Alterity Therapeutics Limited — Form 20-F Summary
Reporting period: This is an annual report for the fiscal year ended June 30, 2020, not a standalone 2019 fourth-quarter filing. The consolidated financial statements are prepared under IFRS and reported in Australian dollars (A$).
Business context
Alterity is a development-stage biotechnology company developing therapies for neurodegenerative and movement disorders. Its lead candidate, ATH434 (formerly PBT434), is being developed initially for multiple system atrophy (MSA). The company has no commercial product revenue and depends on external funding and grants to support research and development.
Financial performance and liquidity
| Metric | FY2020 | FY2019 |
|---|---|---|
| Product revenue | None reported | None reported |
| Interest income | A$17,117 | A$108,538 |
| Other income | A$122,729 | A$4,951,167 |
| Research and development expense | A$10,098,439 | A$12,983,185 |
| General and administrative expense | A$3,446,139 | A$4,308,352 |
| Net loss | A$13,456,800 | A$12,337,830 |
| Basic and diluted loss per share | 1.50 A$ cents | 2.00 A$ cents |
| Operating cash outflow | A$9,431,122 | A$13,954,818 |
| Cash and cash equivalents at year-end | A$9,196,892 | A$14,399,904 |
| Working capital | A$7,121,827 | A$16,541,001 |
| Total assets | A$9,907,718 | A$19,909,918 |
| Total liabilities | A$2,756,904 | A$3,355,145 |
Margins are not meaningful because the company reports no product sales. It reported no conventional borrowings; year-end liabilities included A$33,747 of lease liabilities. Management stated that year-end cash was expected to fund forecast outflows for at least six months from the report date, but disclosed substantial doubt about the company’s ability to continue as a going concern. The auditor’s report included a going-concern explanatory paragraph.
Changes versus prior year
- Net loss increased by about 9%, despite lower R&D and administrative expenses, as FY2019 included A$4.95 million of other income, principally an R&D tax incentive; FY2020 other income was only A$122,729.
- R&D expense fell 22.2%, primarily because the ATH434 Phase 1 study had concluded in FY2019. Administrative expense fell 20%, partly reflecting reduced travel and operating activity during COVID-19 restrictions.
- Cash declined A$5.20 million year over year. FY2020 financing generated A$3.98 million net cash, mainly from share issuance, versus A$12.72 million in FY2019.
- Ordinary shares outstanding rose from 860.8 million to 1,037.4 million during FY2020; 176.5 million shares were issued, primarily through the at-the-market facility.
Outlook, risks and unusual items
- Funding and going concern: Management intended to raise equity within six months of the report to advance R&D, while acknowledging uncertainty about obtaining the required funds. Failure to raise capital could force delays, reductions or termination of programs and cause further dilution.
- R&D tax incentive uncertainty: The ATO had preliminarily indicated that the company might not qualify for the refundable cash offset. Alterity did not recognize A$3,363,433 of FY2020 potential incentive income or receivable and was considering its options, including an appeal. FY2019’s incentive receivable was collected during FY2020.
- ATH434: The Phase 1 study in healthy and older volunteers was completed and reported as safe and well tolerated, with no serious adverse events. The FDA provided guidance and agreement on key nonclinical requirements and aspects of the proposed Phase 2 design. Phase 2 planning and a natural-history study for MSA were underway; the filing does not provide a definitive Phase 2 start date.
- PBT2: Further development remained uncertain because the FDA’s partial clinical hold, imposed in 2015 following dog neurotoxicity findings, restricts dose levels. Regulators requested further characterization of the findings and their reversibility.
- COVID-19: Restrictions and limits at research institutions, hospitals and laboratories disrupted operations and could delay research, trials and regulatory submissions, increasing costs and funding needs. The company reported limited operating effects to date but highlighted uncertainty about future impacts.
- Other risks: Drug development, clinical and regulatory failure, reliance on third-party research and manufacturing, competition, intellectual-property challenges, foreign-exchange exposure and potential financing dilution. The company reported no material legal proceedings or contingent liabilities.
- Subsequent events: On July 2, 2020, the company issued 47.646 million shares through its ATM facility. Shareholder-approved director incentive options were to be issued after year-end. NASDAQ notified the company in July 2020 that it had regained compliance with the minimum bid-price requirement.
Important facts for investors to verify
- Current cash runway, subsequent financing and share count, including dilution from later ATM sales and director options.
- ATO’s final determination on the R&D tax incentive and any potential repayment or appeal consequences.
- ATH434 Phase 2 trial design, launch timing, enrollment, costs and emerging clinical results.
- Whether PBT2’s partial clinical hold can be resolved and what additional toxicology work would be required.
- The timing and terms of required capital raises, and whether those resources are sufficient to address the auditor’s going-concern uncertainty.