Biodexa Pharmaceuticals Plc (formerly Midatech Pharma plc) — Form 20-F Summary
Reporting period: Fiscal year ended December 31, 2018. The filing was signed April 30, 2019. The registrant named in the filing is Midatech Pharma plc; it describes a later name as Biodexa Pharmaceuticals Plc in the request metadata. Figures are reported in pounds sterling under IFRS, generally in millions below unless stated otherwise.
Business context
Midatech was an early-stage biopharmaceutical company developing drug-delivery technologies and pipeline medicines, focused on oncology and rare diseases. Its principal platforms were Q-Sphera (sustained release), MidaSolve (local drug delivery) and MidaCore (targeted nanoparticle delivery). Following the November 1, 2018 sale of its U.S. commercial subsidiary, the group focused on pipeline research and development and no longer had an internal sales and marketing organization.
Financial performance and position
| Metric | FY 2018 | FY 2017 |
|---|---|---|
| Continuing-operations revenue | £0.149m | £0.149m |
| Grant revenue | £1.789m | £0.840m |
| Total continuing-operations revenue, including grants | £1.938m | £0.989m |
| Research and development costs | £9.359m | £8.329m |
| Administrative costs | £4.394m | £4.266m |
| Loss from operations | £11.815m | £13.276m |
| Loss from continuing operations | £10.368m | £11.705m |
| Loss from discontinued operations | £4.662m | £4.359m |
| Net loss | £15.030m | £16.064m |
| Cash used in operating activities | £13.450m | £12.953m |
| Cash and cash equivalents at year-end | £2.343m | £13.204m |
| Total assets | £20.444m | £49.224m |
| Total liabilities | £3.520m | £14.548m |
| Total borrowings, current and non-current | £1.252m | £6.546m |
Continuing revenue was minimal and came from one customer; reported grant revenue included £1.610m associated with the EU-funded NanoFacturing project. The filing does not present a meaningful continuing-operations gross margin. At year-end, current assets were £5.618m and current liabilities £2.471m. The £7m MidCap loan drawdown had been repaid in connection with the U.S. subsidiary sale; remaining borrowings primarily comprised government research loans and finance leases.
Changes versus the prior year and notable items
- R&D expense increased 12% as activity increased on lead programs MTD201 and MTX110. Operating loss narrowed, partly because 2017 included a £1.5m impairment charge for the Opsisporin program.
- The U.S. subsidiary was sold effective November 1, 2018, for initial cash consideration of $13m, with up to $6m additional consideration subject to sales milestones. The group recorded a £1.407m loss on disposal; the estimated contingent consideration receivable at year-end was nil.
- Cash fell by £10.880m during 2018. The sale generated £9.259m net cash inflow, but operating cash burn and debt repayment more than offset it. Capital expenditure was £0.244m.
- Net loss improved from 2017, but included a £4.662m discontinued-operations loss. In 2018, finance expense rose to £0.587m, including loan interest and early repayment-related charges; finance income was only £0.002m.
- For 2017, the company reclassified the £1.5m Opsisporin impairment from administrative to R&D costs; the reclassification did not affect loss before tax or net assets. A further IFRS 5 disposal-classification error increased the reported disposal loss by £0.459m, with no effect on loss before tax or net assets.
Outlook, commentary and risks
- Management expected losses and negative operating cash flows to continue. It stated that year-end resources, together with the post-year-end financing, were expected to support operations for at least 12 months from approval of the financial statements. The filing gives no specific revenue or earnings guidance; product revenue was not expected before approximately 2020 at the earliest.
- In February 2019, a subscription, placing and open offer raised £13.4m before expenses (£12.5m net), issuing 348.2m shares. Separately, CMS-affiliated investors acquired 207.8m shares and warrants through an £8m subscription; they held approximately 50.8% of ordinary shares after the transaction, or approximately 67% if their warrants were exercised.
- The January 2019 CMS license agreement covered development and commercialization of pipeline products in Greater China and specified Southeast Asian territories. CMS is responsible for territorial development and commercialization; Midatech may receive milestone and royalty payments and expects to manufacture and supply products. These arrangements were post-balance-sheet events, not FY 2018 revenue.
- MTD201 (Q-Octreotide) first-in-human results were described as supporting a monthly sustained-release profile, with growth-hormone suppression comparable to the reference product and fewer reported injection-site symptoms in the small healthy-volunteer study. The pivotal-trial design and route to market remained under consideration. MTX110’s Phase I/II DIPG study was ongoing and management said it was progressing on track.
- Material risks include continued cash burn and financing dependence; clinical, regulatory, manufacturing and commercialization uncertainty; foreign-exchange exposure; Brexit-related regulatory and operating uncertainty; and potential indemnity exposure from the U.S. sale, including an uncapped potential PDUFA user-fee claim for which a waiver had been sought.
- Management identified a material weakness in internal control over financial reporting relating to IFRS 5 classification and disposal accounting, and disclosed the prior-year classification weakness. It described additional review controls and use of outside experts as remediation steps. Disclosure controls were assessed as effective at a reasonable assurance level, but this does not negate the reported material weakness in financial reporting controls.
- The auditor issued an unqualified opinion on the IFRS financial statements. The auditor did not express an opinion on internal control over financial reporting; the company cited its emerging-growth-company status.
Important facts for investors to verify
- Post-financing cash balance, monthly cash burn and the resulting funding runway, including any material change since the February 2019 raise.
- Whether the U.S. sale’s contingent payments become payable, and the status and potential amount of the uncapped PDUFA-related indemnity exposure.
- Clinical-trial progress, regulatory feedback and the selected pivotal-trial design for MTD201; enrollment, safety and efficacy updates for MTX110.
- CMS agreement economics, development responsibilities, milestone conditions, supply obligations and any resulting revenue actually recognized.
- Progress in remediating the material weakness and the accuracy of future disposal, discontinued-operations and segment reporting.
- The dilution and governance implications of the February 2019 share and warrant issues and CMS’s controlling ownership position.