Akari Therapeutics plc — FY2019 Form 20-F
Reporting period: Fiscal year ended December 31, 2019. This is an annual report, not a standalone fourth-quarter filing. Financial statements are prepared under U.S. GAAP and audited by BDO USA, LLP.
Business context
Akari is a clinical-stage biopharmaceutical company with no marketed products or product-sales revenue. Its lead candidate, nomacopan, is being developed for rare and orphan inflammatory diseases; the company relies on external financing and third parties for clinical research and manufacturing.
Key financial metrics
| Metric (U.S. dollars, unless stated) | FY2019 / Dec. 31, 2019 | FY2018 / Dec. 31, 2018 |
|---|---|---|
| Revenue from product sales | None | None |
| Research and development expense | $8.74 million | $11.80 million |
| General and administrative expense | $8.22 million | $10.90 million |
| Total operating expenses | $16.96 million | $19.99 million |
| Net loss | $17.11 million | $16.47 million |
| Basic and diluted loss per ordinary share | $0.01 | $0.01 |
| Cash used in operating activities | $12.92 million | $22.58 million |
| Cash and cash equivalents | $5.73 million | $5.45 million |
| Total assets | $6.80 million | $8.03 million |
| Total liabilities | $8.57 million | $4.92 million |
| Shareholders’ equity (deficit) | $(1.77) million | $3.11 million |
There is no meaningful operating margin to report because the company had no product revenue. It reported no short- or long-term interest-bearing debt. Current liabilities exceeded current assets by approximately $1.81 million at year-end. The accumulated deficit was $143.91 million.
Changes versus the prior year
- Net loss increased by about $0.64 million despite lower operating expenses. Other income of $3.52 million in 2018 became other expense of $0.14 million in 2019, primarily reflecting changes in the fair value of option and warrant liabilities.
- Reported R&D expense declined 26%, largely because recognized U.K. R&D tax credits increased to $7.91 million from $3.79 million. The filing therefore attributes the lower reported expense mainly to tax credits, not necessarily to a comparable reduction in underlying development activity.
- G&A expense fell 25%, mainly due to lower legal, stock-based compensation, rent and professional fees.
- Operating cash use declined to $12.92 million from $22.58 million; financing cash inflow rose to $12.65 million from $0.31 million, principally from Aspire Capital share sales and the July 2019 offering.
- Year-end shares outstanding increased to 2.246 billion from 1.581 billion. The company issued 428.3 million ordinary shares to Aspire Capital during 2019 for gross proceeds of $8.77 million and raised approximately $4.5 million in a July registered direct offering.
Outlook, clinical programs and material risks
- Liquidity and going concern: Management said year-end cash was expected to fund operations through the end of Q2 2020, without assuming further Aspire facility sales. The auditor’s report includes a going-concern explanatory paragraph citing recurring operating losses and net capital deficiency; substantial doubt remains. Management expects continued losses and needs additional funding. The Aspire facility had approximately $10.73 million available at December 31, 2019, subject to its terms and market conditions.
- Subsequent financing: After year-end, Akari reported about $1.11 million of Aspire proceeds and approximately $9.5 million gross proceeds from February 2020 private placements, alongside warrants. These transactions post-date FY2019 and involve further dilution.
- Clinical progress: The company reported a December 2019 start of a Phase III pediatric HSCT-TMA study. Its Phase II bullous pemphigoid trial had completed recruitment; interim results from six of nine patients, announced in 2019, included no drug-related serious adverse events and reported improvements in disease scores. These are early, limited-patient findings, not proof of efficacy.
- COVID-19 disruption: The filing states that the AKC Phase I/II trial’s efficacy-arm recruitment was halted and that HSCT-TMA enrollment and the long-term safety program could be delayed or disrupted. The full operational and financial impact was uncertain.
- PNH update after year-end: January 2020 interim CAPSTONE results for the first eight patients were reported as four of four nomacopan patients meeting the primary endpoint versus none of four control patients; recruitment was later discontinued. These interim results are subsequent-period disclosures, and the filing says a PNH program might be restarted using a new formulation.
- SEC investigation and litigation: The SEC investigation relating primarily to the Phase II PNH trial remained ongoing; Akari said it was cooperating and could not predict the outcome. The securities class-action settlement was completed, with the $2.7 million settlement funded by insurance; a separate Edison-related dispute was settled for an amount described as immaterial.
- Listing and financing risks: Akari disclosed that it was not in compliance with Nasdaq’s stockholders’ equity requirement at year-end and warned of possible delisting. Additional equity issuance could materially dilute holders. The filing also identifies clinical, regulatory, patient-enrollment, manufacturing-supply, intellectual-property, competition and reimbursement risks.
- Controls and contingencies: Management concluded disclosure controls and internal control over financial reporting were effective as of December 31, 2019. No significant contractual obligations or off-balance-sheet arrangements were reported; the company leases office space on short-term terms.
Most important facts for investors to verify
- Whether subsequent financings and available Aspire proceeds provide adequate runway, and what additional capital is required.
- The latest cash burn, working-capital position, Nasdaq compliance status and fully diluted share count, including warrants and options.
- Updated trial status and complete results for BP, AKC and HSCT-TMA, including the effects of COVID-related delays.
- The status and potential consequences of the SEC investigation.
- Whether manufacturing supply, regulatory requirements and funding are sufficient to support planned development of nomacopan.