developing science,
delivering therapies
4D pharma plc
Annual Report and Accounts 2016
4D pharma plc Annual Report and Accounts 2016 We are pioneers in 
harnessing bacteria as 
a novel and revolutionary 
class of medicines: 
Live Biotherapeutics.
We understand that bacteria in the human intestine – known as the 
gut microbiome – have an important function in health and disease. 
More than just aiding in the digestion of food, production of vitamins 
and maintenance of gut health; they play an important role in the 
regulation of our immune system.
We are also beginning to understand their role in the maintenance 
of our central nervous system.
These pivotal interactions mean that Live Biotherapeutics are not 
just limited to the treatment of gastrointestinal conditions such 
as IBS and Crohn’s Disease. We have also found bacteria that are 
potentially game-changing treatments for cancer, asthma, autism 
and autoimmune conditions such as Rheumatoid Arthritis and 
Multiple Sclerosis.
4D and the Live Biotherapeutics we develop have the potential to 
transform the way in which many challenging diseases are treated.
Find the most up-to-date information on our website: 
www.4dpharmaplc.com STRATEGIC REPORT
01 4D pharma plc Annual Report and Accounts 2016
www.4dpharmaplc.com
Highlights
Operational highlights
• Successful phase 1 clinical trial in respect of Blautix, 4D’s 
proprietary programme for the treatment of Irritable Bowel 
Syndrome, achieving the primary objective of establishing 
safety and tolerability
• Analysis of patient data from phase 1 clinical trial showing 
a positive improvement in patient symptoms over placebo
• Analysis of IBS patient microbiome showing Blautix both 
stabilises and increases diversity of the microbiome
• Commencement of the phase 1 clinical trial in respect 
of Thetanix, 4D’s proprietary programme for the treatment 
of Paediatric Crohn’s Disease
• Acquisition of 4D Pharma Cork Limited (formerly Tucana 
Health Limited), a start-up company from University College 
Cork founded to investigate the use of microbiome 
signatures to aid the diagnosis and treatment of diseases; 
the year has also seen the successful development of its 
proprietary diagnostic platform, MicroDx
• Acquisition of the production assets of Instituto Biomar, 
S.A. via a newly incorporated Spanish subsidiary, 4D 
Pharma León, S.L.U., establishing 4D’s own development 
and manufacturing facility in León, Spain
Strategic report
Highlights 01
4D pharma at a Glance 02
Chairman’s Statement 04
Our Business Model and Strategy 05
Our Key Performance Indicators (“KPIs”) 06
Risk and Risk Management 07
Chief Executive Officer’s Report 10
Corporate governance
Board of Directors 14
Corporate Governance Statement 15
Report of the Audit and Risk Committee 18
Report of the Remuneration Committee 20
Directors’ Report 22
Statement of Directors’ Responsibilities 24
Financial statements
Independent Auditor’s Report 25
Group Statement of T otal Comprehensive Income 26
Group Statement of Financial Position 27
Company Statement of Financial Position 28
Group Statement of Changes in Equity 29
Company Statement of Changes in Equity  30
Group Cash Flow Statement 31
Company Cash Flow Statement 32
Notes to the Financial Statements 33
Total comprehensive 
loss after tax (£m) 
£10.3m
Financial highlights
Expenditure on 
research and 
development (£m)
£10.2m
Total equity (£m) 
 
£86.5m
Cash and cash 
equivalents
1
 (£m) 
£68.8m
Loss per share
2
 
(pence) 
15.21p
10.3
7.7
2.3
14 15 16
10.2
8.4
1.8
14 15 16
86.5
92.7
37.0
14 15 16
68.8
85.4
31.8
1 includes cash on deposit.
14 15 16 14 15 16
15.21
12.62
4.81
2 basic and diluted. 4D pharma plc Annual Report and Accounts 2016 02
STRATEGIC REPORT
What are Live 
Biotherapeutics?
Live Biotherapeutics are a regulated, emerging 
and disruptive new class of medicines, which 
have the potential to transform the way in 
which many important diseases are treated.
Our products are strains of gut commensal 
bacteria which have been originally isolated 
from a healthy human. These are encapsulated, 
administered orally and delivered selectively 
to the gut where they interact with the 
patient and exert their therapeutic effects.
A disruptive new class
Live Biotherapeutics provide an opportunity 
to offer patients safer and more effective 
treatment options. They also provide an 
opportunity to treat diseases that existing 
therapies are unable to address.
Live Biotherapeutics exert their therapeutic 
effects in a variety of ways. Some act on 
the same or similar pathways as existing 
therapeutics, allowing for safer and efficacious 
alternatives to marketed therapies. Others 
hit previously un-drugged disease targets, 
opening up entirely new avenues of 
treatment. Unlike traditional medicines, 
Live Biotherapeutics exert their effects on 
the host via multiple interactions, and this 
multifaceted approach gives us a greater 
chance of treating more patients effectively.
Intrinsically safe
The constant issue in drug development is 
toxicity, or “side effects”. This occurs when a 
drug “hits” other targets in the body that it 
was not designed to do. This is why drugs 
have side effects, leading to sub-optimal 
treatment regimens or premature termination 
of development programmes, a concern for 
both patients and clinicians, as well as the 
industry as a whole.
Our Live Biotherapeutics are originally 
sourced and isolated from healthy human 
donors and consequently have excellent 
safety profiles. This allows us to safely 
and rapidly accelerate our therapies 
into the clinic.
E 
Live Biotherapeutics interact 
with the immune system by 
a variety of mechanisms. 
Although typically initiated in 
the gut, the resulting changes 
in downstream pathways are 
diverse and can produce effects 
in remote areas of the body.
4D pharma at a Glance
World- 
leading  
research.
We are pioneers in harnessing bacteria as a novel and revolutionary class 
of medicines – called Live Biotherapeutics. From asthma to cancer, our 
teams conduct world-leading research on how gut bacteria influence a 
host of different diseases. We believe that what makes us different is the 
ability to rapidly translate this research into novel therapies for patients. STRATEGIC REPORT
03 4D pharma plc Annual Report and Accounts 2016
www.4dpharmaplc.com
MicroRx – our highly productive discovery platform
Using over two decades of world-leading research into the role 
of the microbiome and its influence on our immune system, 4D 
has built a platform – known as MicroRx – to rapidly select those 
bacteria that may have a therapeutic effect in specific diseases.
MicroRx is able to interrogate our proprietary library of over 4,000 
bacterial strains to develop a host-response profile, which is unique 
to each strain. This allows us to do two things: firstly, to identify 
strains which are potentially therapeutically relevant and have 
meaningful effects on the host; secondly, to target specific 
diseases which are driven by pathways which match the 
host-response profile of the strain.
Gastrointestinal
Blautix Irritable Bowel Syndrome
Rosburix Paediatric Ulcerative Colitis
Thetanix Paediatric Crohn’s Disease
CNS
Autism
Anxiety/Depression
Respiratory
MRx0004 Severe Neutrophilic Asthma
MRx0001 Allergic Asthma 
Immuno-oncology
MRx518 Solid tumours
Autoimmune
MRx0002 Multiple Sclerosis
MRx0006 Rheumatoid Arthritis
Others
Development pipeline
Discovery Pre-clinical Development Phase I Phase II Phase III
Rapid pre-clinical development
Using industry standard methods, as well as our proprietary 
disease models, we select our Live Biotherapeutics based on 
their efficacy and ability to be rapidly translated into a drug. 4D 
understands the functionality of bacteria and their interaction with 
the human body. As this functionality has evolved over millions of 
years, allowing bacteria and host to co-exist, the Live Biotherapeutics 
developed by 4D have attractive safety profiles.
Unlike traditional drug discovery, which involves multiple rounds 
of hit and lead optimisation to identify a clinical candidate – a 
process which can take a number of years – our approach facilitates 
a telescoping of pre-clinical development. We can progress from 
concept to clinical trials in as little as 24 months, ultimately helping 
4D get its therapies to patients who need them more rapidly.
Functional screen
Microbiology  Immunology  Gut physiology
Mechanism of action
Microbiology  Immunology  Gut physiology
Development
RCB  Scale up  Lyophilisation  Stability  Safety  Potency
Source
Gut microbiota from faecal material
Isolation
Individual bacterial strains on selective media
Identification
of bacteria using genome sequencing
Mechanisms
Pre-clinical models
Efficacy
Pre-clinical models 4D pharma plc Annual Report and Accounts 2016 04
STRATEGIC REPORT
 Chairman’ s Statement
David Norwood, Non-executive Chairman
2016 has seen 4D move into clinical trials in patients, and the 
results reinforce our belief that Live Biotherapeutics will bring 
safer, more effective treatments to the market. 
part of being able to move our programmes 
through the clinic, and from there to plan 
for manufacture.
Governance and Board
The Company’s Corporate Governance 
Statement can be found on pages 15 to 17.
Ever since the Company’s initial public 
offering, as the Company and the Group 
have grown, the Board has maintained 
a regular review and evaluation of its 
effectiveness, and that of the wider 
governance structure of the Group.
As an AIM-quoted company, the Company 
is not required to comply with the UK 
Corporate Governance Code. The Board 
has nevertheless always sought to apply 
policies and procedures which reflect 
the principles of good governance and 
best practice reflected in the Code, as 
appropriate to the size, nature and stage 
of development of the Company.
We believe the Company’s governance 
structure has facilitated the growth and 
development of the Group. However, 
as set out in the Corporate Governance 
Statement, as the Group continues 
to grow, we will maintain this evaluation 
and take the governance steps necessary 
to support the Group’s development.
Our people
Both a significant cause and effect of our 
continued successful development is our 
greater ability to recruit high quality people, 
across all aspects of the Group. We now 
employ 85 people over five sites across 
Europe. I would like to thank everyone in 
4D for their contribution to the advances 
we made in 2016.
The steps we have taken in the year give 
us huge confidence in our strategy and in 
our long-term future.
David Norwood
Non-executive Chairman
26 April 2017
Strategic objectives
All drug companies want to provide drugs 
that are safe and effective; they want to 
do so rapidly and cost-effectively. With 
the completion of our trial in patients with 
Irritable Bowel Syndrome (or IBS), and 
commencement of our trial in Paediatric 
Crohn’s Disease, 4D is doing just that.
The clinical progression has been made 
without losing focus on expanding and 
broadening our research base. The year 
saw major advances in the Group’s 
continuing goal to grow its knowledge 
and understanding of the microbiome.
In February we acquired 4D Pharma Cork 
Limited and with it established MicroDx, 
our proprietary diagnostic platform using 
microbiome signatures allowing stratification 
and diagnosis of patient populations. Since 
then we have swiftly developed the platform, 
setting up its first clinical trial (also in IBS), 
whose initial results point for the first time 
towards a biomarker for IBS.
The year also saw the Group acquire 
its development facility in León, Spain. 
Securing this dedicated facility is a vital  STRATEGIC REPORT
05 4D pharma plc Annual Report and Accounts 2016
www.4dpharmaplc.com
 Our Business Model and Strategy
Our strategy is to lead pharma in the rapidly emerging field of Live 
Biotherapeutics, originating and rapidly developing safe, effective 
products that target disease areas with significant unmet needs. 
Rapid cost-effective development 
With escalating development time and costs impacting healthcare 
costs and the pharmaceutical industry, 4D is able to rapidly 
develop its therapeutics and enter the clinic a number of years 
earlier than traditional pharma: 
• pioneering development processes for Live Biotherapeutics, 
enabling our programmes to enter patient trials in two years; 
• our therapeutics originate from a healthy human, and have not 
shown any significant safety or toxicology issues, significantly 
reducing development risk; and
• use of novel pre-clinical models to understand the microbiome 
as a driver of disease, and how our Live Biotherapeutics impact 
both the microbiome and disease. 
World-leading research 
4D continues to expand and broaden its research base, to grow its 
knowledge and understanding of the microbiome, and gain greater 
insight and understanding of the potential of Live Biotherapeutics:
• leveraging our proprietary platform MicroRx, to identify novel 
bacteria that show therapeutic effect, and understand their 
mechanism of action;
• building our understanding of the microbiome, potentially the 
underlying and root cause of disease;
• understanding that the identification of the functionality within 
a specific bacterial isolate is the therapeutic driver, not the 
strain itself;
• targeting new biomarkers through the development of MicroDx, 
our proprietary diagnostic platform using microbiome signatures 
allowing stratification and diagnosis of patient populations; 
• increasing internal research capacity, now employing 
68 scientists in five sites across Europe; and
• establishing long-term research collaborations with world-leading 
academic institutions, such as Baylor College of Medicine in 
Houston and the APC Microbiome Institute in Cork.
Developing and engaging in a new 
regulatory framework 
Live Biotherapeutics are a regulated class of drugs, categorised as 
a biologic. The regulations are emerging and 4D is working with the 
regulators to help understand and define this new class of therapeutics: 
• building on our experience from conducting two clinical trials in 
2016, with a further three trials expected to commence in 2017;
• engaging with key opinion leaders to help educate and understand 
new approaches to disease, its cause and its treatment; and 
• working with regulators to set new standards for safety and 
delivery of this novel and emerging class of therapeutics.
Understanding development and delivery 
Many novel and emerging technologies have failed to achieve 
commercialisation, not due to flawed scientific hypothesis, but due 
to issues with either manufacturing or more simply delivery. At 4D 
we set out to address these issues early on, to ensure we could 
maintain flexibility and pace of development: 
• our therapeutics are single strain, allowing us to minimise 
processing and maximise dose to the patients;
• our own development facility with clinical and manufacturing capacity 
up to 3,000 litres gives us flexibility and speed to the clinic; and
• working with partners who are the global leaders in 
encapsulation to bring new delivery solutions to market.
Building the intellectual property landscape 
Given the intensive research-based nature of the business and 
the pace of development, it is critical that 4D ensures it protects 
its world-leading position through an aggressive, commercially 
focussed intellectual property strategy: 
• maintaining a progressive approach to patent filing; and
• building its portfolio to 85 granted patents (83 at year end) and 
over 100 patent applications, covering all lead programmes. 4D pharma plc Annual Report and Accounts 2016 06
STRATEGIC REPORT
 Our Key Performance Indicators (“KPIs”)
Although we are still in the early stages of our development, we track a 
series of metrics focussed primarily on science and product development 
whilst ensuring the business has sufficient resources which are being 
effectively allocated to ensure achievement of our strategic goals.
R&D spend
£10.2m
+21%
10.2
8.4
1.8
Cash, cash equivalents 
and cash on deposit
£68.8m
-19%
68.8
85.4
31.8
Financial resource measure 
We need to ensure that we have sufficient cash 
in hand and on deposit to cover the anticipated 
future costs of developing the science through 
our various strategic milestones.
Financial allocation of resources 
The split of overheads between research and 
development (“R&D”) and other costs, whilst not 
necessarily highlighting the qualitative aspects of 
that spend, does enable us to ensure that we are 
directing sufficient operating funds towards the 
advancement of our technology.
The Board of 4D and management rigorously monitor the progress 
of our business, maintaining strict discipline throughout the different 
functions of the business as part of our strategic aim of delivering 
therapeutic products to the market and becoming a self-sustaining 
and cash-generative business. 
As we are currently in the pre-revenue stage of our development 
the core focus of the business is on innovation and progression 
of candidates in our pipeline through the clinic and into 
approved products. 
Pipeline progression performance 
measure – development of research
Long-term value will be created via successful 
progression of the pipeline through clinical trials 
into commercial products. We currently have 
15 wholly owned Live Biotherapeutic programmes 
in the pipeline across various stages of development. 
2
1
0
Number of clinical 
studies commenced 
2
+100%
14 15 16
14 15 16 14 15 16
Number of patents 
granted
83
+93%
83
43
Research and innovation 
performance measure 
4D was born out of innovation and this continues 
to be a cornerstone of the Group and in 2016 
we continued to invest in people, facilities and 
technology. Our strategic aim is to commercialise 
Live Biotherapeutic Products and as such a 
comprehensive portfolio of intellectual property 
is vital to the Group’s ability to achieve this. 
The Group’s portfolio of intellectual property is 
therefore a valuable asset and a significant amount 
of resource has been allocated to strengthening 
this portfolio during the year. 
14 15 16
43
Pipeline progression performance 
measure – development of product
Without the ability to manufacture the products 
coming through the pipeline we will not be able 
to commercialise these. 
Number of candidates 
manufactured for 
clinical trials
5
+150%
5
2
14 15 16
0 STRATEGIC REPORT
07 4D pharma plc Annual Report and Accounts 2016
www.4dpharmaplc.com
Risk and Risk Management 
As the Group grows and develops, the management and 
mitigation of risk becomes more important and we have 
taken significant steps in developing our systems.
Identifying and understanding key risks to the business 
4D operates within a complex regulatory environment, which 
is subject to change. The nature of biotherapeutic product 
development exposes us to a number of additional risks and 
uncertainties which could affect our ability to meet our strategic 
goals, our business model and our operating environment. 
The Board is accountable for carrying out a robust assessment 
of the principal risks facing the Group, and has developed a risk 
management framework which provides the structure within which 
the principal risks affecting our business are managed and sets the 
tone, culture and appetite for risk. 
The key objectives for this process are to ensure that the risk 
appetite of the Board is embedded throughout the Group and fully 
understood by all members of the team who have responsibility 
for managing the risk and making key business decisions. This will 
then be encoded in systems of internal controls which will seek 
to mitigate the principal risks that could affect the strategy and 
operation of our business model and finally to ensure that identified 
risks are reported to the relevant stakeholders in a timely manner. 
We have started to develop and implement a risk management 
process and we have spent significant time during the year 
reviewing the risks, clarifying our risk appetite and reviewing the 
longer-term viability of the business to make sure that we fully 
understand our risks and are managing them appropriately. 
These systems are planned to be fully developed and implemented 
within the next six months along the following lines:
The Board
Ensures comprehensive and 
appropriate systems of risk 
management and control are 
in place across the Group
Review of the principal risks 
within the Group and approval 
of the Group Risk Register 
Reports to the shareholders 
about the risk management 
within the Group 
Executive Leadership Team
Responsible for the design 
and implementation of the 
risk management and internal 
control systems 
Review of the Group-wide 
risk registers and reporting 
to the Board 
Department and 
subsidiary heads
Maintenance of the department risk 
registers, implementation and 
monitoring of all internal controls 
Reporting to the Executive 
Leadership Team 
Setting the tone Designing the system
Implementation of the system 
and completion of review
Review of process and outputs Review of high risk areas Risk registers
Risk appetite
In order to achieve the right level of reward it is necessary for us to take some risks and with the business being in a pre-revenue stage 
developing new Live Biotherapeutic Products there is an inherent risk in the science as it develops. However, we are aware that the risk 
we take needs to be aligned to our risk appetite.  4D pharma plc Annual Report and Accounts 2016 08
STRATEGIC REPORT
Why is it important?
A third-party patent could be granted with broad 
claims that affect a 4D technology or product. This 
could lead to us either having to negotiate a licence 
or even being unable to commercialise the future 
product materially affecting future revenues. 
Third-party patents could limit the Group’s freedom to operate
Current mitigating actions
4D is very diligent in carrying out searches to 
identify potential third-party IP . The Group 
has developed and continues to develop 
comprehensive and wide-ranging filings of 
detailed patents across the Group’s technology 
portfolio. There have been a significant number 
of patents granted since the inception of 4D 
and we have a number of applications pending. 
Change in level of risk
 No change
Why is it important?
Live Biotherapeutic Products are a novel and 
emerging technology; neither 4D nor anyone 
else has taken a product through development 
to the marketplace. We are currently working 
on a number of wholly-owned development 
programmes of our pipeline which will provide the 
Group with the opportunity to self-commercialise. 
Failure to complete development activities to plan 
may impact on the Group’s ability to bring products 
to market on time which would affect the timings of 
future revenues and hinder the Group’s ability to 
deliver its strategic goals. 
Product development in a breakthrough technology could 
encounter unforeseen delays to programmes
Current mitigating actions
As we complete each stage of development 
and move through the clinic, we broaden 
our understanding of how to bring Live 
Biotherapeutic Products to market. In addition, 
as we widen our programmes in different 
disease areas, we further mitigate the risk 
of failure of a single programme. While Live 
Biotherapeutic Products are novel, the 
associated regulatory and clinical pathways are 
based on existing frameworks. We therefore 
continue to build and invest in recruiting 
experience, and have plans to significantly 
grow our clinical and regulatory teams in the 
coming year.
Change in level of risk
 Decrease
Why is it important?
4D has grown quickly since 2014 and with any 
rapid growth, a strain can be placed on the 
emerging IT systems and infrastructure. 
Security and resilience of our IT systems and data
Current mitigating actions
We have commissioned and concluded a 
Group-wide strategic review of our IT systems 
in terms of security, efficiency and scalability 
for future growth. We are currently in the 
process of commencing a roll-out of improved 
systems across the Group during 2017. 
Change in level of risk
 No change
Risk and Risk Management continued
Table of principal risks STRATEGIC REPORT
09 4D pharma plc Annual Report and Accounts 2016
www.4dpharmaplc.com
Why is it important?
The biotechnology and pharmaceutical markets 
are highly regulated by government authorities 
in the UK, the US and Europe. These regulatory 
requirements are a major factor in determining whether 
a substance can be developed into a marketable 
product and the amount of time and cost associated 
with such development. Even if products are approved, 
they may still face subsequent regulatory difficulties 
which could result in delays and therefore financial loss. 
Failure to gain regulatory approval
Current mitigating actions
We work closely with expert regulatory 
advisors and as with the clinical team we 
plan to recruit additional members of the 
team during 2017 and beyond. 
Change in level of risk
 No change
Why is it important?
Although 4D reports its results in Sterling, 
a significant proportion of our operations trade 
in local currency and as such the Group has 
an exposure to the Euro and the US Dollar. 
Current mitigating actions
We constantly monitor currencies and their 
movements against Sterling. As the Group 
is currently pre-revenue the exposure affects 
the cost of operations and although the size of 
the exposure is significant we have sufficient 
cash resources to manage these changes 
and have planned these prudently into our 
forward forecasts. 
Change in level of risk
 Increase
Increase due to the increase 
in volatility of foreign currency 
exchange movements 
during 2016.
Exchange rate movements 4D pharma plc Annual Report and Accounts 2016 10
STRATEGIC REPORT
 Chief Executive Officer’s Report
Duncan Peyton, Chief Executive Officer
In 2016, 4D continued to build its world-leading position 
in Live Biotherapeutics through its understanding of the 
microbiome, the role of the microbiome in disease, and the 
development of Live Biotherapeutics as a potential cure. 
What 4D is about 
In 2014, 4D was set up to investigate 
the potential of two bacteria that showed 
promise in modulating the immune system 
and therefore had potential as a drug. 
The simple questions 4D asked:
• Do bacteria act like a drug?
• Are they safe?
• Can they be delivered simply?
• If so, are there further bacteria (in 
addition to the two original bacteria 
that had been isolated) that could have 
therapeutic effect in other diseases?
If the answers to the above questions 
were yes, then 4D had the potential for 
what could be called a “perfect” drug, 
a drug that is safe and effective, and easy 
to deliver; that has a rapid development 
pathway; and that is capable of reliable 
and cost-effective production.
Moving through 2016, 4D has a lot of the 
answers to the above questions. 
Our work in understanding how our Live 
Biotherapeutics function as drugs has 
made significant progress; we understand 
not only the pathways and mechanisms 
our Live Biotherapeutics leverage, but in 
some instances we also understand and 
have patented the agent the bacteria 
produce to exert its effect. 
From a safety perspective 4D has worked 
with the regulators since the Company’s 
inception to understand the potential of 
Live Biotherapeutics as a drug free from 
the significant side effects or toxicity 
normally associated with pharmaceuticals. 
In 2016, Blautix was shown to be safe and 
well tolerated in IBS patients. 
With the acquisition of our development 
facility in León, 4D has now manufactured 
five different Live Biotherapeutics at a 
clinical scale. We have also worked with 
our encapsulation partners to bring a new 
delivery technology to the market enabling 
simple oral delivery of our drugs to patients 
participating in our IBS and Paediatric 
Crohn’s trials.
4D also understands that there are 
additional bacteria that have the potential 
to impact disease as a Live Biotherapeutic. 
Our proprietary platform, MicroRx, has 
identified Live Biotherapeutics that in 
industry standard models demonstrate 
therapeutically relevant effects in diseases 
such as cancer and asthma and autoimmune 
conditions such as Rheumatoid Arthritis 
and Multiple Sclerosis. 
The questions originally asked in 2014 
are just as relevant in 2016; however, 
the research and development 4D has 
undertaken have raised more. 
Understanding disease – 
targeting cures
IBS is not a well understood disease, 
with calls for better diagnostics and more 
targeted drugs. 
It is a functional bowel disorder 
characterised by discomfort, pain and 
changes in bowel habits. Symptoms 
can be mild, moderate or severe. Mild 
symptoms, which occur infrequently, 
can sometimes interfere with normal 
daily functioning. Moderate symptoms 
are more intense, occur more frequently, 
and often interfere with daily functioning. 
Severe symptoms chronically interfere 
with daily functioning. 
The disease is characterised according to 
symptoms into three subtypes: constipation 
(IBS-C), diarrhoea (IBS-D) and mixed (IBS-M). 
The treatments are directed at only one of 
the symptoms, and are not able to address 
the root cause of the disease. Furthermore, 
as no biomarker for IBS exists, current 
treatment protocols are heavily dependent 
on patient reported symptoms, with 
clinicians having difficulty in addressing 
and prescribing adequate treatment. 
It is estimated that 10–15% of the 
population have IBS, with only 30–35% 
of subjects seeking medical attention, the 
majority of which have persistent symptoms.
We believe 4D has taken significant steps 
in moving a misunderstood disease forward.
In 2014 with our Blautix programme, 
a drug targeting IBS, 4D pioneered the use 
of germ-free models to study the effects 
of human microbiota. This involved the 
transplantation of IBS patient microbiome 
to study the effects in a germ-free 
environment. The results of this work 
showed that the translation of IBS patient 
microbiome led to the development of IBS 
symptoms, pointing towards the microbiome 
as potentially being the root cause of 
the disease.
Moving forward to 2016, we conducted 
a safety and tolerability placebo controlled 
trial in IBS patients and healthy volunteers 
(the “Blautix Trial”). As part of that trial 
4D also took the opportunity to look, 
as a secondary measure, at the changes 
in the microbiome before, during and 
after dosing and also for any improvement 
in patient symptoms. STRATEGIC REPORT
11 4D pharma plc Annual Report and Accounts 2016
www.4dpharmaplc.com
Building development –  
delivering drugs
An issue seen with any new breakthrough 
technology are the questions concerning 
whether it can be manufactured repeatedly 
and reliably, and whether it is easy to deliver. 
We do not use consortia of bacteria, where 
multiple different types of bacteria are used 
in combination to try to recreate a “healthy 
gut”; it is clear every person has a different 
“healthy gut” and isolates of the same 
strains from different people can have very 
different functionality.
The Live Biotherapeutics developed by 4D 
are single strain; they are selected on the 
basis of their functionality and potential to 
impact a specific disease pathway. Using 
single strains allows for a simpler more 
straightforward manufacturing process.
From the perspective of delivery, 4D has 
worked with its partners to develop and 
(through our trials) prove encapsulation 
technology that is viable both scientifically 
and commercially. 
The key issue for the emerging 
microbiome field is to understand 
development and manufacturing. 
• there are significant differences seen 
between healthy volunteer and patient 
microbiomes, further suggesting that 
the microbiome is potentially the root 
cause of the disease;
• the difference between the microbiome 
of healthy volunteers and patients points 
to a biomarker based on metabolites 
that could aid diagnosis of IBS; and
• analysis of IBS patient microbiota 
showed no significant difference between 
any of the subtypes, suggesting that 
all subtypes of IBS could potentially 
be treated by a Live Biotherapeutic 
intervention, and current characterisation 
of subtypes is not a true representation 
of the disease, but rather of the 
treatments currently available. 
We are progressing with our Blautix 
programme through 2017 with even 
greater confidence; later in 2017, 4D will 
begin a larger, multi-centre phase 2 trial. 
In addition, 4D recognised that diagnosis 
of IBS is difficult for clinicians; with no 
recognised biomarker, clinicians are left to 
make therapeutic decisions on symptoms 
reported by patients, which may not always 
be clear or accurate. 
In early 2016, 4D began a separate study 
(the “Diagnostic Study”) looking at the 
difference between IBS patients and 
healthy volunteers. The aim of this study 
was to understand if there were differences 
between the microbiome of these two 
groups, and whether 4D could exploit 
this difference as a diagnostic tool.
The results of the above trials conducted 
with IBS patients showed: 
• the microbiome of patients and healthy 
volunteers is significantly different;
• the microbiome of the subtypes of 
IBS patients (IBS-C, IBS-D and IBS-M) 
is not significantly different; 
• those IBS patients on Blautix showed 
an increased diversity and stability of 
microbiome compared to placebo; 
• Blautix to be safe and well tolerated, 
meeting the primary endpoint of the 
Blautix Trial; and
• those patients on Blautix showed a 
greater improvement in symptoms 
than those on placebo.
The above results suggest:
• the microbiome is potentially the root 
cause of the disease, as shown in the 
pre-clinical models;
F 
By reducing development times by up to five years, we can deliver these new drugs to the  
people that need them faster. In fact, we can go from concept to clinic in just 24 months.
24 months 4D pharma plc Annual Report and Accounts 2016 12
STRATEGIC REPORT
The concept at 4D Pharma Cork was 
initially to combine our understanding 
of Live Biotherapeutics (from the research 
generated by our MicroRx therapeutic 
platform) with the knowledge held within 
4D Pharma Cork, to build a new diagnostic 
platform, called MicroDx, based around 
the microbiome. 
The concept for MicroDx is the ability 
to identify “signatures” based on the 
functionality of the gut microbiome and 
also on metabolite profiles (small molecules 
produced by the microbiome). This could 
allow the development of rapid methods 
of diagnosis, which could be readily 
transferred into the clinical setting.
The Diagnostic Trial mentioned earlier was 
a completely stand-alone trial, independent 
from the Blautix Trial. The trial was set up 
to look at the microbiota of patients with 
IBS and that of healthy volunteers, and 
from that information investigate the 
potential for a marker that could distinguish 
between patients and healthy volunteers. 
Whilst the trial is still continuing, interim 
analysis of data has demonstrated MicroDx 
is able to differentiate IBS patients from 
healthy subjects based on metabolite profile.
This work demonstrates the potential within 
the microbiome to provide markers capable 
of use in a point of care diagnostic. 
4D intends to use the MicroDx IBS test 
in our Blautix phase 2 trial to help stratify 
patients and monitor progression, and will 
look to expand on and include it in its trials 
for cancer and asthma which start later 
in 2017. 
 Chief Executive Officer’s Report continued
What people want is a better diagnosis…
leading to better, more targeted drugs.
If 4D worked solely with contract providers, 
shifting programmes and timings would not 
have been possible due to capacity and 
scheduling constraints, nor would 4D be 
able to find sufficient capacity to address 
our need going forward. 
The reason 4D is confident in meeting its 
development goals is due to the in-house 
development and manufacturing capability 
acquired by 4D during 2016.
In April 4D acquired the production assets 
of Instituto Biomar, S.A. (or “Biomar”), 
a Spanish-based contract research 
organisation specialising in microbial 
fermentation (see note 12 to the 
financial statements).
This facility gives the flexibility and scale 
to take all 4D’s current research through 
the clinic, and gives the Company the 
capacity to manufacture enough active 
pharmaceutical ingredient for up to around 
20 million capsules per annum.
Better diagnostics –  
improving patient outcomes
As 4D began to understand more 
about the therapeutic effect of Live 
Biotherapeutics and the impact on the 
microbiome, we recognised the potential in 
using the microbiome to aid the diagnosis 
and treatment of disease. 
In February 2016 we acquired 4D Pharma 
Cork (then Tucana Health), a start-up 
company from University College Cork 
(see note 12 to the financial statements).
Building development –  
delivering drugs continued
At 4D the process of manufacture is 
straightforward: fermentation, separation, 
lyophilisation and encapsulation. Whilst 
the core process remains constant, the 
conditions for each of the programmes 
is different, requiring different media, 
processing times, etc. However, to date 
we have successfully been able to 
manufacture all of our Live Biotherapeutics 
that 4D has so far chosen to take in to the 
clinic. With patient trials completed and 
several in planning, 4D has addressed 
the issues surrounding manufacture and 
delivery; the issue for 4D is flexibility and 
recognising a lack of pharmaceutical grade 
facilities capable of producing Live 
Biotherapeutics at development and 
commercial scale.
In 2016, 4D decided to delay the clinical 
development of Rosburix, our programme 
in Ulcerative Colitis, in favour of our cancer 
programme. The decision was strategic; 
it was important that 4D moved away 
from gastrointestinal disease to diseases 
not generally associated with the gut 
(such as cancer and Rheumatoid Arthritis), 
demonstrating the breadth of the our live 
programmes and development speed. 
From a development pipeline perspective, 
in 2017 4D plans to have trials commencing 
in cancer and severe asthma, to have 
completed the phase 1 trial in Paediatric 
Crohn’s Disease, and to have commenced 
a phase 2 trial in IBS. In 2018, 4D will 
potentially add an additional three new 
clinical programmes. STRATEGIC REPORT
13 4D pharma plc Annual Report and Accounts 2016
trials and preparing our next wave of 
programmes for upcoming phase 1 trials.
The Group continues to manage its cash 
deposits prudently and invests its funds 
across a number of financial institutions 
which have investment grade credit ratings. 
The deposits range from instant access 
to twelve-month term deposits and are 
regularly reviewed by the Board. Cash 
forecasts are updated monthly to ensure 
that there is sufficient cash available for 
the Group’s foreseeable requirements. 
More details on the Group’s treasury 
policies are provided in note 24 to the 
financial statements.
Outlook
In summary, 2016 saw 4D continue its 
successful development, building on its 
existing research and also making strategic 
acquisitions which we believe will play 
a vital role in the Company’s goal to 
successfully develop Live Biotherapeutics 
as safe and effective drugs. 
Duncan Peyton
Chief Executive Officer
26 April 2017
Increased patent coverage 
4D is breaking new ground on a number 
of fronts, use of bacteria as a drug and 
mechanisms associated, process 
development, diagnostics, etc., all of 
which creates intellectual property.
The development of our patent portfolio 
in some way reflects the pace of our 
development; from start up in 2014 we 
now have 85 granted patents and over 
100 applications.
As we continue our understanding and 
progress in this emerging field, 4D will 
continue to develop its leading position 
in intellectual property coverage.
Financial summary
In the year to December 2016, our cash 
and cash equivalents and short-term 
deposits reduced from £85.4 million to 
£68.8 million, with a loss before tax of 
£11.7 million (compared with £10.1 million 
in the year to December 2015). Our claim 
for research and development tax 
credit was £1.8 million (compared with 
£1.4 million in the year to December 2015).
Our cash burn for the year was in line with 
expectation, and reflected among other 
things the increased costs of taking our most 
advanced programmes through phase 1 
Houston, Texas
INRA
León
Cork
Aberdeen
Leeds
F 
Our collaboration in Houston
4D has entered into a long-term collaboration with Diversigen, Inc., a commercial endeavour 
of Baylor College of Medicine in Houston, a world-renowned health sciences university. 
With our partner, 4D has established a dedicated germ-free facility to further the development 
of pre-clinical models of disease.
 Our locations
 Our collaborations
STRATEGIC REPORT 4D pharma plc Annual Report and Accounts 2016 14
Board of Directors
David Norwood
Non-executive Chairman
A
 
R
David has had a long career 
building a number of science, 
technology and investment 
companies. He is the founder 
of IP Group plc, one of the 
UK’s leading technology 
commercialisation businesses, 
and a shareholder in the 
Company. Previously, he was 
chief executive of stockbroker 
Beeson Gregory (acquired by 
Evolution Group plc) after it 
acquired IndexIT Partnership, a 
technology advisory boutique he 
had founded in 1999. He was a 
founding shareholder of Evolution 
Group plc (recently acquired by 
Investec), and also co-founder of 
Ora Capital plc. He has been a 
founder and director of many UK 
technology companies including 
Oxford Nanopore Technologies 
Limited, Proximagen Limited, 
Synairgen plc, Ilika Technologies 
Limited, Oxford Catalysts and 
Plectrum Petroleum (acquired 
by Cairn Energy plc). He has 
also acted as seed investor 
and/or advisor to Wolfson 
Microelectronics Limited, 
Nanoco Technologies Limited, 
Tissue Regenix Group plc and 
Arc International (now part of 
Synopsys). He is also non-
executive chairman of Oxford 
Pharmascience Group plc.
Thomas Engelen
Non-executive director
A
 
R
Thomas has been a founder 
and/or non-executive director 
of a number of UK life sciences 
companies including Colonis 
Pharma Limited, Warneford 
Partners Limited, Martindale 
Pharma Limited and 
Pneumagen Limited. Thomas 
has supported private equity 
and other investors in over 50 
potential deal transactions, on 
targets in Europe and the USA, 
from cash constrained/chapter 
11 to cash-rich with enterprise 
value of up to $1 billion. Before 
this Thomas worked in life 
sciences for over 20 years in 
senior executive roles. Starting 
in 1987 at Akzo Nobel Pharma 
he worked with hospital 
products, diagnostics and 
medical equipment as general 
manager for the Middle East 
and Africa. After this he led 
Rosemont Pharmaceuticals 
in Leeds in niche oral liquid 
medicines, followed by being 
president of Organon in Brazil. 
He was promoted to VP The 
Americas, and lastly to CMO 
at Organon, in charge of the 
global product portfolio, 
based in the USA. Returning 
to Europe he led Novartis 
Consumer Health in the UK. 
Thomas has also acted as 
non-executive chairman at 
Akcros Holdings Limited, 
Penlan Healthcare and 
Quantum Pharmaceutical.
Duncan Peyton
Chief Executive Officer
Duncan has a proven track 
record in identifying, investing 
and growing businesses within 
the pharmaceutical sector. He 
was the founder of Aquarius 
Equity, a specialist investor 
in businesses within the life 
science sector, which provided 
investors with access to 
innovative, high-growth potential 
companies that delivered 
significant capital growth. 
Duncan started his career in a 
bio-science start-up business, 
which ultimately went on 
to list on the London Stock 
Exchange, subsequently 
qualified as a corporate finance 
lawyer with Addleshaw 
Goddard, then Addleshaw 
Booth & Co, and later joined 3i 
plc as an investment manager. 
Duncan founded Aquarius in 
2005, which made founding 
investments into Nanoco 
Technologies Limited, Auralis 
Limited (subsequently sold to 
ViroPharma) and Tissue 
Regenix Group plc.
Alex Stevenson 
Chief Scientific Officer
Alex began his career as a 
microbiologist, working in 
research for a number of years 
before joining an NYSE-quoted 
drug development company. 
He subsequently moved into 
pharmaceutical and healthcare 
investment and has fulfilled a 
number of board-level investment 
and operational management 
roles. He was a director and 
shareholder in Aquarius Equity 
from 2008, where he was 
responsible for identifying new 
investments and developing 
and implementing scientific 
strategies both pre and 
post-investment. These 
included Tissue Regenix Group 
plc, C4X Discovery Holdings 
plc and Brabant Pharma 
(subsequently sold to Zogenix, 
Inc.). Prior to joining Aquarius 
Equity, Alex worked for IP 
Group plc where he specialised 
in life science investments 
identifying, developing and 
advising a number of 
companies in its portfolio, some 
of which went on to list on AIM. 
He joined IP Group following its 
acquisition of Techtran Group 
Limited in 2005.
Audit and Risk Committee A
Remuneration Committee R
Chairman
CORPORATE GOVERNANCE www.4dpharmaplc.com
15 4D pharma plc Annual Report and Accounts 2016
 Corporate Governance Statement
This section of the Annual Report describes the Group’s corporate 
governance structures and processes and how they have been 
applied during the year ended 31 December 2016.
The Company’s ordinary shares have 
been admitted to trading on the AIM 
Market of the London Stock Exchange and 
the Company is subject to the continuing 
requirements of the AIM Rules. The UK 
Corporate Governance Code sets out the 
principles of good practice in relation to 
corporate governance which should be 
followed by companies with a full listing 
on the London Stock Exchange. Although 
the Company is not required to comply 
with the UK Corporate Governance Code 
by virtue of being an AIM-quoted company, 
the Board seeks to apply the QCA Corporate 
Governance Code for Small and Mid-Size 
Quoted Companies (“QCA Guidelines”) 
to the extent appropriate and practical 
for a company of its nature and size. This 
section provides general information on the 
Group’s adoption of the QCA Guidelines.
Board composition and 
responsibility
The Board consists of four directors, two of 
whom are non-executive. The names of the 
directors, together with their biographical 
details, are set out on page 14.
The Board has determined that Thomas 
Engelen is independent in character 
and judgement, and that there are no 
relationships or circumstances which 
could materially affect or interfere with the 
exercise of his independent judgement. 
Thomas previously provided ad hoc 
consultancy services to the Company’s 
subsidiary 4D Pharma Research Limited, 
which were consequential to his former role 
as one of its non-executive directors. Such 
services ceased in early 2015, prior to 
4D Pharma Research Limited becoming 
a wholly owned subsidiary, and the Board 
does not believe that such historical 
services compromise his independence 
in any way.
The Board has determined that David 
Norwood is not independent, by virtue 
only of his holding of ordinary shares in 
the Company, summarised on page 23. 
The Board has nevertheless determined 
that (save only for his holding of ordinary 
shares) there are no relationships or 
circumstances which could materially 
affect or interfere with the exercise of 
his independent judgement. 
The Board remains satisfied with its 
composition and the balance between 
executive and non-executive directors, 
which allows it to exercise objectivity in 
decision making and proper control of the 
Group’s business. The Board notes the 
recommendation in the QCA Guidelines 
that a company should have at least two 
independent non-executive directors and 
should not be dominated by one person 
or a group of people. The Board believes 
it meets this recommendation, save only 
in respect of the holding of ordinary shares 
in the Company by David Norwood.
50 +50+G Board composition
4 members
Executive directors 2
Non-executive directors 2
CORPORATE GOVERNANCE 4D pharma plc Annual Report and Accounts 2016 16
 Corporate Governance Statement continued
Decision making
The Board’s primary objective is to focus 
on adding value to the assets of the Group 
by identifying and assessing business 
opportunities and ensuring that potential risks 
are identified, monitored and controlled. 
Material issues are reserved to a decision 
of the Board, including approval (and 
review of performance) of the Group’s 
strategic aims and objectives; approval 
of the annual operating and capital 
expenditure budgets (and any material 
changes to them); approval of all financial 
statements and results; and maintenance 
of a sound system of internal control and 
risk management. The implementation 
of Board decisions and day-to-day 
operations of the Group are delegated 
to executive directors.
The Board meets both at regular 
intervals and also at short notice to 
consider specific matters (for example 
proposed acquisitions). The Board receives 
appropriate and timely information prior 
to each meeting, with a formal agenda 
and Board and Committee papers being 
distributed several days before meetings 
take place. Any director may challenge 
Group proposals, and decisions are 
taken democratically after discussion. 
Any director who feels that any concern 
remains unresolved after discussion may 
ask for that concern to be noted in the 
minutes of the meeting. Any specific 
actions arising from such meetings are 
agreed by the Board and then followed 
up by management.
The non-executive directors constructively 
challenge and help develop proposals on 
strategy and bring strong, independent 
judgement, knowledge and experience to 
the Board’s deliberations. The directors are 
given access to independent professional 
advice at the Group’s expense when the 
directors deem it is necessary in order for 
them to carry out their responsibilities.
The Group has effective procedures in 
place to deal with conflicts of interest. 
The Board is aware of other commitments 
of its directors, and changes to these 
commitments are reported to the Board.
Appointment and re-election 
of directors
All directors of the Company have 
been appointed (or re-appointed) by 
shareholders; the current non-executive 
directors were appointed to the Board 
by resolution of the shareholders of the 
Company on 5 February 2014 (prior to 
the admission of the Company shares 
to trading on AIM on 18 February 2014).
Each of the directors is subject to 
retirement by rotation and re-election in 
accordance with the articles of association 
of the Company. All directors appointed 
by the Board are subject to election by 
shareholders at the first Annual General 
Meeting after their appointment. 
Board evaluation 
Given its composition and flexibility, the 
Board has been able, since the admission 
of the Company’s shares to trading on 
AIM, to maintain a regular evaluation of its 
effectiveness and that of its Committees. 
It is believed that the Board and its 
Committees have functioned well 
throughout this period, meeting with 
appropriate regularity and with directors 
free to voice differing opinions. In particular, 
the Board still considers its composition 
to be appropriate (in view of the size and 
requirements of the Group’s business, and 
the need to maintain a practical balance 
between executives and non-executives). 
However, it also considers that the 
Company is nearing the position where 
the Board would benefit from additional 
independent input. The Board is actively 
considering potential candidates for a 
further independent non-executive director. 
Committees
The Board has established an Audit 
and Risk Committee and a Remuneration 
Committee, with formally delegated duties 
and responsibilities. The Board has, since 
the admission of the Company’s shares to 
trading on AIM, kept under regular review 
the possible establishment of a nomination 
committee. The Board remains of the 
view that, given the current composition 
of the Board, it is not appropriate to have a 
nomination committee. This will continue to 
be kept under regular review by the Board.
The Audit and Risk Committee
The Audit and Risk Committee 
comprises Thomas Engelen as Chairman 
and David Norwood as the other member 
of the Committee. Thomas Engelen is 
an independent director and has recent 
and relevant financial experience. The 
Committee has primary responsibility for 
CORPORATE GOVERNANCE www.4dpharmaplc.com
17 4D pharma plc Annual Report and Accounts 2016
monitoring the quality of internal controls, 
ensuring that the financial performance 
of the Company is properly measured 
and reported on, and reviewing reports 
from the Company’s auditor relating to 
the Company’s accounting and internal 
controls, in all cases having due regard 
to the interests of shareholders. A report 
from the Chairman of the Audit and Risk 
Committee is on page 18.
The Remuneration Committee
The Company has established a formal and 
transparent procedure for developing policy 
on executive remuneration and for fixing 
the remuneration packages of individual 
directors and senior management. The 
Remuneration Committee comprises 
Thomas Engelen as Chairman and 
David Norwood as the other member 
of the Committee. The Committee 
reviews the performance of the executive 
directors and senior management and 
determines their terms and conditions 
of service, including their remuneration and 
the grant of incentives, having due regard 
to the interests of shareholders. A report 
from the Chairman of the Remuneration 
Committee is on page 20. 
The Board believes that, in accordance 
with the QCA Guidelines, the Audit and 
Risk Committee and the Remuneration 
Committee have the necessary character, 
skills and knowledge to discharge their 
duties and responsibilities effectively; 
notwithstanding that (given the overall 
composition of the Board) there is not a 
majority of members who are independent 
non-executive directors. Each Committee 
is, however, chaired by an independent 
non-executive director.
Approach to risk and internal control
The Board is responsible for establishing 
and maintaining the Group’s systems of 
internal control. The primary responsibility 
for monitoring the quality of internal control 
has been delegated to the Audit and Risk 
Committee. Reference is made to the 
statement on Risk and Risk Management 
on pages 7 to 9.
Communicating vision and strategy
The directors seek to visit institutional 
shareholders at least twice a year. In 
addition, all shareholders can attend the 
Company’s Annual General Meeting, 
where there is an opportunity to question 
the directors as part of the agenda, 
or more informally after the meeting. 
Communication with shareholders is 
seen as an important part of the Board’s 
responsibilities, and care is taken to ensure 
that all price-sensitive information is made 
available to all shareholders at the same time.
Meetings
The number of Board and Committee meetings attended by each of the directors during 
the year is shown below:
Full Board
Audit and Risk
Committee
Remuneration
Committee
Number of meetings in year 8 2 1
Attendance:
Executive directors
Duncan Peyton 8 — —
Dr Alexander Stevenson 8 — —
Non-executive directors
David Norwood 8 2 1
Thomas Engelen 8 2 1
CORPORATE GOVERNANCE 4D pharma plc Annual Report and Accounts 2016 18
As Chairman of the Audit and Risk 
Committee, I am pleased to present our 
report for the year ended 31 December 
2016. The Audit and Risk Committee 
is a sub-committee of the Board and is 
responsible for reviewing all aspects of the 
financial reporting of the business and all 
aspects of internal control. The Committee 
represents the interests of our shareholders in 
relation to the integrity of information and the 
effectiveness of the audit processes in place. 
Key responsibilities 
The Committee acts independently of 
management to ensure the interests of 
shareholders are protected in relation to 
financial reporting, internal controls and 
risk management. 
The principal duties of the Committee are to:
• monitor the integrity of the Group’s 
financial reporting including the review of 
significant financial reporting judgements;
• advise the Board on whether, taken as a 
whole, the Annual Report and Accounts 
is fair, balanced and understandable;
• advise the Board on principal risks, 
their mitigation and risk appetite; 
• review the robustness of our risk 
management and internal controls; 
• oversee the external audit process 
including monitoring the auditor’s 
independence, objectivity, effectiveness 
and performance; and 
• approve any engagement by the external 
auditor outside of the Group’s audit.
The Committee manages the relationship 
with the external auditor on behalf of the 
Board to ensure that the external auditor 
continues to be independent, objective and 
effective in its work, and also considers the 
re-appointment of the auditor each year. 
RSM UK Audit LLP was appointed as 
auditor in 2014 following a comprehensive 
tender process. Each year the Committee 
considers the continued independence of 
the external auditor and the effectiveness 
of the external audit process, to determine 
whether to recommend to the Board that 
the current auditor be re-appointed. 
The Committee has reviewed the external 
audit process in the year through meetings 
and reviewing the reports from the external 
audit team. The Committee has concluded 
that the external audit process was effective 
and is satisfied that the scope of the audit is 
appropriate and that significant judgements 
have been robustly challenged. 
Composition and meetings
The Audit Committee during the year under 
review has consisted of two non-executive 
directors. The Committee is chaired by me, 
Thomas Engelen, with David Norwood as 
the other member. I am an independent 
director and have recent and relevant 
financial experience. 
There were two meetings held in the year 
ended 31 December 2016 in March and 
December. The March meeting was used 
to review the year-end external audit and 
year-end financial reporting and the 
December meeting to consider the 
planning for the year end. 
Report of the Audit and Risk Committee
The Committee acts independently of management to ensure 
the interests of shareholders are protected in relation to financial 
reporting, internal controls and risk management.
Members
• Thomas Engelen (Chairman)
• David Norwood
CORPORATE GOVERNANCE www.4dpharmaplc.com
19 4D pharma plc Annual Report and Accounts 2016
Committee meetings are also attended by 
Stephen Dunbar, the finance director, and 
representatives from the external auditor. 
Significant issues relating to the 
financial statements 
The specific issues considered by the 
Audit Committee in the year under review, 
in relation to the financial statements, 
are shown below. 
Business combinations:
During the year the Group has acquired 
the entire share capital of Tucana Health 
Limited in addition to acquiring the 
production assets of Biomar, S.A. via 
4D Pharma Leon, S.L.U.
The Committee reviewed and critiqued 
the accounting judgements and estimates 
used in accounting for the fair value of the 
assets acquired as well as the contingent 
consideration and the purchase price 
allocations particularly the valuation of 
acquired intangible assets. The Committee 
was satisfied that these were reasonable 
and appropriately applied. 
In addition the Committee considered 
whether the acquisitions should give 
rise to an additional cash-generating unit 
(“CGU”) for impairment testing purposes 
and concluded that neither Tucana Health 
Limited (now 4D Pharma Cork Limited) 
nor 4D Pharma Leon, S.L.U. are separate 
CGUs (see note 12). 
These matters were addressed by the 
Committee through the review of reports 
from external valuation consultants and 
management. The main assumptions were 
discussed and challenged. 
Valuation of goodwill and other 
intangible assets:
Testing for goodwill and other intangible 
assets for potential impairment is complex 
and requires a number of management 
estimates and sensitivities to be applied, 
which inevitably requires judgement and 
is a recurring matter. 
There was a significant amount of work 
performed during the year, including the 
development of more sophisticated 
forecasting tools by management as 
well as undertaking numerous reviews 
by external consultants to help more 
accurately assess the values of intangible 
assets and goodwill. 
The Committee reviewed the reports 
together with the assumptions, judgements 
and sensitivities applied to the valuations 
and underlying models for impairment 
testing purposes. Following this review 
and after discussions with management the 
Committee is satisfied that no impairment 
charge should be recorded in the year to 
31 December 2016 and that the disclosures 
in the financial statements are appropriate. 
Thomas Engelen 
Chairman of the Audit and 
Risk Committee 
26 April 2017
CORPORATE GOVERNANCE 4D pharma plc Annual Report and Accounts 2016 20
Report of the Remuneration Committee
The Committee aims to attract, retain and motivate the 
executive management of the Company, and set remuneration 
at an appropriate level.
As Chairman of the Remuneration 
Committee, I am pleased to present 
our report for the year ended 
31 December 2016. 
This report does not constitute a directors’ 
remuneration report in accordance with 
the Companies Act 2006. As a company 
whose shares are admitted to trading 
on AIM, the Company is not required 
by the Companies Act 2006 to prepare 
such a report. 
Key responsibilities 
The Remuneration Committee is a 
sub-committee of the Board. Its principal 
purpose is to determine and agree with 
the Board the framework and broad policy 
for remuneration, and to determine the 
remuneration packages and service 
contracts of the executive directors, 
the Company Secretary and such other 
members of the executive management 
as it considers appropriate. Among other 
things, the Committee shall approve the 
design of, and determine targets for, any 
performance incentive schemes operated 
by the Company and approve the awards 
made under such schemes.
Composition and meetings
During the year the members of the 
Committee were me, Thomas Engelen, 
an independent non-executive director, 
and the non-executive Group Chairman, 
David Norwood. All members served on 
the Committee throughout the year and 
to the date of this report. I was Chairman 
of the Committee throughout this period.
There was one meeting held of 
the Committee in the year ended 
31 December 2016, held in April. The 
meeting was convened to consider and 
review the Group’s remuneration policy, 
and to approve annual awards to senior 
management under the Group’s Long Term 
Incentive Plan. There were no changes to 
the remuneration or service agreements of 
the executive directors during the period.
Policy on executive remuneration
The Committee aims to attract, retain and 
motivate the executive management of 
the Company, and set remuneration at an 
appropriate level to promote the long-term 
success of the Group, in line with its 
strategic objectives.
The overall policy of the Board is to ensure 
that executive management is provided 
with appropriate incentives to encourage 
enhanced performance and, in a fair and 
responsible manner, rewarded for its 
contribution to the success of the Group.
The main elements of the remuneration 
packages for executive directors and 
senior management are as follows:
Basic annual salary
The base salary is reviewed annually. 
The review process is undertaken by the 
Remuneration Committee and takes into 
account several factors, including the 
current position and development of the 
Group, individual contributions and market 
salaries for comparable organisations.
The Company does not provide an 
occupational pension scheme for executive 
directors, nor does it make contributions 
into the private pension schemes of 
executive directors.
Members
• Thomas Engelen (Chairman)
• David Norwood
CORPORATE GOVERNANCE www.4dpharmaplc.com
21 4D pharma plc Annual Report and Accounts 2016
Discretionary annual bonus
All executive directors and senior managers 
are eligible for a purely discretionary annual 
bonus. This takes into account exceptional 
individual contribution, business performance 
and technical and commercial progress, 
along with financial results.
Long-term incentives
The Group operates a long-term share 
incentive scheme; all Group executive 
directors and employees are eligible for 
the granting of awards under the scheme. 
Details of the awards made under the 
scheme during the year are provided in 
note 21 to the financial statements. All 
such awards vest after three years and 
are subject to individual performance 
criteria. There were no awards during 
the year to the directors of the Company. 
Benefits in kind
The Company provides taxable healthcare 
benefits for Executives.
Policy on non-executive 
directors’ remuneration
Non-executive directors receive a fixed fee 
and do not receive any pension payments 
or other benefits, nor do they participate 
in bonus or incentive schemes. The Board 
reviews non-executive remuneration to 
ensure that it is in line with current market 
rates in order to attract and retain high 
calibre individuals.
Service contracts
Duncan Peyton and Dr Alexander 
Stevenson have service agreements with 
an indefinite term providing for a maximum 
of twelve months’ notice by either party.
Non-executive directors are employed 
on letters of appointment which may 
be terminated on not less than three 
months’ notice.
Directors’ interests in share capital
At 31 December 2016, and at the date of 
this report, David Norwood held 7,000,000 
ordinary shares in the Company’s share 
capital, or 10.8% (2015: 10.9%); each 
of Duncan Peyton and Dr Alexander 
Stevenson held 6,250,286 ordinary shares 
in the Company’s share capital, or 9.6% 
(2015: 9.7%); and Thomas Engelen held 
500,000 shares in the Company’s share 
capital, or 0.8% (2015: 0.8%).
No director was granted any share options 
in the year ended 31 December 2016; 
none of the directors held any share 
options at 31 December 2016. 
Thomas Engelen 
Chairman of the 
Remuneration Committee 
26 April 2017
Directors’ remuneration
The remuneration of the directors who served on the Company’s Board during the year to 31 December 2016 is as follows:
31 December 2016 31 December 2015
Base salary and fees Total Base salary and fees Total
£000 £000 £000 £000
Executive directors
Duncan Peyton 101 101 101 101
Dr Alexander Stevenson 101 101 101 101
Non-executive directors
David Norwood 25 25 25 25
Thomas Engelen 25 25 33 33
252 252 260 260
There were no bonus or pension schemes for the directors during the year ended 31 December 2016.
CORPORATE GOVERNANCE 4D pharma plc Annual Report and Accounts 2016 22
Directors’ Report
The directors present their report together with the audited consolidated financial 
statements, along with the Auditor’s Report for the year ended 31 December 2016.
Pages 1 to 24 inclusive (together with 
sections of the Annual Report incorporated 
by reference) comprise a Directors’ Report 
that has been drawn up and presented 
in accordance with and in reliance upon 
applicable English company law and the 
liabilities of Directors in connection with 
that report shall be subject to the 
limitations and restrictions provided 
by such law.
Strategic Report
In accordance with section 414C(11) of the 
Companies Act 2006 (Strategic Report and 
Directors’ Report) Regulations 2013, the Group 
has chosen to set out in the Strategic Report 
information required by schedule 7 of the Large 
and Medium-sized Companies and Groups 
(Accounts and Reports) Regulations 2008.
Directors
The directors who held office during the 
year, and as at the date of signing the 
financial statements, and brief biographical 
descriptions of the directors, are set out 
on page 14. 
The beneficial and non-beneficial interests 
of the directors in the Company’s ordinary 
shares of 0.25 pence are disclosed in the 
Report of the Remuneration Committee 
on page 20.
No director had an interest in any contract 
that was significant in relation to the Group’s 
business at any time during the year.
Directors’ indemnity insurance
The Group has maintained insurance 
throughout the year for its directors and 
officers against the consequences of 
actions brought against them in relation to 
their duties for the Group. Such provision 
remains in force as at the date of approval 
of the Directors’ Report.
Research and development 
activities 
The principal activity of the Group is 
research and development, a review 
of which is included in the CEO’s Review 
on pages 10 to 13.
T otal research and development spend in the 
year to 31 December 2016 was £10.2 million 
(year to 31 December 2015: £8.4 million). 
No development expenditure was capitalised 
in the current year or the year to 
31 December 2015.
Subsequent events
There have been no important events 
affecting the Company or the Group 
since the year end.
Dividends
The directors do not recommend payment 
of a dividend nor was there a dividend in 
the year to 31 December 2015.
Employment policies
The Group is committed to ensuring the 
health and safety of its employees in the 
workplace. This includes the provision 
of regular medical checks.
The Group is committed to keeping 
employees as fully informed as possible 
with regard to the Group’s performance 
and prospects and seeks their views, 
wherever possible, on matters which 
affect them as employees.
Financial instruments
Details of the Group’s financial 
risk management objectives and 
policies are disclosed in note 24 
to the financial statements.
55 +45+G Research and 
development spend
R&D
2016 £10.2m
2015 £8.4m
CORPORATE GOVERNANCE www.4dpharmaplc.com
23 4D pharma plc Annual Report and Accounts 2016
Share capital and funding
As at 31 December 2016 share capital 
comprised 64,858,150 ordinary shares 
of 0.25 pence each. There is only one 
class of share and all shares are fully paid. 
No share carries any right to fixed income, 
and each share carries the right to one vote 
at general meetings of the Company.
Full details of the Group’s and the 
Company’s share capital movements 
during the year are given in note 20 to 
the financial statements.
Details of shares under option are provided 
in note 21 to the financial statements.
Corporate Governance Statement
The Group’s statement on corporate 
governance can be found in the Corporate 
Governance Statement on pages 15 to 17.
Going concern
The CEO’s Review on pages 10 to 13 
outlines the business activities of the 
Group, along with the factors which 
may affect its future development and 
performance, and discusses the Group’s 
financial position, along with details 
of its cash flow and liquidity. Reference is 
made to the statement on Risk and Risk 
Management on pages 7 to 9.
Having prepared management forecasts 
and made appropriate enquiries, the 
directors are satisfied that the Group has 
adequate cash and other resources for the 
foreseeable future, as the Group is at the 
start-up stage of its business lifecycle. 
Accordingly, they have continued to adopt 
the going concern basis in preparing the 
Group and Company financial statements.
Disclosure of information 
to the auditor
The directors who held office at the 
date of approval of this Directors’ Report 
confirm that:
• so far as they are each aware, there is 
no relevant audit information of which 
the Group’s auditor is unaware; and
• each director has taken all the steps 
that he ought to have taken as a director 
to make himself aware of any relevant 
audit information, and to establish 
that the Group’s auditor is aware of 
that information.
Auditor
RSM UK Audit LLP has indicated its 
willingness to continue in office. Ordinary 
resolutions to re-appoint RSM UK Audit LLP 
as auditor and to authorise the directors to 
agree their remuneration will be proposed 
at the forthcoming Annual General Meeting.
Annual General Meeting
The Annual General Meeting of the 
Company will be held on 26 May 2017 
at 1 p.m. at the Gridiron Building, 
1 Pancras Square, London N1C 4AG. 
Recommendation
The Board considers that the resolutions 
to be proposed at the Annual General 
Meeting are in the best interests of 
the Company and it is unanimously 
recommended that shareholders support 
these proposals as the Board intends 
to do in respect of its own holdings.
The Directors’ Report was approved 
by the Board on 26 April 2017 and 
was signed on its behalf by:
Duncan Peyton
Chief Executive Officer
26 April 2017
Substantial shareholders
The Company has been notified of the following interests of shareholders of 3% or more of the issued ordinary share capital of the 
Company at 31 December 2016, based on the ordinary shares in issue of 64,858,150 (as at 31 December 2015: 64,365,198): 
Number of 0.25 pence ordinary 
shares as at 31 December 2016 % of issued capital
Number of 0.25 pence ordinary 
shares as at 31 December 2015 % of issued capital
Woodford Investment Management LLP 17,514,561 27.0 15,604,321 24.0
Invesco Asset Management Limited 9,163,617 14.1 9,163,617 14.1
David Robert Norwood 7,000,000 10.8 7,000,000 10.9
Duncan Joseph Peyton 6,250,286 9.6 6,250,286 9.7
Dr Alexander James Stevenson 6,250,286 9.6 6,250,286 9.7
Lansdowne Partners 3,000,000 4.6 3,000,000 4.7
There were no notified significant changes in these holdings between 31 December 2016 and the date of the signing of these financial statements.
CORPORATE GOVERNANCE 4D pharma plc Annual Report and Accounts 2016 24
Statement of Directors’ Responsibilities
In relation to the Annual Report and financial statements
The directors are responsible for preparing 
the Strategic Report, the Directors’ Report 
and the financial statements in accordance 
with applicable law and regulations.
Company law requires the directors to 
prepare Group and Company financial 
statements for each financial year. The 
directors have elected to prepare the 
Group and Company financial statements 
in accordance with International Financial 
Reporting Standards (“IFRS”) as adopted 
by the European Union (“EU”).
The financial statements are required 
by law and IFRS adopted by the EU 
to present fairly the financial position 
and performance of the Group and the 
Company. The Companies Act 2006 
provides, in relation to such financial 
statements, that references in the relevant 
part of that Act to financial statements 
giving a true and fair view are references 
to their achieving a fair presentation.
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 the Company and of the profit or loss 
of the Group for that period.
In preparing each of the Group and 
the Company financial statements, 
the directors are required to:
a.   select suitable accounting policies 
and then apply them consistently;
b.   make judgements and accounting 
estimates that are reasonable 
and prudent;
c.   for the Group financial statements, 
state whether they have been 
prepared in accordance with IFRS 
as adopted by the EU; and
d.   prepare the financial statements 
on the going concern basis unless 
it is inappropriate to presume that 
the Group and the Company will 
continue in business.
The directors are responsible for keeping 
adequate accounting records that are 
sufficient to show and explain the Group’s 
and the Company’s transactions and 
disclose with reasonable accuracy at any 
time the financial position of the Group and 
the Company and enable them to ensure 
that the financial statements comply with 
the Companies Act 2006. 
They are also responsible for safeguarding 
the assets of the Group and the Company 
and hence for taking reasonable steps for 
the prevention and detection of fraud 
and other irregularities.
The directors are responsible for 
the maintenance and integrity of the 
corporate and financial information 
included on the 4D pharma plc website 
(www.4dpharmaplc.com). Legislation 
in the United Kingdom governing the 
preparation and dissemination of financial 
statements may differ from legislation 
in other jurisdictions.
CORPORATE GOVERNANCE www.4dpharmaplc.com
FINANCIAL STATEMENTS
25 4D pharma plc Annual Report and Accounts 2016
Opinion on other matter prescribed 
by the Companies Act 2006
In our opinion the information given in the 
Strategic Report and the Directors’ Report 
for the financial year for which the financial 
statements are prepared is consistent with 
the financial statements and, based on the 
work undertaken in the course of our audit, 
the Strategic report and the Directors’ 
Report have been prepared in accordance 
with applicable legal requirements.
Matters on which we are required 
to report by exception
In light of the knowledge and 
understanding of the company and its 
environment obtained in the course of the 
audit, we have not identified any material 
misstatements in the Strategic Report or 
the Directors’ Report. 
We have nothing to report in respect of 
the following matters where the Companies 
Act 2006 requires us to report to you if, 
in our opinion:
• adequate accounting records have not 
been kept by the parent company, or 
returns adequate for our audit have not 
been received from branches not visited 
by us; or
• the parent company financial statements 
are not in agreement with the accounting 
records and returns; or
• certain disclosures of directors’ 
remuneration specified by law are not 
made; or
• we have not received all the information 
and explanations we require for our audit. 
Opinion on financial statements
We have audited the group and parent 
company financial statements (“the financial 
statements”) on pages 26 to 57. The financial 
reporting framework that has been applied 
in their preparation is applicable law and 
International Financial Reporting Standards 
(“IFRSs”) as adopted by the European 
Union and, as regards the parent company 
financial statements, as applied in 
accordance with the provisions of the 
Companies Act 2006. 
In our opinion:
• the financial statements give a true and 
fair view of the state of the group’ s and the 
parent’s affairs as at 31 December 2016 
and of the group’s loss for the year 
then ended;
• the group financial statements have been 
properly prepared in accordance with IFRSs 
as adopted by the European Union;
• the parent financial statements have 
been properly prepared in accordance 
with IFRSs as adopted by the European 
Union and as applied in accordance with 
the Companies Act 2006; and
• the financial statements have been prepared 
in accordance with the requirements of 
the Companies Act 2006.
Scope of the audit of 
the financial statements
A description of the scope of an audit 
of financial statements is provided on the 
Financial Reporting Council’s website at 
http://www.frc.org.uk/auditscopeukprivate.
Respective responsibilities 
of directors and auditor
As more fully explained in the Statement of 
Directors’ Responsibilities on page 24, the 
directors are responsible for the preparation 
of the financial statements and for being 
satisfied that they give a true and fair view. 
Our responsibility is to audit and express 
an opinion on the financial statements 
in accordance with applicable law and 
International Standards on Auditing (UK 
and Ireland). Those standards require us to 
comply with the Auditing Practices Board’s 
(“APB’s”) Ethical Standards for Auditors.
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.
Graham Bond FCA 
(Senior Statutory Auditor)
For and on behalf of 
RSM UK AUDIT LLP,
Statutory Auditor 
Chartered Accountants
3 Hardman Street 
Manchester 
M3 3HF
26 April 2017
Independent Auditor’s Report
For the year ended 31 December 2016 FINANCIAL STATEMENTS
4D pharma plc Annual Report and Accounts 2016 26
Group Statement of Total Comprehensive Income
For the year ended 31 December 2016
Notes
31 December
2016
 £000
31 December
2015
 £000
Research and development costs 4 (10,220) (8,386)
Administrative expenses 4 (2,866) (2,248)
Foreign currency gains 4 799 124 
Operating loss 4 (12,287) (10,510)
Finance income 6 652 451 
Finance expense 6 (71) — 
Loss before taxation (11,706) (10,059)
Taxation 7 1,843 2,328 
Loss for the year (9,863) (7,731)
Other comprehensive income:
Foreign currency translation differences – foreign operations (389) — 
Total comprehensive income for the year (10,252) (7,731)
Loss for the year and total comprehensive income for the year attributable to:
Owners of the parent undertaking (10,252) (7,547)
Non-controlling interests — (184)
Loss for the year and total comprehensive income for the year (10,252) (7,731)
Loss per share
Basic and diluted for the year 8 (15.21)p (12.62)p
The loss for the year arises from the Group’s continuing operations and is attributable to the equity holders of the parent.
The basic and diluted loss per share are the same as the effect of share options is anti-dilutive.
The notes on pages 33 to 57 form an integral part of these financial statements. www.4dpharmaplc.com
FINANCIAL STATEMENTS
27 4D pharma plc Annual Report and Accounts 2016
At 
31 December 
2016
At 
31 December
 2015 
Notes £000 £000
Assets
Non-current assets
Property, plant and equipment 9 3,859 1,115 
Intangible assets 10 14,299 6,171 
Taxation receivables 15 23 — 
18,181 7,286 
Current assets
Inventories 13 238 28 
Trade and other receivables 14 2,651 2,013 
Taxation receivables 15 3,315 2,623 
Short-term investments and cash on deposit 16 40,111 83,664 
Cash and cash equivalents 16 28,661 1,777 
74,976 90,105 
Total assets 93,157 97,391 
Liabilities
Current liabilities
Trade and other payables 17 4,937 4,309 
4,937 4,309 
Non-current liabilities
Deferred tax 18 963 385 
Other payables 19 774 — 
1,737 385 
Total liabilities 6,674 4,694 
Net assets 86,483 92,697 
Capital and reserves
Share capital 20 162 161 
Share premium account 20 105,909 102,003 
Merger reserve 958 958 
Translation reserve (389) — 
Other reserve (864) (864)
Share-based payments reserve 21 138 7 
Retained earnings (19,431) (9,568)
Total equity 86,483 92,697 
Approved by the Board and authorised for issue on 26 April 2017.
The notes on pages 33 to 57 form an integral part of these financial statements.
Duncan Peyton
Director
26 April 2017
Group Statement of Financial Position 
At 31 December 2016 FINANCIAL STATEMENTS
4D pharma plc Annual Report and Accounts 2016 28
At
31 December
2016
At
31 December
2015 
Notes £000 £000
Assets
Non-current assets
Property, plant and equipment 9 256 369 
Intangible assets 10 889 1,076 
Investment in subsidiaries 11 6,128 2,323 
7,273 3,768 
Current assets
Loans to subsidiaries 11 24,114 8,916 
Trade and other receivables 14 350 1,940 
Taxation receivables 15 455 536 
Short-term investments and cash on deposit 16 40,111 83,664 
Cash and cash equivalents 16 27,778 1,684 
92,808 96,740 
Total assets 100,081 100,508 
Liabilities
Current liabilities
Trade and other payables 17 1,018 2,768 
1,018 2,768 
Non-current liabilities
Other payables 19 774 — 
774 — 
Total liabilities 1,792 2,768 
Net assets 98,289 97,740 
Capital and reserves
Share capital 20 162 161 
Share premium account 20 105,909 102,003 
Merger reserve 958 958 
Share-based payments reserve 21 138 7 
Retained earnings (8,878) (5,389)
Total equity 98,289 97,740 
Approved by the Board and authorised for issue on 26 April 2017.
The Company’s loss for the year was £3.489 million (2015: £4.224 million).
The notes on pages 33 to 57 form an integral part of these financial statements.
Duncan Peyton
Director
26 April 2017
Company Statement of Financial Position 
At 31 December 2016 www.4dpharmaplc.com
FINANCIAL STATEMENTS
29 4D pharma plc Annual Report and Accounts 2016
Attributable to owners of parent
Share 
capital
Share
 premium
Merger
 reserve
Translation
 reserve
Other
 reserve
Share-
based
 payment
 reserve
Retained
 earnings Total
Non-
controlling
 interest
Total 
equity
£000 £000 £000 £000 £000 £000 £000 £000 £000 £000
At 1 January 2015 130 38,259 958 — — — (2,021) 37,326 (278) 37,048 
Issue of share capital  
(net of expenses) 31 63,744 — — — — — 63,775 — 63,775 
Acquisition of minority interest — — — — (864) — — (864) 462 (402)
Total transactions with 
owners for the year 31 63,744 — — (864) — — 62,911 462 63,373 
Loss and total comprehensive 
income for the year — — — — — — (7,547) (7,547) (184) (7,731)
Issue of share-based 
compensation — — — — — 7 — 7 — 7 
At 31 December 2015 161 102,003 958 — (864) 7 (9,568) 92,697 — 92,697 
Issue of share capital  
(net of expenses) 1 3,906 — — — — — 3,907 — 3,907 
Total transactions with 
owners recognised in 
equity for the year 1 3,906 — — — — — 3,907 — 3,907 
Loss for the year — — — — — — (9,863) (9,863) — (9,863)
Foreign currency translation 
differences – foreign operations — — — (389) — — — (389) — (389)
Issue of share-based 
compensation — — — — — 131 — 131 — 131 
At 31 December 2016 162 105,909 958 (389) (864) 138 (19,431) 86,483 — 86,483 
Details regarding the purpose of each reserve within equity are given in note 22.
Group Statement of Changes in Equity
For the year ended 31 December 2016 FINANCIAL STATEMENTS
4D pharma plc Annual Report and Accounts 2016 30
Company Statement of Changes in Equity
For the year ended 31 December 2016
Share 
capital
Share 
premium
Merger 
reserve
Share-
based
payment
reserve
Retained
earnings Total
£000 £000 £000 £000 £000 £000
At 1 January 2015 130 38,259 958 — (1,165) 38,182 
Issue of share capital (net of expenses) 31 63,744 — — — 63,775 
Total transactions with owners 
recognised in equity for the year 31 63,744 — — — 63,775 
Loss and total comprehensive income 
for the year — — — — (4,224) (4,224)
Issue of share-based compensation — — — 7 — 7 
At 31 December 2015 161 102,003 958 7 (5,389) 97,740 
Issue of share capital (net of expenses) 1 3,906 — — — 3,907 
Total transactions with owners 
recognised in equity for the year 1 3,906 — — — 3,907 
Loss and total comprehensive income 
for the year — — — — (3,489) (3,489)
Issue of share-based compensation — — — 131 — 131 
At 31 December 2016 162 105,909 958 138 (8,878) 98,289 
Details regarding the purpose of each reserve within equity are given in note 22. www.4dpharmaplc.com
FINANCIAL STATEMENTS
31 4D pharma plc Annual Report and Accounts 2016
Year to
31 December 
2016
Year to
31 December 
2015
Notes £000 £000
Loss after taxation (9,863) (7,731)
Adjustments for:
Depreciation of property, plant and equipment 9 405 143 
Amortisation of intangible assets 10 213 110 
(Profit)/loss on disposal of property, plant and equipment (2) 2 
Finance income 6 (652) (451)
Finance expense 6 71 —
Share-based compensation 21 131 7 
Cash flows from operations before movements in working capital (9,697) (7,920)
Changes in working capital:
(Increase)/decrease in inventories (210) 87 
Increase in trade and other receivables (762) (1,375)
Increase in taxation receivables (715) (2,389)
(Decrease)/increase in trade and other payables (2,142) 2,524 
Cash outflow from operating activities (13,526) (9,073)
Cash flows from investing activities
Purchases of property, plant and equipment 9 (2,243) (845)
Purchase of software and other intangibles 10 (76) (14)
Acquisition of subsidiaries net of cash acquired 12 (1,615) — 
Acquisition of non-controlling interest — (402)
Cash received on disposal of assets 15 — 
Interest received 776 170 
Monies drawn from/(placed on) deposit 43,553 (80,657)
Net cash inflow/(outflow) from investing activities 40,410 (81,748)
Cash flows from financing activities
Proceeds from issues of ordinary share capital — 64,751 
Expenses on issue of shares 20 — (976)
Net cash inflow from financing activities — 63,775 
Increase/(decrease) in cash and cash equivalents 26,884 (27,046)
Cash and cash equivalents at the start of the year 1,777 28,823 
Cash and cash equivalents at the end of the year 16 28,661 1,777 
Group Cash Flow Statement
For the year ended 31 December 2016 FINANCIAL STATEMENTS
4D pharma plc Annual Report and Accounts 2016 32
Company Cash Flow Statement
For the year ended 31 December 2016
Year to 
31 December
2016
Year to 
31 December
2015 
Notes £000 £000
Loss after taxation (3,489) (4,224)
Adjustments for:
Depreciation of property, plant and equipment 9 63 10 
Amortisation of intangible assets 10 201 — 
Impairment of investment 11 — 986 
Finance income 6 (652) (451)
Finance expense 6 71 — 
Share-based consideration 21 131 7 
Cash flows from operations before movements in working capital (3,675) (3,672)
Changes in working capital:
Decrease/(increase) in trade and other receivables 1,466 (1,466)
Decrease/(increase) in taxation receivables 81 (445)
(Decrease)/increase in trade and other payables (1,750) 2,352 
Cash outflow from operating activities (3,878) (3,231)
Cash flows from investing activities
Purchases of property, plant and equipment 9 (104) (375)
Purchase of software and other intangibles 10 (14) (1,076)
Investment in share capital in subsidiary 11 (2) (191)
Acquisition of non-controlling interest 11 — (402)
Loans to subsidiary undertakings 11 (14,237) (6,189)
Interest received 776 170 
Monies drawn from/(placed on) deposit 43,553 (80,657)
Net cash inflow/(outflow) from investing activities 29,972 (88,720)
Cash flows from financing activities
Proceeds from issues of ordinary share capital 20 — 64,751 
Expenses on issue of shares 20 — (976)
Repayment of loan 11 — 1,076 
Net cash inflow from financing activities — 64,851 
Increase/(decrease) in cash and cash equivalents 26,094 (27,100)
Cash and cash equivalents at the start of the year 1,684 28,784 
Cash and cash equivalents at the end of the year 16 27,778 1,684  www.4dpharmaplc.com
FINANCIAL STATEMENTS
33 4D pharma plc Annual Report and Accounts 2016
1. General information
4D pharma plc (the “Company”) is an AIM-quoted company incorporated and domiciled in the UK. The locations and principal activities 
of the subsidiaries are set out in note 11. The Company is incorporated in England and Wales. The registered office is Third Floor, 9 Bond Court, 
Leeds LS1 2JZ. These Group financial statements consolidate those of the Company and its subsidiaries (together referred to as the 
“Group” and individually as “Group entities”) for the year ended 31 December 2016.
The financial statements of 4D pharma plc and its subsidiaries (the “Group”) for the year ended 31 December 2016 were authorised for issue 
by the Board of directors on 26 April 2017 and the Statement of Financial Position was signed on the Board’s behalf by Duncan Peyton. 
The Company has elected to take the exemption under section 408 of the Companies Act 2006 not to present the parent company’s 
Statement of Comprehensive Income. The Company’s loss for the year was £3.489 million (2015: £4.224 million).
The significant accounting policies adopted by the Group are set out in note 3. 
2. Basis of preparation
(a) Statement of compliance
The Group’s financial statements have been prepared in accordance with International Financial Reporting Standards as adopted by the 
European Union (“IFRS”) and IFRS Interpretations Committee interpretations as they apply to the financial statements of the Group for 
the year ended 31 December 2016 and the requirements of the Companies Act 2006 applicable to companies reporting under IFRS.
(b) Basis of measurement
The parent company and Group financial statements have been prepared on the historical cost basis except for the methods used 
to measure fair values of assets and liabilities, which are discussed in the respective notes and in note 3.
(c) Going concern
The Chief Executive Officer’ s Report on pages 10 to 13 outlines the business activities of the Group along with the factors which may affect 
its future development and performance. The Group’ s financial position is discussed in the Financial Summary on page 13 along with details 
of its cash flow and liquidity. Note 24 to the financial statements sets out the Group’ s financial risks and the management of those risks.
Having prepared management forecasts and made appropriate enquiries, the directors are satisfied that the Group has adequate resources 
for the foreseeable future as the Group is at the development stage of its business lifecycle. Accordingly they have continued to adopt 
the going concern basis in preparing the Group and Company financial statements.
(d) Functional and presentational currency
These financial statements are presented in Pounds Sterling, which is the Company’s functional currency and the Group’s presentational 
currency. All financial information presented has been rounded to the nearest thousand.
(e) Use of estimates and judgements
The preparation of financial statements requires management to make estimates and judgements that affect the amounts reported 
for assets and liabilities as at the reporting date and the amounts reported for revenues and expenses during the year. The nature of 
estimation means that actual amounts could differ from those estimates. Estimates and judgements used in the preparation of the 
financial statements are continually reviewed and revised as necessary. While every effort is made to ensure that such estimates and 
judgements are reasonable, by their nature they are uncertain and, as such, changes in estimates and judgements may have a material 
impact on the financial statements.
The key sources of estimation uncertainty and critical accounting policies that have a significant risk of causing material adjustment 
to the carrying amount of assets and liabilities within the next financial year are discussed below.
(i) Taxation 
Management judgement is required to determine the amount of tax assets that can be recognised, based upon the likely timing and 
level of future taxable profits together with an assessment of the effect of future tax planning strategies. Further information is included 
in note 7.
(ii) Research and development
Careful judgement by the directors is applied when deciding whether the recognition requirements for development costs have been met. This is 
necessary as the economic success of any product development is uncertain until such time as technical viability has been proven and commercial 
supply agreements are likely to be achieved. Judgements are based on the information available at each reporting date which includes the progress 
with testing and certification and progress on, for example, establishment of commercial arrangements with third parties. In addition, all internal 
activities related to research and development of new products are continuously monitored by the directors. Further information is included in note 3. 
Notes to the Financial Statements
For the year ended 31 December 2016 FINANCIAL STATEMENTS
4D pharma plc Annual Report and Accounts 2016 34
2. Basis of preparation continued
(e) Use of estimates and judgements continued
(iii) Intangible fixed assets and goodwill
Estimated impairment of intangible fixed assets and goodwill
The Group tests annually whether intangible fixed assets and goodwill have suffered any impairment, in accordance with the accounting 
policy stated in note 3(h). The potential recoverable amounts of intangible fixed assets and goodwill have been determined based on 
value-in-use calculations. These calculations require the use of estimates both in arriving at the expected future cash flows and the 
application of a suitable discount rate in order to calculate the present value of these flows. There is a degree of judgement involved 
in making assessments of attributable values on acquisition and making impairment assessments. More detail is given in notes 3(h) 
and 3(i).
Valuation of intangibles on acquisition
Valuation of an early stage drug discovery pharmaceutical company is a notoriously difficult task. Analysis of financial history gives little 
indication of future performance. Despite this, for products currently in development, sales potentials can be estimated and management 
has used its own experience as well as consulting with external experts to establish best estimates of sales pricing and revenue forecasting 
and these can provide the starting point for valuing these products and ensuring that their value has not been impaired. In addition, clinical 
development risks, measured as product attrition failure rates, incurred as drugs progress through the clinic are reasonably well documented 
and can be applied as meaningful risk adjusters to account for the chance of development failure.
3. Significant accounting policies
The accounting policies set out below are applied consistently by Group entities.
The Group financial statements are presented in Sterling and all values are rounded to the nearest thousand pounds except where 
otherwise indicated.
(a) Basis of consolidation
(i) Business combinations
Business combinations are accounted for using the acquisition method as at the acquisition date – i.e. when control is transferred 
to the Group. Control is the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. 
In assessing control, the Group takes into consideration potential voting rights that are currently exercisable. The Group measures 
goodwill at the acquisition date as:
• the fair value of the consideration transferred; plus
• the recognised amount of any non-controlling interests in the acquiree; plus
• if the business combination is achieved in stages, the fair value of the pre-existing equity interest in the acquiree; less
• the net recognised amount (generally fair value) of the identifiable assets acquired and liabilities assumed.
Transaction costs, other than those associated with the issue of debt or equity securities, that the Group incurs in connection with 
a business combination are expensed as incurred.
(ii) Subsidiaries
Subsidiaries are entities controlled by the Company. The financial statements of subsidiaries are included in the consolidated financial 
statements from the date that control commences until the date that control ceases.
Notes to the Financial Statements continued
For the year ended 31 December 2016 www.4dpharmaplc.com
FINANCIAL STATEMENTS
35 4D pharma plc Annual Report and Accounts 2016
3. Significant accounting policies continued
(a) Basis of consolidation continued
(iii) Transactions eliminated on consolidation
Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions, are eliminated 
in preparing the consolidated financial statements. Unrealised gains arising from transactions with equity-accounted investees are 
eliminated against the investment to the extent of the Group’s interest in the investee. Unrealised losses are eliminated in the same 
way as unrealised gains, but only to the extent that there is no evidence of impairment.
(b) Foreign currency transactions
Transactions in foreign currencies are initially recorded in the functional currency by applying the spot rate ruling at the date of the 
transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional currency rate of exchange 
ruling at the reporting date. All differences are recognised in profit or loss.
Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the 
dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates 
at the date when the fair value was determined.
Exchange differences arising from the translation of foreign operations are taken directly to the translation reserve.
(c) Segmental reporting
An operating segment is a component of an entity that engages in business activities from which it may earn revenues and incur 
expenses, whose operating results are regularly reviewed by the Group’s chief operating decision maker, being the Chief Executive 
Officer, to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial 
information is available. As at the reporting date the Group operated as a single segment.
(d) Lease payments
Rentals payable under operating leases, which are leases where the lessor retains a significant proportion of the risks and rewards 
of the underlying asset, are charged in profit or loss on a straight-line basis over the expected lease term. 
Lease incentives received are recognised as an integral part of the total lease expense, over the term of the lease.
(e) Finance income and finance expense 
Finance income comprises interest income on funds invested and changes in the fair value of financial assets at fair value through profit 
or loss. Interest income is recognised as interest accrues using the effective interest rate method.
Finance expense comprises interest expense on borrowings, changes in the fair value of financial assets at fair value through the Group 
Statement of Comprehensive Income, impairment losses recognised on financial assets and losses on hedging instruments that are 
recognised in profit or loss. All borrowing costs are recognised using the effective interest method.
(f) Income tax
Income tax expense comprises current and deferred tax. Income tax expense is recognised in the Income Statement except to the 
extent that it relates to items recognised directly in equity or in other comprehensive income.
Current income tax assets and liabilities for the current and prior years are measured at the amount expected to be recovered from, or paid to, the 
tax authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the reporting date.
Deferred income tax is recognised on all temporary differences arising between the tax bases of assets and liabilities and their carrying 
amounts in the financial statements with the following exceptions:
• where the temporary difference arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not 
a business combination and that at the time of the transaction affects neither accounting nor taxable profit or loss; and 
• in respect of taxable temporary differences associated with investments in subsidiaries where the timing of the reversal of the 
temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future. FINANCIAL STATEMENTS
4D pharma plc Annual Report and Accounts 2016 36
3. Significant accounting policies continued
(f) Income tax continued
Deferred income tax assets and liabilities are measured on an undiscounted basis using the tax rates and tax laws that have been 
enacted or substantively enacted by the balance sheet date and which are expected to apply when the related deferred tax asset is 
realised or the deferred tax liability is settled.
Deferred income tax assets are recognised to the extent that it is probable that future taxable profits will be available against which 
differences can be utilised. An asset is not recognised to the extent that the transfer or economic benefits in the future are uncertain.
(g) Property, plant and equipment
Property, plant and equipment are recognised initially at cost. After initial recognition, these assets are carried at cost less any accumulated 
depreciation and any accumulated impairment losses. Cost comprises the aggregate amount paid and the fair value of any other consideration 
given to acquire the asset and includes costs directly attributable to making the asset capable of operating as intended.
Depreciation is computed by allocating the depreciable amount of an asset on a systematic basis over its useful life and is applied 
separately to each identifiable component.
The following bases and rates are used to depreciate classes of assets:
Fixtures, fittings and office equipment  – straight line over five years
Plant and machinery  – straight line over five years
Leasehold improvements  – straight line over five years
The carrying values of property, plant and equipment are reviewed for impairment if events or changes in circumstances indicate that the 
carrying value may not be recoverable, and are written down immediately to their recoverable amount. Useful lives and residual values 
are reviewed annually and where adjustments are required these are made prospectively. 
A property, plant and equipment item is derecognised on disposal or when no future economic benefits are expected to arise from the continued 
use of the asset. Any gain or loss arising on the derecognition of the asset is included in the Income Statement in the year of derecognition.
(h) Intangible assets
Intellectual property and patents
The carrying value of intangible fixed assets is reviewed annually for impairment whenever events or changes in circumstances indicate 
the carrying value may not be recoverable.
At each reporting date the Group reviews the carrying value of its intangible assets to determine whether there is any indication that 
those assets have suffered an impairment loss. If any such indication exists the recoverable amount of the asset is estimated in order 
to determine the extent of the impairment loss.
Where the asset does not generate cash flows that are independent from other assets, the Group estimates the recoverable amount 
of the cash-generating unit to which the asset belongs. A cash-generating unit is the smallest identifiable group of assets that generates 
cash inflows from other assets or group assets.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use the estimated future cash 
flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value 
of money and the risks specific to the asset, for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced 
to its recoverable amount. An impairment loss is recognised as an expense immediately.
Where an impairment loss subsequently reverses, the carrying amount of the assets is increased to the recoverable amount, but so that 
the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been 
recognised for the asset in prior years. A reversal of an impairment loss is recognised in profit or loss immediately.
Amortisation is provided on the fair value of the asset and is calculated on a straight-line basis over its useful life. Amortisation 
is recognised within the Statement of Comprehensive Income. Intellectual property and patents acquired as part of a business 
combination are only amortised once technical viability has been proven and commercial agreements are likely to be achieved.
Patents includes the costs associated with acquiring and registering patents in respect of intellectual property rights. Patents are 
amortised on a straight-line basis over the shorter of their useful lives and the period to the expiry of the patent.
Notes to the Financial Statements continued
For the year ended 31 December 2016 www.4dpharmaplc.com
FINANCIAL STATEMENTS
37 4D pharma plc Annual Report and Accounts 2016
3. Significant accounting policies continued
(h) Intangible assets continued
Goodwill
Goodwill on acquisitions, being the excess of the fair value of the cost of acquisition over the Group’s interest in the fair value of the 
identifiable assets and liabilities acquired, is capitalised and tested for impairment on an annual basis.
Any impairment is recognised immediately in profit or loss and is not subsequently reversed. For the purpose of impairment testing 
goodwill is allocated to the single cash-generating unit of 4D pharma plc, which represent the smallest identifiable group of assets that 
generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets.
Software
Software is recognised initially at cost. After initial recognition, these assets are carried at cost less any accumulated amortisation and 
any accumulated impairment losses. Cost comprises the aggregate amount paid and the fair value of any other consideration given 
to acquire the asset and includes costs directly attributable to making the asset capable of operating as intended.
Amortisation is computed by allocating the amortisation amount of an asset on a systematic basis over its useful life and is applied 
separately to each identifiable component. Amortisation is applied to software over five years on a straight-line basis.
The carrying value of software is reviewed for impairment if events or changes in circumstances indicate that the carrying value may not 
be recoverable, and is written down immediately to their recoverable amount. Useful lives and residual values are reviewed annually and 
where adjustments are required these are made prospectively.
A software item is derecognised on disposal or when no future economic benefits are expected to arise from the continued use of the 
asset. Any gain or loss arising on the derecognition of the asset is included in the Income Statement in the year of derecognition.
Internally generated intangible assets
Expenditure on research activities is recognised in the Statement of Comprehensive Income as incurred. Expenditure arising from the 
Group’s development is recognised only if all of the following conditions are met:
• an asset is created that can be identified;
• it is probable that the asset created will generate future economic benefits;
• the development cost of the asset can be measured reliably;
• the Group has the intention to complete the asset and the ability and intention to use or sell it;
• the product or process is technically and commercially feasible; and
• sufficient resources are available to complete the development and to either sell or use the asset.
Where these criteria have not been achieved, development expenditure is recognised in profit or loss in the year in which it is incurred.
The Group has adopted the industry standard approach to the treatment of development expenditure by capitalising development costs 
at the point where regulatory approval is reached and the probability of generating future economic benefits is high.
(i) Impairment of assets 
An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s fair value less costs to sell and its value in use and 
is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other 
assets or groups of assets. Where the carrying value of an asset exceeds its recoverable amount, the asset is considered impaired and 
is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present 
value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the 
asset. In determining fair value less costs of disposal, an appropriate valuation model is used; these calculations are corroborated by 
valuation multiples, or other available fair value indicators. Impairment losses on continuing operations are recognised in the Income 
Statement in those expense categories consistent with the function of the impaired asset.
(j) Investments in subsidiaries
Investments in and loans to subsidiaries are stated in the Company’ s Statement of Financial Position at cost less provision for any impairment.
(k) Inventories
Inventories are stated at the lower of cost and net realisable value. Cost based on latest contractual prices includes all costs incurred in 
bringing each product to its present location and condition. Net realisable value is based on estimated selling price less any further costs 
expected to be incurred to disposal. Provision is made for slow-moving or obsolete items. FINANCIAL STATEMENTS
4D pharma plc Annual Report and Accounts 2016 38
3. Significant accounting policies continued
(l) Cash, cash equivalents and short-term investments
Cash and cash equivalents comprise cash at hand and deposits with maturities of three months or less. Short-term investments 
comprise deposits with maturities of more than three months, but no greater than twelve months.
(m) Trade and other payables
Trade and other payables are non-interest bearing and are initially recognised at fair value. They are subsequently measured at amortised 
cost using the effective interest rate method.
(n) Financial assets and liabilities
Financial assets and liabilities are recognised when the Group becomes party to the contracts that give rise to them and are classified 
as financial assets and liabilities at fair value through the Group Statement of Total Comprehensive Income. The Group determines the 
classification of its financial assets and liabilities at initial recognition and re-evaluates this designation at each financial year end.
A financial asset or liability is generally derecognised when the contract that gives rise to it is settled, sold or cancelled or expires.
(o) Share-based payments 
Equity-settled share-based payment transactions are measured with reference to the fair value at the date of grant, recognised on a 
straight-line basis over the vesting period, based on the Company’s estimate of shares that will eventually vest. Fair value is measured 
using a suitable option pricing model. 
At each reporting date before vesting, the cumulative expense is calculated, representing the extent to which the vesting period 
has expired and management’s best estimate of the achievement or otherwise of non-market conditions and the number of equity 
instruments that will ultimately vest. The movement in cumulative expense since the previous reporting date is recognised in the 
Group Statement of Total Comprehensive Income, with a corresponding entry in equity. 
Where the terms of an equity-settled award are modified or a new award is designated as replacing a cancelled or settled award, 
the cost based on the original award terms continues to be recognised over the remainder of the original vesting period. In addition, 
an expense is recognised over the remainder of the new vesting period for the incremental fair value of any modification, based on 
the difference between the fair value of the original award and the fair value of the modified award, both as measured on the date 
of modification. No reduction is recognised if this difference is negative.
(p) Share capital
Proceeds on issue of shares are included in shareholders’ equity, net of transaction costs. The carrying amount is not remeasured 
in subsequent years.
(q) New accounting standards and interpretations 
Adoption of IFRS 
The Group and Company financial statements have been prepared in accordance with IFRS, IAS and IFRS Interpretations Committee 
effective as at 31 December 2016. The Group and Company have not chosen to adopt any amendments or revised standards early.
IFRS issued but not yet effective
At the date of issue of these financial statements, the following accounting standards and interpretations, which have not been applied, were 
in issue but not yet effective. The directors do not anticipate that adoption of these will have a material impact on the financial statements.
IFRS 9 Financial Instruments
IFRS 15 Revenue from Contracts with Customers
IFRS 16 Leases
Notes to the Financial Statements continued
For the year ended 31 December 2016 www.4dpharmaplc.com
FINANCIAL STATEMENTS
39 4D pharma plc Annual Report and Accounts 2016
4. Operating loss
During the year the Group reviewed the basis of the disclosure of costs in the accounts relative to the expenses incurred and the nature 
of the expense. Although there was no net change in the reported loss following on from this review, the totals disclosed were adjusted 
to accommodate this disclosure change; had they not been adjusted then the totals would have been as follows:
Original Current
disclosure disclosure Movement
Disclosure adjustment to year ending 31 December 2015: £000 £000 £000
Research and development expense 6,895 8,386 1,491
Administrative expenses 3,615 2,248 (1,367)
Foreign currency gains — (124) (124)
10,510 10,510 —
Year to Year to
31 December 31 December
2016 2015
By nature: £000 £000
Operating loss is stated after charging/(crediting):
Research and development expense
Depreciation on property, plant and equipment 349 140
Amortisation of intangible assets 213 110
Staff costs (see note 5) 1,604 650
Operating lease rentals:
– Land and buildings 457 90
– Equipment 2 —
– Other contractual commitments 1,837 764
Other research and development costs 5,758 6,632
10,220 8,386
Administrative expenses
Depreciation on property, plant and equipment 56 3
(Profit)/loss on disposal of property, plant and equipment (2) 2
Staff costs (see note 5) 840 433
Operating lease rentals:
– Land and buildings 44 31
Auditor’s remuneration 56 30
Legal and professional 838 1,106
Consultancy 202 224
Other administrative costs 832 419
2,866 2,248
Foreign currency gains (799) (124)
Auditor’s remuneration:
Audit services:
– Fees payable to Company auditor for the audit of the parent and the consolidated accounts 38 14
– Auditing the financial statements of subsidiaries pursuant to legislation 10 14
– Non-audit services 8 2
Total auditor’s remuneration 56 30 FINANCIAL STATEMENTS
4D pharma plc Annual Report and Accounts 2016 40
5. Staff costs
Year to 31 December 2016 Year to 31 December 2015
Research and Research and
development Administrative Total development Administrative Total
£000 £000 £000 £000 £000 £000
Wages and salaries 1,371  621  1,992  589  382  971 
Social security costs 201  74  275  53  44  97 
Pension contributions 32  14  46  8  —  8 
Share-based compensation — 131  131  —  7  7 
1,604 840 2,444 650 433 1,083 
Directors’ remuneration (including benefits 
in kind) included in the aggregate 
remuneration above comprised:
Emoluments for qualifying services — 252 252 — 260 260 
Directors’ emoluments (excluding social security costs, but including benefits in kind) disclosed above include £101,238 
(31 December 2015: £101,000) paid to the highest paid director.
The directors were not granted any share options in the years ended 31 December 2016 or 31 December 2015 and none of the 
directors held any share options at 31 December 2016.
An analysis of the highest paid director’s remuneration is included in the Report of the Remuneration Committee.
The average number of employees during the year (including directors) was as follows:
Year to Year to 
31 December 31 December
2016 2015
Group Number Number
Directors 4 4
Laboratory and administrative staff 53 20
57 24
Year to Year to 
31 December 31 December
2016 2015
Company Number Number
Directors 4 4
Other staff 6 2
10 6
Notes to the Financial Statements continued
For the year ended 31 December 2016 www.4dpharmaplc.com
FINANCIAL STATEMENTS
41 4D pharma plc Annual Report and Accounts 2016
6. Finance income and finance expense
Year to Year to 
31 December 31 December
2016 2015
£000 £000
Finance income
Bank interest receivable 652 451 
Finance expense
Unwind of discount (71) — 
581 451 
Bank interest receivable includes £156,681 (31 December 2015: £280,818) which is receivable after the year end.
7. Taxation
The tax credit is made up as follows:
Year to Year to 
31 December 31 December
2016 2015
£000 £000
Current income tax
Total current income tax (1,843) (1,398)
Adjustment in respect of prior years — (930)
Current deferred tax
Current year charge — — 
Total deferred tax — — 
Total income tax credit recognised in the year (1,843) (2,328) FINANCIAL STATEMENTS
4D pharma plc Annual Report and Accounts 2016 42
7. Taxation continued
The income tax credit can be reconciled to the accounting loss as follows:
Year to Year to 
31 December 31 December
2016 2015
£000 £000
Loss before taxation (11,706) (10,059)
Tax at standard rate of 20% UK, 25% EU (31 December 2015: 20% (UK only)) (2,356) (2,012)
Effects of:
Expenses not deductible for tax purposes 56 7 
Adjustments to foreign currency translations on subsidiaries 8 — 
Enhanced research and development expenditure (1,410) (1,276)
Property, plant, equipment and software timing differences 20 (40)
Tax losses carried forward to future years 1,154 1,066 
Utilised losses from prior years — 234 
Adjustment in respect of prior years — (930)
Effects of variation on tax reclaims over the standard rate 685 623 
Tax income tax credit recognised in the year (1,843) (2,328)
At 31 December 2016, the Group had tax losses available for carry forward of approximately £12.262 million (31 December 2015: 
£9.542 million). The Group has not recognised deferred tax assets relating to such earned forward losses of approximately £2.452 million 
(31 December 2015: £1.908 million).  
At 31 December 2016, the Company had tax losses available for carry forward of approximately £2.974 million (31 December 2015: 
£3.740 million). The Company has not recognised deferred tax assets relating to such earned forward losses of approximately £0.595 
million (31 December 2015: £0.748 million).  
Group’s management considers that there is insufficient evidence of future taxable income, taxable temporary differences and feasible 
tax-planning strategies to utilise all of the cumulative losses and therefore it is not considered certain that the deferred tax assets will 
be realised in full. If future income differs from current projections, this could significantly impact the tax charge or benefit in future years.
8. Loss per share
Year to Year to 
31 December 31 December
2016 2015
£000 £000
Loss for the year attributable to equity shareholders (9,863) (7,547)
Weighted average number of shares:
Ordinary shares in issue 64,858,150 59,823,755
Basic loss per share (pence) (15.21)p (12.62)p
The basic and diluted loss per share are the same as the effect of share options is anti-dilutive.
Notes to the Financial Statements continued
For the year ended 31 December 2016 www.4dpharmaplc.com
FINANCIAL STATEMENTS
43 4D pharma plc Annual Report and Accounts 2016
9. Property, plant and equipment
Group
Fixtures, fittings
and office
equipment
Plant and
machinery
Leasehold
improvements Total
£000 £000 £000 £000
Cost
At 31 December 2014 6 476 — 482 
Additions 88 653 104 845 
Disposals — (4) — (4)
Reclassification as intangible assets — (1) — (1)
At 31 December 2015 94 1,124 104 1,322 
Additions 88 1,894 261 2,243 
Additions on business combinations — 625 334 959 
Disposals — (15) — (15)
Exchange rate adjustment (2) (44) (16) (62)
At 31 December 2016 180 3,584 683 4,447 
Depreciation
At 31 December 2014 — 65 — 65 
Provided during the year 6 137 — 143 
Released on disposal — (1) — (1)
At 31 December 2015 6 201 — 207 
Provided during the year 32 318 55 405 
Released on disposal — (2) — (2)
Exchange rate adjustment — (20) (2) (22)
At 31 December 2016 38 497 53 588 
Net book value
At 31 December 2016 142 3,087 630 3,859 
At 31 December 2015 88 923 104 1,115 
At 31 December 2014 6 411 — 417  FINANCIAL STATEMENTS
4D pharma plc Annual Report and Accounts 2016 44
9. Property, plant and equipment continued
Company
Fixtures, fittings
and office
equipment
Plant and
machinery
Leasehold
improvements Total
£000 £000 £000 £000
Cost
At 31 December 2014 4 — — 4 
Additions 71 200 104 375 
At 31 December 2015 75 200 104 379 
Additions 41 56 7 104 
Transfer to subsidiary entities — (168) — (168)
At 31 December 2016 116 88 111 315 
Depreciation
At 31 December 2014 — — — — 
Provided during the year 3 7 — 10 
At 31 December 2015 3 7 — 10 
Provided during the year 22 18 23 63 
Released on transfer to subsidiary entities — (14) — (14)
At 31 December 2016 25 11 23 59 
Net book value
At 31 December 2016 91 77 88 256 
At 31 December 2015 72 193 104 369 
At 31 December 2014 4 — — 4 
Notes to the Financial Statements continued
For the year ended 31 December 2016 www.4dpharmaplc.com
FINANCIAL STATEMENTS
45 4D pharma plc Annual Report and Accounts 2016
10. Intangible assets
Software Goodwill
Intellectual
property Patents Total
Group £000 £000 £000 £000 £000
Cost
At 31 December 2014 — 3,316 1,923 1,076 6,315 
Additions 14 — — — 14 
Reclassified from tangible assets 1 — — — 1 
At 31 December 2015 15 3,316 1,923 1,076 6,330 
Additions 71 — — 5 76 
Additions on business combinations — 5,683 2,584 — 8,267 
Exchange rate adjustment (2) — — — (2)
At 31 December 2016 84 8,999 4,507 1,081 14,671 
Amortisation
At 31 December 2014 — — — 49 49 
Provided during the year 2 — — 108 110 
At 31 December 2015 2 — — 157 159 
Provided during the year 13 — — 200 213 
Exchange rate adjustment — — — — — 
At 31 December 2016 15 — — 357 372 
Net book value
At 31 December 2016 69 8,999 4,507 724 14,299 
At 31 December 2015 13 3,316 1,923 919 6,171 
At 31 December 2014 — 3,316 1,923 1,027 6,266 
Software Patents Total
Company £000 £000 £000
Cost
At 31 December 2014 — — — 
Additions — 1,076 1,076 
At 31 December 2015 — 1,076 1,076 
Additions 14 — 14 
At 31 December 2016 14 1,076 1,090 
Amortisation
At 31 December 2015 — — — 
Provided during the year — — — 
At 31 December 2015 — — — 
Provided during the year 2 199 201 
At 31 December 2016 2 199 201 
Net book value
At 31 December 2016 12 877 889 
At 31 December 2015 — 1,076 1,076 
At 31 December 2014 — — —  FINANCIAL STATEMENTS
4D pharma plc Annual Report and Accounts 2016 46
10. Intangible assets continued
During the year goodwill amounting to £5.683 million was acquired as part of the business combinations detailed in note 12 being 
£1.774 million arising on the acquisition of Tucana Health Limited and £3.909 million arising on the acquisition of 4D Pharma Leon, S.L.U.
Goodwill amounting to £8.999 million, intellectual property amounting to £4.507 million and patent rights amounting to £1.081 million 
relate to a single cash-generating unit (“CGU”), contained in the acquisitions of 4D Pharma Research Limited, 4D Pharma Leon, S.L.U. 
and 4D Pharma Cork Limited (formerly Tucana Health Limited). These entities together provide the necessary facilities and resources 
to enable the Group to successfully research, manufacture, gain approval for and commercialise Live Biotherapeutic Products.
Goodwill, which has arisen on the business combinations, represents staff and accumulated know-how after fair value has been 
attributed to all other assets and liabilities acquired. Intellectual property of £1.923 million recognised on the business combinations 
represents bacteria identified by the Group’s know-how and processes and at different stages of research and development, from 
early identification to patented strains of bacteria. Intellectual property of £2.584 million acquired during the year represents the methods 
and know-how in relation to the MicroDx platform acquired as part of 4D Pharma Cork Limited (formerly Tucana Health Limited). 
During the year goodwill, intellectual property, patents and associated property, plant and equipment were tested for impairment in 
accordance with IAS 36 Impairment of Assets. The recoverable amount of the CGU exceeds the carrying amount of goodwill, intellectual 
property, patents and associated property, plant and equipment. The recoverable amount of the CGU has been measured using a 
value-in-use calculation and, as such, no impairment was deemed necessary. The key assumptions used, which are based both on 
management’s past experience as well as externally provided reports, for the value-in-use calculations are those relating to the risk-
adjusted net present value of candidates that have been identified as potential future products as at 31 December 2016 and for which 
estimated potential peak sales and future cash flows have been estimated. In addition an external valuation of the intellectual property 
contained via the acquisition of 4D Pharma Cork Limited (formerly Tucana Health Limited) has been used. Valuation of an early stage 
drug discovery pharmaceutical company is a notoriously difficult task and an analysis of financial history gives little indication of future 
performance. Despite this, for products currently in development, sales potentials can be estimated and management has used its own 
experience as well as consulting with external experts to establish best estimates of sales pricing and revenue forecasting and these can 
provide the starting point for valuing these products and ensuring that their value has not been impaired.
The recoverable amount of goodwill, intellectual property, patents and associated property, plant and equipment exceeds the carrying 
amount by 5,520%. The key assumption considered most sensitive for the value-in-use calculations is that regarding the discount rate 
applied to the net present value calculations. Management has performed sensitivity analysis on this key assumption and increased this 
from 10% to 20%. Due to the headroom which exists between the recoverable amount and the carrying value there is no reasonable 
possible change in this assumption that would cause the CGU’s carrying value to exceed its recoverable amount. 
11. Investment and loans to subsidiaries
Ordinary shares 
Non-current assets £000
Company
At 31 December 2014 2,716
Additions in the year 593
Impairment of investments (986)
At 31 December 2015 2,323 
Additions in the year 3,805 
At 31 December 2016 6,128 
By subsidiary
4D Pharma Research Limited 2,323 
4D Pharma Cork Limited 3,803 
4D Pharma Leon, S.L.U. 2 
At 31 December 2016 6,128 
Notes to the Financial Statements continued
For the year ended 31 December 2016 www.4dpharmaplc.com
FINANCIAL STATEMENTS
47 4D pharma plc Annual Report and Accounts 2016
11. Investment and loans to subsidiaries continued
Loans to
subsidiary
undertakings 
Current assets £000
Company
At 31 December 2014 —
Transferred from non-current assets 3,803
Additions in the year 6,189
Repaid during the year (1,076)
At 31 December 2015 8,916 
Additions in the year 15,198 
At 31 December 2016 24,114 
By subsidiary
4D Pharma Research Limited 18,072 
4D Pharma Cork Limited 397 
4D Pharma Leon, S.L.U. 5,645 
At 31 December 2016 24,114 
4D Pharma Cork Limited
The following addition was settled in shares and deferred consideration:
Proportion
of voting Consideration
equity interests transferred
Subsidiary Principal activity Date of acquisition acquired £000
4D Pharma Cork Limited 
(formerly Tucana Health 
Limited)
Research and development
10-Feb-16 100.00% 3,100
Deferred consideration 100.00% 703
(representing the risk-adjusted discounted value of up to 
1 million further shares; see note 12 for further details)
4D Pharma Leon, S.L.U.
The following addition was settled in cash:
Proportion
of voting Consideration
equity interests transferred
Subsidiary Principal activity Date of acquisition acquired £000
4D Pharma Leon, S.L.U. Production of Live Biotherapeutic Products 08-Apr-16 100.00% 2
See note 12 for further details on the assets acquired and incorporated into 4D Pharma Leon, S.L.U.
Subsidiary undertakings Country of incorporation Principal activity 31 December 2016
4D Pharma Research Limited Scotland Research and development 100%
4D Pharma Cork Limited Ireland Research and development 100%
4D Pharma Leon, S.L.U. Spain Production of Live Biotherapeutic Products 100%
Microbiomics Limited England and Wales Dormant 100%
The Microbiota Company Limited England and Wales Dormant 100%
Schosween 18 Limited England and Wales Dormant 100%
The shares in all the companies listed above are held by 4D pharma plc. FINANCIAL STATEMENTS
4D pharma plc Annual Report and Accounts 2016 48
11. Investment and loans to subsidiaries continued
The registered office of each of Microbiomics Limited, The Microbiota Company Limited and Schosween 18 Limited is Third Floor, 
9 Bond Court, Leeds LS1 2JZ. The registered office of 4D Pharma Research Limited is Life Science Innovation Building, Cornhill Road, 
Aberdeen, Scotland AB25 2ZS. The registered office of 4D Pharma Cork Limited is c/o Paul O’Toole Room 447 Food Science Building, 
University College Cork, Western Road, Cork T12 YN60 Ireland. The registered office of 4D Pharma León, S.L.U. is Parque Tecnológico 
de León, Parc M 10.4, 24009 Armunia, Spain.
12. Business combinations
Acquisition of 4D Pharma Cork Limited (formerly Tucana Health Limited)
On 10 February 2016 4D acquired 100% of the issued share capital of Tucana Health Limited (“Tucana”) for an initial consideration 
of €4 million which was satisfied by the issue of 410,603 shares in 4D at a price per share of £7.55. Tucana is a start-up company 
investigating the use of the microbiome signatures to aid the diagnosis and treatment of diseases including those targeted by 4D. 
On completion of further technical and clinical milestones a further consideration of up to €8 million will become due which will be 
satisfied by the issue of up to 1 million additional shares in 4D.
Year Principal activity Date of acquisition
Proportion
of voting
equity
interests
acquired
%
Consideration
£000
2016 Research and development 10 February 2016 100 3,803
Consideration: £000 £000
Initial share consideration 3,100
Contingent consideration to be satisfied in shares 985
Discounting of estimated future cash flows (282)
Net contingent consideration 703
Total consideration on acquisition 3,803
Fair value of assets acquired and liabilities 
recognised at the date of acquisition
Non-current assets
Intellectual property 2,584
Non-current liabilities
Deferred tax on acquisition (555)
Fair value of identifiable net assets acquired 2,029
Goodwill arising on acquisition
Consideration transferred 3,803
Less: fair value of identifiable net assets acquired (2,029)
Goodwill arising on acquisition 1,774
For the 11 months to 31 December 2016 4D Pharma Cork Limited recorded a loss of £0.233 million after tax. On a pro-rata basis this 
equates to an annualised loss of £0.254 million.
Acquisition of 4D Pharma Leon, S.L.U.
On 8 April 2016 4D invested £2,000 into 4D Pharma Leon, S.L.U., a newly incorporated Spanish subsidiary, which in turn acquired the 
production assets of Biomar, S.A. (“Biomar”). The consideration for the production assets was an initial €3 million on completion of which 
€2 million was paid in cash and €1 million satisfied by the issue of 82,349 4D pharma plc shares at a price of £9.805. In addition a further 
€3 million will become payable in cash upon successful GMP certification in respect of the production of Live Biotherapeutics at the Leon 
premises which is accounted for under financial liabilities in the Statement of Financial Position as at 31 December 2016. 
Notes to the Financial Statements continued
For the year ended 31 December 2016 www.4dpharmaplc.com
FINANCIAL STATEMENTS
49 4D pharma plc Annual Report and Accounts 2016
12. Business combinations continued
Acquisition of 4D Pharma Leon, S.L.U. continued
Year Principal activity Date of acquisition
Proportion
of voting
equity
interests
acquired
%
Consideration
£000
2016 Production of Live Biotherapeutics 8 April 2016 100 4,845
Consideration: £000
Initial share consideration 807
Initial cash consideration 1,615
Contingent consideration to be settled in cash 2,423
Total consideration on acquisition 4,845
Fair value of assets acquired and liabilities 
recognised at the date of acquisition
Non-current assets
Property, plant and equipment 959
Non-current liabilities
Deferred tax on acquisition (23)
Fair value of identifiable net assets acquired 936
Goodwill arising on acquisition
Consideration transferred 4,845
Less: fair value of identifiable net assets acquired (936)
Goodwill arising on acquisition 3,909
For the nine months to 31 December 2016, 4D Pharma Leon, S.L.U. recorded a loss of £0.039 million after tax. On a pro-rata basis this 
equates to an annualised loss of £0.052 million.
13. Inventories
31 December
2016
31 December
2016
31 December
2015
31 December
2015
Group Company Group Company
£000 £000 £000 £000
Consumables and materials 238 — 28 — 
The directors consider that the carrying amount of inventories is the lower of cost and market value.
During the year £1,641,642 (year to 31 December 2015: £876,040) of inventories were expensed to the Income Statement. 
14. Trade and other receivables
31 December
2016
31 December
2016
31 December
2015
31 December
2015
Group Company Group Company
£000 £000 £000 £000
Prepayments 2,651 350 2,013 1,940 
The directors consider that the carrying amount of trade and other receivables approximates to their fair value. FINANCIAL STATEMENTS
4D pharma plc Annual Report and Accounts 2016 50
15. Taxation receivables
31 December
2016
31 December
2016
31 December
2015
31 December
2015
Group Company Group Company
Non-current receivables £000 £000 £000 £000
Corporation tax 23 — — — 
23 — — — 
Non-current assets include research and development tax claims in overseas subsidiaries that are repayable in more than one year.
31 December
2016
31 December
2016
31 December
2015
31 December
2015
Group Company Group Company
Current receivables £000 £000 £000 £000
Corporation tax 2,269 410 2,328 477 
VAT 1,046 45 295 59 
3,315 455 2,623 536 
The directors consider that the carrying amount of taxation receivables approximates to their fair value.
16. Cash, cash equivalents and deposits
31 December
2016
31 December
2016
31 December
2015
31 December
2015
Group Company Group Company
£000 £000 £000 £000
Short-term investments and cash on deposit 40,111 40,111 83,664 83,664 
Cash and cash equivalents 28,661 27,778 1,777 1,684 
68,772 67,889 85,441 85,348 
Under IAS 7 Statement of Cash Flows, cash held on long-term deposits (being deposits with maturity of greater than three months and 
no more than twelve months) that cannot readily be converted into cash has been classified as a short-term investment. The maturity 
on this investment was less than twelve months at the reporting date.
Cash and cash equivalents at 31 December 2016 include deposits with original maturity of three months or less of £15,000,000 (Group) 
and £15,000,000 (Company).
The directors consider that the carrying value of cash and cash equivalents approximates their fair value. For details on the Group’s 
credit risk management refer to note 24.
17. Trade and other payables
31 December
2016
31 December
2016
31 December
2015
31 December
2015
Group Company Group Company
Current £000 £000 £000 £000
Trade payables 1,163 254 2,891 1,808 
Other payables 35 35 23 20 
Contingent consideration 2,560 — — —
Taxation and social security 581 482 42 24 
Accruals 598 247 1,353 916 
4,937 1,018 4,309 2,768 
Trade and other payables principally comprise amounts outstanding for trade purchases and ongoing costs. Trade payables are 
non-interest bearing and are typically settled on 30 to 45-day terms.
The directors consider that the carrying value of trade payables, other payables and accruals approximates to their fair value.
The Group has financial risk management policies in place to ensure that any trade payables are settled within the credit time frame and 
no interest has been charged by any suppliers as a result of late payment of invoices during the reporting year presented herein.
Notes to the Financial Statements continued
For the year ended 31 December 2016 www.4dpharmaplc.com
FINANCIAL STATEMENTS
51 4D pharma plc Annual Report and Accounts 2016
18. Deferred tax
Group
£000
At 31 December 2014 —
Arising on the fair value of intellectual property on the acquisition of subsidiaries 385 
At 31 December 2015 385 
Arising on the fair value of intellectual property on the acquisition of subsidiaries 578 
At 31 December 2016 963 
During the year to 31 December 2016 the Company acquired 4D Pharma Leon, S.L.U. and 4D Pharma Cork Limited. These acquisitions 
created deferred tax provisions arising from the difference between the fair values of the assets acquired and the payment for the assets. 
19. Other payables
Group Company
£000 £000
As at 31 December 2015 — —
Contingent consideration 703 703 
Unwinding of discount 71 71 
As at 31 December 2016 774 774 
On 10 February 2016 the Company acquired Tucana Health Limited (now 4D Pharma Cork Limited) for up to 1,410,603 shares, of which 
only 410,603 shares have been issued currently, the remainder remaining contingent on milestones. Having reviewed the current information 
on the milestones required to achieve the additional share issues the Group has concluded that some or all of the milestones are more 
than likely to be achieved so has valued the potential liability based on their discounted probability.
The following table lists the inputs used in valuing the provision:
The Company and the Group 2016
Share price 757p
Cost of capital 17.50%
20. Share capital
Ordinary shares
Share
capital Share premium Total
The Company and the Group Number £000 £000 £000
Allotted, called up and fully paid ordinary shares of 0.25p
At 1 January 2015 52,092,119 130 38,259 38,389 
Shares issued on 10 February 2015 8,475,610 21 34,729 34,750 
Expenses of placing on 10 February 2015 — — (487) (487)
Shares issued on 11 December 2015 3,797,469 10 29,991 30,001 
Expenses of placing on 11 December 2015 — — (489) (489)
At 31 December 2015 64,365,198 161 102,003 102,164 
Shares issued on 10 February 2016 410,603 1 3,099 3,100 
Shares issued on 8 April 2016 82,349 — 807 807 
Ordinary shares at 31 December 2016 64,858,150 162 105,909 106,071 
The balances classified as share capital and share premium include the total net proceeds (nominal value and share premium 
respectively) on issue of the Company’s equity share capital, comprising 0.25 pence ordinary shares. FINANCIAL STATEMENTS
4D pharma plc Annual Report and Accounts 2016 52
20. Share capital continued
The Company acquired Tucana Health Limited (now 4D Pharma Cork Limited) on 10 February 2016 for up to 1,410,603 shares, of which 
only 410,603 shares have been issued currently, the remainder remaining contingent on milestones. The 410,603 shares were issued at 
a price of 755 pence per share.
The Company acquired the production assets of Instituto Biomar S.A. on 8 April 2016 to form 4D Pharma Leon, S.L.U. for €2 million 
cash and €1 million shares in 4D pharma plc, equating to 82,349 shares issued at a price of 980.5 pence per share. A further €3 million 
cash will become payable on GMP certification.
21. Share-based payment reserve
The Company and the Group £000
At 31 December 2015 7
Share-based compensation 131
At 31 December 2016 138
The share-based payment reserve accumulates the corresponding credit entry in respect of share-based payment charges. 
Movements in the reserve are disclosed in the Group and Company Statements of Changes in Equity.
A charge of £131,000 has been recognised in the Statement of Comprehensive Income for the year (year to 31 December 2015: £7,200).
Share option schemes
The Group operates the following unapproved share option scheme:
4D pharma plc 2015 Long Term Incentive Plan (“LTIP”)
Share options were granted to staff members on 10 November 2015 and 11 May 2016. Share options are awarded to management and 
key staff as a mechanism for attracting and retaining key members of staff. These options vest over a three-year period from the date of 
grant and are exercisable until the tenth anniversary of the award. Exercise of the award is subject to the employee remaining a full-time 
member of staff at the point of exercise.
The fair value benefit is measured using a Black Scholes model, taking into account the terms and conditions upon which the share 
options were issued. 
2016 2015
The Company and the Group Number Number
Outstanding at the start of the year 40,909 — 
Granted during the year 60,147 40,909 
Outstanding at 31 December 101,056 40,909 
Exercisable at 31 December — — 
Weighted average exercise price of options
2016 2015
The Company and the Group Pence Pence
Outstanding at the start of the year 0.25 —
Granted during the year 0.25 0.25
Outstanding at 31 December 0.25 0.25
For the share options outstanding as at 31 December 2016, the weighted average remaining contractual life is 2.13 years.
No share options were exercised during the year (31 December 2015: none) and no share options were exercisable at 31 December 2016 
or at 31 December 2015.
Notes to the Financial Statements continued
For the year ended 31 December 2016 www.4dpharmaplc.com
FINANCIAL STATEMENTS
53 4D pharma plc Annual Report and Accounts 2016
21. Share-based payment reserve continued
Share option schemes continued
The following table lists the inputs to the models used at the respective year ends:
The Company and the Group 2016 2015
Expected volatility 52.50% 52.50%
Risk-free interest rate 1.40% 0.87%
Expected life of options 3 years 3 years
Weighted average exercise price 0.25p 0.25p
Weighted average share price at date of grant 771p 770p
The expected life of the options is based on historical data and is not necessarily indicative of exercise patterns that may occur. 
The expected volatility reflects the assumption that the historical volatility is indicative of future trends, which may also not necessarily 
be the actual outcome.
No dividends were assumed to be paid in the foreseeable future.
The model assumes, within the calculation of the charge, delivery of options that are dependent on a judgemental comparison to the 
total shareholder return against a specified comparator group of companies upon passing of the vesting period.
No other features of options granted were incorporated into the measurement of fair value.
22. Capital and reserves 
The components of equity are as follows:
Called-up share capital
The share capital account includes the par value for all shares issued and outstanding.
Share premium account
The share premium account is used to record amounts received in excess of the nominal value of shares on issue of new shares less the 
costs of new share issues.
Merger reserve
The merger reserve comprises the premium arising on shares issued as consideration for the acquisition of subsidiary undertakings 
where merger relief under section 612 of the Companies Act 2006 applies.
Retained earnings
Retained earnings includes the accumulated profits and losses arising from the Group Statement of Comprehensive Income and certain 
items from other comprehensive income attributable to equity shareholders net of distributions to shareholders.
Non-controlling interest
This reserve includes the accumulated profits and losses arising from the Group Statement of Comprehensive Income and certain items 
from other comprehensive income attributable to the minority equity shareholders of subsidiary undertakings not wholly owned by the Group.
Other reserve
The other reserve represents the balance arising on the acquisition of the former non-controlling interest in 4D Pharma Research Limited. 
Share-based payment reserve
The share-based payment reserve accumulates the corresponding credit entry in respect of share-based compensation charges. 
Movements in the reserve are disclosed in the Group Statement of Changes in Equity.
Translation reserve
The translation reserve is composed of the exchange rate movements in non-monetary assets of foreign subsidiaries which arise on the 
translation from the subsidiary’s functional currency to the Group’s presentational currency. Movements in the reserve are disclosed in the 
Group Statement of Changes in Equity and the Group Statement of Total Comprehensive Income. FINANCIAL STATEMENTS
4D pharma plc Annual Report and Accounts 2016 54
23. Commitments
Operating lease commitments
The Group leases premises under non-cancellable operating lease agreements. The future aggregate minimum lease and service charge 
payments under non-cancellable operating leases are as follows:
31 December
2016
31 December
2016
31 December
2015
31 December
2015
Group Company Group Company
£000 £000 £000 £000
Land and buildings:
– Not later than one year 265 43 126 43 
– After one year but not more than five years 604 117 236 160 
869 160 362 203 
Capital expenditure
The Group and Company have no committed capital expenditure at 31 December 2016 or at 31 December 2015.
Contractual commitments
The Group has the following non-cancellable contractual commitments at the balance sheet date:
31 December
2016
31 December
2016
31 December
2015
31 December
2015
Group Company Group Company
£000 £000 £000 £000
Research and development:
– Not later than one year 1,220 1,220 1,011 1,011 
– After one year but not more than five years 1,874 438 396 396 
3,094 1,658 1,407 1,407 
24. Financial risk management 
Overview
This note presents information about the Group’s exposure to various kinds of financial risks, the Group’s objectives, policies and 
processes for measuring and managing risk, and the Group’s management of capital.
The Board of directors has overall responsibility for the establishment and oversight of the Group’s risk management framework. 
The Executive directors report regularly to the Board on Group risk management.
It is, and has been throughout the year, the Group’s policy that no speculative trading in financial instruments is undertaken. 
Capital risk management
The Company reviews its forecast capital requirements on a half-yearly basis to ensure that entities in the Group will be able to continue 
as a going concern while maximising the return to stakeholders.
The capital structure of the Group consists of equity attributable to equity holders of the parent, comprising issued share capital, reserves 
and retained earnings as disclosed in note 20 and in the Group Statement of Changes in Equity. Total equity was £86.483 million at 
31 December 2016 (31 December 2015: £92.697 million).
The Company is not subject to externally imposed capital requirements.
Liquidity risk
The Group’s approach to managing liquidity is to ensure that, as far as possible, it will always have sufficient liquidity to meet its liabilities 
when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation.
The Group manages all of its external bank relationships centrally in accordance with defined treasury policies. The policies include the 
minimum acceptable credit rating of relationship banks and financial transaction authority limits. Any material change to the Group’s 
principal banking facility requires Board approval. The Group seeks to mitigate the risk of bank failure by ensuring that it maintains 
relationships with a number of investment grade banks.
Notes to the Financial Statements continued
For the year ended 31 December 2016 www.4dpharmaplc.com
FINANCIAL STATEMENTS
55 4D pharma plc Annual Report and Accounts 2016
24. Financial risk management continued
Liquidity risk continued
At the reporting date the Group was cash positive with no outstanding borrowings.
Fixed Floating Non-interest
Categorisation of financial instruments rate rate bearing Total
31 December 2016 £000 £000 £000 £000
Group
Cash and cash equivalents 50,111 18,661 — 68,772 
Trade and other payables — — (3,758) (3,758)
50,111 18,661 (3,758) 65,014 
Company
Cash and cash equivalents 50,111 17,778 — 67,889 
Inter company loans — — 24,114 24,114
Trade and other payables — — (289) (289)
50,111 17,778 23,825 91,714 
Fixed Floating Non-interest
Categorisation of financial instruments rate rate bearing Total
31 December 2015 £000 £000 £000 £000
Group
Cash and cash equivalents 62,211 23,230 — 85,441 
Trade and other payables — — (2,914) (2,914)
62,211 23,230 (2,914) 82,527 
Company
Cash and cash equivalents 62,211 23,137 — 85,348 
Inter company loans — — 8,916 8,916
Trade and other payables — — (1,828) (1,828)
62,211 23,137 7,088 92,436 
All categories of financial assets and liabilities are measured at amortised cost with the exception of the contingent consideration which 
is measured at fair value through the Statement of Total Comprehensive Income using a level 3 valuation technique.
The values disclosed in the above table are carrying values. The Board considers that the carrying amount of financial assets and 
liabilities approximates to their fair value.
Interest rate risk
As the Group has no significant borrowings the risk is limited to the reduction of interest received on cash surpluses held at bank which 
receive a floating rate of interest. The exposure to interest rate movements is immaterial.
Maturity profile
The directors consider that the carrying amount of the financial liabilities approximates to their fair value.
As all financial assets are expected to mature within the next twelve months an aged analysis of financial assets has not been presented.
As all financial liabilities are expected to mature within the next twelve months an aged analysis of financial liabilities has not been presented.
Foreign currency risk
The Group’s principal functional currency is Sterling. However, the Group has acquired two subsidiaries during the year whose functional 
currency is the Euro and the Group as a whole undertakes certain transactions denominated in foreign currencies.
The Group is exposed to currency risk on sales and purchases that are denominated in a currency other than the respective functional 
currency of the Company. These are primarily US Dollars (“USD”) and Euros (“EUR”). Transactions outside of these currencies are limited. FINANCIAL STATEMENTS
4D pharma plc Annual Report and Accounts 2016 56
24. Financial risk management continued
Foreign currency risk continued
The Group may use forward exchange contracts as an economic hedge against currency risk, where cash flow can be judged with 
reasonable certainty. Foreign exchange swaps and options may be used to hedge foreign currency receipts in the event that the timing 
of the receipt is less certain. There were no open forward contracts as at 31 December 2016 or at 31 December 2015 and the Group 
did not enter into any such contracts during 2016 or 2015.
The split of Group assets between Sterling and other currencies at the year end is analysed as follows:
2016 2015
GBP USD EUR CHF Total GBP USD EUR CHF Total
Group £000 £000 £000 £000 £000 £000 £000 £000 £000 £000
Cash, cash 
equivalents and 
deposits 67,413 11 1,348 — 68,772 81,520 — 3,921 — 85,441
Trade and other 
payables (831) (80) (2,847) — (3,758) (856) (1,441) (446) (171) (2,914) 
66,582 (69) (1,499) — 65,014 80,664 (1,441) 3,475 (171) 82,527
Sensitivity analysis to movement in exchange rates
Given the immaterial net payable balances in foreign currency, the exposure to a change in exchange rate is negligible.
25. Related party transactions
Year to Year to 
31 December 31 December
2016 2015
Key management compensation £000 £000
Fees for services provided as non-executive directors:
Salaries and short-term benefits 50 58
Employer’s National Insurance and social security costs 2 5
52 63
Executive directors:
Salaries and short-term benefits 202 202
Employer’s National Insurance and social security costs 25 25
227 227
Other key management:
Salaries and short-term benefits 451 241
Employer’s National Insurance and social security costs 54 29
Share-based payment charge 131 7
636 277
Notes to the Financial Statements continued
For the year ended 31 December 2016 25. Related party transactions continued
Group
Transactions with Directors and related entities
During the year Aquarius Equity Partners Limited, an entity controlled by Duncan Peyton and Dr Alexander Stevenson, charged the 
Group £8,368 for other office expenses (31 December 2015: £94,206). As at 31 December 2016 £3,144 was due from Aquarius Equity 
Partners Limited (31 December 2015: £Nil).
During the year, Thomas Engelen charged the Group £Nil for consultancy services (31 December 2015: £9,210) and was owed £Nil 
at 31 December 2016 (31 December 2015: £Nil).
In November 2012, Thomas Engelen was issued with 6,372 nil-paid shares in 4D Pharma Research Limited. On purchase of the 
remaining non-controlling interest in 4D Pharma Research Limited in March 2015 by the Company, the valuation clause associated 
with these shares was triggered at £30 per share. This resulted in a payment from the Company to 4D Pharma Research Limited 
for the outstanding value on the shares of £191,160.
Transactions with key personnel and related entities
There were no trading transactions with Fommir Limited during the year, a company where Douglas Thomson was a director and 
majority shareholder. During the year to 31 December 2015 the company charged the Group £120,000 for consultancy services, 
£150,000 in performance-related bonuses and £5,197 for other costs. At the year end the Group owed Fommir Limited £Nil 
(31 December 2015: £102,229).
During the year summ.it assist llp, an entity in which Stephen Dunbar is a partner, recharged the Group £23,690 for IT equipment and 
software (31 December 2015: £14,158), £4,126 for IT support (31 December 2015: £7,650), £60,328 for accounting and bookkeeping 
services (31 December 2015: £94,755) and £3,199 for other costs (31 December 2015: £989). At the year end £6,766 was due to 
summ.it assist llp (31 December 2015: £7,402).
3C SAS, an entity owned by Christophe Carité, provided consultancy services to the Group of £182,324 (31 December 2015: £113,322) 
and recharged costs of £73,029 (31 December 2015: £63,805). At the year end £Nil was due to 3C SAS (31 December 2015: £Nil).
Company
Transactions between 100% owned Group companies have not been disclosed as these have all been eliminated in the preparation 
of the Group financial statements.
Transactions with Directors and related entities
During the year Aquarius Equity Partners Limited, an entity controlled by Duncan Peyton and Dr Alexander Stevenson, charged the 
Company £8,368 for other office expenses (31 December 2015: £94,206). As at 31 December 2016 £3,144 was due from Aquarius 
Equity Partners Limited (31 December 2015: £Nil).
Transactions with key personnel and related entities
During the year summ.it assist llp, an entity in which Stephen Dunbar is a partner, recharged the Company £23,590 for IT equipment and 
software (31 December 2015: £13,918), £4,126 for IT support (31 December 2015: £7,650), £53,950 for accounting and bookkeeping 
services (31 December 2015: £79,675) and £3,199 for other costs (31 December 2015: £989). At the year end £5,854 was due to 
summ.it assist llp (31 December 2015: £6,766).
3C SAS, an entity owned by Christophe Carité, provided consultancy services to the Company for the year to 31 December 2016 of 
£182,324 (31 December 2015: £113,322) and recharged costs of £73,029 (31 December 2015: £63,805). At the year end £Nil was 
due to 3C SAS (31 December 2015: £Nil).
All related party transactions during the current and previous year were considered to be at arm’s length.
 
Design Portolio is committed to planting 
trees or every corporate communications 
project, in association with Trees or Cities.
57 4D pharma plc Annual Report and Accounts 2016
www.4dpharmaplc.com
FINANCIAL STATEMENTS 4D pharma plc Annual Report and Accounts 2016 4D pharma plc Annual Report and Accounts 2016