Business Context and Reporting Period
Company: Morria Biopharmaceuticals PLC (Note: The filing text identifies the registrant as Morria Biopharmaceuticals PLC, despite the request metadata referencing Akari Therapeutics Plc. The company intends to change its name to Celsus Therapeutics PLC).
Reporting Period: Fiscal year ended December 31, 2012.
Business Overview: Morria is a development-stage biopharmaceutical company focused on discovering and developing novel, first-in-class, non-steroidal, synthetic anti-inflammatory drugs. The company has no commercial products and has not generated any revenue. Its primary activities involve research and development (R&D) of product candidates for inflammatory diseases, including allergic rhinitis (MRX-4) and dermatitis (MRX-6).
Capital Structure: As of the close of the period, there were 13,369,809 Ordinary Shares outstanding. The company is classified as an "Emerging Growth Company" under the JOBS Act.
Key Financial Metrics
| Metric (in $000s) | 2012 | 2011 |
|---|---|---|
| Revenue | $0 | $0 |
| Total Operating Expenses | $3,667 | $2,247 |
| Research & Development | $1,483 | $841 |
| General & Administrative | $2,184 | $1,406 |
| Financial Expense (Income) | $601 | ($128) |
| Net Loss | ($4,268) | ($2,119) |
| Net Loss Per Share (Basic & Diluted) | ($0.35) | ($0.18) |
| Cash Used in Operating Activities | ($2,134) | ($1,008) |
| Cash Provided by Financing Activities | $3,232 | $1,005 |
| Total Assets | $1,120 | $27 |
| Total Liabilities | $4,480 | $2,512 |
| Working Capital Deficit | ($2,732) | ($2,209) |
| Shareholders' Deficiency | ($3,360) | ($2,485) |
Note: The filing text states an accumulated deficit of $16,922,000 as of December 31, 2012, which differs from the "Shareholders' deficiency" line item in the selected financial data table ($3,360,000). The table data is presented as derived from the audited statements in the "Selected Financial Data" section.
Material Changes vs. Prior Period
- Net Loss: Doubled from $2.1 million in 2011 to $4.3 million in 2012.
- Operating Expenses: Increased by 63% to $3.7 million. R&D expenses rose 76% due to higher costs for formulation, synthesis, and clinical trials. G&A expenses rose 55% driven by stock-based compensation, legal, and professional fees associated with public reporting.
- Financial Expenses: Shifted from a net income of $128,000 in 2011 to an expense of $601,000 in 2012, primarily due to interest expense and issuance costs related to the April 2012 convertible note financing.
- Liquidity: Cash and cash equivalents increased significantly to approximately $1.1 million as of December 31, 2012, compared to minimal levels in 2011, following multiple private placements and a convertible note offering.
Guidance, Outlook, Risks, and Contingencies
Outlook and Capital Needs
Management states that existing cash and investment securities as of March 21, 2013, are insufficient to support the balance of the 2013 operating plan. The company requires additional capital to complete clinical development and commercialization. In January through March 2013, the company raised approximately $1.277 million to continue synthesis and formulation of MRX-4 and prepare for Phase II trials.
Planned 2013 Activities (subject to funding):
- Formulation, manufacturing, and toxicology testing of MRX-4 (~$870,000).
- Formulation and toxicology testing of MRX-6 (~$300,000).
- Phase II clinical trial of MRX-6 for dermatitis (~$30,000).
- Preclinical testing of OPT-1 and CFX-1 (~$100,000).
Risks and Contingencies
- Going Concern: The independent auditor's report includes an explanatory paragraph raising substantial doubt about the company's ability to continue as a going concern due to recurring operating losses, negative cash flows, and dependence on additional financial support.
- Regulatory Compliance: The Phase 2a trial for MRX-6 was conducted as an academic study and is not ICH- or FDA-compliant. The company must execute a new, compliant trial to advance this candidate.
- Dilution: Recent financings include "down round" provisions and "most favored nation" terms that could result in significant dilution to existing shareholders in future financings.
- Intellectual Property: The company relies on an exclusive license from Yissum (Hebrew University). Breach of this license could terminate the company's ability to develop its core technology.
Key Facts for Investor Verification
- Going Concern Status: Verify the company's ability to secure the additional capital required to fund operations beyond early 2013, as explicitly stated as a risk by management and the auditor.
- Regulatory Path for MRX-6: Confirm the timeline and budget for the required ICH/FDA-compliant Phase 2 trial for MRX-6, as the existing data is from a non-compliant academic study.
- Dilution Terms: Review the specific terms of the April 2012, November 2012, and 2013 financings regarding "down round" anti-dilution provisions and their potential impact on future capital raises.
- Accumulated Deficit: Reconcile the reported accumulated deficit of $16.9 million with the shareholders' deficiency of $3.4 million presented in the selected financial data table.
- License Agreement: Assess the terms of the Yissum license agreement, specifically the royalty obligations (4% of net sales, 18% of sublicensing revenue) and termination clauses.