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Immunocore Holdings plc

Unaudited Condensed Consolidated Interim Financial Statements

March 31, 2021

Unaudited Condensed Consolidated Statements of Loss and Other Comprehensive Income

for the Three Months Ended March 31,

The accompanying notes form part of these unaudited condensed consolidated interim financial statements.

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Immunocore Holdings plc

Unaudited Condensed Consolidated Interim Financial Statements

March 31, 2021

Unaudited Condensed Consolidated Statements of Financial Position as at

The accompanying notes form part of these unaudited condensed consolidated interim financial statements.

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Immunocore Holdings plc

Unaudited Condensed Consolidated Interim Financial Statements

March 31, 2021

Unaudited Condensed Consolidated Statements of Changes in Equity for the Three Months Ended March 31, 2021,

The accompanying notes form part of these unaudited condensed consolidated interim financial statements.

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Immunocore Holdings plc

Unaudited Condensed Consolidated Interim Financial Statements

March 31, 2021

Unaudited Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31,

The accompanying notes form part of these unaudited condensed consolidated interim financial statements.

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Immunocore Holdings plc

Unaudited Condensed Consolidated Interim Financial Statements

March 31, 2021

Notes to the Financial Statements

1. Organization and nature of business

General information

Immunocore Holdings plc (the “Company”) is a public limited company incorporated in England and Wales and has the following wholly owned subsidiaries, Immunocore Limited, Immunocore LLC, Immunocore Commercial LLC, Immunocore Ireland Limited and Immunocore Nominees Limited (collectively referred to as the “Group”).

On February 9, 2021, the Company completed its initial public offering (“IPO”) of 11,426,280 American Depositary Shares (“ADSs”) representing 11,426,280 ordinary shares with nominal value of £0.002 per ordinary share for aggregate gross proceeds of $297,083,000.  The Company’s ADSs began trading on the Nasdaq Global Select Market under the ticker symbol “IMCR” on February 5, 2021.

In addition to the ADSs sold in the IPO, the Company completed the concurrent sale of an additional 576,923 ADSs at the initial offering price of $26.00 per ADS, for gross proceeds of approximately $15.0 million, in a private placement to the Bill & Melinda Gates Foundation (“Gates Foundation”).

Prior to completion of the IPO, Immunocore Holdings Limited was incorporated in England and Wales on January 7, 2021.  Following a subsequent corporate reorganization, Immunocore Holdings Limited became the ultimate parent company for the Group and was re-registered as a public limited company with the name Immunocore Holdings plc, the registrant. The corporate reorganization has been accounted for as a business combination under common control and therefore, Immunocore Holdings plc is a continuation of Immunocore Limited and its subsidiaries.  The corporate reorganization has been given retrospective effect in these financial statements and such financial statements represent the financial statements of Immunocore Holdings plc.

The principal activity of the Group is pioneering the development of a novel class of TCR bispecific immunotherapies called ImmTAX – Immune mobilizing monoclonal TCRs Against X disease – designed to treat a broad range of diseases, including cancer, infectious and autoimmune. Leveraging its proprietary, flexible, off-the-shelf ImmTAX platform, the Group is developing a deep pipeline in multiple therapeutic areas, including five clinical stage programs in oncology and infectious disease, advanced pre-clinical programs in autoimmune disease and multiple earlier pre-clinical programs.

2. Significant accounting policies

Basis of preparation

The unaudited condensed consolidated interim financial statements for the three months ended March 31, 2021 and 2020 have been prepared in accordance with International Accounting Standard 34, “Interim Financial Reporting” (“IAS 34”). The accounting policies and methods of computation applied in the preparation of the condensed consolidated interim financial statements are consistent with those applied in the Group’s annual financial statements for the year ended December 31, 2020.

The unaudited condensed consolidated interim financial statements do not include all of the information required for the full annual financial statements and should be read in conjunction with the annual consolidated financial statements of the Group for the year ended December 31, 2020 included in the Company’s Annual Report on Form 20-F for the year ended December 31, 2020, filed with the Securities and Exchange Commission on March 25, 2021 (the “Annual Report”).

The unaudited condensed and consolidated interim financial statements have been prepared under the historical cost basis, as modified by the recognition of certain financial instruments measured at fair value and are presented in pounds sterling which is the Group’s presentation currency. All values are rounded to the nearest thousands, except where otherwise indicated.

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Date of authorization

These condensed consolidated interim financial statements were prepared at the request of the Company’s Board of Directors (the “Board”) and were approved by the Board on May 12, 2021 and signed on its behalf by Dr. Bahija Jallal, Chief Executive Officer of the Group.

Adoption of New Accounting Standards

There have been no recent new accounting standards that have had an impact on these condensed consolidated interim financial statements. New accounting standards not listed below were assessed and determined to be either not applicable or did not have a material impact on the unaudited condensed consolidated interim financial statements or processes.

 

During the three-month period ended March 31, 2020, Interest Rate Benchmark Reform – Phase 1, issued by the International Accounting Standards Board (“IASB”), became effective. Phase 1 contained amendments to IFRS 9, IAS 39, and IFRS 7 related to the impact of interest rate benchmark reform on hedging relationships.  These amendments were not applicable to the Group, as the Group does not have any hedging arrangements. During the three month period ended March 31, 2021, the Group adopted the amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4, and IFRS 16 related to Interest Rate Benchmark Reform – Phase 2, issued by the IASB, which addresses issues that might affect financial reporting during the reform on an interest rate benchmark.  The only financial instrument subject to interest rate reform is the Group’s loan and security agreement (“Loan Agreement”) with Oxford Finance Luxembourg S.A.R.L. (“Oxford Finance”), which has a carrying amount of £36,983,000 as of March 31, 2021.  Currently, borrowings under the Loan Agreement bear interest at an annual rate equal to LIBOR plus 8.85%, with a minimum rate of 9.01% and a maximum rate of 12.01%.  LIBOR is the subject of recent national, international, and other regulatory guidance and proposals for reform, which may cause LIBOR to cease to exist after 2021 or to perform differently than in the past. While the Group expects that alternatives to LIBOR will be implemented prior to the 2021 target date or that the 2021 cessation date may be extended, the consequences and timing of these developments cannot be predicted. There is currently no definitive information regarding the future utilization of LIBOR or of any particular replacement rate. A transition away from LIBOR as a benchmark for establishing the applicable interest rate may adversely affect the Group’s outstanding variable-rate indebtedness.

Going concern

The financial position of the Group, its cash flows and liquidity position and borrowing facilities are described in the statements and notes to these unaudited condensed consolidated interim financial statements.

In assessing the going concern assumptions, the Board has undertaken an assessment of the forecasts, prepared through the end of 2022. As part of this assessment, the Board has considered the impact of the ongoing coronavirus 2019 (‘‘COVID-19’’) pandemic and have concluded that COVID-19 may have an impact but the Board considers that any future cash flow impact will be minimal on clinical trials or other business activities over the period assessed for going concern purposes. As of the date of these financial statements, the Group is not aware of any specific event or circumstance that would require the Group to update its estimates, assumptions and judgments or revise the carrying value of its assets or liabilities. Actual results could differ from these estimates, and any such differences may be material to the Group’s financial statements.

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Given the current cash position and the assessment performed, the Board is confident that the Group will have sufficient funds to continue to meet its liabilities as they fall due until at least the end of 2022 and therefore, have prepared the financial statements on a going concern basis. As the Group continues to incur significant expenses in the pursuit of its business strategy, additional funding will be needed before the existing programs are expected to reach commercialization, which would potentially lead to operational cash inflows. Until the Group can generate significant revenue from product sales, if ever, it expects to finance its operations through a combination of public or private equity offerings and debt financings or other sources, such as potential collaboration agreements, strategic alliances and licensing arrangements.

Estimates and judgements

 

The preparation of the financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions. These judgments, estimates and assumptions affect the reported assets and liabilities as well as income and expenses in the financial period.

The estimates and associated assumptions are based on information available when the consolidated financial statements are prepared, historical experience and various other factors which are believed to be reasonable under the circumstances, the results of which form the basis of making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Judgements and assumptions are primarily made in relation to revenue recognition to determine whether promises contained within the collaboration agreements are distinct from the other promises in the contract, whether milestones or other variable consideration should be included in the transaction price, whether performance obligations are satisfied at a point in time or over time, and for performance obligations satisfied over time the appropriate method of measuring progress for the purposes of revenue recognition. Estimates and assumptions are also made in relation to the valuation of ordinary shares, the incremental borrowing rate for leases, and valuation of derivatives. Details of the estimates and judgements made are included in the accounting policies set out in the consolidated financial statements of the Group for the year ended December 31, 2020, contained in the Annual Report.

Existing circumstances and assumptions about future developments may change due to market changes or circumstances arising that are beyond the Group’s control. Hence, estimates may vary from the actual values.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period, or the period of revision and future periods if this revision affects both current and future periods. The significant judgements made by management in applying the Group’s accounting policies and the key sources of estimation uncertainty are the same as those applied in the annual consolidated financial statements.

The significant accounting policies are disclosed in the consolidated financial statements of the Group for the year ended December 31, 2020, included in the Annual Report. There have been no changes to these accounting policies for the three months ended March 31, 2021.

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3. Revenue

Revenue recognized during the three months ended March 31, 2021 and 2020 was from collaboration agreements with GlaxoSmithKline Intellectual Property Development Ltd (“GlaxoSmithKline”), Eli Lilly and Company (“Eli Lilly”) and Genentech, Inc. (“Genentech”).

Genentech Collaboration.

 

During the three months ended March 31, 2021, the Group recognized £4,900,000 revenue relating to the 2018 Genentech Agreement (for the three months ended March 31, 2020: £4,886,000). Of the total revenue recognized during the three months ended March 31, 2021, £628,000 represented research and development cost reimbursements (for the three months ended March 31, 2020: £251,000). Such reimbursements arise in order to ensure that research and development costs are shared equally in-line with the Genentech Agreement.

GlaxoSmithKline Collaboration

 

Eli Lilly Collaboration

 

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Deferred revenue

For the three months ended March 31, 2021 and the year ended December 31, 2020, deductions from deferred revenue represent revenue recognized during the period. During the three months ended March 31, 2021 and the year ended December 31, 2020 there were no additions to deferred revenue.

The total revenue recognized during the three months ended March 31, 2021 was £8,270,000 of which £7,051,000 was included in deferred revenue at January 1, 2021 and the balance of £1,219,000 relates to reimbursed research and development costs. The total revenue recognized during the three months ended March 31, 2020 was £8,255,000, of which £7,680,000 was included in deferred revenue at January 1, 2020 and the balance £575,000 relates to reimbursed research and development costs. Reimbursed research and development costs are recognized gross as revenue.  No revenue was recognized in the three months ended March 31, 2021 relating to performance obligations satisfied in previous years (for the three months ended March 31, 2020: £nil).

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The derivative liability represents a foreign exchange call option over certain series B shares which was settled in full in March 2020, resulting in a gain of £1,287,000 based on the fair value as at derecognition, and a credit to equity of £3,840,000.

The fair value of this derivative liability at the time of derecognition was determined using an option pricing model using a range of inputs both quoted, observable and unobservable in nature. The unobservable input is the expected final closing of the series B preferred share financing. The resulting derivative liability is not sensitive to changes in the expected close date nor in changes to other underlying input assumptions.

5. Finance costs

Interest expenses for the three months ended March 31, 2020 related to the convertible loan with the Gates Foundation, which was partially converted into series B preferred shares in March 2020.

The convertible loan received from the Gates Foundation contains conversion features which were accounted for as an embedded derivative and separated from the convertible loan. During the three months ended March 31, 2020, the loss from the change in fair value of the embedded derivative asset represented the movement in fair value of this embedded derivative asset on derecognition arising from the conversion of the loan into series B preferred shares.

The fair value of this embedded derivative asset at the time of derecognition was determined using an option pricing model, discounted and probability weighted for the conversion features within the underlying convertible loan, which included unobservable (Level 3) inputs supported by little or no market activity. Significant unobservable inputs used in the fair value measurement of the embedded derivative asset were predominantly regarding the probability of each of the conversion features occurring.

6. Income tax

 

Income tax credit is recognized at an amount determined by multiplying the loss before taxation for the interim reporting period by the Group’s best estimate of the weighted-average annual income taxation rate expected for the full financial year, adjusted for the tax effect of certain items recognized in full in the interim period. As such, the effective tax rate in the interim financial statements may differ from the Group’s estimate of the effective tax rate for the annual financial statements.

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A deferred tax asset of £2,213,000 has been recognized as of March 31, 2021 (December 31, 2020: £2,230,000) representing unused tax credits carried forward for Immunocore LLC following an annual assessment, or periodically as required, of all available and applicable information, including its forecasts of costs and future profitability and the resulting ability to reverse the recognized deferred tax assets over a short period of time.

7. Basic and diluted loss per share

(1) The basic and diluted loss per share are adjusted for the (i) the exchange of shares of Immunocore Limited for shares of Immunocore Holdings Limited on a 1 for 100 basis, and (ii) the reorganization of the share capital of Immunocore Holdings plc, resulting in a consolidation with the effect of a 20 to 1 reverse stock split on the Company’s ordinary shares and non-voting ordinary shares, all of which took place in connection with the IPO which closed on February 9, 2021. Refer to Note 12 for further information.

Basic loss per share is calculated by dividing the loss for the period attributable to the equity holders of the Group by the weighted average number of ordinary shares outstanding during the period, including ordinary shares represented by ADSs. The dilutive effect of potential shares through equity settled transactions are considered to be anti-dilutive as they would decrease the loss per share and are, therefore, excluded from the calculation of diluted loss per share.

8. Property, plant and equipment

9. Leases

Lease liabilities

During the year ended December 31, 2020, the lease term for two leasehold properties was terminated and the lease liability for four leasehold properties were remeasured reducing the associated lease liability by £10,414,000 and £1,075,000, respectively. The Group also entered into a new lease for a leasehold property with an associated lease liability of £405,000 as at December 31, 2020.

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10. Trade and other receivables

Included within prepayments and accrued income are amounts paid in advance for clinical trials that are expected to be repaid within 12 months.

11. Interest-bearing loans and borrowings

12. Capital and reserves

IPO and Impact of Corporate Reorganization

On January 7, 2021 Immunocore Holdings Limited was incorporated as a private limited company under the laws of England and Wales with nominal assets and liabilities for the purpose of becoming the holding company of Immunocore Limited.

On January 22, 2021, each holder of series A preferred shares, series B preferred shares, series C preferred shares, Growth Shares and ordinary shares in Immunocore Limited, sold and transferred their shares to Immunocore Holdings Limited in exchange for 100 shares of the same class at par value of 0.01 pence in Immunocore Holdings Limited.  Following this share exchange, Immunocore Limited became a wholly owned subsidiary of Immunocore Holdings Limited.

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All Immunocore Limited share options granted to directors and employees under share option plans that were in existence immediately prior to the reorganization were exchanged for share options in Immunocore Holdings Limited on a one-for-100 basis.

Following the share exchange, Immunocore Limited undertook a reorganization of its share capital to re-designate its series A preferred shares, series B preferred shares, series C preferred shares and Growth shares into a single class of ordinary shares and subsequently undertook a share capital reduction, cancelling all amounts standing to the credit of its share premium account and cancelling 6,414,412 ordinary shares.

On February 1, 2021, Immunocore Holdings Limited was re-registered as a public limited company (“plc”) with the name Immunocore Holdings plc.  The Company’s consolidated assets and liabilities immediately following the reorganization were the same as Immunocore Limited immediately before the reorganization.

Effective immediately prior to completion of the IPO, the Company re-organized its share capital whereby all of the outstanding series A preferred shares, series B preferred shares and series C preferred shares were re-designated as ordinary shares of the Company on a one for one basis.  A total of 16,632,540 of the ordinary shares, following the re-designation of the series C preferred shares, were converted to a separate class of non-voting ordinary shares.  A total of 6,250,000 Growth Shares were re-designated of which 4,324,000 of the Growth Shares were re-designated as deferred shares of the Company. The remaining 1,926,000 Growth Shares were re-designated in the ratio of one ordinary share, issued for non-cash consideration and three deferred shares.

Immediately following these re-designations referred to above every 20 ordinary shares of £0.0001 and every 20 non-voting ordinary shares of £0.0001 in the Company were consolidated into one ordinary share and one non-voting ordinary share of £0.002.

On February 9, 2021, the Company completed an IPO of 11,426,280 ADSs representing 11,426,280 ordinary shares with nominal value of £0.002 per ordinary share, for gross proceeds of $297,083,000 (£226,527,000).  In addition to the ADSs sold in the IPO, the Company completed the concurrent sale of an additional 576,923 ADSs, representing 576,923 ordinary shares with a nominal value of £0.002 per ordinary share, at the initial offering price of $26.00 per ADS, for gross proceeds of approximately $15.0 million, in a private placement to the Gates Foundation. A total of £15,543,000 representing underwriting discounts and commissions and other offering expenses incurred incrementally and directly attributable to the offering of securities and have been deducted from the gross proceeds of the IPO.

Under the terms of the Company’s agreement with the Gates Foundation, the Group is required to develop, manufacture and commercialize soluble TCR bispecific therapeutic candidates targeted to mutually agreed neglected diseases, currently HIV, with the potential to treat people at an affordable price in developing countries.  In the event of certain defaults by the Group under the agreement, the Gates Foundation has the right to sell, or require the Group to buy-back, any of the shareholdings in the Group held by the Gates Foundation. In such an event, if within 12 months after such redemption or sale, the Group experiences a change in control at a valuation of more than 150% of the valuation used for the redemption or the sale of the shares, the Group has agreed to pay the Gates Foundation compensation equal to the excess of what it would have received in such transaction if it still held its shares at the time of such change of control over what it received in the sale or redemption of its shares.

The table below reflects the impact of the corporate reorganization.

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Share premium

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The £325,000 of share premium is attributable to ordinary shares issued for non-cash consideration arising from the redesignation of 1,926,000 Growth Shares in the ratio of one ordinary share, issued for non-cash consideration and three deferred shares.

Nature and purpose of reserves

The share-based payments reserve is used to recognize the value of equity-settled share-based payments provided to employees. All other reserves are as stated in the consolidated statement of changes in equity.

The other reserve arose as a result of the corporate reorganization described above.

No dividends were paid or declared in the three months ended March 31, 2021 (for the three months ended March 31, 2020: £nil).

13. Share-based payments

During the three months ended March 31, 2021, as a result of the reorganization (see Note 12), the following changes were undertaken in respect to share options and growth share awards in existence immediately prior to the reorganization.

All Immunocore Limited share options and Growth Shares granted to directors and employees under share incentive arrangements that were in existence immediately prior to the reorganization were exchanged for share options and Growth Shares in the Company on a one-for-100 basis with no change in any of the vesting terms and exercise prices.

Immediately prior to completion of the IPO, the Company re-organized its share capital which included the re-designation of 6,250,000 Growth Shares, or 312,500 Growth Shares reflecting the consolidation of every 20 ordinary shares into one ordinary share of £0.002, as both ordinary shares and deferred shares (see Note 12).  Previously awarded Growth Shares were replaced with an award of share options in the Company on a one-for-one basis.  For 216,200 of these replacement share option awards, the vesting terms and exercise prices were substantially unchanged.  For the remaining 96,300 replacement share option awards the vesting terms and exercise prices and revised to an extent that these Growth Shares are considered cancelled, for the purpose of determining the share-based payment charge, prior to the replacement share options being awarded  In addition, the replacement ordinary shares that arose from the re-designation of Growth Shares resulted in an incremental fair value of £325,000.

Immediately following these re-designations referred to above every 20 share options over ordinary shares of £0.0001 in the Company was consolidated into one share option over an ordinary share of £0.002.  At the same time, the exercise price for each of the outstanding share options was adjusted to reflect the reorganization, subject to a minimum exercise price equal to the nominal value of a share and was re-designated into U.S. Dollars.  The adjustment to exercise price did not impact the fair value of the underlying share options, with the exception of the 96,300 replacement share options re-designated from Growth Shares where the exercise price was increased.

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The number and weighted average exercise prices of share options are as follows:

The weighted average fair value of options granted in the three months ended March 31, 2021 was $16.16.

The number and weighted average hurdle rate of Growth Shares are as follows:

No Growth Shares were issued in the three months ended March 31, 2020

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For share options outstanding at March 31, 2021, the range of exercise prices and weighted average remaining contractual life are as follows:

Awards granted in the three months ended March 31, 2021, have been valued using the Black-Scholes option pricing model. The assumptions used in the models for awards granted during the three months ended March 31, 2021, are as follows:

14. Trade and other payables

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15. Commitments and contingencies

The following table summarizes the Group’s contractual obligations as of March 31, 2021:

£’000s		Less than 1 year		​	1-3 years		​	3-5 years		​	More than 5 years		​	Total
Lease liabilities – existing		3,490			5,247			4,249			31,979			44,965
Lease liabilities – contingent		282			2,308			2,418			1,558			6,566
Manufacturing		2,172			74			-			-			2,246
Capital commitments		72			-			-			-			72
Total contractual obligations		6,016			7,629			6,667			33,537			53,849

The following table summarizes the Group’s contractual obligations as of December 31, 2020:

£’000s		Less than 1 year			1-3 years			3-5 years			More than 5 years			Total
Lease liabilities – existing		3,529			5,322			4,286			32,600			45,737
Lease liabilities – contingent		-			2,254			2,471			1,841			6,566
Manufacturing		2,824			500			-			-			3,324
Capital commitments		77			-			-			-			77
Total contractual obligations		6,430			8,076			6,757			34,441			55,704

The Group has contractual obligations for two leasehold properties under which it is obligated to take on the leases should the properties become vacant at specified dates in the future.  For both properties, the Group has reassessed these contingent events as at March 31, 2021 and has continued to recognize an additional contingent commitment totaling £6,566,000 (December 31, 2020: £6,566,000).