Third Quarter 2021 Financial Results

16 November 2021, 07:00

Source - LSE Regulatory

RNS Number : 4607S

Silence Therapeutics PLC

16 November 2021

Silence Therapeutics Reports Third Quarter 2021 Financial Results

16 November 2021

LONDON, Silence Therapeutics plc, AIM: SLN and Nasdaq: SLN ("Silence" or "the Company"), a leader in the discovery, development and delivery of novel short interfering ribonucleic acid (siRNA) therapeutics for the treatment of diseases with significant unmet medical need, today reported unaudited financial results for the quarter and nine months ended September 30, 2021.

Financial Highlights

· Revenue for the three-month period ended September 30, 2021 increased by £1.2 million from the same three-month period in 2020. The growth is a result of the further advancement of the partner programs, as well as the introduction of additional programs with our partners. For the nine months ended September 30, 2021 revenue was £9.0 million (nine months ended September 30, 2020: £3.1 million).

· Research and development expenses for the three months ended September 30, 2021 were £7.9 million, compared to £3.5 million for the three months ended September 30, 2020. For the nine months ended September 30, 2021, research and development expenses were £23.5 million as compared to £13.6 million for the nine months ended September 30, 2020, an increase of £9.9 million. The largest contributor to the increase in R&D spend is contracted research and development expenses which increased by £5.5 million due to the advancement of clinical studies and manufacturing of clinical supply.

· Administrative expenses increased £2.8 million for the three months ended September 30, 2021 as compared to the same period in 2020. For the nine months ended September 30, 2021, administrative expenses were £14.6 million as compared to £7.8 million for the nine months ended September 30, 2020.

· As of September 30, 2021, we had cash, cash equivalents and term deposits of £76.5 million (September 30, 2020: £43.9 million).

De-Listing from AIM

· On October 15, 2021, we announced our intention to cancel the admission of our ordinary shares of nominal value £0.05 each trading on AIM, with effect from November 30, 2021. Shareholders approved the delisting on November 1, 2021. Our last day of trading on AIM will be November 29, 2021. We will retain our listing on the Nasdaq Global Market of American Depositary Shares, of which each represents three Ordinary Shares, under ticker symbol "SLN". We expect Nasdaq to become the primary trading venue for our equity securities.

Shelf Filing Registration

· On October 15, 2021, we filed Form F-3 registration statement to cover the offering, issuance and sale of our securities from time to time in one or more offerings, for an aggregate initial offering price not to exceed $300,000,000, which includes a prospectus supplement covering the offering, issuance and sale of up to a maximum aggregate offering price of $100,000,000 of our American Depositary Shares ("ADSs") each representing three ordinary shares that may be issued and sold under the an Open Market Sale Agreement, dated October, 15, 2021 with Jefferies LLC.

Enquiries:

Silence Therapeutics plc

Gem Hopkins, Head of IR and Corporate Communications

ir@silence-therapeutics.com

Tel: +1 (646) 637-3208

Investec Bank plc (Nominated Adviser and Broker)

Daniel Adams/Gary Clarence

Tel: +44 (0) 20 7597 5970

European PR

Consilium Strategic Communications

Mary-Jane Elliott/ Angela Gray / Chris Welsh

silencetherapeutics@consilium-comms.com

Tel: +44 (0) 20 3709 5700

About Silence Therapeutics

Silence Therapeutics is developing a new generation of medicines by harnessing the body's natural mechanism of RNA interference, or RNAi, to inhibit the expression of specific target genes thought to play a role in the pathology of diseases with significant unmet need. Silence's proprietary mRNAi GOLD™ platform can be used to create siRNAs (short interfering RNAs) that precisely target and silence disease-associated genes in the liver, which represents a substantial opportunity. Silence's wholly owned product candidates include SLN360 designed to address the high and prevalent unmet medical need in reducing cardiovascular risk in people born with high levels of lipoprotein(a) and SLN124 designed to address iron-loading anemia conditions. Silence also maintains ongoing research and development collaborations with AstraZeneca, Mallinckrodt Pharmaceuticals, and Hansoh Pharma, among others. For more information, please visit https://www.silence-therapeutics.com/.

Forward-Looking Statements

Certain statements made in this announcement are forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995 and other securities laws, including with respect to the Company's clinical and commercial prospects and the anticipated timing of data reports from the Company's clinical trials. These forward-looking statements are not historical facts but rather are based on the Company's current expectations, estimates, and projections about its industry; its beliefs; and assumptions. Words such as 'anticipates,' 'expects,' 'intends,' 'plans,' 'believes,' 'seeks,' 'estimates,' and similar expressions are intended to identify forward-looking statements. These statements are not guarantees of future performance and are subject to known and unknown risks, uncertainties, and other factors, some of which are beyond the Company's control, are difficult to predict, and could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements, including those risks identified in the Company's most recent Admission Document and its amended Annual Report on Form 20-F filed with the U.S. Securities and Exchange Commission on April 29, 2021. The Company cautions security holders and prospective security holders not to place undue reliance on these forward-looking statements, which reflect the view of the Company only as of the date of this announcement. The forward-looking statements made in this announcement relate only to events as of the date on which the statements are made. The Company will not undertake any obligation to release publicly any revisions or updates to these forward-looking statements to reflect events, circumstances, or unanticipated events occurring after the date of this announcement except as required by law or by any appropriate regulatory authority.

Condensed consolidated income statement (unaudited)

	Three months ended			Three months ended			Nine months ended			Nine months ended
	September 30, 2021			September 30, 2020			September 30, 2021			September 30, 2020
£000s (except per share information)
Revenue		3,156			1,988			9,001			3,134
Cost of sales		(2,052	)		(2,331	)		(5,414	)		(2,331	)
Gross profit		1,104			(343	)		3,587			803
Research and development costs		(7,916	)		(3,468	)		(23,541	)		(13,647	)
Administrative expenses		(5,472	)		(2,666	)		(14,597	)		(7,826	)
Other losses - net		-			(3,091	)		-			(3,091	)
Operating loss		(12,284	)		(9,568	)		(34,551	)		(23,761	)
Finance and other expenses		(64	)		(119	)		(86	)		(119	)
Finance and other income		296			147			8			1,011
Loss for the period before taxation		(12,052	)		(9,540	)		(34,629	)		(22,869	)
Taxation		2,123			462			4,653			2,762
Loss for the period after taxation		(9,929	)		(9,078	)		(29,976	)		(20,107	)
Loss per ordinary equity share (basic and diluted)	(11.1) pence			(11.0) pence			(33.8) pence			(24.7) pence

Condensed consolidated statement of comprehensive income (unaudited)

	Three months ended			Three months ended			Nine months ended			Nine months ended
	September 30, 2021			September 30, 2020			September 30, 2021			September 30, 2020
	£000s			£000s			£000s			£000s
Loss for the period after taxation		(9,929	)		(9,078	)		(29,976	)		(20,107	)
Other comprehensive expense, net of tax:
Items that may subsequently be reclassified to profit and loss:
Foreign exchange differences arising on consolidation of foreign operations		18			(12	)		(434	)		573
Total other comprehensive income/(expense) for the period		18			(12	)		(434	)		573
Total comprehensive expense for the period		(9,911	)		(9,090	)		(30,410	)		(19,534	)

Condensed consolidated balance sheet (unaudited)

	September 30, 2021			December 31, 2020
	£000s			£000s
Non-current assets
Property, plant and equipment		1,535			1,127
Goodwill		7,786			8,125
Other intangible assets		3			17
Financial assets at amortized cost		302			303
		9,626			9,572
Current assets
Cash and cash equivalents		71,469			27,449
Derivative financial instrument		-			1,492
Financial assets at amortized cost - term deposit		5,000			10,000
Financial assets at amortized cost - other		-			-
R&D tax credit receivable		3,778			3,536
Other current assets		2,882			4,616
Trade receivables		-			29,306
		83,129			76,399
Non-current liabilities
Contract liabilities		(57,998	)		(51,337	)
		(57,998	)		(51,337	)
Current liabilities
Contract liabilities		(9,030	)		(17,042	)
Trade and other payables		(9,236	)		(8,192	)
Lease liability		(131	)		(341	)
		(18,397	)		(25,575	)
Net assets		16,360			9,059
Capital and reserves attributable to the owners of the parent
Share capital		4,489			4,165
Capital reserves		223,637			186,891
Translation reserve		1,784			2,218
Accumulated losses		(213,550	)		(184,215	)
Total shareholders equity		16,360			9,059

Condensed consolidated statement of changes in equity (unaudited)

	Share Capital		Capital Reserves			Translation Reserve			Accumulated Losses			Total
	£000s		£000s			£000s			£000s			£000s
At January 1, 2020		3,919		167,243			1,746			(151,999	)		20,909
Recognition of share-based payments		-		4,395			-			-			4,395
Options exercised in the period		-		(331	)		-			331			-
Proceeds from shares issued		246		15,584			-			-			15,830
Transactions with owners recognized directly in equity		246		19,648			-			331			20,225
Loss for the period		-		-			-			(32,547	)		(32,547	)
Other comprehensive income
Foreign exchange differences arising on consolidation of foreign operations		-		-			472			-			472
Total comprehensive expense for the period		-		-			472			(32,547	)		(32,075	)
At December 31, 2020		4,165		186,891			2,218			(184,215	)		9,059
At January 1, 2021		4,165		186,891			2,218			(184,215	)		9,059
Recognition of share-based payments		-		6,790			-			-			6,790
Options exercised in the period		-		(641	)		-			641			-
Proceeds from shares issued		324		30,597			-			-			30,921
Transactions with owners recognized directly in equity		324		36,746			-			641			37,711
Loss for the period		-		-			-			(29,976	)		(29,976	)
Other comprehensive expense
Foreign exchange differences arising on consolidation of foreign operations		-		-			(434	)		-			(434	)
Total comprehensive expense for the period		-		-			(434	)		(29,976	)		(30,410	)
At September 30, 2021		4,489		223,637			1,784			(213,550	)		16,360

Condensed consolidated statement of cash flows (unaudited)

	Nine months ended
	September 30, 2021			September 30, 2020
	£000s			£000s
Cash flow from operating activities
Loss before tax		(34,629	)		(22,869	)
Depreciation charges		347			295
Amortization charges		14			15
Charge for the period in respect of share-based payments		6,790			1,353
Net foreign exchange (gain)/loss		(226	)		3,410
Finance and other expenses		86			(801	)
Finance and other income		(8	)		(91	)
Decrease/(increase) in trade and other receivables		29,306			(31,905	)
Decrease/(increase) in other current assets		1,735			(2,325	)
Decrease in current financial assets at amortized cost - other		-			7
Increase/(decrease) in trade and other payables		1,044			(912	)
Decrease in derivative financial instrument		1,492			-
(Decrease)/increase in contract liabilities		(1,351	)		48,454
Cash provided/(spent) on operations		4,600			(5,369	)
R&D tax credits received		4,411			-
Net cash inflow/(outflow) from operating activities		9,011			(5,369	)
Cash flow from investing activities
Redemption of financial assets at amortized cost - term deposits		5,000			10,000
Purchase of financial assets at amortized cost - term deposits		-			(20,021	)
Interest received		8			86
Purchase of property, plant and equipment		(784	)		(417	)
Net cash (outflow)/inflow from investing activities		4,224			(10,352	)
Cash flow from financing activities
Repayment of lease liabilities		(210	)		(272	)
Proceeds from issue of share capital		30,921			15,806
Net cash inflow from financing activities		30,711			15,534
Increase/(decrease) in cash and cash equivalents		43,946			(187	)
Cash and cash equivalents at start of the period		27,449			13,515
Effect of exchange rate fluctuations on cash and cash equivalents held		74			587
Cash and cash equivalents at end of the period		71,469			13,915

Notes to the financial statements

Nine months ended September 30, 2021

1. General information

Silence Therapeutics plc and its subsidiaries (together the 'Group') are primarily involved in the discovery, delivery and development of RNA therapeutics. Silence Therapeutics plc, a public company limited by shares registered in England and Wales, with company number 02992058, is the Group's ultimate parent Company. The Company's registered office is 27 Eastcastle Street, London, W1W 8DH and the principal place of business is 72 Hammersmith Road, London, W14 8TH.

These condensed interim financial statements were approved for issue on 15 November 2021.

These condensed interim financial statements do not comprise statutory accounts within the meaning of section 434 of the Companies Act 2006. Statutory accounts for the year ended 31 December 2020 were approved by the board of directors on 31 March 2021 and delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under section 498 of the Companies Act 2006.

The financial statements have not been reviewed or audited.

The Company announced on October 15, 2021, its intention to cancel the admission of the Company's ordinary shares of nominal value £0.05 each trading on AIM, with effect from November 30, 2021. Shareholders approved the delisting on November 1, 2021. The last day of trading for the Company's ordinary shares on AIM will be November 29, 2021.

Basis of Preparation and Accounting Policies

On 31 December 2020, IFRS as adopted by the European Union at that date was brought into UK law and became UK-adopted international accounting standards, with future changes being subject to endorsement by the UK Endorsement Board. Silence Therapeutics Plc transitioned to UK-adopted international accounting standards in its consolidated financial statements on 1 January 2021. This change constitutes a change in accounting framework. However, there is no impact on recognition, measurement or disclosure in the period reported as a result of the change in framework.

This condensed consolidated financial report for the interim reporting period ended 30 September 2021 has been prepared in accordance with UK-adopted International Accounting Standard 34, 'Interim Financial Reporting' (IAS 34)

The interim report does not include all of the notes of the type normally included in an annual financial report. Accordingly, this report is to be read in conjunction with the annual report for the year ended 31 December 2020, which was prepared in accordance with "international accounting standards in conformity with the requirements of the Companies Act 2006".

The accounting policies adopted are consistent with those of the previous financial year and corresponding interim reporting period.

The preparation of interim financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results might differ from these estimates.

In preparing these condensed interim financial statements, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty are disclosed in the 'Critical Accounting Policies, Judgments and Estimates' section on Page 21.

2. Going concern

The financial statements have been prepared on a going concern basis that assumes that the Group will continue in operational existence for the foreseeable future.

Since 2020, the coronavirus (COVID-19) pandemic has been prevalent in Europe, the UK and the US where the Group's principal operations are conducted. Significant restrictions have been imposed by the governments of those countries where the Group has operations, as well as the countries of external parties with which we conduct our business. In compliance with these restrictions, the Group and its employees have adapted to new working arrangements to ensure business continuity as far as is reasonably practicable in the short to medium term. This has so far proven to be effective, with Management maintaining a strong line of communication with all employees during this period.

The main risk posed to the Group by the pandemic is the potential slowing of Research & Development activities including possible knock-on delays in clinical trial data and sustained fixed costs during periods of relative inactivity. Whilst this would result in a lengthening of the Group's cash runway in the medium term, in the longer term these factors could limit the Group's ability to meet its corporate objectives. This risk is mitigated by the receipt of $60 million (£47.9 million) of the upfront payments in respect of the AstraZeneca collaboration, the $45 million private placement (or approximately $42.0 million / £30.8 million, net of expenses) and the expected mid-December 2021 receipt of $14.4 million of the upfront payment, net of taxes withheld, related to Hansoh collaboration executed on October 14, 2021, all of which significantly increase the Group's forecasted baseline cash runway.

Based on the current operating forecasts and plans and, considering the cash, cash equivalents and term deposit at September 30, 2021, the Directors are confident that the Group has sufficient funding through early 2023. For this reason, they continue to adopt the going concern basis in preparing the financial statements.

3. Revenue

Revenue from collaboration agreements for the nine months ended September 30, 2021 relates to the research collaboration agreements the Group entered into with Mallinckrodt plc in July 2019, Takeda Pharmaceutical Company Limited in January 2020 and AstraZeneca plc in March 2020.

Revenue for the nine months ended September 30, 2021 comprised £8,728k of research collaboration income (nine months to September 30, 2020: £2,983k) and £273k of royalty income (nine months to September 30, 2020: £151k).

	Three months ended					Nine months ended
	September 30, 2021			September 30, 2020		September 30, 2021		September 30, 2020
	£000s			£000s		£000s		£000s
Revenue from Contracts with Customers
Research collaboration - Mallinckrodt plc		2,574			1,826		6,362		2,300
Research collaboration - AstraZeneca		506			11		1,777		11
Research collaboration - Other		(29	)		151		589		672
Research collaboration - total		3,051			1,988		8,728		2,983
Royalties		105			-		273		151
Total revenue from contracts with customers		3,156			1,988		9,001		3,134

Under our collaboration agreement with Mallinckrodt, we received an upfront cash payment of £16.4 million ($20 million) in 2019 and are eligible to receive specified development, regulatory and commercial milestone payments. We received milestone payments of £2.9 million (or $4 million) during the nine months ended September 30, 2021, and £1.4 million (or $2 million) in respect of the nine months ended September 30, 2020. In addition to these payments, Mallinckrodt has agreed to fund some of our research personnel and preclinical development costs. We recognize the upfront payment, milestone payments, payments for personnel costs and other research funding payments over time, in accordance with IFRS 15. During the nine months ended September 30, 2021, we recognized a total of £6.4 million in revenue under this agreement.

Under our collaboration agreement with AstraZeneca, we received an upfront cash payment of £17.1 million ($20 million) in 2020 with a further amount of £30.8 million ($40 million) received in May 2021. We recognize the upfront payment and milestone payments over time, in accordance with IFRS 15. During the nine months ended September 30, 2021, we recognized a total of £1.8 million in revenue under this agreement.

We entered into a Technology Evaluation Agreement with Takeda on January 7, 2020 to explore the potential of our platform to generate siRNA molecules against a novel, undisclosed target controlled by Takeda. Under our collaboration agreement, we received a milestone payment of £1.6 million ($2 million) during the year ended December 31, 2020. We recognize the milestone payments over time, in accordance with IFRS 15. Our activities under the Technology Evaluation Agreement were effectively complete as of September 30, 2021. We may negotiate to enter into an exclusive follow-on license and collaboration agreement covering the Takeda target at some point in the future.

4. Segment reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the Board. The chief operating decision maker (CODM), who has been identified as the Chief Executive Officer responsible for allocating resources and assessing performance of the operating segments.

For the nine months ended September 30, 2021 and nine months ended September 30, 2020, the CODM determined that the Group had one business segment, the development of RNAi-based medicines. This is in line with reporting to senior management. The information used internally by the CODM is the same as that disclosed in the financial statements.

	U.S.		U.K.		Germany		Total
	£000s		£000s		£000s		£000s
Non-current assets
As at December 31, 2020		54		689		8,829		9,572
As at September 30, 2021		17		521		9,088		9,626

Revenue analysis for the year ended December 31, 2020
Research collaboration		-		5,253		-		5,253
Royalties		-		-		226		226
		-		5,253		226		5,479

Revenue analysis for the nine months ended September 30, 2021
Research collaboration		-		8,728		-		8,728
Royalties		-		-		273		273
		-		8,728		273		9,001

5. Loss per ordinary equity share (basic and diluted)

The calculation of the loss per share is based on the loss for the nine months to September 30, 2021 after taxation of £29,976k (nine months ended September 30, 2020: loss of £20,107k) and on the weighted average ordinary shares in issue during the nine months ended September 30, 2021 of 88,670,141 (nine months ended September 30, 2020: 81,360,203). For the three months ended September 30, 2021, the calculation of the loss per share is based on the loss after taxation of £9,929k (three months ended September 30, 2020: loss of £9,078k) and on the weighted average ordinary shares in issue during the three months ended September 30, 2021 of 89,740,014 (three months ended September 30, 2020: 82,826,351).

The options outstanding at September 30, 2021 and September 30, 2020 are considered to be anti-dilutive as the Group is loss-making.

6. Goodwill

	September 30, 2021			December 31, 2020
	£000s			£000s
Balance at start of the period		8,125			7,692
Translation adjustment		(339	)		433
Balance at end of the period		7,786			8,125

7. Derivative financial instruments

Derivative financial instruments related to an open forward currency contract measured at fair value through the income statement. The fair value was calculated from data sourced from an independent financial market data provider using mid-market-end-of-day data as of December 31, 2020. The derivative contract in place at December 31, 2020 was closed out on May 28, 2021.

The fair value of the derivative is calculated based on level 2 inputs under IFRS 13.

	September 30, 2021		December 31, 2020
	£000s		£000s
Derivatives carried at fair value		-		1,492

The fair value of financial instruments that are not traded in active market, in the case of an over-the-counter derivative, is determined using valuation techniques which maximize the use of observable market data and rely as little as possible on entity specific estimates. As all significant inputs required to fair value an instrument are observable, this derivative financial instrument is included in level 2.

The specific valuation technique used to value this derivative is the present value of future cash flow based on the forward exchange rate relative to its value based on the year-end exchange rate.

The derivative fair value movement is disclosed in the Income Statement under "Other (losses)/gains - net". For the nine-month period to September 30, 2021 the gain on the derivative financial instrument (£1.02 million), which was closed out in May 2021, matched the related loss (£1.02 million) on the receivable, resulting in a net nil impact on the Income Statement.

8. Contract liabilities

Contract liabilities comprise entirely deferred revenue in respect of the Mallinckrodt, Takeda and AstraZeneca plc Research collaborations. The current contract liabilities represent the amount of estimated revenue to be reported in the next 12 months related to amounts invoiced to our partners. The current and non-current contract liabilities include only recharge expenses and milestones achieved through September 30, 2021.

	September 30, 2021			December 31, 2020
	£000s			£000s
Contract liabilities:
Current		9,030			17,042
Non-current		57,998			51,337
Total contract liabilities		67,028			68,379


	Current			Non-current		Total
	£000s			£000s		£000s
Contract liabilities:
At January 1, 2020		2,478			15,515		17,993
Additions during period		19,779			35,822		55,601
Revenue unwound during period		(5,215	)		-		(5,215	)
At December 31, 2020		17,042			51,337		68,379
At January 1, 2021		17,042			51,337		68,379
Additions during period		3,419			3,958		7,377
Revenue unwound during period		(8,728	)		-		(8,728	)
Program rephasing		(2,703	)		2,703		-
At September 30, 2021		9,030			57,998		67,028

9. Taxation

A £3.8 million current tax asset was recognized in respect of research and development tax credits in the nine months ended September 30, 2021 (nine months ended September 30, 2020: £5.8 million). The asset at September 30, 2020 comprised £2.8 million in respect of research and development activity for the nine months ended September 30, 2020 and £3.0 million in respect of the year ended 31 December 2019. Additionally, during the third quarter of 2021, we received research and development tax credits for the year ended December 31, 2020 of £4.4 million, which resulted in an adjustment to the credit recorded in the year ended December 31, 2020 of a further £0.9 million.

10. Capital reserves

	Share premium account			Merger reserve		Share based payment reserve			Capital redemption reserve		Total
	£000s			£000s		£000s			£000s		£000s
At January 1, 2019		133,242			22,248		2,437			5,194		163,121
Shares issued		3,767			-		-			-		3,767
On options in issue during the year		1,141			-		584			-		1,725
On vested options lapsed during the year		-			-		-			-		-
On options exercised during the year		-			-		(1,370	)		-		(1,370	)
Movement in the year		4,908			-		(786	)		-		4,122
At December 31, 2019		138,150			22,248		1,651			5,194		167,243
Shares issued		15,396			-		-			-		15,396
On options in issue during the year		188			-		4,395			-		4,583
On vested options lapsed during the year		-			-		-			-		-
On options exercised during the year		-			-		(331	)		-		(331	)
Movement in the year		15,584			-		4,064			-		19,648
At December 31, 2020		153,734			22,248		5,715			5,194		186,891
Shares issued		32,585			-		-			-		32,585
On options in issue during the period		-			-		7,090			-		7,090
On vested options lapsed during the period		-			-		(300	)		-		(300	)
On options exercised during the period		459			-		(641	)		-		(182	)
Costs capitalized in respect of issuance of shares during the period		(2,447	)		-		-			-		(2,447	)
Movement in the period		30,597			-		6,149			-		36,746
At September 30, 2021		184,331			22,248		11,864			5,194		223,637

	September 30, 2021		December 31, 2020
	£000s		£000s
Authorized, allotted, called up and fully paid ordinary shares, par value £0.05		4,489		4,165

Number of shares in issue		89,777,000		83,306,259

The Group has only one class of share. All ordinary shares have equal voting rights and rank pari passu for the distribution of dividends.

On February 5, 2021 the Group announced a private placement of 2,022,218 of the Company's American Depositary Shares ("ADSs"), each representing three ordinary shares, at a price of US $22.50 per ADS, with new and existing institutional and accredited investors (the "Private Placement"). The aggregate gross proceeds of the Private Placement was US $45 million (approximately £33 million) before deducting approximately £2.4 million in placement agent fees and other expenses. The financing syndicate included Adage Capital Management LP, BVF Partners L.P., Consonance Capital, Great Point Partners, LLC, and other investors.

On October 15, 2021, the Company filed a registration statement on Form F-3 with the SEC to cover the offering, issuance and sale of securities from time to time in one or more offerings. The aggregate initial offering price is not to exceed $300,000,000, which includes a sale of up to a maximum aggregate offering price of $100,000,000 of ADSs that may be issued and sold under an Open Market Sale Agreement, dated October 15, 2021 with Jefferies LLC.

The Company also announced on October 15, 2021, its intention to cancel the admission of the Company's ordinary shares of nominal value £0.05 each trading on AIM, with effect from November 30, 2021. Shareholders approved the delisting on November 1, 2021. The last day of trading for the Company's ordinary shares on AIM will be November 29, 2021. The Company intends to retain the listing on the Nasdaq Global Market ('Nasdaq') of ADSs under ticker symbol SLN. The Nasdaq Global Market is expected to become the primary trading venue for the Company's equity securities.

Details of the shares issued by the Company during the nine months ended September 30, 2021 are as follows:

Number of shares in issue at January 1, 2020			78,370,265
Shares issued during the period			4,276,580
Options exercised at £0.05			496,666
Options exercised at £0.85			56,470
Options exercised at £1.00			60,000
Options exercised at £1.90			46,278
Number of shares in issue at December 31, 2020			83,306,259
Shares issued during the period			6,066,654
Options exercised at £0.05			59,114
Options exercised at £0.60			80,302
Options exercised at £1.06			25,000
Options exercised at £1.90			198,119
Number of shares in issue at June 30, 2021			89,735,448
Options exercised at £0.05			10,407
Options exercised at £0.60			31,145
Number of shares in issue at September 30, 2021			89,777,000

11. Related party transactions

Transactions between the Group and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note.

During the nine months to September 30, 2021 the Group paid £nil (nine months to September 30, 2020: £75k) to Gladstone Partners Limited, a company controlled by Director Iain Ross. The amounts payable were settled before the relevant period ends.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The statements in this discussion with respect to our plans and strategy for our business, including expectations regarding our future liquidity and capital resources and other non-historical statements, are forward-looking statements. These forward-looking statements are subject to numerous risks and uncertainties, including the risks and uncertainties described in Exhibit 99.1 filed on Form 6-K on August 12, 2021. Our actual results may differ materially from those contained in or implied by any forward-looking statements.

Overview

Silence Therapeutics plc ("we", "us", "our", "the Company" or "Silence") is a biotechnology company focused on discovering and developing novel molecules incorporating short interfering ribonucleic acid, or siRNA, to inhibit the expression of specific target genes thought to play a role in the pathology of diseases with significant unmet medical need. Our siRNA molecules are designed to harness the body's natural mechanism of RNA interference, or RNAi, by specifically binding to and degrading messenger RNA, or mRNA, molecules that encode specific targeted disease-associated proteins in a cell. By degrading the message that encodes the disease-associated protein, the production of that protein is reduced, and its level of activity is lowered. In the field of RNAi therapeutics, this reduction of disease-associated protein production and activity is referred to as "gene silencing." Our proprietary mRNAi GOLD™ (GalNAc Oligonucleotide Discovery) platform is a platform of precision engineered medicines designed to accurately target and 'silence' specific disease-associated genes in the liver, which represents a substantial opportunity. Using our mRNAi GOLD™ platform, we have generated siRNA product candidates both for our internal development pipeline as well as for out-licensed programs with third-party collaborators. In May 2021, we presented the first clinical data from our mRNAi GOLD platform that successfully translated the results from pre-clinical models into humans.

Our proprietary clinical programs include SLN360 designed to address the high and prevalent unmet need in reducing cardiovascular risk in people born with high levels of lipoprotein(a), or Lp(a), and SLN124 designed to address rare hematological disorders, including thalassemia and myelodysplastic syndrome, or MDS, and polycythemia vera, or PV. We are evaluating SLN360 in the APOLLO phase 1 single-ascending dose study in healthy individuals with high levels of Lp(a) ≥ 60 mg/dL. In August 2021, we announced complete enrollment in the SLN360 single-ascending dose study and we anticipate topline data in the first quarter of 2022. We are evaluating SLN124 in the GEMINI II phase 1 single-ascending dose studies in patients with thalassemia and MDS. We anticipate topline data from both studies in the third quarter of 2022. In May 2021, we reported positive topline results from the SLN124 GEMINI healthy volunteer study, which was the first clinical data from our mRNAi GOLD™ platform. The SLN124 healthy volunteer study demonstrated safety and proof-of-mechanism to support the ongoing SLN124 phase 1 studies in patients with thalassemia and MDS.

Our partnered pipeline includes ongoing research and development collaborations with leading pharmaceutical companies, such as AstraZeneca plc, or AstraZeneca, Mallinckrodt plc, or Mallinckrodt, Takeda Pharmaceutical Company Limited, or Takeda and Hansoh Pharmaceutical Group Company Limited or Hansoh. These collaborations collectively represent up to 14 pipeline programs and up to $6 billion in potential milestones plus royalties.

There are approximately 14,000 liver-expressed genes and only around one percent of them have been targeted by publicly known siRNAs. We aim to maximize the substantial opportunity of our mRNAi GOLD™ platform through a combination of building and advancing our proprietary and partnered pipelines. Through this hybrid model, we plan to significantly expand our portfolio of mRNAi GOLD™ platform programs by delivering 2-3 initial new drug applications per year from 2023.

Recent Corporate Highlights

We held a R&D Day on October 21, 2021 to provide updates on our mRNAi GOLD™ platform and pipeline. The updates included the following:

Proprietary Pipeline

SLN360

· The independent safety review committee recommended to extend the follow-up period in the single-ascending dose study from 150 days to 365 days to fully assess the duration of action, which may be longer than initially anticipated based on preclinical modelling. The therapeutic dose range has been established based on Cohorts 1-4 (optional Cohort 5 not needed) and the study can now proceed to the multiple-ascending dose phase.

SLN124

· We plan to pursue new polycythemia vera (PV) indication and start a phase 1 trial in the second half of 2022.

· We received the FDA Acceptance of the US IND in myelodysplastic syndrome (MDS) on October 20, 2021.

· The positive results from the healthy volunteer study reported in May 2021 was accepted for poster presentation at the American Society of Hematology (ASH) Annual Meeting being held December 11-14, 2021.

Partnered Pipeline

· On October 15, 2021, we announced a collaboration agreement with Hansoh, one of the leading biopharmaceutical companies in China, to develop siRNAs for three undisclosed targets leveraging Silence's proprietary mRNAi GOLD™ platform. Under the terms of the agreement, Hansoh will have the exclusive option to license rights to the first two targets in Greater China, Hong Kong, Macau and Taiwan following the completion of phase 1 studies. We will retain exclusive rights for those two targets in all other territories. Silence will be responsible for all activities up to option exercise and will retain responsibility for development outside the China region post phase 1 studies. Hansoh will also have the exclusive option to license global rights to a third target at the point of IND filing. Hansoh will be responsible for all development activities post option exercise for the third target. Hansoh will make a $16 million upfront payment and Silence is eligible to receive up to $1.3 billion in additional development, regulatory and commercial milestones. Silence will also receive royalties tiered from low double-digit to mid-teens on Hansoh net product sales.

· In our Mallinckrodt collaboration for complement-mediated diseases, we are progressing IND-enabling studies for SLN501 C3 targeting program and expect to initiate a phase 1 study in the first half of 2022.

De-Listing from AIM

Shelf Filing Registration

· On October 15, 2021, we filed a registration statement on Form F-3 to cover the offering, issuance and sale of our securities from time to time in one or more offerings, for an aggregate initial offering price not to exceed $300,000,000, which includes a prospectus supplement covering the offering, issuance and sale of up to a maximum aggregate offering price of $100,000,000 of our American Depositary Shares ("ADSs") each representing three ordinary shares that may be issued and sold under the an Open Market Sale Agreement, dated October 15, 2021 with Jefferies LLC.

Upcoming Events and Anticipated Data Milestones

· Additional results from the SLN124 healthy volunteer study will be presented at ASH Annual Meeting being held December 11-14, 2021.

· Topline data from the SLN360 phase 1 single-ascending dose study in people with high Lp(a) is anticipated in the first quarter of 2022. The Company plans to start phase 2 development in the second half of 2022 pending regulatory discussions.

· Topline data from the SLN124 phase 1 single-ascending dose studies in people with thalassemia and MDS is anticipated in the third quarter of 2022.

· Silence plans to initiate a phase 1 study of SLN124 in PV patients in the second half of 2022.

· We anticipate initiating a phase 1 study of SLN501 in our Mallinckrodt collaboration for complement-mediated diseases in the first half of 2022.

Collaboration Agreement with AstraZeneca

In March 2020, we entered into a collaboration agreement with AstraZeneca to discover, develop and commercialize siRNA therapeutics for the treatment of cardiovascular, renal, metabolic and respiratory diseases. Under this agreement, AstraZeneca made an upfront cash payment to us of $20.0 million in May 2020 (equivalent to £17.1 million as of the payment date) with a further £30.8 million ($40 million) received in May 2021. In March 2020, an affiliate of AstraZeneca also subscribed for 4,276,580 new ordinary shares for an aggregate subscription price of $20.0 million.

We anticipate initiating work on five targets within the first three years of the collaboration, with AstraZeneca having the option to extend the collaboration to an additional five targets. AstraZeneca has agreed to pay us $10.0 million upon the exercise of each option to collaborate on an additional target. For each target selected, we will be eligible to receive up to $140.0 million in potential milestone payments upon the achievement of milestones relating to the initiation of specified clinical trials, the acceptance of specified regulatory filings and the first commercial sale in specified jurisdictions. For each target selected, we will also be eligible to receive up to $250.0 million in potential commercial milestone payments, upon the achievement of specified annual net sales levels, as well as tiered royalties as a percentage of net sales ranging from the high single digits to the low double digits.

We continue to advance the research and development workplans for each identified target as scheduled and agreed to with our collaboration partner.

Collaboration Agreement with Mallinckrodt

In July 2019, we entered into a collaboration agreement with Mallinckrodt Pharma IP Trading DAC, a wholly owned subsidiary of Mallinckrodt plc, to develop and commercialize RNAi drug targets designed to silence the complement cascade in complement-mediated disorders. Under the agreement, we granted Mallinckrodt an exclusive worldwide license to our C3 targeting program, SLN500, with options to license two additional complement-mediated disease targets from us. Mallinckrodt exercised options to license two additional complement targets from us in July 2020.

While we are responsible for the Phase 1 clinical trial in each case, Mallinckrodt will be funding all of our research personnel costs on a full-time equivalent, or FTE, basis associated with preparing for and conducting the Phase 1 clinical trials. We are also responsible for the provision of drug product for preclinical activities and for the Phase 1 clinical trials, but any manufacturing expense relating to the Phase 1 trial will be paid for by Mallinckrodt. After completion of the Phase 1 clinical trials, Mallinckrodt will assume clinical development and responsibility for potential global commercialization.

The collaboration provides for potential additional development and regulatory milestone payments in aggregate of up to $100 million for the initial C3 target and up to $140 million for each of the two optioned complement-mediated disease targets, with such milestones relating to the initiation of specified clinical trials in specified jurisdictions, and upon the receipt of regulatory approvals by specified authorities, in each case for multiple indications. We are also eligible to receive potential commercial milestone payments of up to $562.5 million upon the achievement of specified levels of annual net sales of licensed products for each program. We are also eligible to receive tiered, low double-digit to high-teen percentage royalties on net sales for licensed products for each program. We received a research milestone payment of $2 million in October 2019 upon the initiation of work for the first complement C3 target. In September 2020, we received another $2 million research milestone payment following the initiation of work on a second complement target. In February 2021, we initiated work on the third complement target which triggered another $2 million research milestone payment. In April 2021, we received another $2.0 million research milestone for the initiation of the toxicology study for the first identified target.

In connection with the execution of this agreement, Mallinckrodt made an upfront cash payment in 2019 of $20.0 million (equivalent to £16.4 million as of the payment date). Under a separate subscription agreement, Cache Holdings Limited, a wholly owned subsidiary of Mallinckrodt plc, concurrently subscribed for 5,062,167 new ordinary shares for an aggregate subscription price of $5.0 million (equivalent to £4.0 million as of the payment date).

We continue to advance the research and development workplans for each identified target as scheduled and agreed to with our collaboration partner.

Financial Operations Overview

Revenue

We do not have any approved products. Accordingly, we have not generated any revenue from product sales, and we do not expect to generate any revenue from the sale of any products unless and until we obtain regulatory approvals for, and commercialize any of, our product candidates. In the future, we will seek to generate revenue primarily from product sales and, potentially, regional or global strategic collaborations with third parties.

Under our collaboration agreement with AstraZeneca, we received an upfront cash payment of £17.1 million ($20.0 million) and an additional payment of £30.8 million ($40.0 million) in May 2021. We are also eligible to receive specified development and commercial milestone payments as well as tiered royalties on net sales, if any. We recognize the upfront payment and milestone payments over time, in accordance with IFRS 15. During the nine months ended September 30, 2021, we recognized a total of £1.8 million in revenue under this agreement.

Under our collaboration agreement with Mallinckrodt, we received an upfront cash payment of $20.0 million (£16.4 million as of the payment date) and are eligible to receive specified development, regulatory and commercial milestone payments. We received a milestone payment of $2.0 million (£1.7 million as of the payment date) in 2020 and 2 other milestone payments totaling $4.0 million (£2.9 million as of the payment date) in the first half of 2021. In addition to these potential payments, Mallinckrodt has agreed to fund some of our research personnel and preclinical development costs. We recognize the upfront payment, milestone payments, payments for personnel costs and other research funding payments over time, in accordance with IFRS 15. During the nine months ended September 30, 2021, we recognized a total of £6.4 million in revenue under this agreement.

We entered into a Technology Evaluation Agreement with Takeda on January 7, 2020 to explore the potential of our platform to generate siRNA molecules against a novel, undisclosed target controlled by Takeda. Under our collaboration agreement, during the nine months ended September 30, 2021 we received a milestone payment of £nil (nine months ended September 30, 2020: £0.4 million). We recognize the milestone payments over time, in accordance with IFRS 15. Our activities under the Technology Evaluation Agreement with Takeda were effectively complete as of September 30, 2021. We may negotiate to enter into an exclusive follow-on license and collaboration agreement covering the Takeda target at some point in the future.

In December 2018, we entered into a settlement and license agreement with Alnylam Pharmaceuticals Inc., or Alnylam, pursuant to which we settled outstanding patent litigation with Alnylam related to its RNAi product ONPATTRO. As part of the settlement, we license specified patents to Alnylam, and Alnylam pays us a tiered royalty of up to one percent of net sales of ONPATTRO in the EU. We are eligible to receive these royalties until 2023. We invoice Alnylam quarterly in arrears based on sales data for that quarter as reported to us by Alnylam. Royalty revenue is recognized based on the level of sales when the related sales occur. During the nine months ended September 30, 2021, we recognized a total of £0.3 million in royalty income from Alnylam.

Cost of Sales

Cost of sales consists of research and development expenditure that is directly related to work carried out on revenue generating contracts. This includes salary costs that are apportioned based on time spent by employees working on these contracts as well as costs of materials and costs incurred under agreements with contract research organizations, or CROs.

Operating Expenses

We classify our operating expenses into two categories: research and development expenses and administrative expenses. Personnel costs, including salaries, benefits, bonuses and share-based payment expense, comprise a significant component of each of these expense categories. We allocate expenses associated with personnel costs based on the function performed by the respective employees.

Research and Development Expenses

The largest component of our total operating expenses since inception has been costs related to our research and development activities, including the preclinical and clinical development of our product candidates. We account for research and development costs on an accruals basis.

Our contracted research and development expense primarily consists of:

· costs incurred under agreements with CROs and investigative sites that conduct preclinical studies and clinical trials;

· costs related to manufacturing active pharmaceutical ingredients and drug products for preclinical studies and clinical trials; and

· costs for materials used for in-house research and development activities.

Our research and development personnel expense primarily consists of:

· salaries and personnel-related costs, including bonuses, benefits, recruitment costs and any share-based payment expense, for our personnel performing research and development activities or managing those activities that have been out-sourced;

· consultants' costs associated with target selection, preclinical and clinical research activities, and the progression of programs towards clinical trials;

Other research and development expense primarily consists of:

· costs of related facilities, equipment and other overhead expenses that are considered directly attributable to research and development;

· costs associated with obtaining and maintaining patents for intellectual property; and

· depreciation of capital assets used for research and development activities.

The successful development of our product candidates is highly uncertain. Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. Accordingly, we expect research and development costs to increase significantly for the foreseeable future as programs progress. However, we do not believe that it is possible at this time to accurately project total program-specific expenses through commercialization. We are also unable to predict when, if ever, material net cash inflows will commence from our product candidates to offset these expenses. Our expenditures on current and future preclinical and clinical development programs are subject to numerous uncertainties in timing and cost to completion.

The duration, costs and timing of clinical trials and development of our product candidates will depend on a variety of factors, including:

· the scope, rate of progress, results and expenses of our ongoing and future clinical trials, preclinical studies and research and development activities;

· the potential need for additional clinical trials or preclinical studies requested by regulatory agencies;

· potential uncertainties in clinical trial enrollment rates or drop-out or discontinuation rates of patients;

· competition with other drug development companies in, and the related expense of, identifying and enrolling patients in our clinical trials and contracting with third-party manufacturers for the production of the drug product needed for our clinical trials;

· the achievement of milestones requiring payments under in-licensing agreements, if any;

· any significant changes in government regulation;

· the terms and timing of any regulatory approvals;

· the expense of filing, prosecuting, defending and enforcing patent claims and other intellectual property rights; and

· the ability to market, commercialize and achieve market acceptance for any of our product candidates, if they are approved.

We have not historically tracked research and development expenses on a program-by-program basis for our preclinical product candidates.

Administrative Expenses

Administrative expenses consist of personnel costs, including salaries, bonuses, benefits, recruitment costs and share-based payment expense for personnel in executive, finance, business development and other support functions. Administrative expenses also include those costs associated with being a public company, such as general and D&O insurance, legal, audit, tax, public relations and investor relations services.

Finance and Other Income (Expense)

Finance and other income primarily relates to interest earned on our cash, cash equivalents and short-term deposits, as well as foreign exchange gains. Finance and other expense primarily relates to lease liability interest expense and foreign exchange losses. Foreign exchange gains and losses relate to cash held in foreign currencies (primarily Euros).

Taxation

We are subject to corporate taxation in the United Kingdom, Germany and the United States. Due to the nature of our business, we have generated losses since inception. Our income tax credit recognized represents the sum of the research and development, or R&D, tax credits recoverable in the United Kingdom. The U.K. R&D tax credit, as described below, is fully refundable to us and is not dependent on current or future taxable income. As a result, we have recorded the entire benefit from the U.K. R&D tax credit as a credit to "Taxation."

As a company that carries out extensive research and development activities, we currently benefit from the U.K. research and development tax credit regime for small or medium-sized enterprises, or SMEs. Under the SME regime, we are able to surrender some of the trading losses that arise from qualifying R&D activities for a cash rebate of up to 33.35% of such qualifying R&D expenditures. Qualifying expenditures are net of any revenue contribution and largely comprise employment costs for research staff, materials, outsourced CRO costs and R&D consulting costs incurred as part of research projects, clinical trial and manufacturing costs, including outsourced CRO costs, employment costs for relevant staff and consumables incurred as part of research and development projects. Certain subcontracted qualifying research and development expenditures are eligible for a cash rebate of up to 21.68%. A large portion of costs relating to our research and development, clinical trials and manufacturing activities are eligible for inclusion within these tax credit cash rebate claims. We recognize research and development tax credits when receipt is probable.

We may not be able to continue to claim research and development tax credits in the future under the current research and development tax credit scheme if we cease to qualify as a small or medium-sized company which is not anticipated at the time of this filing. However, should this occur in the future we may be able to file under the U.K. research and development expenditure credit, or RDEC, regime for large companies. However, the relief available under RDEC is not as favorable as that of the SME regime.

Total estimated tax losses of £142.0 million as of September 30, 2021 were available for relief against our future profits. Unsurrendered U.K. tax losses may be carried forward indefinitely to be offset against future taxable profits, subject to numerous utilization criteria and restrictions. The amount that can be offset each year is limited to £5.0 million plus an incremental 50% of U.K. taxable profits. After accounting for tax credits receivable, we had accumulated tax losses for carry forward in the United Kingdom of £84.1 million as of December 31, 2020. However, in the event of a change in ownership of a U.K. company, certain provisions may apply to restrict the utilization of carried forward tax losses in future periods. These provisions apply where there is a major change in the nature or conduct of a trade in connection with the change in ownership. For the avoidance of doubt, we do not recognize a deferred tax asset in respect of the accumulated tax losses. In addition to our accumulated tax losses in the United Kingdom, we also had £51.5 of accumulated tax losses as of December 31, 2020 related to our operations in Germany.

In the event we generate revenues in the future, we may benefit from the U.K. "patent box" regime that allows profits attributable to revenues from patents or patented products to be taxed at an effective rate of 10%.

Value Added Tax, or VAT, is charged on all qualifying goods and services by VAT-registered businesses. Where applicable, an amount of 20% of goods and services is added to all sales invoices and is payable to the U.K. tax authorities. Similarly, VAT paid on purchase invoices is reclaimable from the U.K. tax authorities.

Results of Operations

Comparison of the Three Months and Nine Months Ended September 30, 2021 and 2020

The following tables summarize the results of our operations for the three months and nine months ended September 30, 2021 and 2020.

Consolidated Income Statements (unaudited)

	Three months ended						Nine months ended
	September 30, 2021			September 30, 2020			September 30, 2021			September 30, 2020
£000s (except per share information)
Revenue		3,156			1,988			9,001			3,134
Cost of sales		(2,052	)		(2,331	)		(5,414	)		(2,331	)
Gross profit		1,104			(343	)		3,587			803
Research and development costs		(7,916	)		(3,468	)		(23,541	)		(13,647	)
Administrative expenses		(5,472	)		(2,666	)		(14,597	)		(7,826	)
Other (losses)/gains - net		-			(3,091	)		-			(3,091	)
Operating loss		(12,284	)		(9,568	)		(34,551	)		(23,761	)
Finance and other expenses		(64	)		(119	)		(86	)		(119	)
Finance and other income		296			147			8			1,011
Loss for the period before taxation		(12,052	)		(9,540	)		(34,629	)		(22,869	)
Taxation		2,123			462			4,653			2,762
Loss for the period after taxation		(9,929	)		(9,078	)		(29,976	)		(20,107	)
Loss per ordinary equity share (basic and diluted)	(11.1) pence			(11.0) pence			(33.8) pence			(24.7) pence

Revenue

Revenue for the three-month period ended September 30, 2021 increased by £1.2 million from the same three-month period in 2020. The growth is a result of the further advancement of the partner programs, as well as introduction of additional programs with our partners. For the nine months ended September 30, 2021 revenue was £9.0 million (nine months ended September 30, 2020: £3.1 million). The increase was primarily due to the AstraZeneca and Mallinckrodt collaborations which delivered £1.8 million (nine months ended September 30, 2020: £nil) and £6.4 million (nine months ended September 30, 2020: £2.3 million) of revenue respectively in 2021.

Research and Development Expenses

The following table summarizes our research and development expenses for the nine months ended September 30, 2021 and 2020, based on their classification.

	Three months ended				Nine months ended
	September 30, 2021		September 30, 2020		September 30, 2021		September 30, 2020
	£000s		£000s		£000s		£000s
Research and development expenses
Contracted development costs		4,171		1,576		13,084		7,573
Personnel costs		3,268		1,561		9,284		5,126
Other costs		477		331		1,173		948
Total		7,916		3,468		23,541		13,647

Research and development expenses for the three months ended September 30, 2021 were £7.9 million, compared to £3.5 million for the three months ended September 30, 2020. For the nine months ended September 30, 2021, research and development expenses were £23.5 million as compared to £13.6 million for the nine months ended September 30, 2020, an increase of £9.9 million. The largest contributor to the increase in R&D spend is contracted research and development expenses which increased by £5.5 million due to the advancement of clinical studies and manufacturing of clinical supply. Personnel expenses (including payroll, consultants, share-based payment expense and recruitment fees), also increased by £4.2 million as a result of the advancement and addition of new R&D programs.

Administrative Expenses

Administrative expenses increased £2.8 million for the three months ended September 30, 2021 as compared to the same period in 2020. The increase is primarily due to the growth of the organization, as well as the increase in share-based payment expense. For the nine months ended September 30, 2021, administrative expenses were £14.6 million as compared to £7.8 million for the nine months ended September 30, 2020. Administrative expenses consist of personnel costs, allocated expenses and other expenses for outside professional services, including legal, audit, tax and accounting services and public relations and investor relations services. Personnel costs consist of salaries, bonuses, benefits, recruitment costs and share-based payment expense for personnel in executive, finance, business development and other support functions. Other administrative expenses include office space-related costs not otherwise allocated to research and development expense, costs of our information systems and costs for compliance with the day-to-day requirements of being a listed public company. We anticipate that our administrative expenses will continue to increase in the future to support our continued research and development activities of our product candidates.

Finance and Other Income (Expense)

Finance income/(expense) includes:

· interest income on our cash, cash equivalents and short-term deposits of £6 thousand for the three-months ended September 31, 2021 compared to £23 thousand for the three-months ended September 31, 2020. For the nine-month period ended September 30, 2021, interest income was £8 thousand compared to £86 thousand for the nine-months ended September 30, 2020. The decrease is primarily attributable to fewer instances of funds being placed on term deposits in 2021 primarily due a general decrease in interest rates being offered by Deposit Taking Institutions.

· net foreign exchange income was £226 thousand for the three-months ended September 31, 2021 compared to £5 thousand for the three-months ended September 31, 2020. For the nine-month period ended September 30, 2021, net foreign exchange loss was £86 thousand compared to £806 thousand for the nine-months ended September 30, 2020.; foreign exchange gains/losses relate to cash held in foreign currencies.

Taxation

We have recognized U.K. research and development tax credits of £2.1 million for the three months ended September 30, 2021 as compared to £0.5 million for the nine months ended September 30, 2020. For the nine-months ended September 40. 2021, we recognized £3.8 million for the nine months ended September 30, 2021 and an additional £0.9 million recognized and received as part of the full year 2020 submission. This compares to £2.8 million for the nine months ended September 30, 2020. We expect to receive the amount in respect of the full year 2021 in 2022.

Quantitative and Qualitative Disclosures about Market Risk

Market risk arises from our exposure to fluctuation in interest rates and currency exchange rates. These risks are managed by maintaining an appropriate mix of cash deposits in the two main currencies we operate in, which is placed with a variety of financial institutions for varying periods according to expected liquidity requirements.

Interest Rate Risk

As of September 30, 2021, we had cash, cash equivalents and term deposits of £76.5 million (September 30, 2020: £43.9 million). Our exposure to interest rate sensitivity is impacted primarily by changes in the underlying U.K. bank interest rates. Our surplus cash and cash equivalents are invested in interest-bearing savings accounts and fixed term and fixed interest rate term deposits from time to time. We have not entered into investments for trading or speculative purposes in the year ended December 31, 2020 or the nine months ended September 30, 2021. Due to the conservative nature of our investment portfolio, which is predicated on capital preservation of investments with short-term maturities, an immediate one percentage point change in interest rates would not have a material effect on the fair market value of our portfolio, and therefore we do not expect our operating results or cash flows to be significantly affected by changes in market interest rates.

Currency Risk

Our functional currency is U.K. pounds sterling, and our transactions are commonly denominated in that currency. However, we receive payments under our collaboration agreements in U.S. dollars and we incur a portion of our expenses in other currencies, primarily Euros, and are exposed to the effects of these exchange rates. We seek to minimize this exposure by maintaining currency cash balances at levels appropriate to meet foreseeable short to mid-term expenses in these other currencies. Where significant foreign currency cash receipts are expected, we consider the use of forward exchange contracts to manage our exchange rate exposure. A 10% increase in the value of the pound sterling relative to the U.S. dollar or Euro would not have had a material effect on the carrying value of our net financial assets and liabilities in foreign currencies at September 30, 2021.

Counterparty, Credit and Liquidity Risk

Our cash, cash equivalents and term deposits are on deposit with financial institutions with a credit rating equivalent to, or above, the main U.K. clearing banks. We invest our liquid resources based on the expected timing of expenditures to be made in the ordinary course of our activities. All financial liabilities are payable in the short term, meaning no more than three months, and we maintain adequate bank balances in either instant access or short-term deposits to meet those liabilities as they fall due. We believe we have had minimal credit risk relating to our trade receivables as of September 30, 2021 and 2020, which consisted solely of amounts due from AstraZeneca, Mallinckrodt and Alnylam.

Critical Accounting Policies, Judgments and Estimates

In the application of our accounting policies, we are required to make judgments, estimates, and assumptions about the value of assets and liabilities for which there is no definitive third-party reference. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates. We review our estimates and assumptions 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 in the period of the revisions and future periods if the revision affects both current and future periods.

The following are our critical judgments that we have made in the process of applying our accounting policies and that have the most significant effect on the amounts recognized in our consolidated financial statements included elsewhere in this report.

Revenue Recognition under Collaboration Agreements

During the nine months ended September 30, 2021 and the nine months ended September 30, 2020, a significant portion of our revenue from collaboration agreements was derived from our agreements with AstraZeneca (in 2021), Mallinckrodt (in 2020 and 2021) and Takeda (2020 through the six months ended June 30, 2021).

For the nine months ended September 30, 2021 and 2020, we determined actual costs and forecast costs for the remainder of the contract. We then calculated total contract costs across the contract term, including costs that will be reimbursed to us, and costs incurred to date as a percentage of total contract costs. We then multiplied this percentage by the consideration deemed probable, calculating the cumulative revenue to be recognized. When variable consideration increases due to a further milestone becoming probable, a catch-up in revenue is recorded to reflect efforts already expended by us up to that point.

AstraZeneca Research Collaboration, Option and License Agreement

We have out-licensed the rights to some of our intellectual property associated with our siRNA stabilization chemistry technology to AstraZeneca through a Research Collaboration, Option and License Agreement, dated March 24, 2020, under which we and AstraZeneca will collaborate to discover, develop and commercialize siRNA therapeutics for the treatment of cardiovascular, renal, metabolic and respiratory diseases.

AstraZeneca agreed to make an upfront cash payment of $60 million, of which $20 million was paid in May 2020 and the remaining $40 million was paid in May 2021. AstraZeneca also made an equity investment of $20 million in the Company. We have initially started working on two targets and anticipate initiating work on an additional three targets within the first three years of the collaboration, with AstraZeneca having the option to extend the collaboration to a further five targets. AstraZeneca would be obligated to pay us an option exercise payment of $10 million for each option exercised.

For each target selected under the collaboration, we will be eligible to receive up to $140 million in milestone payments upon the achievement of milestones relating to initiation of specified clinical trials, the acceptance of specified regulatory filings and the first commercial sale in specified jurisdictions. For each target selected, we are also eligible to receive up to $250 million in sales-based milestone payments upon the achievement of specified annual net sales levels, as well as tiered royalties as a percentage of net sales ranging from the high single digits to the low double digits.

As there is only a single performance obligation per target under the collaboration agreement, the revenue for each element of consideration will be recognized over the contract period based on a cost-to-cost method, which is considered to be the best available measure of our effort during the contract period. The total cost estimate for the contract includes costs expected to be incurred during a Phase 1 clinical trial for which we will be reimbursed. Other variable elements of consideration will only begin to be recognized when the amounts are considered probable.

Mallinckrodt License and Collaboration Agreement

On July 18, 2019, Mallinckrodt obtained an exclusive worldwide license from us for an early-stage RNAi program targeting C3 in the complement cascade (known as SLN500), with options to license additional complement-mediated disease targets. The license of the intellectual property and the R&D services are not distinct, as Mallinckrodt cannot benefit from the intellectual property absent the R&D services, since R&D services are used to discover and develop a drug candidate and to enhance the value in the underlying intellectual property. On this basis, we have 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 (i.e., one for the initial target and one for each additional optioned complement-mediated disease targets which represent material rights). We recognize revenue over the duration of the contract based on an input method based on cost to cost.

The agreement with Mallinckrodt has four elements of consideration:

· a fixed upfront payment, which we received in July 2019;

· subsequent milestone payments, which are variable and depend upon our achievement of specified development, regulatory and commercial milestones;

· payments in respect of certain research personnel costs on an FTE, basis, which costs are variable depending on activity under the collaboration; and

· funding for Phase 1 clinical development and certain preparatory activities, including GMP manufacturing, which costs are also variable.

The upfront payment has been allocated evenly between the initial target and the optioned complement-mediated disease targets, because the compounds are at a similar stage of development, on the basis of a benchmarking exercise that took into account the standalone selling price per target, of similar precedent transactions that had been publicly announced by comparable companies. The upfront payment will be recognized as revenue in line with the time period over which services are expected to be provided.

Takeda Technology Evaluation Agreement

We entered into a Technology Evaluation Agreement with Takeda on January 7, 2020 to explore the potential of our platform to generate siRNA molecules against a novel, undisclosed target controlled by Takeda. Our activities under the Technology Evaluation Agreement with Takeda were effectively complete as of September 30, 2021. We may negotiate to enter into an exclusive follow-on license and collaboration agreement covering the Takeda target at some point in the future.

Recognition of Clinical Trial Expenses

As part of the process of preparing our consolidated financial statements, we may be required to estimate accrued expenses related to our preclinical studies and clinical trials. In order to obtain reasonable estimates, we review open contracts and purchase orders. In addition, we communicate with applicable personnel in order to identify services that have been performed, but for which we have not yet been invoiced. In most cases, our vendors provide us with monthly invoices in arrears for services performed. We confirm our estimates with these vendors and make adjustments as needed. Examples of our accrued expenses include fees paid to CROs for services performed on preclinical studies and clinical trials and fees paid for professional services.

Recent Accounting Pronouncements

We have reviewed new IFRS standards issued and updates to existing standards in the reporting period and concluded that none of the recent pronouncements are relevant to Silence Therapeutics plc (either because they relate to standards not relevant to Silence Therapeutics plc or because they have not yet become effective; and there is currently no preference for early adoption). The group did not have to change its accounting policies or make retrospective adjustments as a result.

Implications of Being an Emerging Growth Company and a Foreign Private Issuer

We have taken advantage of reduced reporting requirements in this report. Accordingly, the information contained herein may be different than the information you receive from other public companies in which you hold equity securities.

Emerging Growth Company

As of the date of this filing, we are an "emerging growth company" as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. As such, we may take advantage of certain exemptions from various reporting requirements that are applicable to publicly traded entities that are not emerging growth companies. These exemptions include:

· an exemption from the auditor attestation requirement in the assessment of our internal control over financial reporting pursuant to the Sarbanes-Oxley Act of 2002, as amended;

· to the extent that we no longer qualify as a foreign private issuer, (i) reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and (ii) exemptions from the requirement to hold a non-binding advisory vote on executive compensation, including golden parachute compensation; and

· an exemption from compliance with the requirement that the Public Company Accounting Oversight Board has adopted regarding a supplement to the auditor's report providing additional information about the audit and the financial statements.

We will remain an emerging growth company until the earliest of (a) the last day of our fiscal year during which we have total annual gross revenue of at least $1.07 billion; (b) December 31, 2025; (c) the date on which we have, during the previous three-year period, issued more than $1.0 billion in non-convertible debt; or (d) the date on which we are deemed to be a "large accelerated filer" under the Securities Exchange Act of 1934, as amended, which would occur if the market value of our equity securities that are held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter. As of September 30, 2021, we did not exceed this threshold. Once we cease to be an emerging growth company, we will not be entitled to the exemptions provided in the JOBS Act.

Foreign Private Issuer

We report under the Securities Exchange Act of 1934, as amended, or the Exchange Act, as a non-U.S. company with foreign private issuer status. Even after we no longer qualify as an emerging growth company, as long as we continue to qualify as a foreign private issuer under the Exchange Act, we are exempt from certain provisions of the Exchange Act that are applicable to U.S. domestic public companies, including:

· the rules under the Exchange Act requiring domestic filers to issue financial statements prepared under U.S. GAAP;

· the sections of the Exchange Act regulating the solicitation of proxies, consents or authorizations in respect of a security registered under the Exchange Act;

· the sections of the Exchange Act requiring insiders to file public reports of their share ownership and trading activities and liability for insiders who profit from trades made in a short period of time; and

· the rules under the Exchange Act requiring the filing with the SEC of quarterly reports on Form 10-Q containing unaudited financial statements and other specified information, and current reports on Form 8-K upon the occurrence of specified significant events.

Notwithstanding these exemptions, we will file with the SEC, per foreign private issuer requirements.

We may take advantage of these exemptions until such time as we are no longer a foreign private issuer. We would cease to be a foreign private issuer at such time as more than 50% of our outstanding voting securities are held directly or indirectly by U.S. residents and any of the following three circumstances applies: (i) the majority of our executive officers or directors are U.S. citizens or residents, (ii) more than 50% of our assets are located in the United States or (iii) our business is administered principally in the United States.

Liquidity and Capital Resources

Overview

Since our inception, we have incurred significant operating losses. We anticipate that we will continue to incur losses for at least the next several years. We expect that our research and development and administrative expenses will increase in connection with conducting clinical trials and seeking marketing approval for our product candidates, as well as costs associated with operating as a public company. As a result, we will need additional capital to fund our operations, which we may obtain from additional equity financings, debt financings, research funding, collaborations, contract and grant revenue or other sources.

As of September 30, 2021, we had cash, cash equivalents and term deposits of £76.5 million (December 31, 2020: £37.4 million).

We do not currently have any approved products and have never generated any revenue from product sales or otherwise. To date, we have financed our operations primarily through the issuances of our equity securities and from upfront, milestone and research payments under collaboration agreements with third parties.

We have no ongoing material financing commitments, such as lines of credit or guarantees, that are expected to affect our liquidity over the next five years, other than leases.

Cash Flows

The following table summarizes the results of our cash flows for the nine months ended September 30, 2021 and 2020.

	Nine months ended
	September 30, 2021		September 30, 2020
	£000s		£000s
Net cash inflow/(outflow) from operating activities		9,011		(5,369	)
Net cash inflow/(outflow) from investing activities		4,224		(10,352	)
Net cash inflow from financing activities		30,711		15,534
Increase/(decrease) in cash and cash equivalents		43,946		(187	)

Operating activities

The increase in net cash generated from operating activities of £9.0 million for the nine months ended September 30, 2021 from net cash outflow of £5.4 million for the nine months ended September 30, 2020 was primarily due to the $40 million (£30.8 million) upfront payment from AstraZeneca in the first half of 2021 partially offset by higher research, development and administrative costs.

Investing activities

Net cash inflow from investing activities was £4.2 million for the nine months ended September 30, 2021, compared to £10.4 outflow for the nine months ended September 30, 2020 which was primarily due to the purchase of short-term deposits. Short-term deposits for the nine months ended September 30, 2021 were £5.0 million.

Financing activities

The increase in net cash from financing activities to £30.7 million for the nine months ended September 30, 2021 (nine months ended September 30, 2020: £15.5 million), was due to the proceeds from the issuance of share capital. The only other financing activity for the nine months ended September 30, 2021 of £0.2 million (nine months ended September 30, 2020: £0.3 million) was the repayment of lease liabilities.

Operating and Capital Expenditure Requirements

We have not achieved profitability on an annual basis since our inception, and we expect to incur net losses in the future. We expect that our operating expenses will increase as we continue to invest to grow our product pipeline, hire additional employees and increase research and development expenses.

Additionally, as a public company, we incur significant additional audit, legal and other expenses. We believe that our existing capital resources will be sufficient to fund our operations, including currently anticipated research and development activities and planned capital spending, at least through the end of 2022.

Our future funding requirements will depend on many factors, including but not limited to:

· the scope, rate of progress and cost of our clinical trials, preclinical programs and other related activities;

· the extent of success in our early preclinical and clinical-stage research programs, which will determine the amount of funding required to further the development of our product candidates;

· the cost of manufacturing clinical supplies and establishing commercial supplies of our product candidates and any products that we may develop;

· the costs involved in filing and prosecuting patent applications and enforcing and defending potential patent claims;

· the outcome, timing and cost of regulatory approvals of our product candidates;

· the cost and timing of establishing sales, marketing and distribution capabilities; and

· the costs of hiring additional skilled employees to support our continued growth and the related costs of leasing additional office space.

Trend Information

Other than as disclosed elsewhere in this Report, we are not aware of any trends, uncertainties, demands, commitments or events since December 31, 2020 that are reasonably likely to have a material adverse effect on our net revenues, income from continuing operations, profitability, liquidity or capital resources, or that would cause the disclosed financial information to be not necessarily indicative of future operating results or financial conditions. For more information, see Exhibit 99.1 filed on Form 6-K on August 12, 2021.

Off-Balance Sheet Arrangements

We did not have during the periods presented, and do not currently have, any off-balance sheet arrangements.

Contractual Obligations and Commitments

The following table summarizes our contractual commitments and obligations as of September 30, 2021 and December 31, 2020.

	September 30, 2021		December 31, 2020
	£000s		£000s
Lease liability		131		341

We have agreed to make payments to CROs and manufacturers under various CRO and manufacturing agreements that generally provide for our ability to terminate on short notice. We have not included any such contingent payment obligations in the table above as the amount, timing and likelihood of such payments are not fixed or determinable.

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END

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

Collaboration Agreement with AstraZeneca

Collaboration Agreement with Mallinckrodt

Financial Operations Overview

Results of Operations

Recent Accounting Pronouncements

Implications of Being an Emerging Growth Company and a Foreign Private Issuer

Liquidity and Capital Resources

Trend Information

Off-Balance Sheet Arrangements

Contractual Obligations and Commitments

Related Charts

Market Overview

UK 350 Risers and Fallers

Third Quarter 2021 Financial Results

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

Collaboration Agreement with AstraZeneca

Collaboration Agreement with Mallinckrodt

Financial Operations Overview

Results of Operations

Recent Accounting Pronouncements

Implications of Being an Emerging Growth Company and a Foreign Private Issuer

Liquidity and Capital Resources

Trend Information

Off-Balance Sheet Arrangements

Contractual Obligations and Commitments

Related Charts

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