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Registered number: 12973576

CENTESSA PHARMACEUTICALS PLC PARENT
COMPANY FINANCIAL STATEMENTS FOR THE YEAR
ENDED 31 DECEMBER 2022

ANNUAL REPORT AND FINANCIAL STATEMENTS

INTRODUCTION AND CONTENTS

Centessa Pharmaceuticals PLC (the “Company”, or the “Parent Company”) is a public limited company incorporated under the laws of England and Wales with American Depositary Shares (“ADS’s”) (representing its ordinary shares on a 1:1 basis) listed on the NASDAQ Global Select Market and traded under the symbol “CNTA”.

To meet US securities law reporting requirements, the Company is required to file an annual report on Form 10-K with the United States Securities and Exchange Commission (the “SEC”), which includes the audited consolidated financial statements of the Company and its subsidiaries (the “Group”) prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). To meet UK statutory requirements for being a quoted company under the UK Companies Act 2006 (the “Companies Act”), the Company is required to file UK consolidated accounts.

The contents of this Annual Report are as follows:

This “Annual Report”, as mentioned throughout these UK financial documents, is comprised of the reports listed above and the Annual Report on Form 10-K (the “Form 10-K”) filed with the SEC on 30 March 2023. For the purposes of this Annual Report, the exhibits to the Form 10-K are not incorporated by reference.

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COMPANY INFORMATION

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A LETTER FROM OUR CEO

2022 was a year in which we made solid progress advancing many of our pipeline programs toward our goal of bringing transformational medicines to patients. Across the year, we advanced key clinical and development objectives, prioritized our pipeline, and continued to manage our resources with timely data and science-driven decisions, consistent with our asset-centric operating model. Importantly, we also unified our culture into “ONE” Centessa. At the same time, we were challenged with several impactful strategic decisions that demonstrated our commitment to data-driven decision making, including the decisions to terminate our Phase 3 program for lixivaptan for which we had been conducting a registration trial in Autosomal Dominant Polycystic Kidney Disease (ADPKD), and our Phase 1 program in Alpha-1 Antitrypsin Deficiency (AATD) with ZF874.

As a result of all our work, we entered 2023 with solid momentum and a clear focus on our pipeline programs that we believe have the greatest potential to transform the lives of patients with unmet medical needs. We believe we are well-positioned with a cash runway into 2026 to support the potential for multiple clinical readouts across our pipeline.

SerpinPC

Our most advanced product candidate is SerpinPC, a subcutaneously administered novel inhibitor of activated protein C (“APC”) being developed as a potential treatment for hemophilia. To date, our Phase 2a clinical data has shown SerpinPC to have a favourable safety and tolerability profile, as well as evidence of sustained efficacy in patients with hemophilia, as measured by a reduction in the all-bleeds annualized bleeding rates (ABRs). Based on these data, we believe SerpinPC has the potential to be a first-in-class subcutaneously administered therapy with a differentiated safety profile for individuals with hemophilia, subject to regulatory review and approval. We are excited to be advancing the registrational program for SerpinPC in hemophilia B, and look forward to dosing subjects in the PRESent-2 and PRESent-3 interventional studies for patients with hemophilia B without inhibitors and with inhibitors, respectively, this year.

LockBody Technology Platform and LB101

Following IND clearance from the U.S. FDA in January this year, we dosed the first subject in the Phase 1/2a trial for LB101, the first clinical trial evaluating our proprietary LockBody® technology platform in patients with solid tumors. LB101 is a conditionally tetravalent PD-L1xCD47 bispecific monoclonal antibody. We look to this study to provide valuable insights regarding the safety and tolerability of LB101, as well as the performance of our LockBody platform in a clinical setting. We are working to develop additional LockBody molecules, including PD-L1xCD3.

ORX750 and MGX292

Our team is also excited to be advancing ORX750, an orally administered, selective orexin receptor 2 (OX2R) agonist, as our product candidate for the treatment of narcolepsy with potential expansion into other sleep disorders. We look forward to achieving a steady cadence of preclinical milestones and sharing preclinical data on ORX750 at a scientific meeting later this year. Our earlier stage development programs also include MGX292, a protein-engineered variant of human bone morphogenetic protein 9 (BMP9), for pulmonary arterial hypertension (PAH).

I’m proud of our team’s accomplishments across 2022. Our pipeline and continued progress are a testament both to the strength of our team and to the support of our shareholders. Importantly, it reflects our continuing commitment to help patients. There is much work ahead, and we remain confident that we are well-positioned to drive both innovation and long-term value for the benefit of all our stakeholders.

Sincerely,

Saurabh Saha, M.D., Ph.D.

Board Member and Chief Executive Officer

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UK STATUTORY STRATEGIC REPORT

All references in this Annual Report to “CENTESSA”, the “Company”, the “Group”, “we,” “us” and “our” refer to Centessa Pharmaceuticals PLC and its subsidiaries. The directors present their UK Statutory Strategic Report on the Group and the audited financial statements for the 52 weeks ended 31 December 2022. The comparative period covers the period from incorporation, 26 October 2020, to 31 December 2021. The information in this document that is referred to in the following table shall be deemed to comply with the Companies Act requirements for the UK Statutory Strategic Report.

Principal Activities

We are a clinical-stage pharmaceutical company with a mission to discover, develop and ultimately deliver medicines that are transformational for patients.  

Our company was formed in October 2020 to pursue our mission within a unique, at-scale asset-centric operating model in a capital efficient manner. We refer to this concept as “asset-centricity.” On January 29, 2021, we acquired 11 pre-revenue, development stage biotechnology companies as direct subsidiaries (together referred to as the “Centessa Subsidiaries”), and in June 2021, we completed an initial public offering (“IPO”). Since early 2022, we have substantially changed how we manage the Centessa Subsidiaries, and where applicable, we have reorganized their assets into individual focused pipeline programs unified under the Centessa Pharmaceuticals corporate brand. 

At the core of our asset-centric model is a research and development (“R&D”) engine that aims to pursue the best assets in areas of unmet need, regardless of therapeutic area or technology. We manage our programs dynamically and have a disciplined, data-driven approach to determining which product candidates and programs to progress, including considering whether the potential product profile or most recent data meet our criteria to justify further investment. In particular, we apply various scientific, clinical and commercial criteria aggressively throughout the development of each program individually and evaluate the merits of each program individually. In addition, our program decisions are not biased to therapeutic areas or technologies. We believe our unbiased, science-driven approach to each asset is not only a key differentiator for our Company, but also supports the quality of our diversified pipeline programs.

Equally important, our R&D model is designed toward rapidly progressing programs through development in a capital efficient manner. Research activities related to each of our programs are conducted through a Research Excellence Hub. Each Research Excellence Hub is dedicated to pursuing pathway and/or disease domain-specific research with the aim of bringing assets through candidate selection. Each is led by a subject matter expert based on their unique knowledge and expertise and is overseen by our Chief Innovation Officer (“CIO”). Once a candidate is selected, the program is transitioned to a development program team. The integrated one-team development structure brings together cross-functional expertise to drive agile, lean and effective clinical development of the asset. The development strategy is overseen by our Chairman of Development.

The Research Excellence Hub and development program teams are designed to be lean, with limited fixed costs to further enhance the economics of asset-centric drug development. To accomplish this aim, the teams rely on strategic Contract Research Organization (“CRO”) and Contract Development and Manufacturing Organization (“CDMO”) partners and consultants while maintaining a small, agile, and highly experienced core team of drug developers. Where appropriate, we also pursue opportunities for potentially rapid development, including orphan drug designation, fast track designation, and other regulatory and development avenues.

Our R&D spend is consistent with our asset-centric approach, with the highest spend on the programs that have already established clinical proof of concept. For programs in the earlier stages, we aim to implement capital-efficient plans to reach the next set of catalysts, gating more significant spending until after we obtain clinical proof of concept.

While we continue to refine aspects of our R&D model, we believe that this model enables a pipeline of high conviction assets.

We are led by a management team with both subject matter expertise and extensive R&D experience from leading biotech and pharmaceutical companies. In addition, our program teams are comprised of both inventors of our assets and renowned leaders in their respective fields. Our extensive knowledge of both our assets and drug development informs our decision-making to advance the science and clinical path to demonstrate pharmacological activity and proof-of-concept, with the goal of achieving an efficient timeframe and cost-effective budget. We have a track record of making judicious capital and resource allocation decisions for discovery and development efforts across our portfolio, and expeditiously evaluating and terminating programs when the data do not support advancing a program. We believe this experience and our capabilities well positions us to identify and rapidly advance high value programs from research through all stages of development in a capital efficient manner.

Our most advanced product candidate is SerpinPC, a subcutaneously administered novel inhibitor of activated protein C (“APC”) being developed as a potential treatment for hemophilia. To date, our Phase 2a clinical data has shown SerpinPC to have a favorable safety and tolerability profile, as well as evidence of sustained efficacy in patients with hemophilia, as measured by a reduction in the all-bleeds annualized bleeding rates (ABRs). Based on these data, we believe SerpinPC has the potential to be a first-in-class subcutaneously administered therapy with a differentiated safety profile for individuals with hemophilia, subject to regulatory review and approval. We are excited to be advancing the registrational program for SerpinPC in hemophilia B and look forward to dosing subjects in the PRESent-2 and PRESent-3 interventional studies for patients with hemophilia B without inhibitors and with inhibitors, respectively, this year. Following IND clearance from the U.S. FDA in January this year, we dosed the first subject in our Phase 1/2a trial for LB101, the first clinical trial evaluating our proprietary LockBody technology platform in patients with solid tumors. LB101 is a conditionally tetravalent PD-L1xCD47 bispecific monoclonal antibody. We look to this study to provide valuable insights regarding the safety and tolerability of LB101, as well as the performance of our LockBody platform in a clinical setting.

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Our team is also excited to be advancing ORX750, an orally administered, selective orexin receptor-2 (OX2R) agonist, as our product candidate for the treatment of narcolepsy with potential expansion into other sleep disorders. We look forward to achieving a steady cadence of preclinical milestones and sharing preclinical data on ORX750 at a scientific meeting later this year. Our earlier stage development programs also include MGX292, a protein-engineered variant of human bone morphogenetic protein 9 (BMP9), for pulmonary arterial hypertension (PAH). Applying our data-driven decision making, in 2022 we took a number of actions with respect to our pipeline programs: (1) we discontinued the development of lixivaptan in Autosomal Dominant Polycystic Kidney Disease (“ADPKD”); ZF874 in Alpha-1 Antitrypsin Deficiency (“AATD”), a dual-STAT3/5 degrader program in Acute Myeloid Leukemia (“AML”), and all programs associated with PearlRiver including the small molecule epidermal growth factor receptor (“EGFR”) Exon20 insertion mutation inhibitor program and the C797S mutation inhibitor program for the treatment of Non-Small Cell Lung Cancer (“NSCLC”); (2) we divested PearlRiver in December 2022; and, (3) we evaluated strategic options for imgatuzumab, an anti-EGFR mAb; and subsequently divested this program and the associated entity Pega-One in early January 2023. Additionally, in December 2022, as a result of protocol defined stopping criterion being met, we suspended dosing in the multiple ascending dose (MAD) stage of the Phase 1 study of CBS001, a neutralizing therapeutic mAb to the inflammatory membrane form of LIGHT for inflammatory / fibrotic diseases. In early 2023, we determined to deprioritize CBS001 and paused all development activities. We continue to evaluate strategic partnerships to progress development of CBS001 and CBS004, a therapeutic mAb targeting BDCA-2 for the potential treatment of autoimmune diseases.

Where the requirements of the strategic report in accordance with the Companies Act have been met in the Form 10-K, details of this have been provided in the table below and referenced to the Form 10-K accordingly. Additional requirements which are not met by Form 10-K have been disclosed separately at the end of the UK Statutory Strategic Report. The Form 10-K is attached in Appendix 1, and forms part of this report by cross reference.

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Other information required within the Strategic Report which is not included in the Form 10-K

Key Performance Indicators (KPIs):

Given the Group’s operational inception in January 2021 and the focus of the business, KPI’s for the Group are centered on operational execution and effective cash management.

The directors and management review the Group’s total liquidity position and cash burn as part of the management of overall liquidity, cash runway and capital requirements.

At 31 December 2022, the Group’s total liquidity position was $393.6M (2021: $595.1M) and these cash and cash equivalents were expected to fund the Group’s operations into 2026 without drawing on the remaining available tranches under the Oberland Capital financing agreement. On 2 June 2022, the Company announced its decision to discontinue the development of lixivaptan for ADPKD and on 2 August, 2022, the Company announced its decision to discontinue the development of ZF874 in AATD.

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Corporate Governance Report (Section 172(1), Companies Act 2006 Statement)

The directors of Centessa, and all directors of UK companies must act in accordance with a set of general duties including (but not limited to) a duty to act in a way that they consider, in good faith, would most likely promote the success of the Company for the benefit of its members as a whole and in doing so must have regard (amongst other matters) to the matters set out in sub-paragraphs (a) to (f) of Section 172 of the Companies Act:

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The directors of the Company are mindful of their duties and obligations under section 172 of the Companies Act when making decisions.

This report was approved by the Board of Directors on 22 May 2023 and is signed on behalf of the Board of Directors by:

Saurabh Saha, M.D, Ph.D.

Board Member and Chief Executive Officer
22 May 2023

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UK STATUTORY DIRECTORS’ REPORT

The directors present their report and the audited financial statements of the Company for the 52 weeks ended 31 December 2022. The comparative period covers the period from incorporation, 26 October 2020, to 31 December 2021.

Where the requirements of the Directors’ Report in accordance with the Companies Act have been met in the Form 10-K, details of this have been provided in the table below and referenced to the Form 10-K accordingly.

Additional requirements which are not met by the Form 10-K have been disclosed separately at the end of the Directors’ Report. The Form 10-K is attached in Appendix 1.

Other information required within the UK Statutory Directors’ Report which is not included in the Form 10-K.

Directors

The directors who served at any time during the year were as follows:

Francesco De Rubertis, Ph.D

Arjun Goyal M.D., M.Phil, M.B.A

Mary Lynne Hedley, Ph.D

Aaron Kantoff (resigned 1 July 2022)

Samarth Kulkarni, Ph.D

Saurabh Saha, M.D., Ph.D

Carol Stuckley, M.B.A.

Brett Zbar, M.D.

Robert Mckinnon Califf, M.D. (resigned 16 February 2022)

Mathias Hukkelhoven, Ph.D (appointed 1 July 2022)

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Capital structure

The group’s share capital is comprised of one class of ordinary shares of £0.002 each, the shares are listed on the NASDAQ Global Select Market under the symbol “CNTA”. At 31 December 2022, 95,442,812 shares were in issue (2021: 90,971,172). The shares carry no rights to fixed income and each share carries the right to one vote at general meetings. All shares are fully paid. For further details, refer to note 9 of the notes to the financial statements.

The group’s debt to equity ratio at 31 December 2022 is 0.23(2021: 0.14). The Company is financed primarily through share issues and the associated share premium, which totals $383,007,000 as at 31 December 2022. (2021: $344,976,000). In addition, the Company has a Note Purchase Agreement of $75,000,000 with Oberland Capital Management, LLC. See Part II, Item 8: Note 6 (Debt) on the Company’s 10-K for additional information.

Going concern

The directors have assessed the going concern and believe that the Company has adequate resources to continue in operational existence for twelve months from the date of signing the accounts.

Greenhouse gas and Carbon emissions

The Companies Act 2006 (Strategic Report and Directors’ Reports) Regulations 2013 require quoted companies to report on the greenhouse gas emissions for which they are responsible. For clarity, Scope 1 emissions are direct emissions produced by the burning of fuels. Scope 2 emissions are indirect emissions related to the generation of the electricity consumed and purchased by Centessa. Scope 3 emissions are indirect emissions produced by Centessa activity, these emissions are not owned or controlled by the Company. We are a company with a small number of employees. We have limited serviced offices and we currently outsource much of our research, development and testing activities. As a result, we do not emit greenhouse gases from our own activities. Our consumption of electricity for our own purposes is also within the reporting threshold of 40 MwH (Scope 1 and Scope 2 disclosures).

Accordingly, there are no greenhouse gas emissions to report from the Company’s operations, nor do we have responsibility for any other emissions. Further, for the same reason, the Company considers that it is a ‘low energy user’ under the Streamlined Energy & Carbon reporting regulations and therefore a disclosure on energy and carbon emissions is not required.

Political donations and expenditure

The Group did not make any political donations or incur any political expenditure (including in respect of any non-UK political party) in the financial period being reported on. (2021: nil).

Dividend

The Company did not pay any dividend in the financial year being reported on (2021: nil) and has no intentions to pay dividends in the near future.

Disclosure of information to auditors

In accordance with Section 418 of the Companies Act, each director who held office at the date of approval of this directors’ report confirms that, so far as they are each aware, there is no relevant audit information of which the Company’s auditors are unaware; and each director has taken all the steps that ought to have been taken as a director in order to make him or herself aware of any relevant audit information and to establish that the Company’s auditors are aware of that information.

Independent auditor

The Group’s auditor, KPMG LLP, has indicated their willingness to continue in office and a resolution that they be re-appointed will be proposed at the annual general meeting.

This report was approved by the Board of Directors on 22 May 2023 and is signed on behalf of the Board of Directors by:

Saurabh Saha, M.D., Ph.D.

Board Member and Chief Executive Officer
22 May 2023

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CENTESSA PHARMACEUTICALS PLC DIRECTORS’ REMUNERATION REPORT

ANNUAL STATEMENT FROM THE CHAIR OF THE COMPENSATION COMMITTEE

Dear Shareholder,

As the Chair of the Compensation Committee (the “Committee”), I am pleased to present, on behalf of the board of directors (the “Board”) of Centessa Pharmaceuticals PLC (the “Company” or “Centessa”), the Directors’ Remuneration Report for the period ended 31 December 2022 (the “Remuneration Report”).

The Company’s Remuneration Report will be subject to an advisory vote at the forthcoming Annual General Meeting on 22 June 2023 (the “AGM”).

Introduction

In 2022, the Company made a number of impactful strategic decisions that resulted in a number of Company programs, including its leading Phase 3 program, lixivaptan for which the Company had been conducting a registration trail in Autosomal Dominant Polycystic Kidney Disease (ADPKD), and its Phase 1 program in Alpha-1 Antitrypsin Deficiency (AATD) with, ZF874, being terminated and others accelerated. This resulted in a number of employees being terminated or redeployed depending on transferability of skills and needs within other Company programs. At the same time, the Company continued to hire in strategic positions to fill identified skill gaps including the Company’s Chief People Officer and a number of senior employees at the SVP level. During this period, besides attracting key talent, it was critical for the Company to be able to retain, appropriately incentivize and develop high caliber talent. In order to enable the Company to achieve this, we continued to evaluate and established a broad range of remuneration programs and policies designed to attract, incentivize and retain a high calibre team to enable the Company to deliver on the Company’s core objectives and deliver value to shareholders.

As we move into 2023 and beyond, the Committee’s role will continue to be to ensure that directors and senior executives are appropriately compensated and incentivised to deliver value in a long-term and sustainable manner to shareholders. The Committee will seek to accomplish this by ensuring remuneration programs are grounded in market practice, appropriately balance fixed and variable components of remuneration, are effective at driving proper executive behaviours, and clearly link pay and performance. Key considerations guiding our Remuneration Policy are discussed further on within the Directors’ Remuneration Report.

Pay for Performance

We continue to believe that a significant portion of remuneration of our Executive Directors should be based on achieving objectives designed to create inherent value in the Company, and ultimately on achieving value creation for our shareholders. In line with this belief, the compensation of our Executive Director includes both short and long-term incentives based on strategic goals. On the same basis, our Non-Executive Directors receive equity incentives designed to reward long-term value creation for our shareholders.

The Global Marketplace for Talent

Centessa is a global clinical-stage pharmaceutical company with operations in the United States (“US”) and Europe. Given that our Chief Executive Officer (“CEO”) (currently our sole Executive Director) and most Non-Executive Directors continue to be US-based and that the market for experienced directors and pharmaceutical executive talent, particularly in the US, is very competitive, the Committee references the US market as the leading indicator for remuneration levels and practices. Doing so will help attract and retain directors and motivate the superior executive talent needed to successfully manage the Company’s complex global operations. Being consistent in this market view of the US as the primary benchmark for remuneration practices for our Executive and Non-Executive Directors is key for the Company as it builds its global operations in a manner designed to deliver sustainable long-term shareholder value.

It can be difficult for Centessa, as a global company with operations in various global regions, to have remuneration arrangements that satisfy all local requirements and market demands. As the Company is a UK public limited company, in taking any actions, the Committee is mindful of the general UK compensation framework, including investor bodies’ guidance, and the UK Corporate Governance Code, and has considered these when determining the remuneration programs and policies where it believes they best serve the long-term interests of shareholders.

Remuneration Program Highlights

During the period, we undertook a number of activities to establish a broad range of remuneration programs and policies to appropriately position the Company as a global pharmaceutical company, including:

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2022 Bonus Outcome

The CEO was eligible to receive a target bonus of 55% of his salary for 2022. In 2022, the goals for the CEO’s annual bonus included: advancement of individual clinical program development goals, advancement of preclinical programs, people and culture goals and certain finance goals. The Committee, at its discretion, awarded a bonus payout at 95% of target based on performance and achievement of objectives. The Committee is satisfied that the overall bonus outcome is appropriate.

Conclusion

The Committee believes the proposals put forth in this report will properly motivate our directors to deliver sustainable shareholder value over the long-term and do so in a responsible manner.

I hope that you find the information in this report helpful and I look forward to your support at the Company’s AGM.

Yours sincerely,

Brett Zbar

Chair of the Compensation Committee

14 May 2023

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DIRECTORS’ REMUNERATION POLICY

This part of the Directors’ Remuneration Report sets out the Company’s Directors’ Remuneration Policy (the “Policy”) and has been prepared in accordance with the Large and Medium-sized Companies and Groups (Accounts and Reports) (Amendment) Regulations 2013, the Companies (Miscellaneous Reporting) Regulations 2018, and the Companies Directors’ Remuneration Policy and Directors’ Remuneration Report) Regulations 2019. The Policy was approved by shareholders in a binding vote at the Company’s annual general meeting on 30 June 2022. The Policy applies for a maximum period of three years (or until a revised policy is approved by shareholders).

Key considerations when determining the Policy

The Committee designed the Policy with a number of specific objectives in mind. The Policy should serve to:

In determining compensation policies and practices, the Committee follows a robust process taking into account the views of relevant stakeholders, whilst ensuring that any conflicts of interest are suitably managed. This was the first Policy to be subject to a vote by the Company’s shareholders following the Company’s initial public offering of ADSs on the NASDAQ Global Select Market in May 2021.

Remuneration Policy Table

The table in the following pages sets out, for each element of pay, a summary of how remuneration is structured and how it serves the Company’s strategy.

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Policy for Executive Directors

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Policy for Chair and Non-Executive Directors

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Notes to the Policy Table

Legacy arrangements

For the duration of the Policy, the Company will honour any commitments made in respect of current or former directors before the date on which either: (a) the Policy becomes effective; or (b) an individual becomes a director, even when not consistent with the Policy set out in this report or prevailing at the time such commitment is fulfilled. For the avoidance of doubt, all outstanding historic equity awards that were granted in connection with, or prior to, listing on NASDAQ and/or under the Plans remain eligible to vest based on their original or modified terms.

Payments may be made in respect of existing awards under the Plans and the Committee may exercise any discretions available to it in connection with such awards in accordance with the rules of the Plans and relevant award documentation. Certain options granted under the Plans vest in full on a change of control in accordance with the terms of the grant agreements.

Explanation of performance measures

The Committee determines performance measures that are appropriately challenging and linked to the delivery of the Company’s core strategic objectives. For the annual performance bonus, the Committee reviews and sets performance measures and targets at the start of each year based on the key strategic priorities and objectives of the business at that time.

Measures may be based on a range of operational, financial and qualitative performance objectives for the particular financial year.

The targets for the bonus scheme for the forthcoming year will be set out in general terms, subject to limitations with regards to commercial sensitivity. The full details of the targets will be disclosed when they are in the public domain and are no longer considered commercially sensitive.

Stock option awards made to Directors do not currently carry performance conditions. It is considered that the exercise price of options (which is set at the fair market value on issuance), vesting and, where relevant, exercise period provides alignment to the long-term success of the business. The Committee may determine that performance conditions apply to future awards. If this were to be the case, performance conditions would be determined by the Committee to support the Company’s long-term strategy and sustainable value creation.

The Committee may vary or substitute any performance measure if an event occurs which causes it to determine that it would be appropriate to do so (including to take account of acquisitions or divestments, a change in strategy or a change in prevailing market conditions), provided that any such variation or substitution is fair and reasonable and, in the opinion of the Committee, the change would not make the measure less demanding than the original measure would have been but for the event in question. If the Committee were to make such a variation, an explanation would be given in the next Directors’ Remuneration Report.

Malus and Clawback

Awards under the annual bonus and the Amended and Restated 2021 Stock Option and Incentive Plan made after the 2022 AGM are subject to malus and clawback provisions which permit the Committee, in its discretion, to reduce the size (including to zero) of any future bonus or share award granted to an Executive Director, to reduce the size (including to zero) of any granted but unvested share award. The circumstances in which the Company may apply the malus and clawback provisions are the discovery of a material misstatement of financial results, a miscalculation or error in assessing the performance condition applying to the award, or in the event of serious misconduct committed by the Executive Director.

In respect of cash bonus payments, the malus and clawback provisions apply for one year from the date of payment of the bonus (or, if later, the date of publication of the Company’s financial results for the year following the relevant year over which the bonus was earned).

In respect of share awards under the Amended and Restated 2021 Stock Option and Incentive Plan, malus and clawback provisions apply up until the first anniversary of the date on which the relevant award vests, although the Committee may extend this period for a further two years if there is an ongoing investigation into the circumstances of any event that, if determined to have occurred, would permit the Committee to operate the malus and clawback provisions.

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Committee Discretion

The Committee has discretion in several areas of the Policy to ensure the efficient administration of the policy. This includes with regards to the operation and administration of the incentive arrangements in which directors participate, including the award and payment of any annual performance bonus and the grant and associated terms and conditions of any equity awards. Use of any discretion in relation to equity awards will be in accordance with the terms of the relevant plan and subject to any relevant legislation.

The Committee’s discretion applies to the following (amongst other matters):

If an event occurs which results in the annual performance plan or the Plans (where performance conditions apply) performance conditions and/or targets being deemed unfair or impractical (e.g. material acquisition or divestment), the Committee will have the ability to amend, relax or waive (and/or recommend such alterations to the Board for approval) measures and/or targets and alter weightings.

The Committee reserves the right to make any compensation payments and/or payments for loss of office (including exercising any discretions available to it in connection with such payments) notwithstanding that they are not in line with the Policy where the terms of the payment were agreed (i) before the Company’s first shareholder-approved Policy came into effect; or (ii) at a time when the relevant individual was not a Director of the Company and, in the opinion of the Committee, the payment was not in consideration for the individual becoming a Director of the Company. For these purposes “payments” includes the Committee satisfying awards of variable compensation and, in relation to an equity award, the terms of the payment are “agreed” at the time the award is granted.

The Committee may make minor amendments to the Policy (for regulatory, exchange control, tax or administrative purposes or to take account of a change in legislation) without obtaining shareholder approval.

Employment conditions

The Committee is regularly updated throughout the year on pay and conditions applying to Company employees. Where significant changes are proposed to employment conditions, these are highlighted for the attention of the Committee at an early stage.

Whilst the Committee does not currently consult directly with employees regarding its policy for directors, the Committee is considering the best method of bringing the employee voice to the boardroom.

Policy for the remuneration of employees and consideration of employment conditions elsewhere in the Company

The Company aims to provide all employees with a remuneration package that is competitive and which is appropriate to promote the long-term success of the Company, while not paying more than is necessary. Generally, all employees will receive a base salary, benefits, a discretionary bonus subject to performance and equity awards. In respect of the Executive Director and other members of the senior management team, the compensation package is more heavily weighted towards variable pay and a greater proportion is delivered in equity. The Plans, in which all of the Company’s employees can participate, were introduced to align employee and shareholder interests.

The Committee does not formally consult with employees when determining Executive Director compensation.

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Consideration of shareholder views

This is the first Policy to be subject to a vote of the Company’s shareholders. The views of the Company’s shareholders are important, and the Committee welcomes any feedback from shareholders or their advisors on the Company’s remuneration arrangements. Any feedback received will be considered by the Committee as it develops the Company’s remuneration framework and practices going forward.

Illustration of application of the Policy

The following chart provides an illustration, for the Chief Executive Officer, of the application of the Policy for the year ending 31 December 2022. The chart shows the split of remuneration between fixed pay, the annual performance bonus and equity awards on the basis of minimum remuneration, remuneration receivable for performance in line with Company expectations and maximum remuneration. The CEO’s target bonus for 2022 is 55% of base salary, which is less than that shown in the illustration of the policy below.

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Illustration of remuneration policy application

The Company only has one Executive Director, Dr. Saurabh Saha, and below provides his base case, expected, and maximum remuneration with respect to the period ending 31 December 2023. Dr. Saha will only receive market value options in 2023 as is assumed in this illustration which have an intrinsic value of $0 and are therefore not included in the chart and there is no illustration of share price appreciate on equity award value. The assumptions used in the calculations are set out below:

Amounts in USD

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Approach to compensation on recruitment

When hiring a new Executive Director, the Committee will typically align the compensation package with the Policy taking into account the skills, experience and country of residence of the relevant individual as well as broader considerations such as market competitiveness. The Committee may however include other elements of compensation, as described below, which it considers appropriate.

Base salary will be set at a level appropriate to the role and the experience of the Executive Director being appointed. This may include agreement on future increases, in line with increased experience and/or responsibilities, subject to satisfactory performance, where it is considered appropriate. Benefits, including retirement benefits, will be provided in line with the Policy and to reflect the local market. Where an Executive Director is required to relocate in order to take up the position, relocation benefits may be provided.

The maximum annual performance bonus will be in line with the approach outlined in the Policy. Any equity award will be granted at the discretion of the Committee and in line with the Policy.

The maximum level of variable compensation that may be awarded on an ongoing basis to a new Executive Director (including the annual performance bonus and any equity awards) would be determined by the Committee on appointment. This would not include any amounts paid in relation to replacement awards or recruitment awards, which would be determined at the discretion of the Committee.

Where a position is filled internally, any ongoing compensation obligations or outstanding variable compensation will continue to be honoured in accordance with their terms.

Compensation for a newly appointed Non-Executive Director will be in line with the Policy. In terms of equity awards, the Initial Grant will be made upon their election to the Board.

Service contracts and policy on payments for loss of office

Service contracts and letters of appointment, as applicable, are available for inspection at the Company’s registered office.

Executive Directors

Executive Directors typically have employment agreements under which, other than by termination in accordance with the terms of the agreements, employment continues indefinitely. Dr. Saurabh Saha is the only Executive Director, and details of his employment agreement are set out in the table below. Dr. Saha is located in the US and in line with market practice has entered into an at-will employment agreement that does not have a notice period.

The Company is unequivocally against rewards for failure; the circumstances of any departure, including the individual’s performance, would be taken into account in every case. At-will employment agreements may be terminated summarily without notice. Where applicable, statutory redundancy payments may be made.

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Treatment of compensation, including variable compensation and equity awards, on termination of employment, without cause, would be as set out below.

Non-Executive Directors

Under our articles of association, our Board is divided into three classes (Class I, Class II and Class III), with members of each class serving staggered three-year terms (the “Initial Period”). In the event of termination, the Chair and Non-Executive Directors are only entitled to fees accrued to the date of termination together with reimbursement of expenses properly incurred before that date.

* Engaged under a Non-Executive Director appointment letter.

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On termination of appointment, a Non-Executive Director will not be entitled to any compensation for loss of office.

Equity awards to Non-Executive Directors vest subject to continued service as a director. Therefore, on termination of appointment, any unvested equity awards granted to a Non-Executive Director would lapse. The exercise period for any vested but unexercised options would be reduced, unless otherwise determined, to twelve months from the date of cessation of office.

Non-Executive Directors’ letters of appointment, as applicable, are available for inspection at the Company’s registered office during normal business hours and will be available for inspection at the AGM.

Change of control

In the event of a change of control all outstanding equity awards may vest on an accelerated basis. Alternatively, awards may be exchanged for equivalent awards over shares in another company.

Annual Report on Remuneration

This part of the report has been prepared in accordance with Part 3 of The Large and Medium-sized Companies and Groups (Accounts and Reports) (Amendment) Regulations 2013 and section 420 of the Companies Act 2006. The Annual Report on Remuneration and the Annual Statement by the Chair of the Compensation Committee will be put to a single advisory shareholder vote at the AGM to be held on 22 June 2023.

Remuneration Committee

The remuneration of the Executive Directors and the Chair is determined by the Committee.

The members of the Committee during 2022 were all Non-Executive Directors. Brett Zbar chaired the Committee, Sam Kulkarni and Arjun Goyal were members of the Committee throughout 2022. Aaron Kantoff was a member of the Committee until his resignation from the Board on 1 July 2022.

No conflicts of interest have arisen during the period and none of the members of the Committee has any personal financial interest in the matters discussed, other than as shareholders. Brett Zbar is the Managing Director and Global Head of Life Sciences for General Atlantic and acts as its representative on the Board of Centessa and Arjun Goyal is Co-Founder and Managing Director of Vida Ventures and acts as its representative on the Board of Centessa. The fees of the Non-Executive Directors are approved by the Board on the recommendation of the Committee.

During the period, the Committee met four times formally. Details of attendees are as below.

Meetings Attendance

The CEO, General Counsel, CFO and Chief People Officer are invited to attend meetings where appropriate. No individual is present when matters relating to their own remuneration are discussed.

Advisors to the Remuneration Committee

During the period, the Remuneration Committee received advice from the executive compensation practice of Aon. Aon advises the Committee on all aspects of director and senior executive remuneration. Since the IPO, Aon has assisted with the drafting of the Remuneration Policy and has updated the Committee on US and UK remuneration reporting and corporate governance best practice. In relation to work carried out in 2022, fees charged by Aon for advice provided to the Committee amounted to approximately $130,000 (2021: $135,000). The Committee evaluates the support provided by AON annually and is content that it does not have any connections with the Group that may impair its independence.

Activities of the Remuneration Committee

The Committee’s principal function is to develop and implement compensation policies and plans that ensure the attraction and retention of key management personnel, the motivation of management to achieve the Company’s corporate goals and strategies, and the alignment of the interests of management with the long-term interests of the Parent Company’s shareholders. In overseeing the Company’s overall compensation structure and the remuneration policy, and in constructing the remuneration arrangements for Executive Directors and senior employees, the Board, advised by the Committee, aims to provide remuneration packages that are competitive and designed to attract, retain and motivate Executive Directors and senior employees of the highest caliber.

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The Committee is responsible for and considered, where applicable, during the period:

The Committee is formally constituted and operates pursuant to a written charter, which is available on Centessa’s website, https://investors.centessa.com.

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The information provided in this part of the Directors’ Remuneration Report is subject to audit:

Single total figure of remuneration of each Director (Audited)

The Company was incorporated in October 2020 but did not have any employees or make any payments to directors until 2021. Dr. Saha, Executive Director and Chief Executive Officer, did not receive any compensation for his service as a director. The total remuneration of the individual Directors who served during the 12-month period ending 31 December 2022 is shown below, along with the comparative 12 months ended 31 December 2021.

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Long-term incentive awards (Audited)

During 2022, the Executive Director and Non-Executive Directors were awarded options to subscribe for the ordinary shares under the Company’s 2021 Plan (“Options”). Options granted to the Executive Director and Non-Executive Directors have an exercise price equal to the market price on the date of grant and are subject to service conditions. There are no performance conditions associated with regards to the Options. In addition, during 2022, the Executive Director was awarded Restricted Stock Units (“RSUs”) as part of a one-off retention grant. Details of the Options and RSUs are noted in the table below:

The Options vest as follows:

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Directors’ Shareholding and Share Interests (Audited)

The share interests of each Director at 31 December 2022 (together with interests held by his or her connected persons) are set out in the table below. There is no requirement for any director to hold shares.

As a direct link between executive remuneration and the interests of shareholders, the Committee has implemented shareholding guidelines for Executive Directors in 2022. The guidelines require that Executive Directors build up and maintain an interest in the ordinary shares of the Company that is 200% of their salary within five years from the later of the introduction of the guidelines or appointment.

External Directorships

The Board believes that it may be beneficial to the Company for Executive Directors to hold certain roles outside the Company, provided that the Company’s business takes priority. Any such appointments are subject to the prior written consent of the Board and the director may retain any fees received. In April 2022, Dr. Saha was appointed a director of Scorpion Therapeutics, Inc.

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Payments to past directors (Audited)

There were no payments made to past Directors during the period ending 31 December 2022. However, Aaron Kantoff was retained as an advisor by the Company following his resignation on 1 July, 2022. No cash compensation is paid to Mr. Kantoff in respect of his services as an advisor but Mr. Kantoff is entitled to have options granted to him in his capacity as a Director in 2021 continue to vest during the service period. In the event Mr. Kantoff ceases to be an advisor to the Company or his service agreement is terminated by the Company, vesting will cease and on such date, unvested options shall lapse.

Payments for loss of office (Audited)

There were no payments made to Directors for Loss of Office during the period ended 31 December 2022.

Total Shareholder Return

The graph below shows the Company’s performance, measured by total shareholder return, for the Company’s American Depositary Shares (“ADSs”), which are listed on Nasdaq and each representing one of the Company’s ordinary shares against the Nasdaq Composite Index (Nasdaq: CMPS vs NBI). The Nasdaq Biotech Index has been selected for this comparison because the Company has been admitted to trading on the Nasdaq exchange and it is considered to be the most suitable comparator index. The total cumulative stockholder return on the ADSs below includes data from 1 January 2022, through 31 December 2022, assuming an initial investment of $100 on 31 December 2021.

Chief Executive Officer (‘CEO’) remuneration

The CEO’s total cash compensation for the period ended 31 December 2022 was $957,672. The CEO’s total non-cash compensation was $8,654,558 comprising grant of $4,777,058 options and $3,877,500 of restricted stock units. The CEO’s total combined cash and non-cash compensation was $9,612,230.

Annual percentage change in remuneration of directors and employees

The Committee and the Board considered the average increases being awarded to employees below the level of Executive Management in the UK and US. After due consideration of performance, it was agreed that it was appropriate to award increases in line with the wider workforce to the CEO (Executive Director) to ensure the competitiveness of his remuneration could be maintained. There was no change to the remuneration of the Non-Executive Directors.

(i) Based on the average increase budget for employees below the level of Executive Management in the UK and the US.

Annual Bonus

No changes were made to the annual bonus target percentage. An award of 95% of the target was granted to the CEO and the wider workforce(i).

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(i) Based on the average award across wider workforce.

Benefits

No changes.

Relative Importance of Spend on Pay

The Committee considers the Company’s research and development expenditure relative to salary expenditure for all employees to be the most appropriate metric for assessing overall spend on pay due to the nature and stage of the Company’s business. The Company does not have a history of making any dividend distributions and does not intend to make any distributions in the near future. The graph below illustrates the total salary payable to all employees in comparison to research and development expenditures (excluding the IPR&D charge related to the acquisition) for the period 1 January 2022 through 31 December 2022 compared to the prior year.

Amounts in USD 

Statement of shareholder votes on remuneration matters: 2022 AGM

Statement of implementation of remuneration policy in 2023

There have been no significant changes in the way that the remuneration policy will be implemented in the 2023 financial year compared to how it was implemented in the 2022 financial year. There have been no deviations from the procedure for the implementation of the remuneration policy set out in that policy.

Executive Director Remuneration Annual base salary and benefits

The percentage salary increase for the CEO effective as of 1 January 2023 was within the range of salary increase provided to Company employees on the whole for 2023 of 5%. Dr. Saha’s base salary for 2023 is $652,050. Dr. Saha is eligible for the same benefits (such as private health insurance and retirement plan contribution) as provided to all employees in the jurisdiction in which he resides. Matching pension contributions for 2022 are up to 4% of compensation, subject to tax limitations.

Bonus

Dr. Saha will be entitled to a target bonus of 55% of base salary in 2023. The bonus will be paid in cash and is subject to the achievement of a number of operational and strategic objectives determined by the Committee and recommended to the Board. Company specific targets are commercially sensitive and therefore are not disclosed in advance. However, full details of the targets and performance against them will be disclosed when they are no longer considered commercially sensitive.

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Long-term Incentive Plan

In February 2023, the CEO was granted 315,000 share options in the Company at a strike price of $3.85 per share, based on the NASDAQ closing price on the grant date and 211,400 restricted stock units (“2023 RSU Grant”). The share options will expire 10 years from the date of grant. The share options vest monthly over a 4-year period beginning 1 March 2023 and contain no performance conditions. The 2023 RSU Grant vest in four equal annual installments beginning 1 February 2024 and contain no performance conditions.

Non-Executive Director Remuneration

Fees

Each director who is not an employee will be paid cash compensation, as set forth below:

Long-term Incentive

The Committee will review and make recommendations to the Board as to the actual equity grant award levels for non-executive Directors each year taking into account any factors it deems relevant including, but not limited to, the responsibilities of the role and expected time commitment as well as appropriate market data and peer group comparisons.

For 2023, the Committee recommended to the Board, and the Board has established that upon initial election to our Board, each non-employee director will be granted an option to purchase up to 96,000 ordinary shares, or the Initial Grant. The Initial Grant will vest in 36 equal monthly installments over three years from the grant date, subject to continued service as a director through the applicable vesting date.

Furthermore, at the upcoming annual meeting of shareholders on 22 June 2023, each non-employee director who continues as a non-employee director following such meeting will be granted an option to purchase up to 48,000 ordinary shares, or the Annual Grant. The Annual Grant will vest in full on the earlier of (i) the first anniversary of the grant date or (ii) our next annual meeting of shareholders, subject to continued service as a director through the applicable vesting date.

The grant date fair value of all equity awards and all other cash compensation paid by the Company to any non-employee director in any calendar year for services as a non-employee director shall not exceed $1,000,000.

We will reimburse all reasonable out-of-pocket expenses incurred by non-employee directors in attending meetings of the board of directors and committees thereof.

35 

STATEMENT OF DIRECTORS’ RESPONSIBILITIES IN RESPECT OF THE ANNUAL REPORT AND THE FINANCIAL STATEMENTS

The directors are responsible for preparing the Annual Report and the financial statements of the Group and Parent Company in accordance with applicable law and regulations.

Company law requires the directors to prepare Group and Parent Company financial statements for each financial year. Under that law they have elected to prepare the Group financial statements in accordance with US GAAP and applicable law and the Parent Company financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards, comprising FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland”, and applicable law).

Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and Parent Company and of the Group’s profit or loss for that period. In preparing each of the Group and Parent Company financial statements, the directors are required to:

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Parent Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Parent Company and enable them to ensure that its financial statements comply with the Companies Act 2006. They are responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error, and have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities.

Under applicable law and regulations, the directors are also responsible for preparing a Strategic Report, a Directors’ Report and a Directors’ Remuneration Report that complies with that law and those regulations.

The directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company’s website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

36 

INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF CENTESSA PHARMACEUTICALS PLC

1 Our opinion is unmodified

We have audited the financial statements of Centessa Pharmaceuticals Plc (‘the Company’ or ‘the Parent Company’) for the year ended 31 December 2022 which comprise the Consolidated Balance Sheets, Consolidated and Combined Statement of Operations and Comprehensive Loss, Consolidated Statement of Shareholders’ Equity, Combined Statements of Convertible Preferred Shares and Combined Deficit, Consolidated and Combined Statements of Cash Flows, and the related notes included on Form 10-K including the accounting policies in note 2. In addition, the financial statements include the Parent Company Balance Sheet, and Statement of Changes in Equity and the related notes, including the accounting policies in note 2 and the notes on pages 45 to 54.

In our opinion:

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our responsibilities are described below. We have fulfilled our ethical responsibilities under, and are independent of the Group in accordance with, UK ethical requirements including the FRC Ethical Standard as applied to listed entities. We believe that the audit evidence we have obtained is a sufficient and appropriate basis for our opinion.

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2 Key audit matters: our assessment of risks of material misstatement

Key audit matters are those matters that, in our professional judgement, were of most significance in the audit of the financial statements and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by us, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. In arriving at our audit opinion above, the key audit matters, in decreasing order of audit significance, were as follows:

In our audit report last year we included the Acquisition of Centessa subsidiaries – fair value of Centessa ordinary shares issued as a key audit matter. This was a specific risk that related solely to that financial year. Hence, this has not been identified as a key audit matter in the current year

38 

Materiality for the Group financial statements as a whole was set at $2,400k (2021: $3,810k, determined with reference to a benchmark of total expenses of $215 million (2021: $381 million) of which it represents 1.12% (2021: 1%). The benchmark used is consistent with that used in the prior year.

Materiality for the Parent Company financial statements as a whole was set at $1,900k, determined with reference to a benchmark of total assets of $382 million, limited to be less than materiality for Group materiality as a whole. It represents 0.50% of the stated benchmark. In the prior year materiality for the Parent Company financial statements as a whole was set at $757k using a benchmark of total expenses of $28m of which it represented 2.7%. We selected total assets as the benchmark in the current year because of the significant decrease in expenses resulting from less research and development activity and the principal activity of the business now just being a Parent Company.

In line with our audit methodology, our procedures on individual account balances and disclosures were performed to a lower threshold, performance materiality, so as to reduce to an acceptable level the risk that individually immaterial misstatements in individual account balances add up to a material amount across the financial statements as a whole.

Performance materiality was set at 75% (2021: 75%) of materiality for the financial statements as a whole, which equates to $1,800k (2021: $2,858k) for the Group and $1,425k (2021: $567k) for the Parent Company. We applied this percentage in our determination of performance materiality by considering a number of factors and concluded the aggregation risk was low and therefore a higher percentage was more appropriate.

We agreed to report to the Audit Committee any corrected or uncorrected identified misstatements exceeding $120k (2021: $190k) for the Group and $95k (2021: $38k) for the Parent Company, in addition to other identified misstatements that warranted reporting on qualitative grounds.

Of the Group’s 11 reporting components, we subjected 4 (2021:4) to full scope audits for Group purposes and 2 (2021:6) to specified risk-focused audit procedures. The Group team instructed the component auditor as to the significant areas to be covered, including the relevant risks detailed above and the information to be reported back. The Group team approved the components’ materiality levels, which ranged from $1.1 million to $1.9 million (2021: $1.3 million to $3.2 million), having regard to the mix of size and risk profile of the Group across the components. The Group team held virtual meetings with the component auditor on multiple occasions. At these meetings, the findings reported to the Group team were discussed in more detail, and any further work required by the Group team was then performed by the component auditor. Our audit of the Parent Company was undertaken to the materiality level specified above and was performed by the Group audit team.

The scope of the audit was fully substantive as we did not rely upon the Group’s internal controls over financial reporting.

The directors have prepared the financial statements on the going concern basis as they do not intend to liquidate the Group or the Parent Company or to cease their operations, and as they have concluded that the Group’s and the Parent Company’s financial position means that this is realistic. They have also concluded that there are no material uncertainties that could have cast significant doubt over their ability to continue as a going concern for at least a year from the date of approval of the financial statements (“the going concern period”).

We used our knowledge of the Group and the Parent Company, its industry, and the general economic environment to identify the inherent risks to its business model and analysed how those risks might affect the Group’s and Parent Company’s financial resources or ability to continue operations over the going concern period. The risks that we considered most likely to adversely affect the Group’s available; financial resources over this period were:

We considered whether these risks could plausibly affect the liquidity in the going concern period by comparing severe but plausible downside scenarios that could arise from these risks individually and collectively against the level of available financial resources indicated by the Group’s financial forecasts.

We considered whether the going concern disclosure in note 2.3 to the financial statements gives a full and accurate description of the directors’ assessment of going concern, including the identified risk and related sensitivities.

Our conclusions based on this work:

39

However, as we cannot predict all future events or conditions and as subsequent events may result in outcomes that are inconsistent with judgements that were reasonable at the time they were made, the above conclusions are not a guarantee that the Group or the Parent Company will continue in operation.

Identifying and responding to risks of material misstatement due to fraud

To identify risks of material misstatement due to fraud (“fraud risks”) we assessed events or conditions that could indicate an incentive or pressure to commit fraud or provide an opportunity to commit fraud. Our risk assessment procedures included:

We communicated identified fraud risks throughout the audit team and remained alert to any indications of fraud throughout the audit.

As required by auditing standards and taking into account our overall knowledge of the control environment, we perform procedures to address the risk of management override of controls, in particular the risk that Group management may be in a position to make inappropriate accounting entries and the risk of bias in accounting estimates and judgements such as those used in determination of discount rate. On this audit we do not believe there is a fraud risk related to revenue recognition because the Group is in the pre-commercialisation stage and no revenues are earned from trading.

We did not identify any additional fraud risks.

In determining the audit procedures, we took into account the results of our evaluation and testing of the operating effectiveness of some of the Group-wide fraud risk management controls.

We also performed procedures including:

Identifying and responding to risks of material misstatement related to compliance with laws and regulations

We identified areas of laws and regulations that could reasonably be expected to have a material effect on the financial statements from our general commercial and sector experience, through discussion with the directors and other management (as required by auditing standards), and from inspection of the Group’s regulatory and legal correspondence and discussed with the policies and procedures regarding compliance with laws and regulations.

We communicated identified laws and regulations throughout our team and remained alert to any indications of non-compliance throughout the audit.

The potential effect of these laws and regulations on the financial statements varies considerably.

Firstly, the Group is subject to laws and regulations that directly affect the financial statements including financial reporting legislation (including related companies’ legislation), distributable profits legislation, and taxation legislation, and we assessed the extent of compliance with these laws and regulations as part of our procedures on the related financial statement items.

Secondly, the Group is subject to many other laws and regulations where the consequences of non-compliance could have a material effect on amounts or disclosures in the financial statements, for instance through the imposition of fines or litigation or the loss of the Group’s license to operate.

We identified the following areas as those most likely to have such an effect: health and safety, anti-bribery, employment law, human medicines regulations and clinical trial legislation recognising the financial and regulated nature of the Group’s activities and its legal form. Auditing standards limit the required audit procedures to identify non-compliance with these laws and regulations to enquiry of the directors and other management and inspection of regulatory and legal correspondence, if any. Therefore, if a breach of operational regulations is not disclosed to us or evident from relevant correspondence, an audit will not detect that breach.

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Context of the ability of the audit to detect fraud or breaches of law or regulation

Owing to the inherent limitations of an audit, there is an unavoidable risk that we may not have detected some material misstatements in the financial statements, even though we have properly planned and performed our audit in accordance with auditing standards. For example, the further removed non-compliance with laws and regulations is from the events and transactions reflected in the financial statements, the less likely the inherently limited procedures required by auditing standards would identify it.

In addition, as with any audit, there remained a higher risk of non-detection of fraud, as these may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal controls. Our audit procedures are designed to detect material misstatement. We are not responsible for preventing non-compliance or fraud and cannot be expected to detect non-compliance with all laws and regulations.

The directors are responsible for the other information presented in the Annual Report together with the financial statements. Our opinion on the financial statements does not cover the other information and, accordingly, we do not express an audit opinion or, except as explicitly stated below, any form of assurance conclusion thereon.

Our responsibility is to read the other information and, in doing so, consider whether, based on our financial statements audit work, the information therein is materially misstated or inconsistent with the financial statements or our audit knowledge. Based solely on that work we have not identified material misstatements in the other information.

Strategic report and directors’ report

Based solely on our work on the other information:

Directors’ remuneration report

In our opinion the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the Companies Act 2006.

Under the Companies Act 2006, we are required to report to you if, in our opinion:

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8  Respective responsibilities

Directors’ responsibilities

As explained more fully in their statement set out on page 36, the directors are responsible for: the preparation of the financial statements including being satisfied that they give a true and fair view; such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error; assessing the Group and Parent Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and using the going concern basis of accounting unless they either intend to liquidate the Group or the Parent Company or to cease operations, or have no realistic alternative but to do so.

Auditor’s responsibilities

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue our opinion in an auditor’s report. Reasonable assurance is a high level of assurance, but does not guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements.

A fuller description of our responsibilities is provided on the FRC’s website at www.frc.org.uk/auditorsresponsibilities.

This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members, as a body, for our audit work, for this report, or for the opinions we have formed.

Shirley Rogan (Senior Statutory Auditor) 

for and on behalf of KPMG LLP, Statutory Auditor 

Chartered Accountants 

2 Forbury Place, 

33 Forbury Road
Reading 

United Kingdom 

RG1 3AD 

Date : 22 May 2023

42

CENTESSA PHARMACEUTICALS

PLC REGISTERED NUMBER:

12973576

PARENT COMPANY BALANCE

SHEET AS AT 31 DECEMBER 2022

The above parent company balance sheet should be read in conjunction with the accompanying notes.

The Company has elected to take the exemption under section 408 of the Companies Act of 2006 from presenting the company statement of comprehensive income. The Company loss for the year ended 31 December 2022 was $616,106,000 (2021: loss of $37,109,000).

The parent company financial statements were approved and authorised for issue by the board and were signed on its behalf on 22 May 2023.

Saurabh Saha, M.D., Ph.D. 

Board Member and Chief Executive Officer

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CENTESSA PHARMACEUTICALS PLC

REGISTERED NUMBER: 12973576

STATEMENT OF CHANGES IN EQUITY  

FOR THE YEAR ENDED 31 DECEMBER 2022

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CENTESSA PHARMACEUTICALS PLC

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2022

Centessa Pharmaceuticals PLC (the “Company”) and its subsidiaries (the “Group” or “Centessa”) was formed in October 2020 with the purpose of bringing impactful new medicines to patients by combining the primary strengths of the asset-centric venture capital model with the benefits of diversification and scale typically attributed to traditional large R&D organizations. Medicxi formed Centessa with a view to ultimately acquiring several pre-revenue, development stage biotech companies, each of which was either controlled by and/or invested in by a fund affiliated with Medicxi or Index Ventures.

Centessa operates as a clinical-stage pharmaceutical company with a Research & Development (“R&D”) innovation engine that aims to discover, develop and ultimately deliver impactful medicines to patients. Centessa’s model seeks to minimize infrastructure investment and fixed costs by incorporating extensive outsourced resources into its research and development model to optimize deployment of funds for discovery and development. Centessa is led by a management team with extensive R&D experience from leading biotech and pharmaceutical companies. Centessa’s management team provides direct guidance to rapidly advance its programs from research through all stages of development through the integrated one-team structure of its operating model. The management team is also responsible for judicious capital and resource allocation decisions for discovery and development efforts across the portfolio and aims to expeditiously evaluate and potentially terminate programs when the data do not support advancing a program.

The Company is a public limited company limited by shares, incorporated pursuant to the laws of England and Wales. The registered office is 3rd Floor, 1 Ashley Road, Altrincham, Cheshire, WA14 2DT. These financial statements cover the 52 weeks ended 31 December 2022. The comparative period covers the period from incorporation, 26 October 2020, to 31 December 2021.

The financial statements have been prepared under the historical cost convention unless otherwise specified within these accounting policies and in accordance with Financial Reporting Standard 102, the Financial Reporting Standard applicable in the UK and the Republic of Ireland and the Companies Act 2006.

The preparation of financial statements in compliance with FRS 102 requires the use of certain critical accounting estimates. It also requires management to exercise judgement in applying the Company’s accounting policies (see note 3).

The following principal accounting policies have been applied:

The Company has taken advantage of the following disclosure exemptions in preparing these financial statements, as permitted by the FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland”:

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CENTESSA PHARMACEUTICALS PLC

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2022

Notwithstanding a loss for the period ended 31 December 2022 of $616.1M (2021: loss of $37.3M) and $216.2 (2021: Loss of $381.1m) of the Company and the Group respectively and negative cash outflows from operating activities of $200.5M (2021: $135.1M) of the Group, the financial statements have been prepared on a going concern basis which the directors consider to be appropriate for the following reasons.

The Company reported Cash and cash equivalents of $272.3M (2021: $539.9M) and net current assets of $289.2M ($557.1M) as at 31 December 2022. The Group reported Cash and cash equivalents of $393.6m (2021: $595.1M) and net current assets of $406.0M as at 31 December 2022(2021: $604.1M).

Since inception, the Group has devoted substantially all of its resources to acquiring and developing product and technology rights, conducting research and development in its discovery and enabling stages, in its clinical and preclinical trials and raising capital. The Group and the Company have incurred recurring losses and negative cash flows from operations since inception and has funded operations primarily through the sale and issuance of its common stock and convertible preferred stock. The Group and the Company expect to continue to incur significant expenses, increasing operating losses and negative cash outflows for the foreseeable future in connection with ongoing development activities related to its portfolio of programs

The Directors have reviewed the cash flow forecasts of the Group for the twelve months subsequent to the date of approval of these financial statements (going concern assessment period), taking account of severe but reasonably possible downsides relating to various clinical trial scenarios and variability in spending and development costs that may affect the Group in that period. These show that the Group will be able to pay (or otherwise discharge) its debts as they fall due during the going concern assessment period.

Accordingly, the financial statements have been prepared on a basis that assumes the Group and the Company will continue as a going concern and which contemplates the realisation of assets and settlement of liabilities and commitments as they fall due in the ordinary course of business for at least 12 months from the date of approval of the financial statements.

Functional and presentation currency

The Company’s functional and presentational currency is USD.

Transactions and balances

Foreign currency transactions are translated into the functional currency using the spot exchange rates at the dates of the transactions.

At each period end foreign currency monetary items are translated using the closing rate. Nonmonetary items measured at historical cost are translated using the exchange rate at the date of the transaction and non-monetary items measured at fair value are measured using the exchange rate when fair value was determined.