Akari Therapeutics plc — Form 20-F Summary
Reporting period: Fiscal year ended December 31, 2016. This is an annual report, not a quarterly filing. Financial statements are prepared under U.S. GAAP and were audited; the auditor did not provide an opinion on internal control effectiveness.
Business context
Akari is a clinical-stage biopharmaceutical company with no product sales or commercial revenue. Its lead candidate, Coversin, is being developed for complement-mediated and inflammatory diseases, including paroxysmal nocturnal hemoglobinuria (PNH), atypical hemolytic uremic syndrome (aHUS), and Guillain-Barré syndrome (GBS). The company depends on external financing and third parties for manufacturing and clinical development.
Financial performance and position
| Metric (US$) | FY 2016 | FY 2015 |
|---|---|---|
| Product revenue | None | None |
| Research and development expense | $17.31 million | $5.80 million |
| General and administrative expense | $9.94 million | $5.50 million |
| Total operating expenses | $27.25 million | $30.58 million |
| Net loss | $18.14 million | $45.32 million |
| Net loss per share, basic and diluted | $0.02 | $0.05 |
| Cash and cash equivalents | $34.10 million | $68.92 million |
| Short-term investments | $10.02 million | — |
| Total current assets | $45.63 million | $69.66 million |
| Total current liabilities | $11.71 million | $21.12 million |
| Total liabilities | $11.77 million | $21.17 million |
| Shareholders’ equity | $34.10 million | $48.72 million |
| Accumulated deficit | $74.94 million | $56.80 million |
Margins are not meaningful for a pre-commercial company with no product revenue. The filing reports no interest-bearing debt at year-end. Current liabilities included $7.66 million of option and warrant liabilities, measured using Level 3 valuation inputs.
Operating cash use was $24.62 million, versus $4.97 million in 2015. Investing cash use was $10.07 million, largely reflecting purchases of short-term investments, partly offset by maturities. There was no financing cash flow in 2016; 2015 financing cash flow included the private placement. Cash, cash equivalents, and short-term investments totaled $44.12 million at year-end.
Changes versus the prior year
- R&D expense increased 198% (about $11.51 million), mainly from higher manufacturing and clinical-trial spending. Management expects R&D costs to rise as Coversin trials advance.
- G&A expense increased 81% (about $4.44 million), including higher share-based compensation, personnel, board, and rent costs; management expects public-company and operating costs to increase further.
- Net loss narrowed by $27.18 million. The 2015 loss included a $19.28 million non-cash excess-consideration charge and significant financing and interest expense. In 2016, favorable non-cash fair-value changes in option and warrant liabilities contributed to other income.
- Cash and cash equivalents fell by $34.82 million. The company shifted some funds into short-term investments, so cash alone does not represent total liquid resources.
Outlook, risks, and unusual items
- Management stated that year-end cash and short-term investments were expected to fund operations for at least the next 12 months, while also warning that additional capital would be needed for longer-term development and commercialization. Future financing is not assured and equity issuance could dilute shareholders.
- At filing, the open-label 90-day Phase II PNH trial in patients not previously treated with complement blockers had enrolled five patients. Interim results were expected in April 2017; Phase III was planned before year-end 2017 if results supported it. These were forward-looking plans, not reported outcomes.
- A separate Phase II study addressed PNH patients resistant to eculizumab due to C5 polymorphisms. The filing describes favorable results in one patient, including continued complement inhibition and reduced LDH after more than a year; this is limited evidence and not proof of efficacy in a larger population.
- The FDA had allowed the Coversin investigational new drug application in December 2016. Fast Track designation for Coversin in eculizumab-resistant PNH was announced March 29, 2017, after the reporting period.
- Key risks include clinical efficacy and safety uncertainty, slow recruitment in rare diseases, reliance on a single clinical manufacturer, manufacturing scale-up and supply, regulatory approval, competition (including eculizumab), intellectual-property protection, and need for further capital. Coversin had not received marketing approval.
- The company had no material legal proceedings or off-balance-sheet arrangements and did not anticipate paying cash dividends. Management reported effective disclosure controls and internal control over financial reporting as of year-end; no auditor attestation on internal controls was included because the company was an emerging growth company.
Most important facts for investors to verify
- Whether subsequent clinical-trial data support Coversin’s efficacy and safety, especially beyond the single reported eculizumab-resistant patient.
- Actual cash burn and financing needs against management’s stated minimum 12-month runway; confirm cash and short-term investment balances and any later capital raises.
- Progress on Phase III planning, U.S. trial expansion, commercial-scale manufacturing, and securing backup or commercial supply.
- The composition and valuation assumptions behind the $7.66 million option and warrant liabilities, and the potential dilution from outstanding options and warrants.
- Whether the company’s later financial and regulatory disclosures changed the outlook; the filing states it believed it was not a PFIC in 2016 but might be one in 2017 or later.