| Summary of significant accounting policies | 2. Summary of significant accounting policies Basis of presentation The Company’s consolidated financial statements are prepared in accordance with accounting principles generally accepted in the U.S. ("U.S. GAAP") for the fiscal years ended December 31, 2024, 2023, and 2022 and include the financial results of all wholly-owned subsidiaries. Intercompany transactions and balances have been eliminated upon consolidation and the consolidated financial statements are presented in U.S. dollars. Use of estimates The preparation of the consolidated financial statements in conformity with U.S. GAAP 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. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising that are beyond the Company’s control. Actual results could differ from those estimates. Estimates are primarily made in relation to revenue recognition, estimation of operating lease incremental borrowing rates, share-based compensation expense, clinical accruals and deferred tax asset valuation allowances. Foreign currencies The reporting currency of the Company is the U.S. dollar. Effective January 1, 2024, the Company’s ultimate parent adopted the U.S. dollar as its functional currency. Prior to January 1, 2024, the functional currency of the Company’s ultimate parent was the British pound sterling. The functional currency of the Company’s ultimate parent and each subsidiary is based on the currency of the economic environment in which they operate. The change in functional currency of the Company’s ultimate parent is due to a change in the economic facts and circumstances of the entity due to the increased exposure to the U.S. dollar primarily as a result of the increased cash flows related to financing and investing activities that are now expected to occur going forward in this entity. The effect of the change in functional currency for the Company’s ultimate parent was applied prospectively in the Consolidated Financial Statements effective January 1, 2024. Upon consolidation, assets and liabilities of each subsidiary with a functional currency that differs to the Company’s ultimate parent are translated into U.S. dollars at period-end exchange rates, and revenues and expenses are translated into U.S. dollars using average exchange rates for each reporting period. Translation adjustments are reflected as other comprehensive income (loss). Revenues Pursuant to Accounting Standards Codification Topic 606 ("ASC 606"), the Company recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To determine revenue recognition for agreements, the Company performs the following five steps: (i) identifying the contract with a customer, (ii) identifying the performance obligations in the contract, (iii) determining the transaction price, (iv) allocating the transaction price to the performance obligations, and (v) recognizing revenue when, or as, an entity satisfies a performance obligation. The Company only applies the five-step model to contracts when it is probable that the entity will collect the consideration to which it is entitled in exchange for the goods or services it transfers to the customer. At contract inception, the Company identifies the goods or services promised within each contract, assesses whether each promised good or service is distinct and determines those that are performance obligations. The Company recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when the performance obligation is satisfied. Revenue from sale of therapies, net Revenue from sale of therapies, net relates to the sale of KIMMTRAK following marketing approval and the sale of tebentafusp under a compassionate use and an early access program in France up to September 2022. The Company recognizes revenue at the point in time that control transfers to a customer, which is typically on delivery. The Company also operates under consignment arrangements where control passes when the Company’s distributors take KIMMTRAK out of consignment inventory. The amount of revenue recognized under its arrangements reflects the consideration to which the Company expects to be entitled, net of estimated deductions for rebates, chargebacks and product returns. Estimated revenue deductions are updated at the end of each reporting period using the latest available data. The Company considers whether any part of amounts expected to be received should be constrained to ensure that it is probable that a significant reversal in the cumulative revenue recognized will not occur. Rebates: Rebates consist of Medicaid and other governmental rebates in the U.S. and other similar programs in Europe. These reserves are recorded as a reduction to revenue in the same period the related revenue is recognized. The Company's estimates are based on current pricing and historical data, updated at each reporting period to reflect actual claims received. For markets where the price is open to negotiation, judgements are made in line with expected pricing outcomes. Chargebacks : Chargebacks for discounts represent the Company’s estimated obligations resulting from contractual commitments for specialty distributors to sell KIMMTRAK to qualifying hospitals at a lower price. For such sales, the specialty distributors charge back the difference between the wholesale acquisition cost and this lower price. The Company estimates chargeback deductions by analyzing sell-through data relating to the hospital mix of onward sales made by specialty distributors. Product returns : The Company estimates the amount of its product sales that may be returned by its customers and records this in the period the related revenue is recognized. The Company bases product return liabilities on quantitative information provided by the Company’s distributors. The Company’s main customers in the United States and Europe are its distributors. These distributors are invoiced at contractual list prices with standard payment terms typically between one and three months. When the Company has the right to offset chargebacks against accounts receivable and the parties have agreed to settle the payments net, chargebacks are recorded as a reduction in accounts receivable. Other chargebacks, rebates and deductions are recognized in Accrued expenses and other current liabilities in the Consolidated Balance Sheets. In certain countries, the Company’s customers are hospitals and healthcare providers, where KIMMTRAK is sold through an agent acting on the Company’s behalf. Revenue from sale of therapies, net also includes amounts for partnered revenue, which is recognized on delivery and transfer of title to Medison Pharma Ltd ("Medison"), the Company’s exclusive distributor in certain countries outside the United States. From December 31, 2024, we have combined Product revenue, net and Pre-product revenue, net into Revenue from sale of therapies, net in order to simplify our presentation. Collaboration revenue The Company analyzes its collaboration agreements to assess whether they are within the scope of ASC Topic 808, Collaborative Arrangements (“ASC 808”) to determine whether such arrangements involve joint operating activities performed by parties that are both active participants and are exposed to significant risks and rewards that are dependent on the commercial success of such activities. It was determined that the Company's historical collaboration agreements were not in the scope of ASC 808. The Company concluded that all aspects of the arrangements represented a transaction with a customer, and therefore, were accounted for within the scope of ASC 606. Pursuant to ASC 606, a customer is a party that has contracted with an entity to obtain goods or services that are an output of the entity’s ordinary activities in exchange for consideration. An entity recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. The Company determines the units of account within the collaboration agreement utilizing the guidance in ASC 606 to determine which promised goods or services are distinct. In order for a promised good or service to be considered distinct under ASC 606, the customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer (i.e., the good or service is capable of being distinct), and the entity’s promise to transfer the good or service to the customer is separately identifiable from other promises in the contract (i.e., the promise to transfer the good or service is distinct within the context of the contract). Under its historical collaboration agreements, the Company granted rights to technology with respect to the development of specified targets and the commercialization of future product candidates for such targets. In addition, the Company was required to perform R&D services, participate on a joint steering committee and the agreements also provided parties with the option to obtain exclusive rights to the associated intellectual property license. The Company assesses whether each promised good or service is distinct for the purpose of identifying the performance obligations in the contract. The Company determined that these promises represented specialized, combined performance obligations, which were satisfied over time. Further, the Company determined that their collaborators cannot benefit from the intellectual property licenses separately from the R&D activities and participation on the joint steering committee because these services are specialized and rely on the Company’s expertise such that these activities are highly interrelated and therefore not distinct. The Company estimates the transaction price based on the amount it expects to be entitled to for transferring the promised goods or services in the contract and may include fixed and variable consideration. At the inception of each arrangement that includes variable consideration, the Company evaluates the amount of potential payment and the likelihood that the underlying constraint will be released. Variable consideration is included in the transaction price only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized will not occur in a future period. Revenue is recognized using an estimate of percentage completion which takes into consideration the estimated timelines required to satisfy the performance obligation and the time taken since program nomination. Deferred revenue The Company’s deferred revenue as of December 31, 2024 and 2023 is related to a revenue partnership with Medison relating to the supply and distribution of KIMMTRAK and will be classified within revenue from sale of therapies, net in accordance with ASC 606 . The Company’s deferred revenue relates to a non-refundable upfront receipt from Medison under an amended agreement entered into in November 2022. The Company determined that this receipt relates to the distribution of KIMMTRAK in South America and assessed that the Company has a single performance obligation to provide KIMMTRAK to Medison for onward sale under an exclusive distribution license. The deferred revenue is expected to be released with the sale of products following regulatory approval in the territory. Accounts receivable Accounts receivable includes amounts invoiced or contractually accrued where only the passage of time is required before payment is received under the Company’s revenue arrangements. Such receivables principally relate to KIMMTRAK sales. An allowance for lifetime expected credit losses on accounts receivable is measured using historical credit loss experience, conditions at the end of each reporting period, and reasonable and supportable forecasts that affect collectability. Expected credit losses at the end of December 31, 2024 and 2023 were immaterial. Inventory Inventory includes KIMMTRAK manufactured for commercial sale, items in the process of being manufactured for sale, and materials to be used in the manufacturing process for such sale. The principal costs in manufacturing the Company’s inventory are raw materials, external manufacturing costs, and other costs incurred in bringing inventory to its location and condition prior to sale. Inventory is recorded at weighted average cost and presented as an asset in the Consolidated Balance Sheets at the lower of cost and net realizable value. The Company assesses whether an expense should be recognized as a result of writing down inventory values at each reporting period for excess or obsolete inventory at risk of expiry. Such expenses are recorded as a component of Cost of revenue from sale of therapies in the Consolidated Statements of Operations and Comprehensive Loss in the period during which they are first identified. The Company records inventory costs for potential products within R&D expenses until regulatory approval is considered probable, after which, the Company capitalizes subsequent costs related to the production of inventories. Certain inventory can be used for clinical purposes or for commercial products, and the Company records such items within R&D expenses at the point that the vials are assigned for clinical use. Cost of revenue from sale of therapies Cost of revenue from sale of therapies represents production costs including raw materials, external manufacturing costs, and other costs incurred in bringing inventory to its location and condition prior to sale. Overheads and internal costs of revenue from sale of therapies are minimal under the Company's manufacturing arrangements. Cost of revenue from sale of therapies may also include write-off costs and provisions related to excess or obsolete inventory. Research and development ("R&D") expense R&D costs are expensed as incurred and include (i) employee-related expenses, including salaries, benefits, travel and share-based compensation expense for employees engaged in R&D functions; (ii) external R&D expenses incurred under arrangements with third parties, such as contract research organization ("CRO") agreements, investigational sites and consultants; (iii) the cost of acquiring, developing and manufacturing clinical study materials, including the cost of consultants and contract manufacturing organization ("CMO"); (iv) costs associated with preclinical and clinical activities and regulatory operations; (v) costs incurred in development of intellectual property, (vi) and depreciation and R&D facilities costs. The Company estimates accrued expenses at each balance sheet date based on facts and circumstances known at that time. These estimates are based on reviews of open contracts, reports provided by the CROs and CMOs and internal reviews to estimate the level of service performed and the associated cost incurred for those services when the Company has not yet been invoiced or otherwise notified of the actual cost. In accruing clinical trial expenses, the Company estimates the time period over which services will be performed and the level of effort to be expended in each period. If the actual timing of the performance of services or the level of effort varies from the estimate made, the expense is adjusted accordingly. Where payments made to CROs or other parties exceed the level of services provided, a prepayment is recorded in the Consolidated Balance Sheets. Share-based compensation The Company operates equity-settled, share-based compensation plans whereby employees and directors are granted options to purchase shares in the Company. The fair value of grants is expensed over the vesting period, which is the period in which the services are received. The majority of the Company’s awards have graded vesting schedules, and the expense for these options is recognized over the requisite service period for each separately vesting portion as if the grant of options, in substance, represented multiple awards. The grant date fair value of options is calculated using the Black Scholes valuation model. Estimation of fair value requires judgement, including assumptions about the expected term of share-based options and expected volatility, which are used to determine the fair value of the Company’s options granted. The expected term is based on the Company’s assessment of the period within which participants are expected to exercise options, which requires consideration of employee groups, expected employee service, and other internal factors, and the degree to which these are expected to shorten the term of options in comparison to contractual expiry dates. Estimated expected volatility is based on the Company’s share price volatility since its IPO. The expected volatility reflects the assumption that the historical volatility over a period similar to the life of the awards is indicative of future trends, which may not necessarily be the actual outcome. The Company does not assume dividend payments for the purposes of estimating fair value and uses a zero-coupon U.S. Treasury yield curve applicable for the period of the expected term to form an estimate of the risk-free rate. Forfeitures expected to occur are estimated considering both market and company-specific data and the available internal information at the end of each reporting period. Income tax Income tax includes components of current and deferred tax and is recognized in the Consolidated Statements of Operations and Comprehensive Loss. Current tax is the expected tax payable or receivable on the taxable income or loss for the current or prior periods using tax rates enacted at the balance sheet date. Deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial statement carrying amount and the tax bases of assets and liabilities at the applicable tax rates and for operating loss and tax credit carryforwards. A valuation allowance reduces deferred tax assets in the Consolidated Balance Sheets to reflect the amount that is more likely than not to be realized. The Company evaluates the realizability of its deferred tax assets at each reporting period and adjusts the valuation allowance accordingly, considering income forecasts, availability of carrybacks, taxable temporary differences and other factors affecting the realization of deferred tax assets. The Company accounts for uncertain tax positions in accordance with the provisions of ASC 740. When uncertain tax positions exist, the Company recognizes the tax benefit of tax positions to the extent that the benefit will more likely than not be realized. The determination as to whether the tax benefit will more likely than not be realized is based upon the technical merits of the tax position as well as consideration of the available facts and circumstances. As of December 31, 2024 and 2023, the Company has not recorded any provision for uncertain tax positions. Changes in the Company’s estimate of income tax positions relating to the more-likely-than-not threshold are recognized in the first subsequent period following the threshold being met or ceasing to be met. R&D expenditure credits The Company receives R&D expenditure credits to compensate for its research activities, which are recognized when it is more likely than not the Company will meet the terms for receiving and realizing the benefit of the credits. Recognition is on a systematic basis over the periods in which the Company recognizes costs for which the credits are intended to compensate (i.e., qualified expenses). The Company benefits in the United Kingdom from His Majesty’s Revenue & Customs (“HMRC”) R&D Expenditure Credit (“RDEC”), which provides relief against U.K. corporation tax. Based on criteria established by HMRC, a portion of the Company’s expenditures incurred on R&D activities are eligible for RDEC relief. The Company recognizes the benefit as a reduction of the related R&D expenses on the Consolidated Statements of Operations and Comprehensive Loss. Leases The Company assesses whether contracts represent or contain leases at inception by determining whether the Company has the right to use, or control the use of, an identified asset from which it can obtain substantially all the economic benefits for a defined period. The Company leases its corporate headquarters in the United Kingdom, where its facilities contain R&D, laboratory and office space of approximately 123,000 square feet. In addition, the Company leases approximately 36,000 square feet of office space in the United States, and small offices in Ireland and Switzerland. The leases in the United Kingdom expire between 2037 and 2043. Estimates of the term consider non-cancellable periods and include options to extend or terminate the lease when it is reasonably certain that the Company will exercise such options. Operating lease right-of-use assets and liabilities are recognized at the lease commencement date. Right-of-use assets are initially measured at cost, representing the initial amount of the lease liability and any initial direct costs incurred, with a reduction for any lease incentives received. Lease liabilities are initially measured at the present value of the lease payments. Since the rate implicit in leases is not readily determinable, the Company uses available information to determine its incremental borrowing rates, which represent the rate of interest that the Company would have to pay to borrow on a collateralized basis over a similar term for an amount equal to the lease payments in a similar economic environment. Fixed lease components include rental payments at inception and termination costs for leases not reasonably certain of extension. Such components are accounted for as part of the right-of-use assets and lease liabilities and recognized on a straight-line basis over the lease term. Variable lease components include subsequent indexation-related rental increases. If such variable components do not coincide with a remeasurement of the lease term, the additional costs are recorded as a variable component of the lease expense in the Consolidated Statements of Operations and Comprehensive Loss as incurred. Non-lease components such as maintenance costs and service charges are separated from lease components and recognized separately in the Consolidated Statements of Operations and Comprehensive Loss. Operating lease costs are allocated to R&D and Selling, general and administrative ("SG&A") expenses in the Consolidated Statements of Operations and Comprehensive Loss. The related lease cash flows are categorized under Net cash used in operating activities in the Consolidated Statements of Cash Flows. The Company elects not to recognize right-of-use assets and lease liabilities for short-term leases with a term of 12 months or less containing no repurchase options reasonably certain of exercise, and the expense for these short-term leases is immaterial. The Company does not have financing leases. Property and equipment Property and equipment are stated at cost net of accumulated depreciation and impairment losses. The Company expenses repairs and maintenance related to property and equipment in the Consolidated Statements of Operations and Comprehensive Loss when the costs are incurred. Depreciation is charged to the Consolidated Statements of Operations and Comprehensive Loss on a straight-line basis over the estimated useful lives of assets as follows: • Leasehold improvements - shorter of expected lease term and useful life of the asset • Laboratory equipment - 3 to 7 years • Office equipment and other assets - 3 to 5 years Impairment of long-lived assets The Company assesses whether circumstances indicate that the estimated remaining useful life of its long-lived assets should be changed or that the carrying value of such assets may be impaired. The Company did not identify any such circumstances or recognize any impairment charges for the years ended December 31, 2024 , 2023 and 2022 . Cash and cash equivalents Cash and cash equivalents comprise cash balances and short-term money market funds with an original maturity of less than three months. Money market funds are presented at fair value in the Consolidated Balance Sheets. Marketable securities Marketable securities consist of investment funds which are measured and reported at fair value determined using quoted market prices. The investment funds are primarily invested in U.S. investment-grade debt securities, including asset-backed and mortgage-backed securities. Marketable securities are available to the Company for use in current operations and are classified as current assets. Gains and losses from marketable securities are recognized in Other income (expense), net. Concentrations of credit risk and off-balance sheet risk Financial instruments that potentially subject the Company to concentrations of credit risk are accounts receivable, cash equivalents, marketable securities and deposits held with banks and financial institutions. Cash, cash equivalents, marketable securities and deposits are maintained with high-quality financial institutions in Europe and the United States. The Company has not experienced any credit losses with such institutions and has incurred an immaterial amount of losses in relation to its accounts receivable from customers. The Company has no financial instruments with off-balance sheet risk of loss. As of December 31, 2024 and 2023 , the amounts of expected credit losses recognized in the Consolidated Balance Sheets were not materia l . Interest-bearing loans and borrowings The Company issued 2.5% Convertible Senior Notes due in 2030 in February 2024 (the "Notes"), and evaluated to determine whether they contain features that qualify as embedded derivatives in accordance with ASC 815. Embedded derivatives must be separately measured from the host contract if all the requirements for bifurcation are met. The assessment of the conditions surrounding the bifurcation of embedded derivatives depends on the nature of the host contract and the features of the derivatives. In accounting for the issuance of the Notes, the Company treats the instrument wholly as a liability, in accordance with ASC 470, as the conversion features do not require bifurcation as a derivative in accordance with ASC 815 and the Notes were not issued at a substantial premium. The Company offsets issuance costs against the initial value of the debt on the Company’s Consolidated Balance Sheets and amortizes the costs over the loan term using the effective interest method. Such costs are recognized under Interest expense in the Consolidated Statements of Operations and Comprehensive Loss. Fair value measurements Where financial and non-financial assets and liabilities are measured at fair value, the Company uses appropriate valuation techniques for which sufficient data are available, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs. Fair values are categorized into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows: • Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities. • Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices). • Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs), and that are significant to the fair value of the assets or liabilities. As of December 31, 2024 and 2023 , the Company held $338.1 million and $331.0 million, respectively, of money market funds required to be measured at fair value on a recurring basis within cash and cash equivalents. In addition, as of December 31, 2024 and 2023 , the Company held $364.6 million and $0, of marketable securities, respectively, including unrealized gains of $14.6 million and $0, respectively. The fair value of these cash equivalents and marketable securities is based on quoted prices from active markets (Level 1 inputs). The Company recognizes transfers between levels of the fair value hierarchy at the end of the reporting period during which the changes have occurred. There were no transfers between levels of fair value hierarchy in the years ended December 31, 2024 and 2023 . Other financial instruments, although not recorded at fair value on a recurring basis, include cash, accounts receivable, accounts payable and interest-bearing loans and borrowings. On November 8, 2024, the Company, repaid in full the loan outstanding under the Pharmakon Loan Agreement. The fair value of borrowings under the Notes and Pharmakon Loan Agreement (disclosed in Note 7. “Non-current interest-bearing loans and borrowings”) were based on Level 2 inputs, which include observable inputs estimated using discounted cash flows and market-based expectations for interest rates, credit risk, and the contractual terms of debt instruments. After initial recognition, borrowings are measured at amortized cost using the effective interest method. Net loss per share Basic and diluted net loss per share is calculated by dividing the net loss for the period by the weighted average number of ordinary shares outstanding during the period. The dilutive effect of potential ordinary shares through share options and the Notes are considered to be anti-dilutive as they would decrease the net loss per share and are therefore excluded from the calculation of diluted net loss per share. Recently issued and recently adopted accounting pronouncements On November 27, 2023, the FASB issued Accounting Standards Update (ASU) No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (ASU 2023-07), which enhances segment disclosures and requires additional disclosures of segment expenses. This ASU is effective for annual periods in fiscal years beginning after December 15, 2023, and interim periods beginning after December 15, 2024. The Company adopted this ASU for the annual period ended December 31, 2024 and the amendments have been applied retrospectively to all prior periods presented in the financial statements by expanding the Company's segment information disclosure in Note 13. "Segment information." In December 2023, the FASB issued ASU 2023-09 , Improvements to Income Tax Disclosures . This ASU improves the transparency of income tax disclosure by requiring consistent categories and greater disaggregation of information in the rate reconciliation, and income taxes paid disaggregated by jurisdiction. This guidance is effective for the Company for the year beginning January 1, 2025, with early adoption permitted. The amendments should be applied on a prospective basis, with retrospective application permitted. The Company is currently assessing the impact of this guidance on its disclosures. |
