Polarean Imaging : Annual Report & Accounts 2022 (inc. Notice of AGM)

Polarean Imaging Plc

Group Annual Report & Accounts 2022

Company Number 10442853

Group Annual Report and Financial Statements

for the year ended 31 December 2022

Contents

Company Information	3
Chairman's Statement	4
Chief Executive Officer's Statement	5
Strategic Report	7
Directors' Report	18
Corporate Governance Statement	23
Remuneration Committee Report	30
Independent Auditors' report to the members of Polarean Imaging plc	32
Consolidated Statement of Comprehensive Income	37
Consolidated Statement of Financial Position	38
Company Statement of Financial Position	39
Consolidated Statement of Changes in Equity	40
Company Statement of Changes in Equity	41
Consolidated Statement of Cash Flows	42
Company Statement of Cash Flows	43
Notes to the Financial Statements	44
Notice of the Annual General Meeting	67

Group Annual Report and Financial Statements

for the year ended 31 December 2022

Company Information

Directors	Kenneth West	Non-Executive Chairman
	Richard Hullihen	Chief Executive Officer
	Charles Osborne	Chief Financial Officer
	Bastiaan Driehuys, PH.D.	Chief Technology Officer
	Jonathan Allis, PH.D.	Non-Executive Director
		(resigned 4 May 2022)
	Daniel Brague	Non-Executive Director
		(appointed 4 May 2022)
	Juergen Laucht	Non-Executive Director
	Cyrille Petit	Non-Executive Director
	Frank Schulkes	Non-Executive Director
		(appointed 13 April 2022)
	Marcella Ruddy, M.D.	Non-Executive Director
		(appointed 25 August 2022)
Company Secretary	Stephen Austin
Registered Office	27-28 Eastcastle Street
	London, W1W 8DH
Company Number	Registered in England and Wales Number 10442853
Nominated Adviser and Broker	Stifel Nicolaus Europe Limited
	150 Cheapside
	London
	EC2V 6ET
Independent Auditor	Crowe U.K. LLP
	55 Ludgate Hill
	London
	EC4M 7JW
Registrars	Share Registrars Limited
	Suite E, First Floor
	9 Lion and Lamb Yard
	Farnham
	Surrey
	GU9 7XX
Principal Banker	Silicon Valley Bank
	a division of First-Citizens Bank & Trust Company
	3003 Tasman Drive
	Santa Clara,
	CA 95054
Legal Advisers to the Company	Reed Smith LLP
	The Broadgate Tower
	20 Primrose Street
	London
	EC2A 2RS
Financial Public Relations	Walbrook PR
and Investor Relations	75 King William Street
	London
	EC4N 7BE
Independent Expert	Pharma Ventures Limited
	1300 Parkway Court
	John Smith Drive
	Oxford Business Park South
	Oxford
	OX4 2JY

Polarean Imaging plc

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Group Annual Report and Financial Statements

for the year ended 31 December 2022

Chairman's Statement

I am pleased to be able to write this letter with the very important milestone of United States Food & Drug Administration ("FDA") approval of the Company's drug device combination product, XENOVIEW, having been accomplished. The broad label of "evaluation of lung ventilation in adults and pediatric patients aged 12 years and older" allows the company to execute its commercial strategy of selling its polarizer and approved gas for clinical scans of patients suffering from a number of lung diseases where the accurate measurement of lung ventilation provides the physician with actionable diagnostic information. In addition, researchers using Polarean's technology continue to conduct clinical research that supports the broad future potential applications of our technology in areas of gas exchange and cardiopulmonary diagnostics. We are excited to bring Polarean's technology to clinical medicine, with the potential to be an important part of pulmonary and cardiopulmonary diagnostics, monitoring of severity of disease and patient response to treatments.

During 2022, we strengthened our Board with the addition of three independent Non-Executive Board members who bring extensive industry and medical experience to the Board to assist the company's successful transition into the commercialization stage. Frank Schulkes brings substantial financing experience in the medical imaging industry and Dan Brague brings experience successfully commercializing diagnostic imaging products. In addition, Dr. Marcella Ruddy brings important pulmonary medical expertise, both in clinical practice and in pharmaceutical development. With these additions to our Board, we believe that we have a world-class Board that can lead the company to successful commercialization of Xenoview.

Having achieved FDA approval, our efforts are now focused on gaining commercial traction and engaging with potential corporate partners to further accelerate our commercial success. Once we have achieved some of these near-term milestones, we will explore the options for additional financing to more aggressively pursue the development of the next indications and advance the continued development of our polarizer system and software. The Company is exploring a broad range of options for future financing, including equity raises and corporate partnering.

On behalf of the Board, I want to thank our employees, stakeholders and shareholders and assure them that we are committed to making Xenoview a commercial and financial success.

Kenneth West

Non-Executive Chairman

25 May 2023

Polarean Imaging plc

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Group Annual Report and Financial Statements

for the year ended 31 December 2022

Chief Executive Officer's Statement

2022 - Year of Obtaining FDA Approval

We spent much of 2022 working on obtaining FDA approval of our New Drug Application ("NDA") for XENOVIEW and were please received our approval on 23 December 2022. After receiving a Complete Response Letter ("CRL") from the FDA in October 2021, we spend the subsequent six months addressing the issues raised in the CRL. On 30 March 2022, the Company refiled the NDA with the FDA. The resubmission addressed the items identified in the CRL. On 22 September the Company announced that the FDA had requested additional information related to the cGMP (Current Good Manufacturing Practice) pre-approval inspection at the partner's production facility. The Company and its partner addressed the FDA's request and the Company received FDA approval on 23 December 2022. We were very pleased to receive the broad label of evaluation of lung function in adults and pediatric patients twelve and older. In addition, the FDA indicated that they would allow us to submit a non-clinical plan to obtain approval in pediatric patients six and older. The FDA has granted New Chemical Entity ("NCE") designation for Xenoview. NCE designation provides the important first mover protection envisioned under the Hatch Waxman legislation.

Commercialization

With FDA approval, the Company is focused on successful commercialization of XENOVIEW for the evaluation of lung function. The Company has an enthusiastic base of US institutions who have been using our technology for research purposes for years. We are leveraging this knowledge and enthusiasm by converting its US research sites to FDA approved configuration and clinical use, which will allow these sites to purchase Xenoview and perform clinical scans. In parallel, we are pursuing various reimbursement codes that could enable the hospitals to be reimbursed for Xenoview, the polarization process, the MRI procedure and the analysis of the pulmonary function imaging. If obtained, we believe that this reimbursement would enable a very compelling return on investment for hospitals to purchase our polarizer systems. We are aggressively pursuing our early commercialization targets of the sale of 15 to 20 polariser systems and 75 to 100 cylinders of Xenoview by the end of 2024.

We are focusing initially on addressing the high end of the US academic and teaching hospital market segment, which comprises approximately the top 1000 institutions nationally having coincident multiple Centres of Excellence in Pulmonary Medicine and Radiology. We believe our strategy of selling the capital equipment and the Xenoview drug on a per cylinder basis could provide a capital equipment and recurring drug sales model that supports rapidly growing revenue.

Financials

Sales for 2022 were below our original expectations, as we did not receive FDA approval in October 2022 as anticipated in the plan. We adjusted our spending plans commensurate with the delayed approval, which allowed us to finish 2022 with a higher than anticipated cash balance of US$16.4 million. We continued to sell our polariser systems into the research market and completed two installations during 2022.The current cash balance is expected to fund the company into late Q2-2024.

Corporate Partnering

We continue to believe that corporate partnering could be an important part of the Company's business plan. We see the opportunity to help the pharmaceutical industry reduce by significant amounts the size, time required to conduct and costs of their pulmonary drug clinical trials by providing quantitative, reproducible image-based data. We also see the opportunity to partner with MRI manufacturers to open up the MRI applications space to include pulmonary diagnostics, driving the demand for more MRI systems. In addition, we will explore the opportunity to partner with pulmonary disease organizations and foundations to incorporate the use of Xenoview in the diagnosis and treatment of disease.

Polarean Imaging plc

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