Biodexa Pharmaceuticals Plc annual report, Q4 FY2019

Filing scope and business context

This is Midatech Pharma plc’s annual report on Form 20-F for the fiscal year ended December 31, 2019—not a standalone 2019 Q4 filing. The company, now identified in the request as Biodexa Pharmaceuticals, reported under IFRS in pounds sterling. Its business was early-stage drug-delivery research and development, with no products being commercialized after the 2018 sale of its U.S. commercial subsidiary. The filing was signed June 15, 2020 and includes material post-year-end developments.

Financial performance and position

Amounts below are in £ millions unless stated otherwise.

Revenue from continuing operations was formulation-services revenue; the filing reports no product sales. Gross margin is not a meaningful disclosed measure for this R&D business. Cash flow from investing activities was a £3.807 million outflow and financing activities generated £18.733 million. Financing included £14.108 million net proceeds from share issues and £5.575 million of loan proceeds, partly offset by repayments and other financing cash flows.

Year-end borrowings were £6.082 million, including £5.670 million non-current and £0.412 million current; these figures include lease liabilities. The company also reported a £0.664 million derivative financial liability. Contractual obligations disclosed at year-end totaled £7.974 million, including government research loans and lease liabilities. No dividends were declared or paid.

Material changes versus 2018

• Continuing revenue rose by £0.163 million, but grant revenue fell by £1.427 million; total continuing revenue and grants consequently declined by £1.264 million.
• R&D and administrative expenses decreased, contributing to a smaller operating loss. Net loss improved by £4.945 million, substantially reflecting a smaller discontinued-operations loss after the U.S. business sale.
• Operating cash outflow decreased by £6.961 million. Year-end cash increased by £8.585 million, principally due to 2019 equity fundraising and government-loan proceeds; this does not indicate positive operating cash generation.
• Borrowings increased from £1.252 million to £6.082 million, mainly following Spanish government financing and recognition of lease liabilities under IFRS 16.

Outlook, risks and unusual items

• Going concern and funding: The auditor’s report highlights substantial doubt about the company’s ability to continue as a going concern. Management reported recurring losses, £6.489 million of operating cash outflow in 2019 and accumulated deficits of about £99.8 million. Forecasts required further financing within 12 months; the auditor included a going-concern explanatory paragraph. Management continued to use the going-concern basis, citing a May 2020 equity raise of £3.7 million net and an expected cash runway into Q2 2021, subject to assumptions and execution of plans.
• Strategic reset after year-end: In March 2020, the company stopped further in-house development of MTD201 because it could not timely fund the remaining development and manufacturing investment, estimated at about $30 million. It began closing its Bilbao facilities and announced workforce reductions. It planned to seek partners for MTD201 and other assets, and undertook a strategic review that included a potential sale of the company or other transactions. Further human trials were generally contingent on partner or grant funding, except for ongoing MTX110 commitments.
• Restructuring charges and asset risk: Management estimated post-year-end restructuring cash outflows of about £4.933 million and possible non-cash charges of about £12.319 million, including potential full impairment of £9.300 million of acquired in-process R&D and £2.291 million of goodwill. These were estimates, not 2019 charges; final amounts depended on strategic outcomes.
• MTX110 license dispute: Secura Bio sent a notice purporting to terminate the license for panobinostat, used in MTX110, in June 2020. The company disputed the termination and was evaluating remedies. The dispute could affect a key clinical-stage asset and consume resources.
• Other contingencies: The company expensed a £0.947 million deposit relating to an indemnity for FDA PDUFA fees following its U.S. subsidiary sale; recovery depended on an unresolved waiver request. A Spanish former-employee unfair-dismissal claim sought up to €258,000 and was being defended.
• Clinical and external risks: COVID-19 restrictions could delay trials, recruitment, supply and operations. MTX110’s Phase I study was ongoing, and further development depended on funding; a proposed EU-funded study was conditional on grant finalization. The company also reported material weaknesses in financial-reporting controls, including IT access, close/consolidation and revenue recognition. Management said disclosure controls were effective at a reasonable level of assurance, but internal-control weaknesses remained.
• Other unusual items: A £0.484 million finance-income gain arose from remeasurement of warrants; it was non-operating and linked to share-price movements. The company adopted IFRS 16, recording right-of-use assets and lease liabilities, without restating comparative periods.

Most important facts for investors to verify

• Current cash, cash burn and runway against the filing’s Q2 2021 estimate, including the timing and use of May 2020 offering proceeds and any additional financing needs.
• Progress and terms of the strategic review, asset-partnering efforts, potential sale process and MTD201 licensing prospects.
• Status and legal outcome of the Secura Bio license dispute, and whether MTX110 trials can continue under the company’s asserted rights.
• Actual restructuring costs, repayment of Spanish government loans, release of related cash collateral and any impairment charges recorded in 2020.
• Clinical-trial progress, grant-agreement status and COVID-19-related delays, as well as remediation of the disclosed internal-control weaknesses.
• Whether the £0.947 million PDUFA-related deposit is recoverable and the outcome of the €258,000 employee claim.