NuCana (NCNA) 6-K NuCana Reports Second Quarter 2018 Financial Results and Provides Business Update

Exhibit 99.2

NUCANA PLC

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

			For the three months ended June 30,						For the six months ended June 30,
	Notes		2018			2017			2018			2017
			(in thousands, except per share data)
			£			£			£			£
Research and development expenses				(5,158	)		(2,077	)		(8,863	)		(3,689	)
Administrative expenses				(1,402	)		(313	)		(2,642	)		(637	)
Initial public offering related expenses		3		—			(1,034	)		—			(1,066	)
Net foreign exchange gains (losses)				3,607			(113	)		1,059			(161	)
Operating loss				(2,953	)		(3,537	)		(10,446	)		(5,553	)
Finance income				252			44			442			91
Loss before tax				(2,701	)		(3,493	)		(10,004	)		(5,462	)
Income tax credit		4		1,383			745			2,292			1,077
Loss for the period				(1,318	)		(2,748	)		(7,712	)		(4,385	)
Basic and diluted loss per share		5		(0.04	)		(0.11	)		(0.24	)		(0.18	)

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

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NUCANA PLC

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

	For the three months ended June 30,						For the six months ended June 30,
	2018			2017			2018			2017
	(in thousands)
	£			£			£			£
Loss for the period		(1,318	)		(2,748	)		(7,712	)		(4,385	)
Other comprehensive expense:
Items that may be reclassified subsequently to profit or loss:
Exchange differences on translation of foreign operations		9			—			4			(1	)
Other comprehensive income (expense) for the period		9			—			4			(1	)
Total comprehensive loss for the period		(1,309	)		(2,748	)		(7,708	)		(4,386	)
Attributable to:
Equity holders of the Company		(1,309	)		(2,748	)		(7,708	)		(4,386	)

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

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NUCANA PLC

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

AS AT

			June 30, 2018			December 31, 2017
			(in thousands)
	Notes		£			£
Assets
Non-current assets
Intangible assets		6		2,485			1,938
Property, plant and equipment				495			358
Deferred tax asset		4		32			81
				3,012			2,377
Current assets
Prepayments, accrued income and other receivables				1,737			3,050
Current income tax receivable		4		4,660			4,225
Cash and cash equivalents		7		81,469			86,703
				87,866			93,978
Total assets				90,878			96,355
Equity and liabilities
Capital and reserves
Share capital and share premium		9		80,508			80,508
Other reserves				59,072			58,071
Accumulated deficit				(52,871	)		(45,159	)
Total equity attributable to equity holders of the Company				86,709			93,420
Non-current liabilities
Provisions				26			18
Current liabilities
Trade payables				2,123			1,120
Payroll taxes and social security				103			157
Accrued expenditure				1,917			1,640
				4,143			2,917
Total liabilities				4,169			2,935
Total equity and liabilities				90,878			96,355

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

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NUCANA PLC

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

	For the Six Months Ended June 30,
	Share capital		Share premium			Own share reserve			Share option reserve		Foreign currency translation reserve			Capital reserve		Accumulated deficit			Total equity attributable to equity holders
	(in thousands)
	£		£			£			£		£			£		£			£
Balance at December 31, 2016		663		42,770			(339	)		4,406		(3	)		—		(22,256	)		25,241
Loss for the period		—		—			—			—		—			—		(4,385	)		(4,385	)
Other comprehensive expense for the period		—		—			—			—		(1	)		—		—			(1	)
Total comprehensive loss for the period		—		—			—			—		(1	)		—		(4,385	)		(4,386	)
Share-based payments		—		—			—			532		—			—		—			532
Reduction in share premium		—		(42,466	)		—			—		—			42,466		—			—
Balance at June 30, 2017		663		304			(339	)		4,938		(4	)		42,466		(26,641	)		21,387
Balance at December 31, 2017		1,272		79,236			(339	)		15,955		(11	)		42,466		(45,159	)		93,420
Loss for the period		—		—			—			—		—			—		(7,712	)		(7,712	)
Other comprehensive income for the period		—		—			—			—		4			—		—			4
Total comprehensive loss for the period		—		—			—			—		4			—		(7,712	)		(7,708	)
Share-based payments		—		—			—			997		—			—		—			997
Balance at June 30, 2018		1,272		79,236			(339	)		16,952		(7	)		42,466		(52,871	)		86,709

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

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NUCANA PLC

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

	For the six months ended June 30,
	2018			2017
	(in thousands)
	£			£
Cash flows from operating activities
Loss for the period		(7,712	)		(4,385	)
Adjustments for:
Income tax credit		(2,292	)		(1,077	)
Amortization and depreciation		164			84
Finance income		(442	)		(91	)
Share-based payments		997			532
Initial public offering (IPO) related expenses		—			1,066
Net foreign exchange (gains) losses		(1,112	)		142
		(10,397	)		(3,729	)
Movements in working capital:
Decrease in prepayments, accrued income and other receivables		1,358			609
Increase (decrease) in trade payables		1,003			(477	)
Increase (decrease) in payroll taxes, social security and accrued expenditure		231			(230	)
Movements in working capital		2,592			(98	)
Cash used in operations		(7,805	)		(3,827	)
Net income tax credit received		1,906			235
Net cash used in operating activities		(5,899	)		(3,592	)
Cash flows from investing activities
Interest received		429			98
Payments for property, plant and equipment		(200	)		(5	)
Payments for intangible assets		(648	)		(492	)
Net cash used in investing activities		(419	)		(399	)
Cash flows from financing activities
IPO related expenses included in statement of operations		—			(73	)
Net cash used in financing activities		—			(73	)
Net decrease in cash and cash equivalents		(6,318	)		(4,064	)
Cash and cash equivalents at beginning of period		86,703			19,990
Foreign currency translation differences		1,084			(8	)
Cash and cash equivalents at end of period		81,469			15,918

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

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NUCANA PLC

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. General information

NuCana plc (“NuCana” or the “Company”) is a clinical-stage biopharmaceutical company developing a portfolio of new medicines to treat cancer. We are harnessing the power of phosphoramidate chemistry to generate new medicines called ProTides. These compounds have the potential to improve cancer treatment by enhancing the efficacy and safety of several current standards of care.

On August 29, 2017 the Companyre-registered as a public limited company and changed its name from NuCana BioMed Limited to NuCana plc.

The Company has had American Depository Receipts (“ADRs”) registered with the US Securities and Exchange Commission (“SEC”) and is listed on Nasdaq since October 2, 2017. The Company is incorporated in England and Wales and domiciled in the United Kingdom.

The Company has two wholly owned subsidiaries, NuCana, Inc. and NuCana BioMed Trustee Company Limited (together referred to as the “Group”).

The comparative figures for the year ended December 31, 2017 are not the Group’s statutory accounts for that financial year within the meaning of section 434 of the Companies Act 2006. Those accounts have been reported on by the Company’s auditor and delivered to the Registrar of Companies. The report of the auditor was (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report, and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.

2. Significant accounting policies

Basis of preparation

The unaudited condensed consolidated financial statements (the “financial statements”) for the three and six months ended June 30, 2018 have been prepared in accordance with International Accounting Standard 34 “Interim Financial Reporting” (IAS 34). The significant accounting policies and methods of computation applied in the preparation of the financial statements are consistent with those applied in the Company’s annual financial statements for the year ended December 31, 2017. No new standards, amendments or interpretations have had an impact on the financial statements for the six months ended June 30, 2018.

The financial statements comprise the financial statements of the Company and its subsidiaries at June 30, 2018. The financial statements are presented in pounds sterling, which is also the Company’s functional currency. All values are rounded to the nearest thousand, except where otherwise indicated.

The financial statements do not include all the information and disclosures required in the annual financial statements, and should be read in conjunction with the Company’s annual financial statements as at December 31, 2017.

The unaudited condensed consolidated statement of cash flows for the six months ended June 30, 2017 has been restated to be consistent with the presentation of foreign exchange differences and IPO related expenses in the annual financial statements for the year ended December 31, 2017.

Going concern

In common with many companies in the biopharmaceutical sector, the Company incurs significant expenditure in its early years as it researches and develops its potential products for market.

The board of directors, having reviewed the operating budgets and development plans, considers that the Company has adequate resources to continue in operation for the foreseeable future. The board of directors is therefore satisfied that it is appropriate to adopt the going concern basis of accounting in preparing the financial statements. The Company believes that its cash and cash equivalents of £81.5 million at June 30, 2018, will be sufficient to fund its current operating plan for at least the next 12 months. As the Company continues to incur losses, the transition to profitability is dependent upon the successful development, approval and commercialization of its product candidates and achieving a level of revenues adequate to support its cost structure. The Company may never achieve profitability, and unless and until it does, it will continue to need to raise additional capital. There can be no assurances, however, that additional funding will be available on acceptable terms.

Judgements and estimates

The accounting estimates and judgements made by management in applying the Group’s accounting policies that have the most significant effect on the amounts included within these financial statements, were the same as those that applied to the annual financial statements for the year ended December 31, 2017.

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NUCANA PLC

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

3. IPO related expenses

	For the three months ended June 30,				For the six months ended June 30,
	2018		2017		2018		2017
	(in thousands)				(in thousands)
	£		£		£		£
IPO related expenses		—		1,034		—		1,066

IPO related expenses primarily relate to legal, accounting and other advisors’ fees in relation to the Company’s listing on Nasdaq which completed on October 2, 2017.

4. Income tax

	For the three months ended June 30,					For the six months ended June 30,
	2018			2017		2018			2017
	(in thousands)					(in thousands)
	£			£		£			£
Current tax		1,393			745		2,341			1,077
Deferred tax		(10	)		—		(49	)		—
Income tax credit		1,383			745		2,292			1,077

The income tax credit recognized primarily represents the U.K. research and development tax credit. In the U.K. the Company is able to surrender some of its losses for a cash rebate of up to 33.35% of expenditure related to eligible research and development projects.

	June 30, 2018		December 31, 2017
	(in thousands)
	£		£
Current income tax receivable
U.K. tax		4,641		4,207
U.S. tax		19		18
		4,660		4,225
Deferred tax asset
U.S. deferred tax asset		32		81

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NUCANA PLC

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

5. Basic and diluted loss per share

	For the three months ended June 30,						For the six months ended June 30,
	2018			2017			2018			2017
	(in thousands, except per share data)
	£			£			£			£
Loss for the period		(1,318	)		(2,748	)		(7,712	)		(4,385	)
Basic and diluted weighted average number of shares		31,811			24,185			31,811			24,185
	£			£			£			£
Basic and diluted loss per share		(0.04	)		(0.11	)		(0.24	)		(0.18	)

Basic loss per share is calculated by dividing the loss for the period attributable to the equity holders of the Company by the weighted average number of shares outstanding during the period.

The potential shares issued through equity settled transactions were considered to be anti-dilutive as they would have decreased the loss per share and were therefore excluded from the calculation of diluted loss per share.

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NUCANA PLC

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

6. Intangible assets

Intangible assets comprise patents with a carrying value of £2.4 million as of June 30, 2018 (as of December 31, 2017: £1.8 million) and computer software with a carrying value of £0.1 million as of June 30, 2018 (as of December 31, 2017: £0.1 million).

During the six months ended June 30, 2018, the Company acquired intangible assets with a cost of £0.6 million in relation to patents (six months ended June 30, 2017: £0.4 million in relation to patents and £0.1 million in relation to computer software).

There were no disposals of intangible assets in the six months ended June 30, 2018 (six months ended June 30, 2017: £nil).

7. Cash and cash equivalents

	June 30, 2018		December 31, 2017
	(in thousands)
	£		£
Cash and cash equivalents		81,469		86,703

Cash and cash equivalents comprise cash at bank with maturities of three months or less and earn interest at fixed or variable rates based on the terms agreed for each account.

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NUCANA PLC

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

8. Share-based payments

The Company has three share-based payment plans for employees, directors and consultants. The share options granted will be settled in equity.

On April 11, 2018 and May 8, 2018, 79,000 and 62,000 share options respectively were granted under the U.K. share-based payment plans. Options granted under these plans will vest if the option holder remains under respective contract of employment or contract of service for the agreed vesting period. The share options granted under these plans will vest equally over a period of four years, with the exception of options granted to a consultant, which vested immediately.

The fair values of options granted were determined using the Black-Scholes model that takes into account factors specific to the share incentive plan. As NuCana plc listed on October 2, 2017, it is not possible to derive historical volatility from the Company’s own share price. The underlying expected volatility was therefore determined by using the historical volatility of similar listed entities as a proxy. The volatility percentage applied to each tranche is the average of the historical volatility of comparable companies to NuCana plc.

The following weighted average principal assumptions were used in calculating the fair values of options granted:

	Options granted on
	Apr 11, 2018			Apr 11, 2018			May 8, 2018
Vesting dates		Apr 11, 2019			Apr 11, 2018			May 8, 2019
		Apr 11, 2020						May 8, 2020
		Apr 11, 2021						May 8, 2021
		Apr 11, 2022						May 8, 2022
Volatility		64.48	%		60.06	%		65.80	%
Dividend yield		0	%		0	%		0	%
Risk-free investment rate		1.04	%		0.83	%		1.02	%
Fair value of option at grant date	£	8.97		£	17.35		£	8.63
Fair value of share at grant date	£	17.51		£	17.51		£	16.57
Exercise price at date of grant	£	17.51		£	0.16		£	16.57
Lapse date		Apr 11, 2028			Apr 11, 2028			May 8, 2028
Expected option life (years)		4.50			2.00			4.50
Number of options granted		71,500			7,500			62,000

For the six months ended June 30, 2018, the Company has recognized £1.0 million of share-based payment expense in the statement of operations (six months ended June 30, 2017: £0.5 million). For the three months ended June 30, 2018, the Company has recognized £0.6 million of share-based payment expense in the statement of operations (three months ended June 30, 2017: £0.3 million).

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NUCANA PLC

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

9. Share capital and share premium

	June 30, 2018		December 31, 2017
	(in thousands)
	£		£
Share capital		1,272		1,272
Share premium		79,236		79,236
		80,508		80,508
	June 30, 2018		December 31, 2017
	Number (in thousands)
Issued share capital comprises:
Ordinary shares of £0.04 each		31,811		31,811

	Number of shares		Share capital		Share premium
	(in thousands)
Fully paid shares:			£		£
Balance at December 31, 2017		31,811		1,272		79,236
Balance at June 30, 2018		31,811		1,272		79,236

10. Contingent liabilities

Under the U.K. share-based payment plan, the Company granted unapproved share options that have fully vested. If and when these share options are exercised, the Company will be liable for the Employer Class 1 National Insurance payable to HMRC in the U.K. This contingent liability will be determined based on the market value of the shares on exercise less the exercise price paid by the option holders, at the prevailing rate of Employer National Insurance (currently 13.8%). Based on the closing share price of ADSs on the Nasdaq Global Select Market on June 29, 2018, the last trading day of the period to which these financial statements relate, and assuming full exercise of all outstanding and vested unapproved share options on that date, the Employer National Insurance contingent liability would have been £4.1 million (December 31, 2017: £2.1 million).

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