| Summary of significant accounting policies | 2. Summary of significant accounting policies 2.1. Basis of preparation The Group’s consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and the rules and regulations of the U.S. Securities and Exchange Commission (“SEC"). Any reference in these notes to the applicable guidance is meant to refer to authoritative U.S. GAAP as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Update (“ASU”) of the Financial Accounting Standards Board (“FASB”). The consolidated financial statements include the accounts of the Group and its wholly owned subsidiaries, after elimination of intercompany accounts and transactions. The Group previously prepared its consolidated financial statements in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board (“IASB”) when the Group qualified as a foreign private issuer under the rules and regulations of the SEC. In connection with the loss of the Group’s status as a foreign private issuer, the Group is required to report with the SEC on domestic forms and comply with domestic company rules in the United States. The transition to U.S. GAAP was made retrospectively for all periods from the Group’s inception. 2.2. Functional and reporting currency The reporting currency of the consolidated financial statements is the U.S. Dollars (“USD” or “$”). The functional currency of the Group’s subsidiaries reflects the economic environment of their respective operations. All amounts disclosed have been rounded to the nearest thousand, unless otherwise stated. Due to the loss of the Group’s status as a foreign private issuer, the Group as a domestic filer, changed its reporting currency of the consolidated financial statements from GBP to USD. The change in reporting currency was applied retrospectively. Consolidated financial statements for all periods have been recast into USD and presented to the nearest thousand dollars. 2.3. Principles of consolidation The consolidated financial information comprises the financial statements of Silence Therapeutics plc and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated on consolidation. 2.4. Use of estimates The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Significant estimates and assumptions reflected in the Group’s consolidated financial statements include, but are not limited to, the recognition of revenue and research and development expenses. The Group bases its estimates on historical experience, known trends and other market-specific or other relevant factors that it believes to be reasonable under the circumstances. On an ongoing basis, management evaluates its estimates when there are changes in circumstances, facts and experience. Changes in estimates are recorded in the period in which they become known. Actual results could differ materially from those estimates. 2.5. Going concern The Group has incurred recurring losses since inception, including net losses of $ 45.3 million for the year ended December 31, 2024. As of December 31, 2024, the Group had accumulated losses of $ 474.0 million and cash outflows from operating activities for the year ended 31, December 2024 of $ 67.6 million. The Group expects to incur operating losses for the foreseeable future as it continues its research and development efforts, seeks to obtain regulatory approval of its product candidates and pursues any future product candidates the Group may develop. To date, the Group has funded its operations through upfront payments and milestones from collaboration agreements, equity offerings and proceeds from private placements, as well as management of expenses and other financing options to support its continued operations. In 2024, the Group raised additional proceeds of $ 27.7 million before deducting $ 0.9 million in placement agent fees and other expenses, from sales of ADSs under its Sales Agreement. On February 5, 2024, the Group announced a private placement of 5,714,286 of the Group’s American Depositary Shares (“ADSs”), each representing three ordinary shares, at a price of $ 21.00 per ADS, with new and existing institutional and accredited investors (the “Private Placement”). The aggregate gross proceeds of the Private Placement were $ 120.0 million before deducting approximately $ 7.7 million in placement agent fees and other expenses. In 2024, the Group received a $ 10.0 million milestone payment from the AstraZeneca Collaboration and achieved another $ 2.0 million in milestone payments from the Hansoh collaboration. As of December 31, 2024, the Group had cash and cash equivalents and short-term investments of $ 147.3 million. The Group believes that its current cash and cash equivalents are sufficient to fund its operating expenses for at least the next twelve months from the issuance date of these consolidated financial statements. For this reason, the Group continues to adopt the going concern basis in preparing the financial statements. The Group will need to raise additional funding to fund its operation expenses and capital expenditure requirements in relation to its clinical development activities. The Group may seek additional funding through public or private financings, debt financing or collaboration agreements. Specifically, the Group may receive future milestone payments from existing collaboration agreements which will extend the ability to fund operations. However, these future milestone payments are dependent on achievement of certain development or regulatory objectives that may not occur. The inability to obtain future funding could impact; the Group’s financial condition and ability to pursue its business strategies, including being required to delay, reduce or eliminate some of its research and development programs, or being unable to continue operations or unable to continue as a going concern. 2.6. Segment reporting The Group has determined that its chief executive officer is the chief operating decision maker (“CODM”). The CODM reviews financial information presented on a consolidated basis. Resource allocation decisions are made by the CODM based on consolidated results. There are no segment managers who are held accountable by the CODM for operations, operating results, and planning for levels or components below the consolidated unit level. As such, the Group has concluded that it operates as a single reportable segment (see Note 4). 2.7. Revenue recognition The Group’s revenue for the year ended December 31, 2024, consists of royalty income and revenue from collaboration agreements. To determine revenue recognition for arrangements that the Group determines are within the scope of ASC 606: Revenue from Contracts with Customers , (“ASC 606”), it performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when, or as, the Group satisfies the performance obligations. The Group only applies the five-step model to contracts when it is probable that the entity will collect substantially all the consideration it is entitled to in exchange for the goods or services it transfers to the customer. As part of the accounting for these arrangements, the Group must make significant judgments, including identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each performance obligation. Royalty income The Group’s royalty income is generated by a settlement and license agreement with Alnylam. Under this contract, Alnylam is obliged to pay royalties to the Group on the net sales of ONPATTRO in the EU in a manner commensurate with the contractual terms. Invoices are raised in arrears on a quarterly basis based on sales information provided by Alnylam no later than 75 days after the quarter end. Under ASC 606, royalty income is recognized at the later date of (i) when the subsequent sale of the commercial partner’s product occurs, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied). Revenue from collaboration agreements The Group has considered the Mallinckrodt, AstraZeneca, and Hansoh contracts and assessed whether the research and development services and license of the IP in respect of each target are distinct. For all contracts the Group has concluded the license of the intellectual property and the R&D services are not distinct, as Mallinckrodt, AstraZeneca, and Hansoh cannot benefit from the intellectual property absent the R&D services, as those R&D services are used to discover and develop a drug candidate and to enhance the value in the underlying intellectual property, and these services could not be performed by another party, indicating that the two are highly interrelated. On this basis, the Group has concluded that there is a single performance obligation covering both the R&D services and the license of the intellectual property in respect of each target. The Group recognizes revenue over the duration of the contract based on an input method based on cost to cost. The contracts have multiple elements of consideration (some or all of the following), namely: • Upfront payments (fixed); • Subsequent milestone payments (variable); • FTE costs rechargeable (variable); • Recharges of direct costs for certain research activities (variable). The Group’s effort under the contracts continues throughout their entire duration. On this basis revenue is recognized over the contract period based on costs to completion. Revenue has been calculated on the following ongoing basis for the year ended December 31, 2024: • Total contract costs which includes actual FTE and direct costs incurred up to December 31, 2024 and forecast FTE and direct costs for the remainder of the contract • Actual costs incurred up until December 31, 2024 are calculated as a percentage of total contract costs (actual and forecast) • This percentage is then multiplied by the transaction price allocated to the performance obligation in question, thus calculating the cumulative revenue which is then used to calculate the revenue to be recognized in that period. In the case of the upfront and milestones, the consideration that is multiplied is in relation to the upfront and completed milestones only. Consideration in relation to milestones not yet been achieved is excluded from the calculation. Forecast costs are monitored each period, with revenue recognized reflecting any changes in forecast or over/under spend in actuals. Further details of the revenue amounts recognized in the year ended December 31, 2024 can be found in note 3. 2.8. Research and development Research and development costs consist of salary and personnel related costs and third party costs for the Group's research and development activities. Personnel related costs include a share based compensation charge relating to its stock option plan. The largest component of third party costs is for clinical trials, as well as manufacturing for clinical supplies and associated development, and pre-clinical studies. Research and development costs are expensed as incurred. The Group recognizes expenditure incurred in carrying out its research and development activities in line with management’s best estimation of the costs incurred to date for each separately contracted study or activity. This includes the calculation of research and development accruals and prepayments at each period to account for expenditure that has been incurred. This requires estimations of the full costs to complete each study or activity and also estimation of the current stage of completion. In all cases, the full cost of each study or activity is expensed by the time the final report or, where applicable, product, has been received. Further details on research and development can be found in note 2.15. 2.9. Taxation Current tax payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. Current tax liabilities are calculated using tax rates that have been enacted or substantively enacted by the balance sheet date. As a company that carries out extensive research and development activities, the Group currently benefits from the U.K. research and development tax credit regime for small or medium-sized enterprises (“SMEs”). A benefit receivable arises from the U.K. legislation regarding the treatment of certain qualifying research and development costs, allowing for the surrender of tax losses attributable to such costs in return for a tax rebate. Research and development tax credits are recognized when the receipt is probable. Research and development costs which are not eligible for reimbursement under the U.K. Research and Development Tax Credit scheme, such as expenditure incurred on research projects for which the group receives income, may be reimbursed under the U.K. Research and Development Expenditure Credit (“RDEC”) scheme. Amounts receivable under either scheme are presented within the consolidated statements of income (loss) within Benefit from R&D credit. The U.K. R&D tax credit is fully refundable to the Group and is not dependent on current or future taxable income. As a result, the Company has recorded the entire benefit from the U.K. R&D tax credit as a benefit which is included in net loss before income tax and, accordingly, not reflected it as part of the income tax provision. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial reporting basis and the respective tax basis of the Group’s assets and liabilities, and expected benefits of utilizing net operating loss, capital loss, and tax-credit carryforwards. The Group assesses the likelihood that its deferred tax assets will be realized and, to the extent management does not believe these assets are more likely than not to be realized, a valuation allowance is established. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates or laws is recognized in consolidated statements of income (loss) in the period that includes the enactment date. 2.10. Foreign currency translation Monetary assets and liabilities denominated in currencies other than the functional currency are remeasured into the functional currency at exchange rates prevailing at the balance sheet dates. Non-monetary assets and liabilities denominated in foreign currencies area remeasured into the functional currency at the exchange rates prevailing at the date of the transaction. Exchange gains or losses arising from foreign currency transactions are included in the consolidated statements of income (loss) and comprehensive income (loss) for each respective period. For financial reporting purposes, the consolidated financial statements of the Group have been presented in USD, the reporting currency. The financial statements of the Group’s entities are translated from their functional currency into USD as follows: assets and liabilities are translated at the exchange rates at the balance sheet dates, revenues and expenses are translated at the average exchange rates for the periods presented, and shareholders’ equity is translated at the prevailing historical exchange rates. Translation adjustments are not included in determining net loss but are included as a foreign exchange adjustment to other comprehensive income, a component of shareholders’ equity. 2.11. Cash and cash equivalents The Group considers cash and cash equivalents to comprise of cash on hand and demand deposits with original maturities of three months or less that are readily convertible to a known amount of cash and are subject to an insignificant risk of change in value. 2.12. Property, plant and equipment The Group only holds equipment and furniture. These are stated at cost, net of accumulated depreciation. Depreciation is calculated using the straight-line method over the estimated useful life of the asset. The estimated useful life of furniture and equipment is 3 to 10 years. Estimated useful life and residual values are reviewed each year and amended if necessary. Property, plant and equipment is assessed for impairment upon triggering events that indicate the carrying value of an asset group may not be recoverable. Recoverability is measured by a comparison of the carrying amount to future net undiscounted cash flows of the asset group expected to be generated from its use and eventual disposition. If the asset group’s carrying value is determined to not be recoverable, the impairment to be recognized is measured by which the carrying amount exceeds the fair value of the asset group. No impairment charges related to property and equipment were recorded in any of the periods presented. 2.13. Leases The Group determines if an arrangement contains a lease at inception. The Group currently only has operating leases. The Group recognizes a right-of-use ("ROU") operating lease asset and associated short- and long-term operating lease liability in its consolidated balance sheets for operating leases greater than one year. Its right-of-use assets represent its right to use an underlying asset for the lease term and its lease liabilities represent its obligation to make lease payments arising from the lease arrangement. The Group recognizes its right-of-use operating lease assets and lease liabilities based on the present value of the future minimum lease payments it will pay over the lease term. The Group determines the lease term at the inception of each lease, and in certain cases its lease term could include renewal options if the Group concludes it is reasonably certain to exercise the renewal option. When the Group exercises a lease option that was not previously included in the initial lease term, it reassesses its right-of-use asset and lease liabilities for the new lease term. As its operating lease do not provide an interest rate implicit in the lease, the Group uses its incremental borrowing rate, based on the information available as of the lease inception date or at the lease option extension date in determining the present value of future payments. The Group recognizes lease expense for its minimum lease payments on a straight-line basis over the expected term of its lease. Its leases do not include material variable or contingent lease payments. Leases with an initial term of 12 months or less are not recorded on the balance sheet. Instead, these lease payments are recognized on the consolidated statements of income (loss) on a straight-line basis over the lease term. Similar to property, plant and equipment, ROU lease asset impairment is assessed upon triggering events that indicate the carrying amount may not be recovered by comparison to the future net undiscounted cash flows. 2.14. Goodwill Goodwill is the excess of the purchase price over the estimated fair values of the underlying net assets of an acquired business. The Group assesses goodwill for impairment annually, or immediately if conditions indicate that such impairment could exist. Impairment testing for goodwill is performed at the reporting unit level. The Group first evaluates qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If the qualitative assessment indicates potential impairment, or if the Group elects to bypass the qualitative assessment, a quantitative test is performed. The quantitative test calculates the excess of the reporting unit’s fair value over its carrying amount, including goodwill, utilizing a discounted cash flow method. The test for impairment of goodwill requires the Group to make several assumptions and estimates regarding market conditions and its future profitability to determine the fair value of the goodwill at the reporting unit. Significant assumptions used in the reporting unit fair value measurements include forecasted cash flows, including revenue and expense growth rates, discount rates, and revenue and earnings multiples. An impairment loss is recognized when the carrying amount of the reporting unit net assets exceeds the estimated fair value of the reporting unit. Impairment losses recognized for the reporting unit to which goodwill has been allocated are credited initially to the carrying amount of goodwill. Any remaining impairment loss is charged pro rata to the other assets in the reporting unit. All goodwill for the Group is attributed to an acquisition that occurred in 2005 and the Group has determined that no impairment was recorded as of December 31, 2024 and 2023. 2.15. Other intangible assets Other intangible assets that are acquired by the Group are stated at cost less accumulated amortization and less accumulated impairment losses. Amortization is charged to the consolidated statements of income (loss) on a straight-line basis over the estimated useful lives of intangible assets unless such lives are indefinite. Intangible assets with an indefinite useful life and goodwill are systematically tested for impairment at each balance sheet date. Other intangible assets are amortized from the date they are available for use. The estimated useful lives are as follows: Licenses and software: 3 - 10 years. Costs associated with research activities are treated as an expense in the period in which they are incurred. Costs that are directly attributable to the development phase of software will only be recognized as intangible assets provided they meet the following requirements: • an asset is created that can be separately identified; • the technical feasibility exists to complete the intangible asset so that it will be available for sale or use and the Group has the intention and ability to do so; • it is probable that the asset created will generate future economic benefits either through internal use or sale; • sufficient technical, financial and other resources are available for completion of the asset; and • the expenditure attributable to the intangible asset during its development can be reliably measured. Careful judgment by management is applied when deciding whether recognition requirements for software development costs have been met. This is necessary as the economic success of any product development is uncertain and may be subject to future technical problems at the time of recognition. Judgments are based on the information available at each balance sheet date. 2.16. Fair value measurements The Group’s financial instruments include cash and cash equivalents, trade receivables, U.S. treasury bills, trade and other payables and accrued expenses. These are initially recorded at fair value and subsequently measured at cost, which is considered to approximate their fair value due to the short-term nature of such financial instruments. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The guidance prioritizes the inputs used in measuring fair value into the following hierarchy: • Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities; • Level 2: Quoted prices for similar assets and liabilities in active markets, quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability; or • Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity). To the extent that the valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. 2.17. Share-based compensation expense Historically the Group has issued equity settled share-based compensation to certain employees (see note 19). Equity settled share-based payments are measured at fair value (excluding the effect of non-market-based vesting conditions) at the date of grant. The fair value so determined is expensed on a straight-line basis over the vesting period, based on the number of stock that will eventually vest and adjusted for the effect of non-market-based vesting conditions. The value of the charge is adjusted to reflect expected and actual levels of award vesting, except where failure to vest is as a result of not meeting a market condition. Cancellations of equity instruments are treated as an acceleration of the vesting period and therefore any amount unrecognized that would otherwise have been recorded in future accounting periods is recognized immediately. The Group has elected to recognize the effect of forfeitures on share-based compensation when they occur. Any differences in compensation recognized at the time of forfeiture are recorded as a cumulative adjustment in the period in which the forfeiture occurs. Fair value is measured using a Black Scholes model. The key assumptions used in the model have been adjusted, based on management’s best estimate, for the effects of non-transferability, exercise restrictions and behavioral considerations. Any payment made to a counterparty on the cancellation or settlement of a grant of equity instruments (even if this occurs after the vesting date) should be accounted for as a repurchase of an equity interest (that is, as a deduction from equity). But, if the payment exceeds the fair value of the equity instruments repurchased (measured at the repurchase date), any such excess should be recognized as an expense. 2.18. Equity Ordinary shares is determined using the nominal value of shares issued. The additional paid-in capital account includes any premiums received on the initial issuing of the ordinary shares. Any transaction costs associated with the issuing of shares are deducted from the additional paid-in capital account, net of any related income tax benefits. Equity settled share-based payments are credited to a share-based payment reserve as a component of additional paid-in capital, until related options or warrants are exercised. Foreign currency translation differences are included in the accumulated other comprehensive income. Accumulated deficit includes all current and prior period results as disclosed in the consolidated statements of income (loss). 2.19. Loss per share Basic income/(loss) per share is computed by dividing the net income/(loss) attributable to ordinary shareholders by the weighted-average number of ordinary shares outstanding for the reporting period without consideration for potentially dilutive securities. Net income/(loss) attributable to ordinary shareholders is computed as if all net income/(loss) for the period had been distributed. The Group computes diluted income/(loss) per ordinary share after giving consideration to all potentially dilutive ordinary equivalents, except where the effect of such non-participating securities would be antidilutive. The Group been loss making for each fiscal year and therefore all potentially dilutive ordinary equivalents are considered to be antidilutive. 2.20. Recently Issued Accounting Pronouncements Recently adopted accounting standards In November 2023, the FASB issued ASU 2023-07 , Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures . This guidance expands public entities’ segment disclosures primarily by requiring disclosure of significant segment expenses that are regularly provided to the chief operating decision maker and included within each reported measure of segment profit or loss, an amount and description of its composition for other segment items, and interim disclosures of a reportable segment’s profit or loss and assets. The amendments are required to be applied retrospectively to all prior periods presented in an entity’s financial statements. The Group adopted the new accounting standard for fiscal year end 2024. See the Segment Reporting policy above and Note 4 below for further detail. Accounting standards issued but not yet adopted In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which provides for improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information. This guidance is effective for annual periods beginning after December 15, 2024, and the adoption of this standard is not anticipated to have a material impact on the Group’s consolidated financial statements other than adding new disclosures, which the Group is currently evaluating. In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40) . The amendments in this update require disclosure, in the notes to financial statements, of specified information about certain costs and expenses at each interim and annual reporting period. The amendments are effective for annual periods beginning after December 15, 2026, and reporting periods beginning after December 15, 2027, with early adoption permitted. The Group is currently evaluating the impact to its consolidated financial statements. |
