Akari Therapeutics plc — 2017 Form 20-F Summary
Reporting period: Fiscal year ended December 31, 2017. The filing is an annual report, not a quarterly report; it was signed on July 18, 2018. Financial statements are prepared under U.S. GAAP. Akari is a clinical-stage biopharmaceutical company with no product sales or commercial revenue.
Financial performance and position
- Revenue: None reported; the company had not commercialized a product.
- Expenses and loss: R&D expense was $23.29 million, up 35% from $17.31 million in 2016. General and administrative expense was $11.80 million, up 19% from $9.94 million. A $2.70 million securities-litigation settlement loss was recorded. Net loss was $35.40 million, versus $18.14 million in 2016; basic and diluted loss per share was $0.03.
- Cash flow: Operating cash use was $31.60 million, compared with $24.62 million in 2016. Investing activities provided $9.99 million, primarily from maturities of short-term investments. Financing provided $15.67 million, net, primarily from the October 2017 equity offering.
- Liquidity: Cash and cash equivalents were $28.11 million at year-end, down from $34.10 million; short-term investments were zero, versus $10.02 million in 2016. Current assets were $28.81 million and current liabilities $11.85 million. Management said available cash and short-term resources were expected to fund operations through the end of Q2 2019.
- Debt and equity: The company reported no short- or long-term debt requiring interest payments. Total liabilities were $11.90 million, including $5.08 million of option-related liabilities; these are not described as conventional borrowings. Shareholders’ equity was $17.15 million, down from $34.10 million. The October 2017 offering raised $17.4 million gross and $15.7 million net, issuing 348 million ordinary shares.
- Margins: Not meaningful because the company reported no product revenue.
Changes versus 2016
- Net loss widened by $17.26 million, while operating cash use increased by $6.97 million.
- R&D and G&A spending increased as manufacturing, clinical development, professional services and personnel costs rose.
- The $2.70 million proposed securities-litigation settlement was a new expense; the company expected D&O insurance to cover it, subject to confirmation.
- Cash declined despite the 2017 offering, partly reflecting continuing operating cash consumption and investment maturities.
Outlook, risks and unusual items
- Going concern: The auditor highlighted substantial doubt about the company’s ability to continue as a going concern, citing recurring operating losses and a net capital deficiency. Management said additional financing would be needed to fully execute its plans; funding may not be available on acceptable terms or at all.
- Development outlook: Coversin was the lead candidate. The COBALT Phase II PNH trial completed in December 2017; the filing reports that it met its primary endpoint, but also describes patients who did not meet the endpoint. Phase III CAPSTONE began recruiting in 2018. The aHUS Phase II study had opened a site but had enrolled no patients as of the filing’s later update. These are development updates, not evidence of regulatory approval.
- Clinical and commercial risks: Patient-enrollment delays, uncertain efficacy and safety, regulatory approval, reliance on a third-party manufacturer, commercialization costs, competition and future financing needs could delay or prevent development. Akari had no sales or distribution infrastructure.
- Litigation and investigation: The filing records a $2.70 million settlement in principle of the securities class action, pending documentation and court approval, and reports a separate Edison dispute settlement in principle expected to be immaterial. The SEC had issued a subpoena seeking information primarily related to the Phase II PNH trial; the company said it was cooperating.
- Controls and governance: Management concluded internal controls over financial reporting and disclosure controls were ineffective at year-end 2017. Material weaknesses involved a former CEO’s personal corporate-card charges and unauthorized agreements, and inadequate controls over loss-contingency accounting. The late annual filing also led to a Nasdaq deficiency notice; the company believed filing the report remedied the issue.
- Management and other commitments: The filing describes executive departures and a continuing CEO search. A January 2018 New York sublease carried approximately $3.3 million of cumulative fixed rent; management planned to sublease part of the space.
Most important facts for investors to verify
- Current cash, burn rate, financing plans and whether the stated runway through Q2 2019 was achieved.
- Status and final terms of the $2.70 million class-action settlement, insurance coverage, Edison dispute and SEC investigation.
- Clinical-trial records and endpoint calculations for COBALT, including the filing’s differing descriptions of endpoint results; current status of CAPSTONE and other trials.
- Remediation and independent assessment of the disclosed material weaknesses, and subsequent filing and Nasdaq-listing compliance.
- Manufacturing supply, clinical enrollment, regulatory pathway and any material changes in Coversin’s safety or efficacy evidence.