This announcement is deemed by the Company to contain inside information under the Market Abuse Regulation (EU) No. 596/2014.

22 MAY 2020

4D PHARMA PLC

(“4D”, the “Company” or, together with its subsidiaries, the “Group”)

Final Results for the year ended 31 December 2019

4D pharma plc (AIM: DDDD), a pharmaceutical company leading the development of Live Biotherapeutics, is pleased to announce the final results for the Group for the year ended 31 December 2019.

Financial highlights for the year:

·      Net assets of £22.3 million (2018: £45.8 million)

·      Cash and cash equivalents (including cash on deposit) of £3.8 million (2018: £26.2 million)

·      Total comprehensive loss after tax of £23.7 million (2018: £24.3 million)

·      Adjusted loss per share of 40.81 pence (2018: 36.17 pence)

·      Basic and diluted loss per share of 36.75 pence (2018: 36.17 pence)

Operational highlights for the year:

·      First-in-class data in oncology – positive safety and preliminary clinical observations of lead immuno-oncology candidate MRx0518 in combination with Keytruda^®

·      Entered a research collaboration and option agreement with MSD (Merck Sharp & Dohme Corp., a subsidiary of Merck & Co., Inc., Kenilworth, NJ, USA) to use the MicroRx^® discovery platform to develop Live Biotherapeutics in the vaccines space, including an upfront payment and potential milestone payments totalling >$1 billion

·      MSD collaboration included commitment to equity investment in 4D by MSD, triggered after period end

·      Launched a Phase I/II trial of MRx-4DP0004 in partly controlled asthma – the first clinical trial of a single strain Live Biotherapeutic in this indication

·      Expanded our Board of Directors, adding clinical and commercial expertise from both Europe and US

Since the period end:

·      In early January 2020 we launched our third trial of MRx0518, in pancreatic cancer in combination with radiotherapy

·      In February 2020 4D completed a placing and subscription raising gross proceeds of £22 million

·      In April 2020 we announced interim results from an ongoing Phase II trial of Blautix^® in IBS-C or IBS-D

·      In April 2020 we received expedited approval from the MHRA for a Phase II clinical trial of immunomodulatory Live Biotherapeutic MRx-4DP0004 to treat COVID-19 patients

Axel Glasmacher, Chairman of 4D pharma, commented “I am pleased to be able to announce the Group’s final results for the year ended 31 December 2019. 2019 was a successful year for the Group in which we made great progress in the clinic across multiple programmes, and entered collaborations with new partners. I would like to thank everyone in the Group for their valuable contributions as we look ahead to a pivotal year for 4D as we reach key readouts from multiple clinical studies.”

Duncan Peyton, Chief Executive Officer, commented “Over the past year we made impressive progress in all aspects of our business, towards the delivery of a new class of drug, Live Biotherapeutics.  We now look forward to the year having set up multiple near-to-mid-term catalysts as we generate robust clinical data with multiple shots on goal. ”

The Annual Report, together with a notice of the Company’s Annual General Meeting (“AGM”), will be posted to shareholders and made available on the Company’s website, www.4dpharmaplc.com, on 4 June 2020. The Annual General Meeting will be held on Tuesday 30 June 2020 at 10 a.m. at 9 Bond Court, Leeds, LS1 2JZ. In light of the current guidance from the UK Government which prevents public gatherings of more than two people, shareholders, advisers and other guests will not be allowed to attend the AGM and anyone seeking to attend the meeting in person will be refused entry. We therefore encourage shareholders to submit any questions they would like to pose to the Board to [email protected] so as to be received no later than 26 June 2020. All emails should be marked “AGM Question” in the subject line, and will require a shareholder number. If the UK Government’s guidance changes before the AGM and allows gatherings of more than two people, we will notify you via the Company’s website at www.4dpharmaplc.com

For further information please contact:

4D

Duncan Peyton, Chief Executive Officer + 44 (0)113 895 0130

Investor Relations [email protected]

N+1 Singer – Nominated Adviser and Joint Broker +44 (0) 20 7496 3000

Aubrey Powell / Justin McKeegan / Alex Bond (Corporate Finance)

Tom Salvesen (Corporate Broking)

Bryan Garnier & Co. Limited – Joint Broker +44 (0)20 7332 2500

Dominic Wilson / Phil Walker

Image Box PR

Neil Hunter / Michelle Boxall

Tel +44 (0)20 8943 4685

[email protected] / [email protected] 

www.4dpharmaplc.com

Chairman’s Statement

Axel Glasmacher, Non-Executive Chairman since 17 April 2020, and David Norwood, Non-Executive Chairman to 17 April 2020

2019 was a successful year for the Group in which we made great progress in the clinic across multiple programmes, and entered collaborations with new partners. The coming year will be pivotal for 4D as we reach key readouts from multiple clinical studies.

Performance

Over the last year we have continued to lead the development of Live Biotherapeutics, significantly expanding our clinical development activities and rapidly generating early signs of clinical efficacy. Meanwhile we continued to identify promising new candidates from our MicroRx^® platform in exciting new areas like neurodegenerative disease.

This year has ushered in a critical period for us as a fully fledged clinical-stage biotech, including some historic firsts for the broader microbiome space. We reported safety and positive early clinical observations in oncology – the first ever for a Live Biotherapeutic – and since the period end we announced an interim analysis from our Phase II study of Blautix^® in IBS, demonstrating a safety profile comparable to placebo and encouraging us to continue with the analysis of the full cohort.

In 2019 we launched a Phase I/II trial in asthma, another first for an LBP in this indication. In addition, we commenced a clinical biomarker study of immuno-oncology LBP MRx0518 with our partners at Imperial College London. This study will generate valuable data to deepen our understanding of MRx0518’s activity and help guide clinical development plans. After the period end, in early January 2020, we launched a third study of MRx0518 and our second at the world-leading MD Anderson Cancer Center, in combination with radiotherapy in patients with pancreatic cancer.

While we are immensely pleased with the rapid progress we are making in the clinic, we continue to leverage the MicroRx^® platform to generate value, through our internal development pipeline but also by facilitating partnerships. Our research collaboration with MSD in the vaccines space serves as an example of the power and potential of the platform, and provides a valuable endorsement from an industry-leading partner.  

Our Culture

Our success is built on a foundation of collaboration between our cross-functional teams. Where we are today is a testament to the hard work and commitment of our staff across all our sites in Europe and those involved in our wider collaborations. I would like to thank them all for their valuable contribution to the progress we have made in 2019.  

Board and Governance

We were delighted to welcome Dr. Sandy Macrae as an independent Non-Executive Director in August 2019. Dr. Macrae brings extensive biopharma leadership experience, most recently as CEO of US-based genomic medicine pioneer Sangamo Therapeutics.  Reflecting the transition to a new phase in the Company’s growth, after the period end I was appointed to the role of Chairman, taking over from David Norwood, who has done an excellent job leading the Company since its inception. On behalf of the Board I would like to thank David for his leadership in making 4D what it is today, and look forward to continuing to work with him in his role as Non-Executive Director.

I would also like to thank Thomas Engelen for his contribution over the years, after he stepped down from 4D’s Board of Directors in May 2020.

The Board is committed to maintaining high standards of governance, both at Board level and operationally throughout the business.

Outlook

Building on the success of 2019, during which we took great strides on multiple fronts in the clinic, the coming year will be pivotal for 4D as we reach readouts from key clinical studies in oncology, IBS and asthma. In the last year we entered pioneering research collaborations, and will seek to continue the rapid progress already made to date. I look forward to taking the next steps to bring this revolutionary new class of medicines to patients.

In 2020 the global COVID-19 pandemic hit the UK affecting almost all aspects of the economy, the pharmaceutical industry and 4D pharma included. In response we have been proactive, putting the safety of staff and patients first. We have made good use of technology to minimise disruption to our operations while protecting our staff. However, as has been seen across the biopharma industry, there have been unavoidable impacts on certain activities, resulting in some potential delays to expected clinical readouts. We continue to monitor the situation closely and will provide updates as and when the expected resolution of the situation becomes clearer.

In light of this unprecedented situation the Board has carefully re-evaluated the Company’s strategic priorities and near-to-mid-term objectives. We have taken measures to streamline the business, including changes to management structure and reducing staffing requirements, primarily relating to manufacturing, research and administrative services. The Board has also prioritised allocation of capital and resources to key programmes such as oncology, set to deliver key clinical value drivers for our shareholders in the coming year, including launching a Phase II clinical trial of an orally administered immunomodulatory LBP in COVID-19 in the second quarter of 2020.

David Norwood

Non-Executive Chairperson (up to 15 April 2020)

Axel Glasmacher

Non-Executive Chairperson (since 15 April 2020)

22 May 2020

Chief Executive Officer’s Report

Duncan Peyton, Chief Executive Officer

In 2019 we made significant progress in our mission to deliver Live Biotherapeutics, a disruptive new class of drug. 4D has firmly established itself as a clinical-stage drug development biotech, focussing significant resources on the clinical development of our lead LBP drug candidates.

We were pleased to announce positive safety data and the world’s first ever positive clinical observations of a Live Biotherapeutic in oncology, from a study of our LBP MRx0518 in combination with the immune checkpoint inhibitor (ICI) Keytruda^® in heavily pre-treated patients with secondary resistant tumours refractory to ICIs.

Continuing to lead the development of LBPs for diseases beyond the gut, we also launched a Phase I/II clinical trial of MRx-4DP0004 in partly controlled asthma.

Meanwhile, we continue to utilise the MicroRx^® platform to discover promising new LBP candidates for major diseases with significant unmet need. This year we presented data on two novel LBPs which have demonstrated potential as treatments for neurodegenerative diseases like Parkinson’s.

A landmark achievement in 2019 was the announcement of a research collaboration and option agreement with MSD in the field of vaccines. This partnership represents a significant endorsement of 4D’s approach and the MicroRx^® platform from an industry leader.

From a corporate strategy perspective, since the period end we made further progress in our goal of expanding our US presence, bringing in new US-based investors as part of a fundraise in February 2020, including a $5 million investment from our partner MSD.

Research

Our research is the core of what we do, and our philosophy is what sets us apart. Since inception we have pursued a function-focussed approach investigating the interactions between commensal bacteria and the human host. Our long-standing position, that understanding mechanism will be key to the success of this new area of medicine, is a view increasingly espoused within the microbiome field as well as the broader biopharma industry. This ‘function first’ approach has generated a pipeline pioneering the use of Live Biotherapeutics in diseases beyond the gut. In 2019 we presented ground-breaking research on the mechanisms and pre-clinical efficacy of our investigational LBPs for the treatment of cancer and neurodegenerative disease in respected peer-reviewed journals and at leading international conferences.

Recognising the value of such an approach, and building on our existing clinical collaboration in oncology, in October 4D pharma and MSD were pleased to announce a research collaboration and option agreement in the vaccines space in up to three undisclosed indications. Under the terms of the deal 4D pharma is eligible for potential milestone payments totalling over $1 billion. It has been great to see this project come together, driven by close collaboration between our respective research teams and effectively leveraging our complementary expertise.

As the Live Biotherapeutics field rapidly matures, we see the next critical stage being the generation of robust clinical data, to deliver on the immense potential of microbiome research to date. This year we have made significant advances in this respect across our development pipeline.

Oncology

Oncology is a core focus area for 4D and a field in which we believe LBPs will make a significant impact first. 2019 saw a number of clinical developments regarding our lead oncology candidate MRx0518.

In November we were pleased to be able to report the first clinical observations from our ongoing Phase I/II trial in combination with blockbuster immunotherapy Keytruda^®, in heavily pre-treated patients with acquired resistance to checkpoint inhibitors. Of the first six patients enrolled, three achieved a clinical benefit including two partial responses. Additional details of these patients achieving clinical benefit were presented in March 2020 at Chardan’s 2nd Annual Microbiome Medicines Summit. While preliminary, these observations are hugely encouraging in this particularly difficult to treat population, and represent a significant milestone for the microbiome-oncology space. Since the period end we have successfully completed Part A of the study, confirming the safety of the combination therapy and generating highly encouraging preliminary signals of activity. Part B of the study will assess clinical benefit and safety, enrolling up to an additional 30 patients per tumour type cohort (up to a total of 120). Encouraged by these early results, enrolment for Part B will be expanded to additional trial sites.

To inform our clinical strategy, in 2019 4D launched two clinical biomarker studies of MRx0518, furthering our understanding of this promising immunotherapy and its potential application. One, a study of MRx0518 as a monotherapy in patients undergoing surgical resection of solid tumours, is being conducted at Imperial College London, while the second is in pancreatic cancer under our strategic collaboration with the University of Texas MD Anderson Cancer Center.

Meanwhile we have ramped up our business development activities with the goal of expanding the development of MRx0518 into new settings, and are actively exploring additional collaborations.

Beyond our lead immuno-oncology candidate MRx0518, the MicroRx^® platform has continued to identify new LBP candidates exhibiting novel mechanisms of action with the potential to treat different types of cancers. This year we presented mechanistic and pre-clinical efficacy data from the first of these – MRx1299.

Gastrointestinal Disease

This year we made significant progress with our Phase II study of Blautix^® in IBS. In April 2020 4D announced results of a pre-planned interim analysis performed on around 270 patients. The interim analysis demonstrated that Blautix^® has a safety profile comparable to placebo, and that the study was not futile with regards to the primary endpoint.

Based on these encouraging interim safety and non-futility data we are actively exploring potential partnering or out-licensing opportunities as we seek to streamline our development pipeline and focus on our key areas of oncology, asthma and neurodegenerative disease.

Respiratory disease

2019 saw another world first for Live Biotherapeutics delivered by 4D, in the area of respiratory disease. We commenced a Phase I/II randomised, placebo-controlled trial of MRx-4DP0004 in partly controlled asthma in July, evaluating the safety and tolerability of MRx-4DP0004 in combination with existing maintenance therapy, with a range of secondary endpoints to evaluate efficacy. Unfortunately, the global COVID-19 pandemic has had a significant impact on recruitment for the study as we have a duty to prioritise the safety of our patients in this high risk group and the wellbeing of the medical staff involved. We are monitoring the situation closely and will be in a position to provide further updates as the expected impact on the trial becomes clearer.

COVID-19

However, with great challenges come great opportunity and social obligation. The primary burden on healthcare systems caused by SARS-CoV-2 infection is the hyperinflammatory response which leads to the need for mechanical ventilation and admission to intensive care. There is a clear and urgent need for an immunomodulatory therapeutic to prevent or reduce hyperinflammation associated with severe disease.

As the scientific community’s understanding of the immunology of COVID-19 has developed it became clear that the unique immunomodulatory activity of MRx-4DP0004 may be able to address this critical gap in the management of COVID-19 – to prevent or reduce hyperinflammation in hospitalised patients. 4D is conducting a Phase II placebo-controlled trial to demonstrate clinical benefit in addition to standard of care. The trial has received expedited acceptance from the UK’s MHRA, and preparations are advancing quickly to begin dosing patients.

Intellectual Property

Intellectual property is a key component of our strategy. We continue to invest in our industry-leading patent estate, now numbering over 60 patent families.

Our functional, granular approach to LBPs has allowed us to secure robust multi-layered protection for all our development candidates in major markets including the US, Europe and Japan. This year we secured over a hundred new patents across multiple territories, and have many more applications pending.

Our IP estate is a testament to our highly productive R&D platform, MicroRx^®. In addition, however, we have also filed a number of patent applications deriving from the product development work at our cGMP-certified facility, and from our machine learning microbiome analysis research. Our IP strategy allows us to capture the competitive advantages from our unique end-to-end capabilities.

2019 saw the first major challenges to IP in the microbiome therapeutics space. We are confident in the strength of our patent portfolio and its ability to protect our single strain Live Biotherapeutic candidates. Where challenged, we will robustly defend it.

Financial Summary

Our cash consumption for the year ended 31 December 2019 remained in line with management expectations, driven by the increased clinical trial activity and progress of our pre-clinical candidates.

In the year to December 2019, our cash and cash equivalents and short-term deposits reduced from £26.2 million to £3.8 million with a loss before tax of £29.4 million (compared with £28.4 million in the year to December 2018). This is inclusive of £0.2 million of Revenue relating to the recognition of a limited part of the upfront cash payment, in accordance with IFRS15 and the terms of our collaboration with MSD in the vaccine space. Our claim for research and development tax credit was £5.4 million (compared with £4.7 million in the year to December 2018).

The Group continues to manage its cash deposits prudently and invest available longer-term funds across a number of financial institutions which have investment grade credit ratings. The Board has continued to operate a robust set of financial controls including rolling short-term and long-term forecasts to assist in the control and prioritisation of resources.

After the period end, in February 2020, the Group completed a fundraise through the placing and a subscription for new ordinary shares with and by certain existing and new investors, to raise aggregate gross proceeds of £22 million. As a result of this fundraise, prioritisation of the Group’s programmes and cost reduction measures put in place, the Directors estimate that cash held by the Group, together with known receivables, will be sufficient to support the current level of activities until Q4 2020.

The Directors are continually exploring sources of finance available to the Group and have a reasonable expectation that they will be able to secure sufficient cash inflows for the Group to continue its activities for not less than twelve months from the date of approval of the accounts. They have therefore been prepared on a going concern basis.

Because the additional finance is not committed at the date of approval of the financial statements, these circumstances represent a material uncertainty as to the Group’s ability to continue as a going concern.

Should the Group be unable to obtain further finance such that the going concern basis of preparation was no longer appropriate, adjustments may be required which would include the reduction in the carrying value of the Group’s to their recoverable amounts and would also incorporate provisions for any future liabilities that would arise.

Outlook

Over the past year we made impressive progress in all aspects of our business. We reported the first signs of clinical activity for a Live Biotherapeutic in the field of oncology, and took a new candidate into the clinic in asthma. We have set up multiple near-to-mid-term clinical catalysts as we generate robust clinical data with multiple shots on goal. In parallel, the Company has continued to elucidate the mechanisms of our lead LBPs, and identified promising new candidates in priority areas like neurodegenerative disease.

While the progression of our drug candidates through the clinic to approval is a key value driver, we believe the MicroRx^® platform itself also has immense potential to create value, in diverse therapeutic areas, exemplified by our collaboration with MSD in the vaccines space. In order to capture the potential of the platform and maximise value creation, we are actively pursuing additional research collaborations, pairing our expertise in LBP discovery and development and access to our library of well characterised bacterial isolates with the disease-specific expertise of partners.

Like many others in the wider pharmaceutical industry, 4D pharma has not been immune to the disruption caused by the COVID-19 pandemic. We are taking the situation very seriously and heeding the advice of the UK government and other authorities, utilising technology effectively to mitigate this unprecedented disruption where possible. To protect the safety of patients, our staff and the staff of our collaborators, we have limited non-essential activity at clinical sites which has had an impact on patient recruitment for some studies. The time course of the pandemic, and thus its impact on our operations, is hard to predict. 4D is monitoring the situation closely and prepared to adapt our strategy and operations in response to unfolding events.

Duncan Peyton

Chief Executive Officer

22 May 2020

Development Pipeline

Group Statement of Total Comprehensive Income

For the year ended 31 December 2019

The basic and diluted loss per share are the same as the effect of share options is anti-dilutive.

Group Statement of Financial Position

At 31 December 2019

Registered no. 08840579

Group Statement of Changes in Equity

For the year ended 31 December 2019

Group Cash Flow Statement

For the year ended 31 December 2019

On 1 January 2019 IFRS 16 ‘Leases’ came into effect, replacing IAS 17. Amongst other effects the new reporting requirement removed the distinction between operating leases and finance leases, which changed the general presentation. The Group has limited exposure to the effects of the changes so has elected to implement the simplified cumulative catch–up approach with the effects being recognised entirely in the current year. Further details of the effect of the adoption of IFRS 16 are included in the notes to the full accounts.

Notes to the Financial Information

For the year ended 31 December 2019

1. Basis of preparation

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 December 2019 has been extracted from the Company’s audited financial statements which were approved by the Board of Directors on 22 May 2020 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 December 2018 has been extracted from the Company’s audited financial statements which were approved by the Board of Directors on 20 May 2019 and which have been delivered to the Registrar of Companies for England and Wales.

 The report of the auditor on the 31 December 2019 31 December 2018 financial statements was unqualified, did not contain a statement under Section 498(2) or Section 498(3) of the Companies Act 2006 but did include a matter to which the auditors drew attention by way of emphasis without qualifying their report relating to the basis of preparation which is reproduced below:

Material uncertainty related to going concern

We draw attention to the accounting policy on going concern on page 46 of the financial statements, which indicates that the cash flow forecast prepared by the directors estimate that the Group has sufficient funds to support the current level of activities to the final quarter of 2020 and therefore needs to raise additional funds. As stated in the accounting policy on going concern, these events or conditions, along with the other matters as set forth on page 46 indicate that a material uncertainty exists that may cast significant doubt on the Group’s ability to continue as a going concern. Our opinion is not modified in respect of this matter.

The information included in this preliminary announcement has been prepared on a going concern basis under the historical cost convention, and in accordance with International Financial Reporting Standards (IFRSs) as adopted by the EU and the International Financial Reporting Interpretations Committee (IFRIC) interpretations issued by the International Accounting Standards Board (“IASB”) that are effective or issued and early adopted as at the date of this financial information and in accordance with the provisions of the Companies Act 2006.

The information in this preliminary statement has been extracted from the audited financial statements for the year ended 31 December 2019 and as such, does not contain all the information required to be disclosed in the financial statements prepared in accordance with the International Financial Reporting Standards (‘IFRS’).

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. The Company is incorporated in England and Wales. The registered office is 9 Bond Court, Leeds LS1 2JZ.

2. Going concern

The Group subject to a number of risks similar to those of other development stage pharmaceutical companies. These risks include, amongst others, generation of revenues in due course from the development portfolio and risks associated with research, development and obtaining regulatory approvals of its products. Ultimately, the attainment of profitable operations is dependent on future uncertain events which include obtaining adequate financing to fulfil the Group’s commercial and development activities and generating a level of revenue to support the Group’s cost structure.

The Directors have prepared detailed financial forecasts and cash flows looking beyond twelve months from the date of the approval of these financial statements. In developing these forecasts, the Directors have made assumptions based upon their view of the current and future economic conditions that are expected to prevail over the forecast period. Shortly after the year end the Group issued and placed new ordinary shares to raise combined gross proceeds of £22 million from the issue of new share capital. Together with restructuring measures undertaken in light of COVID-19 the Directors estimate that the cash held by the Group together with known receivables will be sufficient to support the current level of activities to the end of quarter four of 2020. The Directors are continuing to explore sources of finance available to the Group and have a reasonable expectation that they will be able to secure sufficient cash inflows into the Group to continue its activities for not less than twelve months from the date of approval of these accounts. They have therefore prepared the financial statements on a going concern basis.

Because the additional finance is not committed at the date of approval of these financial statements, these circumstances represent a material uncertainty as to the Group’s ability to continue as a going concern. Should the Group be unable to obtain further finance such that the going concern basis of preparation were no longer appropriate, adjustments would be required including to reduce the balance sheet values of assets to their recoverable amounts, and to provide for future liabilities that may arise.

3. Non-recurring income

The Group have provided for the contingent consideration on the achievement of three time–based milestones for the validation of the MicroDx platform by 4D Pharma Cork Ltd.

The contingent liability was calculated upon the acquisition of 4D Pharma Cork Limited and was based on the discounted probability of the liability at that time. The probability of future milestones is re-assessed as the timepoints for the milestones are reached, these milestones are:

1) Technical validation of a diagnostic platform for IBS dysbiosis

The milestone was achieved by 23 August 2017 and triggered the issue of 635,692 shares for an aggregate market value of €2.6 million (at £3.7575 per 4D pharma plc share, being the average mid-market price of a 4D share for the five business days immediately preceding the date of allotment). The shares were subsequently admitted on 31 August 2017.

2) Clinical validation of the optimal IBS dysbiosis diagnostic platform based on  more than 1,000 patients in a multicentre trial

It is anticipated that the clinical validation stage will be completed in 2024. Whilst there are no adverse indicators relating to the clinical validation of the platform at 31 December 2019, the time–based criteria for the completion of the milestone, which required completion of this phase by 23 August 2019, was not achieved and the fair value of the contingent consideration has been adjusted by £1.877 million to bring the balance at 31 December 2019 to £Nil.

3) Regulatory approval of a diagnostic platform for IBS dysbiosis

The third milestone is also time based and linked to regulatory approval being achieved by 23 August 2020. Based on the patient recruitment at milestone two it is anticipated that regulatory approval would be achieved in 2021 meaning that the probability of achieving milestone three by the required date is considered to be minimal; as a result the fair value has been reduced to £Nil, releasing £0.782 million of the contingent consideration.

4. Loss per share

(a) Basic and diluted

The basic and diluted loss per share are the same as the effect of share options is anti-dilutive.

(b) Adjusted

Adjusted loss per share is calculated after adjusting for the effect of non-recurring income in relation to the reassessment of the contingent consideration.

Reconciliation of adjusted loss after tax:

5. Subsequent events

Fundraising events

In February 2020 the Group raised £22 million (£20.8 million net of transaction costs) through the issue of 27,179,920 new ordinary shares and a placing of 16,820,080 new ordinary shares with certain new and existing investors at a share price of 50 pence per share. A warrant was also issued on the basis of one share for every two placing or subscription shares based on an admission cost of 100 pence per ordinary share and is exercisable for five years from the date of admission.

As part of the Fundraising, the Group has exercised its right to cause MSD (the tradename of Merck & Co., Inc, Kenilworth, NJ, USA) to purchase US$5 million (approx. £3.83 million) of new ordinary shares at the Issue Price pursuant to the terms of a Subscription Agreement (the agreement to do so having been announced in parallel with the Company’s research collaboration and option to license agreement with MSD on 8 October 2019).

Directors’ participation in Fundraising

At the time of the Fundraising certain of the Directors agreed to subscribe for Subscription Shares at the Issue Price. The number of Subscription Shares subscribed for by each of these Directors pursuant to the Fundraising, and their resulting shareholdings on Admission, are set out below:

COVID-19

In 2020 the global COVID-19 pandemic hit the UK affecting almost all aspects of the economy, the pharmaceutical industry and the Group included. In response to this unexpected and unprecedented event, the Group has taken the situation very seriously and heeded the advice of the UK government and other authorities, utilising technology effectively to mitigate this unprecedented disruption where possible. To protect the safety of patients, our staff and the staff of our collaborators we have limited non-essential activity at clinical sites which has had an impact on patient recruitment for some studies resulting in some potential delays to expected clinical readouts.

The likely duration of the disruption caused by COVID-19 is not yet known and it is too early to accurately predict the impact on the Group’s operations and clinical timelines. However, in light of this unprecedented situation the Board has carefully re-evaluated the Company’s strategic priorities and near-to-mid-term objectives.  We have taken measures to streamline the business, including changes to management structure and reducing staffing requirements, primarily relating to manufacturing, research and administrative services.  The Board has also prioritised allocation of capital and resources to key programmes set to deliver key clinical value drivers for our shareholders, including oncology and launching a Phase II clinical trial in COVID-19.

The Group remains committed to reviewing the rapidly evolving global situation and adapting its strategy and operations accordingly.

6. Report and accounts

A copy of the Annual Report and Accounts will be sent to all shareholders with notice of the Annual General Meeting, and will be made available on the Company’s website, www.4dpharmaplc.com, by 4 June 2020.