prepared to reflect the above strategic plans, shows that we have sufficient funds to continue in operational existence for at least 12 months from the signing of these financial statements. We anticipate a considerable increase in our rate of spend and our budget remains prudent and incorporates discretionary spend which could be scaled back if considered appropriate.

Michael Bretherton

Chief Financial Officer

4 May 2023

Income Statement

For the year ended 31 January 2023

Statement of Comprehensive Income

For the year ended 31 January 2023

Statement of Changes in Equity

For the year ended 31 January 2023

Statement of Financial Position

As at 31 January 2023

Statement of Cash Flow

For the year ended 31 January 2023

The acquisition of property, plant and equipment in the year to 31 January 2022 includes a non-cash amount of £0.79 million capitalised in respect of a right of use property for which a corresponding non-cash amount has been recognised in proceeds from lease liability.

Notes

1. Status of Audit

The financial information set out herein does not constitute statutory accounts as defined in Section 434 of the Companies Act 2006. The financial information for the year ended 31 January 2023 has been extracted from the Company's audited financial statements which were approved by the Board of Directors on 4 May 2023 and which, if adopted by the members at the Annual General Meeting, will be delivered to the Registrar of Companies for England and Wales.

The financial information for the year ended 31 January 2022 has been extracted from the Company's audited financial statements which were approved by the Board of Directors on 4 May 2022 which have been delivered to the Registrar of Companies for England and Wales.

The report of the auditor on these financial statements was unqualified, did not contain a statement under Section 498(2) or Section 498(3) of the Companies Act 2006. The report of the auditor on the 31 January 2022 financial statements was unqualified, did not contain a statement under Section 498(2) or Section 498(3) of the Companies Act 2006, and did not include a matter to which the auditors drew attention by way of emphasis without qualifying their report.

The information in this preliminary statement has been extracted from the audited financial statements for the year ended 31 January 2023 and as such, does not contain all the information required to be disclosed in the financial statements prepared in accordance with International Accounting Standards in Conformity with the provisions of the Companies Act 2006.

The Company is a public limited company incorporated and domiciled in England & Wales and whose shares are quoted on AIM, a market operated by The London Stock Exchange.

2. Basis of preparation

While the financial information included in this preliminary announcement has been prepared in accordance with the recognition and measurement criteria of International accounting standards in conformity with the requirements of the Companies Act 2006, this announcement does not in itself contain sufficient information to comply with IFRS. This preliminary announcement has been prepared using the accounting policies that are expected to be published in the Company's accounts for the year ended 31 January 2023, which are consistent with the accounting policies published in the Company's accounts for the year ended 31 January 2022 and that are available on the Company's website at www.etherapeutics.co.uk, with the exception of those new standards, interpretations and amendments which became effective during the year and were adopted by the Company, albeit with no impact on the Company's loss for the year or equity on initial recognition.

This announcement contains forward-looking statements that are based on current expectations or beliefs, as well as assumptions about future events. These forward-looking statements can be identified by the fact that they do not relate only to historical or current facts. Forward-looking statements often use words such as anticipate, target, expect, estimate, intend, plan, goal, believe, will, may, should, would, could, is confident, or other words of similar meaning. Undue reliance should not be placed on any such statements because they speak only as at the date of this document and, by their very nature, they are subject to known and unknown risks and uncertainties and can be affected by other factors that could cause actual results, plans and objectives, to differ materially from those expressed or implied in the forward-looking statements. There are a number of factors which could cause actual results to differ materially from those expressed or implied in forward-looking statements. The Company undertakes no obligation to revise or update any forward-looking statement contained within this announcement, regardless of whether those statements are affected as a result of new information, future events or otherwise, save as required by law and regulations.

Going concern

Although the Company has recognised revenue from commercial deals during the current and prior year, it is still largely reliant on its cash balance to fund ongoing operations.

At 31 January 2023, we reported cash and cash equivalents and short term investments of £31,689,000 versus an underlying cash burn during the year of £9,642,000, excluding R&D tax credits received and net proceeds from the equity fundraise.

We prepared detailed strategic plans as part of the fundraise process announced in September 2022, which raised total gross proceeds of £13,500,000. We have also prepared a detailed annual budget and follow-on projections, which together cover a 24-month period, and provide support for the view that the Company has sufficient cash to meet its operational requirements for at least 12 months from the signing of these financial statements. The budget includes a considerable increase in R&D expenditure, in line with progressing our strategic aims. This expenditure is largely uncommitted and discretionary and would be reduced or postponed if required to manage the Company's cash resources.

The financial performance and position of the Company are discussed in more detail in the CFO's Review above.

The preliminary announcement has been prepared on the going concern basis since, given the points discussed above, the Directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future.

3. Accounting judgements and sources of estimation uncertainty

The preparation of financial statements requires management to make judgements, estimates and assumptions that may affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. The estimates and underlying assumptions are reviewed on an ongoing basis.

The following are the key judgements that management have made in the process of applying the Company's accounting policies and that have the most significant effect on the amounts recognised in these financial statements:

· There are various revenue streams from collaborative partnerships. Management review these revenue streams against the IFRS 15 criteria to establish whether revenue should be recognised over time or at a point in time. Revenue recognised over time results in a difference between up-front cash receipts and revenue recognised, the balance of which is recorded on the Balance Sheet. Revenue recognised from collaborative partnerships and corresponding contract liabilities reflect management's best estimate of each contract's stage of completion. Management estimates project progress at each reporting date, with consideration to project plans outlined in customer contracts, and remeasures revenue accordingly. At the year end, deferred revenue liability was £nil (2022: £nil). Revenue of £475,000 (2022: £477,000) is made up of £475,000 (2022: £400,000) recognised at a point in time and £nil (2022: £77,000) over time.

· The Directors have not recognised a deferred tax asset based on an assessment of the probability that future taxable income will be available against which the deductible temporary differences and tax loss carry-forwards can be utilised. The potential deferred tax asset is disclosed in Note 5.

The following are the key assumptions concerning estimation uncertainty that may have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year:

· The current tax receivable, of £1,500,000 (2022: £1,474,000), represents an R&D tax credit based on an advance claim with HMRC. The final receivable is subject to judgement and the correct application of complex R&D tax rules. The minimum receipt approved by HMRC could be £nil. Historically, final claims have been successful and materially in line with the receivable recognised in the financial statements. The Company expects the current year to be successful too.

4. Staff numbers

The average number of persons employed by the Company (including Executive Directors and excluding Non-Executive Directors) during the year, analysed by category, was as follows:

5. Taxation

The standard rate of corporation tax applied to reported profit is 19% (2022: 19%). The credit for the year can be reconciled to the Income Statement as follows:

The total tax credit recognised within the Income Statement is £1,522,000 (2022: £1,484,000), which is made up the small or medium- sized enterprise ("SME") R&D tax relief of £1,498,000 (2022: £1,449,000) and Research and Development Expenditure Credit ("RDEC") of £24,000 (2022: £35,000). The SME tax credit is shown within taxation, as reconciled above. The RDEC is included within administrative expenses in the Income Statement on the basis that the RDEC is treated as taxable income, being an 'above the line' relief.

The tax receivable on the Balance Sheet, of £1,500,000 (2022: £1,474,000), is made up of current year SME tax relief of £1,483,000 (2022: £1,439,000) and RDEC of £17,000 (2022: £35,000). Historically, R&D credits relating to both the SME scheme and the RDEC scheme have been received from HMRC as a single payment.

The Company has accumulated losses available to carry forward against future trading profits of £38,162,000 (2022: £33,623,000). No deferred tax has been recognised in respect of tax losses since it is uncertain at the Balance Sheet date as to whether future profits will be available against which the unused tax losses can be utilised. The estimated value of the deferred tax asset not recognised, measured at the main rate of 25% (2022: 19%), is £10,237,000 (2022: £9,792,000).

The current year R&D credit has not yet been approved by HMRC and, therefore, there is a risk that this claim may not be successful.

6. Loss per share

The calculation of the basic and diluted earnings per share is based on the following data:

Diluted EPS is calculated in the same way as basic EPS but also with reference to reflect the dilutive effect of share options in existence at the year end over 21,172,836 (2022: 22,100,614) ordinary shares. The diluted loss per share is, however, identical to the basic loss per share, as potential dilutive shares are not treated as dilutive where they would reduce the loss per share.

7. Intangible assets

Research and development costs of £7,224,000 (2022: £6,109,000) have been recognised in the Income Statement.

Amortisation

Amortisation has been charged on patents for which the registration process is complete, over the term granted. Amortisation is included within administrative expenses.

The goodwill in the Balance Sheet arose following the hive-up of the trade and assets of InRotis Technologies Limited in 2007. That goodwill was fully impaired during 2020, reflecting the fact that the Company's business model was then founded upon a very different, and significantly advanced, technological capability versus that at the date of the hive-up in 2007. This goodwill was accounted for as disposed in the current year following an application for dissolution and strike off of InRotis Technologies that was made in the final quarter of 2022. InRotis Technologies was subsequently removed from the UK Companies House register.

8. Property, plant and equipment

9. Cash and cash equivalents and short term investments

The Company's primary objective is to minimise the risk of a loss of capital and to eliminate any loss of liquidity which would have a detrimental effect on the business. Short term surplus funds are deposited with reputably rated banks for maturities of not more than 35 days.

10. Capital and reserves

The Company has one class of ordinary shares with a nominal value of £0.001 each and carry no right to fixed income.