TIDMMTFB
RNS Number : 8043D
Motif Bio PLC
02 May 2017
Motif Bio Reports Year-End 2016 Financial Results
This announcement was originally released on 1 May 2017 in the
US and UK via Nasdaq Globe Newswire and has been released again
today, 2 May 2017, via RNS.
NEW YORK, May 1, 2017 (GLOBE NEWSWIRE) -- Motif Bio plc (NASDAQ:
MTFB; AIM: MTFB.LN), a clinical stage biopharmaceutical company
specializing in developing novel antibiotics, today announced
financial results for the year ended December 31, 2016.
"Motif Bio made significant progress in 2016 towards our goal of
bringing our novel antibiotic candidate, iclaprim, to patients with
serious and life-threatening infections. The announcement of
positive Phase 3 topline results for iclaprim in REVIVE-1 was a
major achievement for Motif Bio and we expect to announce the top
line data from REVIVE-2, the second Phase 3 trial, in the second
half of 2017," commented Graham Lumsden, CEO of Motif Bio plc.
Recent Corporate Developments
-- Announced positive topline results for iclaprim in the REVIVE-1 Phase 3 study of ABSSSI
-- Data from REVIVE-2, which uses an identical protocol to
REVIVE-1 but has different trial centres, has more than 80% of the
total patients enrolled, and data is expected in the second half of
2017
-- Achieved a NASDAQ listing
-- Closed a U.S. initial public offering and a concurrent
European placement with aggregate net proceeds of $21.5 million,
which brought the total raised by the Company to approximately $65
million
-- Appointed Robert Dickey IV as Chief Financial Officer
-- Presented two posters at ID Week 2016.The first showed new
data demonstrating that iclaprim is highly potent in vitro against
bacterial strains associated with clinical Hospital Associated
Bacterial Pneumonia ("HABP") and Skin and Skin Structure Infections
("SSSI") clinical isolates. The second poster described the
potential benefits of an optimized 80mg fixed dose of iclaprim
administered intravenously over 120 minutes, that is being used in
the REVIVE Phase 3 clinical trials. Improvement by approximately
30% in the PK/PD parameters associated with efficacy, AUC/MIC and
t/MIC, was seen compared to the previously studied weight based
dose of 0.8 mg/kg.
-- Completed preparations for INSPIRE, a Phase 3 trial designed
to study the safety and efficacy of iclaprim in patients with HABP,
including VABP
-- Completed additional research with clinicians and payers to
understand how iclaprim may be able to address the unmet need in
hospitalized ABSSSI patients with renal impairment with/without
diabetes
Full Year 2016 Financial Results
-- For the full year, Motif Bio reported a net loss of $40.3
million, or $(0.35) per share (basic and diluted) compared to a net
loss of $8.5 million, or $(0.14) per share (basic and diluted)
during the same period in 2015.
-- Research and development (R&D) costs for 2016 were $34.8
million compared to $4.7 million during 2015. Higher R&D costs
in 2016 were primarily attributable to the commencement of iclaprim
clinical development. Clinical development expenses are a
significant component of our research and development expenses and
product candidates in later stage development generally have higher
costs.
-- General and administrative expenses for 2016 were $4.9
million compared to $3.6 million during 2015. The increase is
primarily due to the costs associated with the filing of a
registration statement relating to the initial public offering in
the U.S.; costs associated with being a public company in both the
United Kingdom and the U.S.; and increases in the costs of outside
professional services.
-- Cash and cash equivalents were $21.8 million as of December 31, 2016.
-- As of December 31, 2016, the Company had 195.7 million ordinary shares outstanding.
Motif Bio has filed its U.S. Annual Report on Form 20-F for the
year ended December 31, 2016 with the US Securities and Exchange
Commission ("SEC"). The Form 20-F is available to download, either
from the Investors section of the Company website at
www.motifbio.com or from the SEC website at www.sec.gov.
About iclaprim
Iclaprim is a potential novel antibiotic, designed to be
effective against bacteria that have developed resistance to other
antibiotics, including trimethoprim. Iclaprim exhibits potent in
vitro activity against Gram-positive clinical isolates of many
genera of staphylococci, including methicillin sensitive
Staphylococcus aureus (MSSA) and methicillin resistant
Staphylococcus aureus (MRSA). The MIC(90) of iclaprim was lower
than most comparators including vancomycin and linezolid, standard
of care therapies used in serious and life-threatening
Gram-positive hospital infections. To date, iclaprim has been
studied in over 1,000 patients and healthy volunteers. Iclaprim is
administered intravenously at a fixed dose, with no dosage
adjustment required in patients with renal impairment, or in obese
patients. This may help reduce overall hospital treatment costs,
especially in renally impaired patients.
About Motif Bio plc www.motifbio.com
Motif Bio is a clinical-stage biopharmaceutical company, engaged
in the research and development of novel antibiotics designed to be
effective against serious and life-threatening infections in
hospitalised patients caused by multi-drug resistant bacteria. Our
lead product candidate, iclaprim, is being developed for the
treatment of acute bacterial skin and skin structure infections
(ABSSSI) and hospital acquired bacterial pneumonia (HABP),
including ventilator associated bacterial pneumonia (VABP),
infections often caused by MRSA (methicillin resistant
Staphylococcus aureus). Having completed the REVIVE-1 trial,
patients are currently being enrolled and dosed in a second global
Phase 3 clinical trial (REVIVE-2) with an intravenous formulation
of iclaprim, for the treatment of ABSSSI. Data readout for REVIVE-2
is expected in the second half of 2017.
Forward-Looking Statements
This press release contains forward-looking statements. Words
such as "expect," "believe," "intend," "plan," "continue," "may,"
"will," "anticipate," and similar expressions are intended to
identify forward-looking statements. Forward-looking statements
involve known and unknown risks, uncertainties and other important
factors that may cause Motif Bio's actual results, performance or
achievements to be materially different from any future results,
performance or achievements expressed or implied by the
forward-looking statements. Motif Bio believes that these factors
include, but are not limited to, (i) the timing, progress and the
results of clinical trials for Motif Bio's product candidates, (ii)
the timing, scope or likelihood of regulatory filings and approvals
for Motif Bio's product candidates, (iii) Motif Bio's ability to
successfully commercialize its product candidates, (iv) Motif Bio's
ability to effectively market any product candidates that receive
regulatory approval, (v) Motif Bio's commercialisation, marketing
and manufacturing capabilities and strategy, (vi) Motif Bio's
expectation regarding the safety and efficacy of its product
candidates, (vii) the potential clinical utility and benefits of
Motif Bio's product candidates, (viii) Motif Bio's ability to
advance its product candidates through various stages of
development, especially through pivotal safety and efficacy trials,
and (ix) Motif Bio's estimates regarding the potential market
opportunity for its product candidates, and (x) the factors
discussed in the section entitled "Risk Factors" in Motif Bio plc's
Annual Report on Form 20-F filed with the SEC on May 1, 2017, which
is available on the SEC's web site, www.sec.gov. Motif Bio plc
undertakes no obligation to update or revise any forward-looking
statements.
This announcement contains inside information for the purposes
of Article 7 of the Market Abuse Regulation (EU) No 596/2014 and
has been released by Robert Dickey IV, Chief Financial Officer, on
behalf of the Company.
For further information please contact:
Motif Bio plc info@motifbio.com
Graham Lumsden (Chief
Executive Officer)
Robert Dickey IV (Chief
Financial Officer)
Peel Hunt LLP (NOMAD
& BROKER) + 44 (0)20 7418 8900
Dr Christopher Golden
Oliver Jackson
Northland Capital Partners
Limited (BROKER) +44 (0)203 861 6625
Patrick Claridge/ David
Hignell
John Howes/ Rob Rees
(Broking)
Westwicke Partners 001 415-513-1284
Patricia L. Bank patti.bank@westwicke.com
Walbrook PR Ltd. (FINANCIAL +44 (0) 20 7933 8780 or
PR & IR) motifbio@walbrookpr.com
Paul McManus Mob: +44 (0)7980 541 893
Mike Wort Mob: +44 (0)7900 608 002
MC Services AG (EUROPEAN
IR) +49 (0)89 210 2280
Raimund Gabriel
Motif Bio plc Selected Financial Data
Year Year Year
ended ended ended
12/31/2016 12/31/2015 12/31/2014
US $ US $ US $
------------------------------- ------------------------------------ -----------------------------------
Continuing
operations
General and
administrative
expenses (4,912,150) (3,577,180) (1,096,116)
Research and
development
expenses (34,794,815) (4,680,940) -
Gains on
settlement
of contract
disputes 83,320 5,027 360,060
------------------------------- ------------------------------------ -----------------------------------
Operating loss (39,623,645) (8,253,093) (736,056)
Interest income 69,754 15,028 78
Interest expense (383,259) (268,216) (449,036)
Net foreign
exchange losses (250,926) (9,644) -
Loss from
revaluation
of derivative
liabilities (135,939) -
Loss before
income taxes (40,324,015) (8,515,925) (1,185,014)
Income tax (287) (774) (876)
Net loss for
the year (40,324,302) (8,516,699) (1,185,890)
------------------------------- ------------------------------------ -----------------------------------
Total
comprehensive
loss for the
year (40,324,302) (8,516,699) (1,185,890)
=============================== ==================================== ===================================
Net loss per
share
Basic and diluted
per share * $(0.35) $(0.14) $(0.03)
=============================== ==================================== ===================================
Weighted average
number of
ordinary
shares, basic
and diluted 116,558,191 61,225,922 36,726,342
* In accordance with IAS 33 "Earnings per
share", shares are not diluted where the
entity has reported a loss for the period.
December 31, 2016 December 31, 2015
US $ US $
--------------------------------- ---------------------------------
ASSETS
Non-current assets
Intangible assets 6,195,748 6,195,748
Total non-current assets 6,195,748 6,195,748
--------------------------------- ---------------------------------
Current assets
Prepaid expenses and other receivables 401,064 167,657
Cash 21,829,632 28,594,347
Total current assets 22,230,696 28,762,004
--------------------------------- ---------------------------------
Total assets 28,426,444 34,957,752
================================= =================================
LIABILITIES
Non-current liabilities
Payable on completion of clinical trial - 500,000
Total non-current liabilities - 500,000
--------------------------------- ---------------------------------
Current liabilities
Trade and other payables 12,319,117 987,083
Other interest-bearing loans and borrowings - 3,747,961
Derivative liability 5,798,058 -
Payable on completion of clinical trial 500,000 -
Total current liabilities 18,617,175 4,735,044
--------------------------------- ---------------------------------
Total liabilities 18,617,175 5,235,044
================================= =================================
Net assets 9,809,269 29,722,708
================================= =================================
EQUITY
Share capital 2,728,199 1,645,291
Share premium 57,348,694 38,534,280
Group reorganization reserve 9,938,362 9,938,362
Accumulated deficit (60,205,986) (20,395,225)
Total equity 9,809,269 29,722,708
======================================= ==========================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 20-F
(Mark One)
.. REGISTRATION STATEMENT PURSUANT TO SECTION 12(b)
OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2016
OR
.. TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
OR
.. SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of event requiring this shell company report
Commission File Number 001-37847
MOTIF BIO PLC
(Exact name of Registrant as specified in its charter and
translation of Registrant's name into English)
----------------------------------------------------------
United Kingdom
(Jurisdiction of incorporation or organization)
125 Park Avenue
25th Floor
New York, New York 10011
United States
(Address of principal executive offices)
Graham Lumsden, CEO
Motif Bio plc
125 Park Avenue
25th Floor
New York, New York 10011
United States
Tel: (212) 210-6248
(Name, Telephone, E-mail and/or Facsimile number and Address of
Company Contact Person)
Securities registered or to be registered pursuant to Section
12(b) of the Act.
Name of each exchange on
Title of each class which registered
------------------------------ ------------------------
American Depositary Shares The NASDAQ Stock Market
each representing 20 Ordinary LLC
Shares
------------------------------ ------------------------
Warrants to purchase The NASDAQ Stock Market
American Depositary Shares LLC
each representing 20 Ordinary
Shares
------------------------------ ------------------------
Ordinary shares, par value The NASDAQ Stock Market
GBP0.01 per share LLC*
------------------------------ ------------------------
* Not for trading, but only in connection with the
registration of the American Depositary Shares.
Securities registered or to be registered pursuant to Section
12(g) of the Act. None
Securities for which there is a reporting obligation pursuant to
Section 15(d) of the Act. None
Indicate the number of outstanding shares of each of the
issuer's classes of capital or common stock as of the close of the
period covered by the annual report.
Ordinary shares, par value GBP0.01 per share: 195,741,528 as of
December 31, 2016
Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities Act. ..
Yes x No
If this report is an annual or transition report, indicate by
check mark if the registrant is not required to file reports
pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934. .. Yes x No
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days. x Yes .. No
Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any, every
Interactive Data File required to be submitted and posted pursuant
to Rule 405 of Regulation S-T (--232.405 of this chapter) during
the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). (*).. Yes
.. No
(*) This requirement does not apply to the registrant in respect
of this filing.
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer or
an emerging growth company. See definition of "accelerated filer,"
"large accelerated filer" and "emerging growth company" in Rule
12b-2 of the Exchange Act. (Check one):
Large accelerated filer .. Accelerated filer .. Non-accelerated
filer ..
Emerging Growth Company x
If an emerging growth company that prepares its financial
statements in accordance with U.S. GAAP, indicate by check mark if
the registrant has elected not to use the extended transition
period for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange
Act.
..
The term "new or revised financial accounting standard" refers
to any update issued by the Financial Accounting Standards
Board to its Accounting Standards Codification after April 5,
2012.
Indicate by check mark which basis of accounting the registrant
has used to prepare the financial statements included in this
filing:
U.S. International Financial Other
GAAP Reporting Standards as issued ..
.. by the International Accounting
Standards Board x
If "Other" has been checked in response to the previous
question, indicate by check mark which financial statement item the
registrant has elected to follow. .. Item 17 .. Item 18
If this is an annual report, indicate by check mark whether the
registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act). .. Yes x No
INTRODUCTION.......................................................................................................................................................................................................
1
CAUTIONARY NOTE REGARDING FORWARD-LOOKING
STATEMENTS...............................................................................................
2
PART
I.........................................................................................................................................................................................................................
4
Item 1.......... Identity of Directors, Senior Management and
Advisers.............................................................................
4
Item 2.......... Offer Statistics and Expected
Timetable................................................................................................................
4
Item 3.......... Key
Information.......................................................................................................................................................................
4
A............ Selected Financial
Data.................................................................................................................................................
4
B............ Capitalization and
Indebtedness..................................................................................................................................
5
C............ Reasons for the Offer and Use of
Proceeds...................................................................................................................
5
D............ Risk
Factors.......................................................................................................................................................................
5
Item 4.......... Information on the
Company........................................................................................................................................
34
A............ History And Development Of The
Company..............................................................................................................
34
B............ Business
Overview..........................................................................................................................................................
35
C............ Organizational
Structure.............................................................................................................................................
61
D............ Property, Plants and
Equipment.................................................................................................................................
62
Item 5.......... Operating and Financial Review and
Prospects................................................................................................
62
A............ Operating
Results...........................................................................................................................................................
62
B............ Liquidity and Capital
Resources................................................................................................................................
66
C............ Research and
Development..........................................................................................................................................
66
D............ Trend
Information..........................................................................................................................................................
66
E............ Off-Balance Sheet
Arrangements.................................................................................................................................
66
F............ Tabular Disclosure of Contractual
Obligations......................................................................................................
68
G............ Safe
Harbor.....................................................................................................................................................................
68
Item 6.......... Directors, Senior Management and
Employees..................................................................................................
68
A............ Directors and Senior
Management.............................................................................................................................
68
B............
Compensation.................................................................................................................................................................
71
C............ Board
Practices..............................................................................................................................................................
74
D............
Employees........................................................................................................................................................................
77
E............ Share
Ownership............................................................................................................................................................
77
Item 7.......... Major Shareholders and Related Party
Transactions..............................................................................
77
A............ Major
shareholders........................................................................................................................................................
77
B............ Related Party
Transactions..........................................................................................................................................
80
C............ Interests of Experts and
Counsel.................................................................................................................................
83
Item 8.......... Financial
Information.......................................................................................................................................................
83
A............ Consolidated Statements and Other Financial
Information.................................................................................
83
B............ Significant
Changes......................................................................................................................................................
83
Item 9.......... The Offer and
Listing...........................................................................................................................................................
83
A............ Offer and Listing
Details...............................................................................................................................................
83
B............ Plan of
Distribution.......................................................................................................................................................
84
C............
Markets............................................................................................................................................................................
85
D............ Selling
Shareholders.....................................................................................................................................................
85
E............
Dilution............................................................................................................................................................................
85
F............ Expenses of the
Issue......................................................................................................................................................
85
Item 10........ Additional
Information...................................................................................................................................................
85
A............ Share
Capital..................................................................................................................................................................
85
B............ Memorandum and Articles of
Association.................................................................................................................
85
C............ Material
Contracts........................................................................................................................................................
85
D............ Exchange
Controls........................................................................................................................................................
86
E............
Taxation...........................................................................................................................................................................
86
F............ Dividends and Paying
Agents......................................................................................................................................
95
G............ Statement by
Experts.....................................................................................................................................................
95
H............ Documents on
Display...................................................................................................................................................
95
I.............. Subsidiary
Information.................................................................................................................................................
96
Item 11........ Quantitative and Qualitative Disclosures About
Market
Risk............................................................
96
Item 12........ Description of Securities Other than Equity
Securities...............................................................................
96
A............ Debt
Securities................................................................................................................................................................
96
B............ Warrants and
Rights......................................................................................................................................................
96
C............ Other
Securities..............................................................................................................................................................
96
D............ American Depositary
Shares........................................................................................................................................
96
PART
II.....................................................................................................................................................................................................................
98
Item 13........ Defaults, Dividend Arrearages and
Delinquencies.........................................................................................
98
Item 14........ Material Modifications to the Rights of Security
Holders and Use of Proceeds....................... 98
Item 15........ Controls and
Procedures.................................................................................................................................................
98
ITEM 16.
RESERVED.....................................................................................................................................................100
ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT..............................................................................................100
ITEM 16B. CODE OF BUSINESS CONDUCT AND ETHICS.........................................................................................100
ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES.....................................................................................100
.
ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES........................................101
ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND
AFFILIATED PURCHASERS........................101
ITEM 16F. CHANGE IN REGISTRANT'S CERTIFYING ACCOUNTANT....................................................................101
ITEM 16G. CORPORATE GOVERNANCE.......................................................................................................................102
ITEM 16H. MINE SAFETY DISCLOSURE.....................................................................................................................111
PART
III..................................................................................................................................................................................................................
111
Item 17........ Financial
Statements.......................................................................................................................................................
111
Item 18........ Financial
Statements.......................................................................................................................................................
111
Item 19........
Exhibits.......................................................................................................................................................................................
111
INTRODUCTION
Unless otherwise indicated or the context otherwise requires,
all references in this annual report on Form 20-F (this "Annual
Report") to "Motif", "the company", "our company", "the group",
"we", "us" and "our" refer to Motif Bio plc, together with Motif
BioSciences, Inc., its consolidated subsidiary.
The trademarks, service marks and trade names referred to in
this Annual Report are the property of their respective owners.
Solely for convenience, the trademarks and trade names in this
Annual Report may be referred to without the (R) and (TM) symbols,
but such references should not be construed as any indicator that
their respective owners will not assert, to the fullest extent
under applicable law, their rights thereto. We do not intend to use
or display other companies' trademarks and trade names to imply a
relationship with, or endorsement or sponsorship of us by, any
other companies.
Our audited consolidated financial statements have been prepared
in accordance with International Financial Reporting Standards, or
IFRS, as issued by the International Accounting Standards Board, or
IASB, and in accordance with IFRS as endorsed for use in the
European Union. Our consolidated financial statements are presented
in U.S. Dollars. All references in this Annual Report to "$,"
"US$," "U.S. dollars," and "dollars" mean U.S. dollars and all
references to "GBP" and "pounds" mean pounds sterling, unless
otherwise noted. Throughout this Annual Report, references to ADSs
mean ADSs or ordinary shares represented by ADSs, as the case may
be.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report contains forward looking statements that
involve substantial risks and uncertainties. The forward looking
statements are contained principally in the sections of this Annual
Report titled "Item 3.D. Risk Factors," "Item 4. Information on the
Company" and "Item 5. Operating and Financial Review and
Prospects." All statements, other than statements of historical
facts, contained in this Annual Report, including statements
regarding our future results of operations and financial position,
business strategy, prospective products, product approvals,
research and development costs, timing and likelihood of success,
plans and objectives of management for future operations, and
future results of current and anticipated products, are forward
looking statements. These statements relate to future events or to
our future financial performance and involve known and unknown
risks, uncertainties and other factors which may cause our actual
results, performance or achievements to be materially different
from any future results, performance or achievements expressed or
implied by the forward looking statements. The words "anticipate,"
"assume," "believe, " "contemplate," "continue," "could,"
"estimate," "expect," "goal," "intend," "may," "might,"
"objective," "plan, " "potential," "predict," "project,"
"positioned," "seek," "should," "target," "will," "would," or the
negative of these terms or other similar expressions are intended
to identify forward looking statements, although not all forward
looking statements contain these identifying words. These forward
looking statements are based on current expectations, estimates,
forecasts and projections about our business and the industry in
which we operate and management's beliefs and assumptions, are not
guarantees of future performance or development and involve known
and unknown risks, uncertainties and other factors. These forward
looking statements include statements regarding:
-- the timing, progress and results of clinical trials for our
product candidates, including statements regarding the timing of
initiation and completion of clinical trials, dosing of subjects
and the period during which the results of the clinical trials will
become available;
-- the timing, scope or likelihood of regulatory filings and
approvals for our product candidates;
-- our ability to successfully commercialize our product candidates;
-- potential benefits of the clinical development and commercial
experience of our management team;
-- our ability to effectively market any product candidates that
receive regulatory approval with a small, focused sale force;
-- potential development and commercial synergies from having
multiple product candidates for related indications;
-- our commercialization, marketing and manufacturing capabilities and strategy;
-- our expectation regarding the safety and efficacy of our product candidates;
-- the potential clinical utility and benefits of our product candidates;
-- our ability to advance our product candidates through various
stages of development, especially through pivotal safety and
efficacy trials;
-- our estimates regarding the potential market opportunity for our product candidates;
-- our expectations related to the use of proceeds from this offering;
-- our strategy to in--license, acquire and develop new product
candidates and our ability to execute that strategy;
-- developments and projections relating to our competitors or our industry;
-- our ability to become profitable;
-- our estimates regarding expenses, future revenue, capital
requirements and needs for additional financing;
-- our ability to secure additional financing when needed on acceptable terms;
-- the impact of government laws and regulations in the United States and foreign countries;
-- the impact of Brexit on our business and operations;
-- the implementation of our business model, strategic plans for
our business, product candidates and technology;
-- our intellectual property position;
-- our ability to attract or retain key employees, advisors or consultants; and
-- our expectations regarding the time during which we will be
an emerging growth company under the JOBS Act.
Actual results or events could differ materially from the plans,
intentions and expectations disclosed in the forward looking
statements we make. As a result, any or all of our forward looking
statements in this Annual Report may turn out to be inaccurate. We
have included important factors in the cautionary statements
included in this Annual Report, particularly in the section of this
Annual Report titled "Item 3.D. Risk Factors," that we believe
could cause actual results or events to differ materially from the
forward looking statements that we make. We may not actually
achieve the plans, intentions or expectations disclosed in our
forward looking statements, and you should not place undue reliance
on our forward looking statements. Moreover, we operate in a highly
competitive and rapidly changing environment in which new risks
often emerge. It is not possible for our management to predict all
risks, nor can we assess the impact of all factors on our business
or the extent to which any factor, or combination of factors, may
cause actual results to differ materially from those contained in
any forward looking statements we may make. Our forward looking
statements do not reflect the potential impact of any future
acquisitions, mergers, dispositions, joint ventures or investments
we may make.
You should read this Annual Report and the documents that we
reference in this Annual Report and have filed as exhibits to this
Annual Report completely and with the understanding that our actual
future results may be materially different from what we expect. The
forward looking statements contained in this Annual Report are made
as of the date of this Annual Report, and we do not assume any
obligation to update any forward looking statements except as
required by applicable law.
PART I
Item 1. Identity of Directors, Senior Management and Advisers.
Not applicable.
Item 2. Offer Statistics and Expected Timetable.
Not applicable.
Item 3. Key Information.
A. Selected Financial Data
The following tables set forth a summary of our consolidated
financial data. We have derived the consolidated statement of
comprehensive loss data and the consolidated statement of financial
position data from our audited consolidated financial statements.
Our historical results presented below are not necessarily
indicative of financial results to be achieved in future
periods.
All operations are continuing and we have not paid any dividends
in the periods presented.
You should read this data together with the audited consolidated
financial statements and related notes appearing elsewhere in this
Annual Report and the section in this Annual Report titled "Item 5.
Operating and Financial Review and Prospects."
Our audited consolidated financial statements have been prepared
in accordance with International Financial Reporting Standards
("IFRS") as issued by the International Accounting Standards Board
("IASB"), and in accordance with IFRS as endorsed for use in the
European Union, and are presented in U.S. dollars except where
otherwise indicated.
Statement of Comprehensive Loss Data:
Year ended December 31,
----------------------------------------------------
2016 2015 2014
----------------- ---------------- ---------------
(in thousands, except share and per share data)
Consolidated Statement of Comprehensive Loss
Operating expenses:
General and
administrative..............................................
........................... $(4,912) $(3,577) $(1,096)
Research and
development.................................................
....................... (34,794) (4,681) -
Gains on settlement of contract
disputes................................................. 83 5 360
----------------- ---------------- ---------------
Total operating
expenses................................................
....................... $(39,623) $(8,253) $(736)
----------------- ---------------- ---------------
Operating
loss..........................................................
......................................... (39,623) (8,253) (736)
Other income (expense), net
Interest
income......................................................
....................................... 70 15 -
Interest
expense.....................................................
...................................... (383) (268) (449)
Loss from revaluation of derivative
liability............................. (136) - -
Net foreign exchange
losses......................................................
................ (251) (10) -
----------------- ---------------- ---------------
Total other expense,
net.....................................................
.................... $(700) $(263) $(449)
----------------- ---------------- ---------------
Loss before income
taxes.........................................................
....................... (40,323) (8,516) (1,185)
Income tax
loss..........................................................
....................................... (1) (1) (1)
----------------- ---------------- ---------------
Net
loss..........................................................
.................................................... $(40,324) $(8,517) $(1,186)
================= ================ ===============
Total comprehensive
loss..........................................................
..................... $(40,324) $(8,517) $(1,186)
================= ================ ===============
Net loss attributable to ordinary shareholders, basic and
diluted............ $(40,324) $(8,517) $(1,186)
================= ================ ===============
Net loss per share attributable to ordinary shareholders, basic
and diluted(1) $(0.35) $(0.14) $(0.03)
================= ================ ===============
Weighted average shares used in computing net loss per share
attributable to ordinary shareholders,
basic and
diluted.......................................................
.......... 116,558,191 61,225,922 36,726,342
================= ================ ===============
(1) In accordance with IAS 33 "Earnings per share", shares are
not diluted when the entity has reported a loss for the period.
Statement of Financial Position Data:
As of December 31,
--------------------------------------
2016 2015 2014
------------ ------------ ----------
(in thousands, except share data)
Consolidated Statement of Financial Position
Data...................................................
Cash and cash
equivalents.................................................................
............................. $21,830 $28,594 $3
Total
assets......................................................................
.................................................. 28,426 34,958 226
Total
liabilities.................................................................
.................................................. 18,617 5,235 11,144
Total shareholders'
equity......................................................................
........................ 9,809 29,723 (10,918)
Share
capital.....................................................................
.................................................. 2,728 1,645 1
Number of ordinary shares in
issue.......................................................................
........ 195,741,528 108,601,496 1,645,291
B. Capitalization and Indebtedness
Not applicable.
C. Reasons for the Offer and Use of Proceeds
Not applicable.
D. Risk Factors
Our business faces significant risks. You should carefully
consider all of the information set forth in this Annual Report and
in our other filings with the United States Securities and Exchange
Commission, or the SEC, including the following risk factors which
we face and which are faced by our industry. Our business,
financial condition or results of operations could be materially
adversely affected by any of these risks. This report also contains
forward-looking statements that involve risks and uncertainties.
Our results could materially differ from those anticipated in these
forward-looking statements, as a result of certain factors
including the risks described below and elsewhere in this Annual
Report and our other SEC filings. See "Cautionary Note Regarding
Forward-Looking Statements" above.
Risks Related To Our Being A Development--Stage Company
We Are A Development--Stage Biopharmaceutical Company And Have A
Limited Operating History On Which To Assess Our Business, Have
Incurred Significant Losses Over The Last Several Years, And
Anticipate That We Will Continue To Incur Losses For The
Foreseeable Future.
We are a development--stage biopharmaceutical company with a
limited operating history. We have not yet demonstrated an ability
to complete a large--scale, pivotal clinical trial successfully,
obtain regulatory approval or manufacture and commercialize a
product candidate. Consequently, we have no meaningful commercial
operations upon which to evaluate our business and predictions
about our future success or viability may not be as accurate as
they could be if we had a history of successfully developing and
commercializing pharmaceutical products.
Since inception, we have incurred significant operating losses.
Our net loss was $40.3 million, $8.5 million and $1.2 million for
the fiscal years ended December 31, 2016, 2015 and 2014,
respectively. As of December 31, 2016, we had an accumulated
deficit of $60.2 million. We have devoted substantially all of our
financial resources to identifying, attempting to in--license or
otherwise acquire rights to our product candidates, including
conducting clinical trials and providing general and administrative
support for these operations to build our business
infrastructure.
To date, we have financed our operations primarily through
proceeds received from our initial public offering and follow--on
offering on AIM and the issuance of convertible promissory notes.
The amount of our future net losses will depend, in part, on the
rate of our future expenditures and our ability to obtain funding
through equity or debt financings, strategic collaborations or
grants.
Our directors have prepared cash flow forecasts extending for at
least 12 months from the date of this Annual Report. These
forecasts assume no sales and the continuation of costs associated
with drug discovery and development. Our directors acknowledge that
substantial uncertainty remains over our ability to have the
resources to fully support the iclaprim trials and that additional
funding will be needed through public markets, private financing,
and partnering opportunities within the next 12 months. In the
event that we do not have adequate capital to maintain or develop
our business, additional capital may not be available to us on a
timely basis, on favorable terms, or if at all, which could have a
material and negative impact on our business and results of
operations.
To become and remain profitable, we must develop and eventually
commercialize one or more of our product candidates with
significant market potential. Biopharmaceutical product development
is a highly speculative undertaking and involves a substantial
degree of risk. It may be several years, if ever, before we receive
regulatory approval and have a product candidate approved for
commercialization. Even if we obtain regulatory approval to market
a product candidate, our future revenue will depend upon the size
of any markets in which our product candidates may receive approval
and our ability to achieve market acceptance and adequate market
share for our product candidates in those markets. Further, because
the potential markets in which our product candidates may
ultimately receive regulatory approval are small, we may never
become profitable despite obtaining such market share and
acceptance of our product candidates.
We expect to continue to incur significant expenses and
increasing operating losses for the foreseeable future. We
anticipate that our expenses will increase substantially if and as
we:
-- continue research and nonclinical and clinical development of
our product candidates, including advancing our programs from
preclinical development into clinical trials and increasing the
number and size of our current clinical trials and preclinical
studies;
-- seek to identify, assess, in--license, acquire and develop additional product candidates;
-- change or add manufacturers or suppliers;
-- seek regulatory approvals for our product candidates that
successfully complete clinical trials;
-- establish a sales, marketing and distribution infrastructure
to commercialize any products for which we may obtain regulatory
approval;
-- make up--front, milestone or other payments under any of our license agreements;
-- seek to maintain, protect, defend, enforce and expand our intellectual property portfolio;
-- seek to attract and retain skilled personnel;
-- create additional infrastructure to support our operations as
a U.S. listed company and our product development and planned
future commercialization efforts; and
-- experience any delays or encounter issues with any of the
above, including, but not limited to, failed preclinical studies or
clinical trials, obtaining complex results, safety issues or other
regulatory challenges that may require either longer follow--up of
existing preclinical studies or clinical trials or limitation of
additional preclinical studies or clinical trials in order to
pursue regulatory approval.
Further, the net losses we incur may fluctuate significantly
from quarter--to--quarter and year--to--year, such that a
period--to--period comparison of our results of operations may not
be a good indication of our future performance. Moreover, if we
incur substantial losses, we could be liquidated, and the value of
our shares might be significantly reduced or the shares might be of
no value.
We Have Never Generated Any Revenue From Product Sales And May
Never Be Profitable.
We have no products approved for commercialization and have
never generated any revenue from product sales. We will not
generate revenue from product sales unless and until we
successfully complete the development of, obtain regulatory
approval for and commercialize one or more of our product
candidates. Our ability to generate future revenue from product
sales depends heavily on our success in many areas, including, but
not limited to:
-- completing research, preclinical or clinical development, as
applicable, of our product candidates, including successfully
completing clinical trials of our product candidates;
-- integrating product candidates that we in--license or
acquire, as well as completing research, formulation and process
development, and preclinical or clinical development, as
applicable, of those product candidates, including successfully
completing clinical trials of those product candidates;
-- obtaining regulatory approval of our product candidates;
-- incurring additional costs as we advance our product candidates;
-- developing a sustainable and scalable manufacturing process
for our product candidates, if approved;
-- maintaining supply and manufacturing relationships with
third-parties that can conduct the manufacturing process
development and provide adequate, in amount and quality, products
to support clinical development and the market demand for our
product candidates, if approved;
-- developing a commercial organization and launching and
commercializing product candidates for which we obtain regulatory
approval, either directly or with a collaborator or
distributor;
-- obtaining market acceptance of our product candidates as viable treatment options;
-- addressing any competing technological and market developments;
-- identifying, assessing, in--licensing, acquiring and/or developing new product candidates;
-- negotiating favorable terms in any collaboration, licensing
or other arrangements into which we may enter;
-- maintaining, protecting, enforcing and expanding our
portfolio of intellectual property rights, including patents, trade
secrets and know--how; and
-- attracting, hiring and retaining qualified personnel.
Given the numerous risks and uncertainties associated with
pharmaceutical product development, we are unable to accurately
predict the timing or amount of increased expenses or when, or if,
we will be able to achieve profitability. Our expenses could
increase beyond expectations if we are required by the FDA or the
EMA, or any comparable foreign regulatory agency, to perform
nonclinical and preclinical studies or clinical trials in addition
to those that we currently anticipate.
Even if one or more of the product candidates that we develop is
approved for commercial sale, we anticipate incurring significant
costs associated with commercializing any approved product
candidate. Further, our revenue will be dependent, in part, upon
the size of the markets in the territories for which we gain
regulatory approval, the accepted price for the product, the
ability to obtain coverage and adequate reimbursement, and whether
we own the commercial rights for that territory. If the number of
our addressable patients is not as significant as we estimate, the
indication approved by regulatory authorities is narrower than we
expect, or the treatment population is narrowed by competition,
physician choice or treatment guidelines, we may not generate
significant revenue from sales of our product candidates. If we are
not able to generate sufficient revenue from the sale of any
approved products, we may never become profitable. Even if we do
achieve profitability, we may not be able to sustain or increase
profitability on a quarterly or annual basis. Our failure to
successfully execute any of the foregoing would decrease the value
of our company and could impair our ability to raise capital,
expand our business or continue our operations. A decline in the
value of our company could cause you to lose all or part of your
investment.
We Will Need Substantial Additional Funding Before We Can Expect
To Complete The Development Of Our Product Candidates And Become
Profitable From Sales Of Our Approved Products, If Any.
We are currently advancing our product candidates through
preclinical and clinical development. Development of our product
candidates is expensive, and we expect our research and development
expenses to increase in connection with our ongoing activities,
particularly as we continue our ongoing trials and initiate new
trials of iclaprim and our other product candidates. Even with the
proceeds of the offerings, we expect that we will require
additional capital to obtain regulatory approval for, and to
commercialize, our product candidates.
As of December 31, 2016 and 2015, our cash and cash equivalents
were $21.8 million and $28.6 million, respectively. Our future
funding requirements will depend on many factors, including, but
not limited to:
-- the scope, rate of progress, results and cost of our clinical
trials, nonclinical testing, formulation, process development and
other related activities;
-- the cost of manufacturing clinical supplies and establishing
commercial supplies of our product candidates, if approved, and any
products that we may develop;
-- the number and characteristics of product candidates that we
pursue, including any additional product candidates we may
in--license or acquire;
-- the cost of filing, prosecuting, defending and enforcing our
patent claims and other intellectual property rights;
-- the cost of defending potential intellectual property
disputes, including patent infringement actions brought by
third-parties against us or our product candidates;
-- the cost, timing and outcomes of regulatory approvals;
-- the cost and timing impact of, and our ability to
successfully resolve, any regulatory enforcement actions that may
be brought against us or any of our suppliers, contract
manufacturers, contract research organizations, clinical
investigators, or other related entities, including responding to
any adverse inspectional findings (FDA Form 483s), clinical holds,
warning letters or untitled letters or other administrative or
judicial actions against us or any related entities;
-- the cost and timing of establishing sales, marketing and distribution capabilities; and
-- the terms and timing of any collaborative, licensing and
other arrangements that we may establish, including any required
milestone and royalty payments thereunder.
Any additional fundraising efforts may divert our management
from their day--to--day activities, which may compromise our
ability to develop and commercialize our product candidates, if
approved. In addition, we cannot guarantee that future financing
will be available in sufficient amounts or on terms acceptable to
us, if at all. Moreover, the terms of any financing may adversely
affect the holdings or the rights of our shareholders and the
issuance of additional securities, whether equity or debt, by us,
or the possibility of such issuance, may cause the market price of
the ADSs and our ordinary shares to decline.
If we are unable to obtain funding on a timely basis, we will be
required to significantly curtail, delay or discontinue one or more
of our research or development programs or the commercialization of
any product candidates, if approved, or be unable to expand our
operations or otherwise capitalize on our business opportunities,
as desired.
The accompanying consolidated financial statements have been
prepared on a basis which assumes we will continue as a going
concern and which contemplates the realization of assets and
satisfaction of liabilities and commitments in the normal course of
business. However, we have recorded losses since inception. As of
December 31, 2016, we held unrestricted cash and cash equivalents
of $21.8 million. We will need substantial additional funding to
complete our two Phase 3 clinical trials of iclaprim for the
treatment of acute bacterial skin and skin structure infection
("ABSSSI"), including the completion of our REVIVE--1 trial, for
which positive topline results were announced on April 18, 2017,
our REVIVE--2 Phase 3 clinical trial, our INSPIRE Phase 3 clinical
trial and to continue operations. Our present capital resources are
not sufficient to fund our planned operations for the next twelve
months from the date of this Annual Report, and therefore, there
exists substantial doubt about our ability to continue as a going
concern.
Raising Additional Capital May Cause Dilution To Our
Shareholders, Restrict Our Operations Or Require Us To Relinquish
Rights To Our Intellectual Property Or Future Revenue Streams.
Until such time, if ever, as we can generate substantial product
revenue, we expect to finance our cash needs through a combination
of equity offerings, debt financings, grants, and license and
development agreements in connection with any collaborations. We do
not have any committed external source of funds. In the event we
seek additional funds, we may raise additional capital through the
sale of equity or convertible debt securities. In such an event,
your ownership interest will be diluted, and the terms of these
securities may include liquidation or other preferences that
adversely affect your rights as a holder of our ordinary shares or
the ADSs. Debt financing, if available, could result in increased
fixed payment obligations and may involve agreements that include
restrictive covenants, such as limitations on our ability to incur
additional debt, make capital expenditures, acquire, sell or
license intellectual property rights or declare dividends, and
other operating restrictions that could hurt our ability to conduct
our business.
Further, if we raise additional funds through collaborations,
strategic alliances, or marketing, distribution or licensing
arrangements with third-parties, we may have to relinquish valuable
rights to our intellectual property or future revenue streams. If
we are unable to raise additional funds when needed, we will be
required to delay, limit, reduce or terminate our product
development or future commercialization efforts, or grant rights to
develop and market product candidates that we would otherwise
prefer to develop and market ourselves.
We May Not Be Successful In Executing Our Growth Strategy Or Our
Growth Strategy May Not Deliver The Anticipated Results.
We plan to source new product candidates that are complementary
to our existing product candidates by in--licensing or acquiring
them from other companies or academic institutions. If we are
unable to identify, in--license or acquire and integrate product
candidates in accordance with this strategy, our ability to pursue
our growth strategy would be compromised.
Research programs and business development efforts to identify
new product candidates require substantial technical, financial and
human resources. We may focus our efforts and resources on
potential programs or product candidates that ultimately prove to
be unsuccessful. Our research programs, business development
efforts or licensing attempts may fail to yield additional
complementary or successful product candidates for clinical
development and commercialization for a number of reasons,
including, but not limited to, the following:
-- our research or business development methodology or search
criteria and process may be unsuccessful in identifying potential
product candidates with a high probability of success for
development progression;
-- we may not be able or willing to assemble sufficient
resources or expertise to in--license, acquire or discover
additional product candidates;
-- for product candidates we seek to in--license or acquire, we
may not be able to agree to acceptable terms with the licensor or
owner of those product candidates;
-- our product candidates may not succeed in preclinical studies or clinical trials;
-- we may not succeed in formulation or process development;
-- our product candidates may be shown to have harmful side
effects or may have other characteristics that may make the
products unmarketable or unlikely to receive regulatory
approval;
-- competitors may develop alternatives that render our product
candidates obsolete or less attractive;
-- product candidates that we develop may be covered by
third-parties' patents or other exclusive rights;
-- product candidates that we develop may not allow us to
leverage our expertise and our development and commercial
infrastructure as currently expected;
-- the market for a product candidate may change during our
program so that such a product may become unreasonable to continue
to develop;
-- a product candidate may not be capable of being produced in
commercial quantities at an acceptable cost, or at all; and
-- a product candidate may not be accepted as safe and effective
by patients, the medical community or third--party payors.
If any of these events occurs, we may not be successful in
executing our growth strategy or our growth strategy may not
deliver the anticipated results.
We May Expend Our Limited Resources To Pursue A Particular
Product Candidate Or Indication And Fail To Capitalize On Product
Candidates Or Indications That May Be More Profitable Or For Which
There Is A Greater Likelihood Of Success.
We have limited financial and managerial resources. As a result,
we may forego or delay pursuit of opportunities with other product
candidates or for other indications that later prove to have
greater commercial potential. Our resource allocation decisions may
cause us to fail to capitalize on viable commercial products or
profitable market opportunities. Our spending on current and future
research and development programs and product candidates for
specific indications may not yield any commercially viable
products. If we do not accurately evaluate the commercial potential
or target market for a particular product candidate, we may
relinquish valuable rights to that product candidate through
collaboration, licensing or other royalty arrangements in cases in
which it would have been more advantageous for us to retain sole
development and commercialization rights to such product
candidate.
If We Acquire Other Businesses Or In--license Or Acquire Other
Product Candidates And Are Unable To Integrate Them Successfully,
Our Financial Performance Could Suffer.
If we are presented with appropriate opportunities, we may
acquire other businesses. We have had limited experience
integrating other businesses or product candidates, or
in--licensing or acquiring other product candidates. The
integration process following any future transactions may produce
unforeseen operating difficulties and expenditures, and may absorb
significant management attention that would otherwise be directed
to the ongoing development of our business. Also, in any future
in--licensing or acquisition transactions, we may issue ordinary
shares that would result in dilution to existing shareholders,
incur debt, assume contingent liabilities or create additional
expenses related to amortizing intangible assets, any of which
might harm our financial results and cause our share price to
decline. Any financing we might need for future transactions may be
available to us only on terms that restrict our business or impose
costs that reduce our net income.
We Are Highly Dependent On Our Key Personnel, As Well As Our
Ability To Recruit, Retain And Motivate Additional Qualified
Personnel.
We are highly dependent on Graham Lumsden, our Chief Executive
Officer, Robert Dickey IV, our Chief Financial Officer, and David
Huang, our Chief Medical Officer. Any member of management or
employee can terminate his or her relationship with us at any time.
Although we have included non--compete provisions in their
respective employment or consulting agreements, as the case may be,
such arrangements might not be sufficient for the purpose of
preventing such key personnel from entering into agreements with
any of our competitors. The inability to recruit and retain
qualified personnel, or the loss of Graham Lumsden, Robert Dickey
IV or David Huang could result in competitive harm as we could
experience delays in reaching our in--licensing, acquisition,
development and commercialization objectives.
We also depend substantially on highly qualified managerial,
sales and technical personnel who are difficult to hire and retain.
As a result, competition for skilled personnel is intense and the
turnover rate can be high. We may not be able to attract and retain
personnel on acceptable terms given the competition among numerous
pharmaceutical and biotechnology companies for individuals with
similar skill sets. In addition, failure to succeed in preclinical
studies or clinical trials may make it more challenging to recruit
and retain qualified personnel. Recruiting and retaining other
qualified employees, consultants and advisors for our business,
including scientific and technical personnel, will be critical to
our success.
We Expect To Expand Our Organization, And We May Experience
Difficulties In Managing This Growth, Which Could Disrupt Our
Operations.
As of the date of this Annual Report, we had six full--time
employees. As our development, commercialization, in--licensing and
acquisition plans and strategies develop, and as we advance the
preclinical and clinical development of our product candidates, we
expect to experience significant growth in the number of our
employees and the scope of our operations, particularly in the
areas of managerial, operational, sales, marketing, financial,
legal and other resources. To manage our anticipated future growth,
we must continue to implement and improve our managerial,
operational and financial systems, expand our facilities, and
continue to recruit and train additional qualified personnel. Our
management may need to divert a disproportionate amount of its
attention away from our day--to--day activities and devote a
substantial amount of time to managing these growth activities. Due
to our limited financial resources, we may not be able to
effectively manage the expansion of our operations, which may
result in weaknesses in our infrastructure, operational mistakes,
loss of business opportunities, loss of employees and reduced
productivity among remaining employees. Our expected growth could
require significant capital expenditures and may divert financial
resources from other projects, such as the in--licensing,
acquisition and development of additional product candidates. If
our management is unable to effectively manage our growth, our
expenses may increase more than expected, our ability to generate
or grow revenue could be reduced and we may not be able to
implement our business strategy.
If We Fail To Maintain An Effective System Of Internal Control
Over Financial Reporting, We May Not Be Able To Accurately Report
Our Financial Results Or Prevent Fraud. As A Result, Shareholders
Could Lose Confidence In Our Financial And Other Public Reporting,
Which Would Harm Our Business And The Trading Price Of The ADSs,
The ADS Warrants and Our Ordinary Shares.
Effective internal controls over financial reporting are
necessary for us to provide reliable financial reports and,
together with adequate disclosure controls and procedures, are
designed to prevent fraud. Any failure to implement required new or
improved controls, or difficulties encountered in their
implementation could cause us to fail to meet our reporting
obligations. In addition, any testing by us, as and when required,
conducted in connection with Section 404 of the Sarbanes--Oxley
Act, or Section 404, or any subsequent testing by our independent
registered public accounting firm, as and when required, may reveal
deficiencies in our internal controls over financial reporting that
are deemed to be material weaknesses or that may require
prospective or retroactive changes to our financial statements or
identify other areas for further attention or improvement. Inferior
internal controls could also cause investors to lose confidence in
our reported financial information, which could have a negative
effect on the trading price of the ADSs, the ADS Warrants and our
ordinary shares.
Pursuant to Section 404, we will be required to furnish a report
by our management on our internal control over financial reporting.
However, as an emerging growth company, we will not be required to
include an attestation report on internal control over financial
reporting issued by our independent registered public accounting
firm until we are no longer an emerging growth company. To achieve
compliance with Section 404 within the prescribed period, we will
be engaged in a process to document and evaluate our internal
control over financial reporting, which is both costly and
challenging. In this regard, we will need to continue to dedicate
internal resources, potentially engage outside consultants and
adopt a detailed work plan to assess and document the adequacy of
internal control over financial reporting, continue steps to
improve control processes as appropriate, validate through testing
that controls are functioning as documented and implement a
continuous reporting and improvement process for internal control
over financial reporting. Despite our efforts, there is a risk that
we will not be able to conclude within the prescribed timeframe
that our internal control over financial reporting is effective as
required by Section 404. This could result in an adverse reaction
in the financial markets due to a loss of confidence in the
reliability of our financial statements.
As of December 31, 2016, our Chief Executive Officer and Chief
Financial Officer assessed the effectiveness of our internal
control over financial reporting. In making this assessment,
management used the criteria set forth by the Committee of
Sponsoring Organizations of the Treadway Commission in Internal
Control - Integrated Framework (2013). A material weakness is a
deficiency, or a combination of deficiencies, in internal control
over financial reporting such that there is a reasonable
possibility that a material misstatement of the annual or interim
financial statements will not be prevented or detected on a timely
basis. In connection with this assessment, we identified the
following material weaknesses in internal control over financial
reporting as of December 31, 2016.
We did not maintain an effective control environment as we did
not maintain effective internal controls to ensure processing and
reporting of valid transactions is complete, accurate, and timely
and did not maintain a sufficient complement of resources with an
appropriate level of accounting knowledge, experience, and training
commensurate with their structure and financial reporting
requirements to allow for appropriate monitoring, presentation and
disclosure, and internal control over financial reporting.
Specifically, we have not designed and implemented a sufficient
level of formal accounting policies and procedures that define how
transactions across the business cycles should be initiated,
recorded, processed, authorized, approved and appropriately
reported, including presentation and disclosure, within the
financial statements. Additionally, the limited personnel resulted
in our inability to consistently establish appropriate authorities
and responsibilities in pursuit of our financial reporting
objectives, as demonstrated by, amongst other things, our
insufficient segregation of duties in their finance and accounting
functions.
These control deficiencies resulted in the misclassification of
derivative liabilities in the statement of financial position. In
addition, these control deficiencies resulted in immaterial audit
adjustments to increase our trade and other payables as of December
31, 2016. Additionally, these control deficiencies could result in
a misstatement of the aforementioned account balances or
disclosures that would result in a material misstatement to the
annual or interim consolidated financial statements that would not
be prevented or detected. Accordingly, our management has
determined that these control deficiencies constitute material
weaknesses.
Our Business And Operations Would Suffer In The Event Of System
Failures.
Our computer systems, as well as those of our clinical research
organizations, or CROs, and other contractors and consultants, are
vulnerable to damage from computer viruses, unauthorized access,
natural disasters, including hurricanes, terrorism, war and
telecommunication and electrical failures. If such an event were to
occur and cause interruptions in our operations, it could result in
a material disruption of our product development programs. For
example, the loss of preclinical study or clinical trial data from
completed, ongoing or planned preclinical studies or clinical
trials could result in delays in our regulatory approval efforts
and significantly increase our costs to recover or reproduce the
data. To the extent that any disruption or security breach were to
result in a loss of or damage to our data or applications, or
inappropriate disclosure of personal, confidential or proprietary
information, we could incur liability and the further development
of our product candidates could be delayed.
The Recent Vote By The U.K. Electorate In Favor Of A U.K. Exit
From The EU Could Adversely Impact Our Business, Results Of
Operations And Financial Condition.
In a referendum held in the United Kingdom on June 23, 2016, a
majority of those voting voted for the United Kingdom to leave the
EU (referred to as "Brexit"). For now, the United Kingdom remains a
member of the EU and there will not be any immediate change in
either EU or English law as a consequence of the "leave" vote. EU
law does not govern contracts and the United Kingdom is not part of
the EU's monetary union. However, the "leave" vote signals the
beginning of a lengthy process under which the terms of the United
Kingdom's withdrawal from, and future relationship with, the EU
will be negotiated and legislation to implement the United
Kingdom's withdrawal from the EU will be enacted. The ultimate
impact of the "leave" vote will depend on the terms that are
negotiated in relation to the United Kingdom's future relationship
with the EU. Although the timetable for U.K. withdrawal is not at
all clear at this stage, it is likely that the withdrawal of the
United Kingdom from the EU will take more than two years to be
negotiated and conclude.
Brexit could impair our ability to transact business in EU
countries. Brexit has already and could continue to adversely
affect European and/or worldwide economic and market conditions and
could continue to contribute to instability in the global financial
markets. The long--term effects of Brexit will depend in part on
any agreements the United Kingdom makes to retain access to EU
markets following the United Kingdom's withdrawal from the EU.
In addition, we expect that Brexit could lead to legal
uncertainty and potentially divergent national laws and regulations
as the United Kingdom determines which EU laws to replicate or
replace. If the United Kingdom were to significantly alter its
regulations affecting the pharmaceutical industry, we could face
significant new costs. It may also be time--consuming and expensive
for us to alter our internal operations in order to comply with new
regulations. Altered regulations could also add time and expense to
the process by which our product candidates receive regulatory
approval in the United Kingdom and EU. Similarly, it is unclear at
this time what Brexit's impact will have on our intellectual
property rights and the process for obtaining and defending such
rights. It is possible that certain intellectual property rights,
such as trademarks, granted by the EU will cease being enforceable
in the U.K. absent special arrangements to the contrary. With
regard to existing patent rights, the effect of Brexit should be
minimal considering enforceable patent rights are specific to the
U.K., whether arising out of the European Patent Office or directly
through the U.K. patent office.
Any of these effects of Brexit, and others we cannot anticipate,
could adversely affect our business, business opportunities,
results of operations, financial condition and cash flows.
Risks Related To The Development And Preclinical And Clinical
Testing Of Our Product Candidates
We Depend Entirely On The Success Of A Limited Number Of Product
Candidates, Which Are Still In Preclinical Or Clinical Development.
If We Do Not Obtain Regulatory Approval For And Successfully
Commercialize One Or More Of Our Product Candidates Or We
Experience Significant Delays In Doing So, We May Never Become
Profitable.
We currently have no products approved for sale and may never be
able to obtain regulatory approval for, or commercialize, any
products. We have invested, and expect to continue to invest, a
significant portion of our efforts and financial resources in the
development of a limited number of product candidates, which are
still in preclinical or clinical development. Our ability to
generate product revenues, which we do not expect will occur for at
least the next several years, if ever, will depend heavily on our
successful development and eventual commercialization, if approved,
of one or more of our product candidates. We are not permitted to
market or promote any of our product candidates in particular
countries or regions before we receive regulatory approval from the
U.S. Food and Drug Administration ("FDA"), European Medicines
Agency ("EMA") or any required comparable regulatory agency, and we
may never receive such regulatory approval for any of our product
candidates. The success of iclaprim and our other product
candidates will depend on several additional factors, including,
but not limited to, the following:
-- successfully completing formulation and process development activities;
-- the success of our contract manufacturers, suppliers,
clinical research organization partners and other related entities
in meeting all regulatory requirements;
-- successfully completing clinical trials that demonstrate the
efficacy and safety of our product candidates;
-- acceptance of our product candidates by patients and the medical community;
-- a continued acceptable safety profile following approval;
-- obtaining and maintaining healthcare coverage and adequate reimbursement; and
-- competing effectively with other therapies, including with
respect to the sales and marketing of our product candidates, if
approved.
Many of these factors are wholly or partially beyond our
control, including clinical development, the regulatory submission
process, potential threats to our intellectual property rights and
changes in the competitive landscape. If we do not achieve one or
more of these factors in a timely manner or at all, we could
experience significant delays or an inability to successfully
complete clinical trials or eventually commercialize our product
candidates, if approved.
Clinical Trials Are Very Expensive, Time Consuming And Difficult
To Design And Implement And Involve Uncertain Outcomes.
Furthermore, Results Of Earlier Preclinical Studies And Clinical
Trials May Not Be Predictive Of Results Of Future Preclinical
Studies Or Clinical Trials.
To obtain the requisite regulatory approvals to market and sell
any of our product candidates, we must demonstrate through
extensive preclinical studies and clinical trials that our products
are safe and effective in humans. Clinical testing is expensive and
can take many years to complete, and its outcome is inherently
uncertain. Failure can occur at any time during the clinical trial
process. The results of preclinical studies and earlier clinical
trials may not be predictive of the results of later--stage
clinical trials. For example, the results generated to date in
preclinical studies or clinical trials for our product candidates
do not ensure that later preclinical studies or clinical trials
will demonstrate similar results. Product candidates in later
stages of clinical trials may fail to show the desired safety and
efficacy traits despite having progressed through preclinical
studies and initial clinical trials. Companies in the
biopharmaceutical industry may suffer setbacks in advanced clinical
trials due to lack of efficacy or adverse safety profiles,
notwithstanding promising results in earlier clinical trials. We
may experience delays in our ongoing or future preclinical studies
or clinical trials, and we do not know whether future preclinical
studies or clinical trials will begin on time, need to be
redesigned, enroll an adequate number of subjects or patients on
time or be completed on schedule, if at all. Clinical trials may be
delayed, suspended or terminated for a variety of reasons,
including delay or failure to:
-- obtain authorization from regulators or institutional review
boards ("IRBs") to commence a clinical trial at a prospective
clinical trial site;
-- reach agreements on acceptable terms with prospective CROs
and clinical trial sites, the terms of which can be subject to
extensive negotiation and may vary significantly among different
CROs and clinical trial sites;
-- recruit and enroll a sufficient number of patients in
clinical trials to ensure adequate statistical power to detect
statistically significant treatment effects;
-- address any noncompliance with regulatory requirements or
safety concerns that arise during the course of a clinical
trial;
-- have patients complete clinical trials or return for post--treatment follow--up;
-- have contract manufacturers, suppliers, clinical research
organization partners and other related entities or other
third-parties comply with regulatory requirements, adhere to the
trial protocol or meet contractual obligations in a timely manner
or at all;
-- identify a sufficient number of clinical trial sites and
initiate them within the planned timelines; and
-- manufacture sufficient quantities of the product candidate in
accordance with current Good Manufacturing Practice ("cGMP")
requirements to complete clinical trials.
Positive or timely results from preclinical or early stage
clinical trials do not ensure positive or timely results in late
stage clinical trials or regulatory approval by the FDA, EMA or any
comparable foreign regulatory agency. In addition, many of the
factors that cause, or lead to, a delay in the commencement or
completion of clinical trials may also ultimately lead to the
denial of regulatory approval of our product candidates.
Preclinical and clinical data are often susceptible to varying
interpretations and analyses. Many companies that believed their
product candidates performed satisfactorily in preclinical studies
and clinical trials have nonetheless failed to obtain regulatory
approval for the product candidates. The FDA, EMA and any
comparable foreign regulatory agency have substantial discretion in
the approval process and in determining when or whether regulatory
approval will be obtained for any of our product candidates. Even
if we believe the data collected from clinical trials of our
product candidates are promising, such data may not be sufficient
to support approval by the FDA, EMA or any comparable foreign
regulatory agency.
In some instances, there can be significant variability in
safety or efficacy results between different clinical trials of the
same product candidate due to numerous factors, including changes
in clinical trial procedures set forth in protocols, differences in
the size and type of the patient populations, adherence to the
administration regimen and other clinical trial protocols, and the
rate of dropout among clinical trial participants. In the case of
our late stage clinical product candidates, results may differ in
general on the basis of the larger number of clinical trial sites
and additional countries involved in Phase 3 clinical trials.
Different countries have different standards of care and different
levels of access to care for patients, which in part drives the
heterogeneity of the patient populations that enroll in our
studies.
The Regulatory Approval Process Of The FDA, EMA Or Any
Comparable Foreign Regulatory Agency May Be Lengthy, Time Consuming
And Unpredictable.
Our future success depends upon our ability to develop, obtain
regulatory approval for and then commercialize one or more of our
product candidates. Although some of our employees have prior
experience with submitting marketing applications to the FDA, EMA
or any comparable foreign regulatory agency, we, as a company, have
not submitted such applications for our product candidates. We
cannot be certain that any of our product candidates will be
successful in clinical trials or receive regulatory approval.
Applications for any of our product candidates could fail to
receive regulatory approval for many reasons, including, but not
limited to, the following:
-- the FDA, EMA or any comparable foreign regulatory agency may
disagree with the design or implementation of our clinical trials
or our interpretation of data from nonclinical trials or clinical
trials;
-- the population studied in the clinical program may not be
sufficiently broad or representative to assure safety in the full
population for which we seek approval, including reliance on
foreign clinical data;
-- the data collected from clinical trials of our product
candidates may not be sufficient to support a finding that has
statistical significance or clinical meaningfulness or support the
submission of a new drug application, or NDA, or other submission,
or to obtain regulatory approval in the United States or
elsewhere;
-- we may be unable to demonstrate to the FDA, EMA or any
comparable foreign regulatory agency that a product candidate's
risk--benefit ratio for its proposed indication is acceptable;
-- the FDA, EMA or any comparable foreign regulatory agency may
fail to approve the manufacturing processes, test procedures and
specifications or facilities of third--party manufacturers with
which we contract for clinical and commercial supplies; and
-- the approval policies or regulations of the FDA, EMA or any
comparable foreign regulatory agency may significantly change in a
manner rendering our clinical data insufficient for approval.
Any of our current or future product candidates could take a
significantly longer time to gain regulatory approval than expected
or may never gain regulatory approval. This could delay or
eliminate any potential product revenue by delaying or terminating
the potential commercialization of our product candidates
We generally plan to seek regulatory approval to commercialize
our product candidates in the United States, the EU and other key
global markets. To obtain regulatory approval in other countries,
we must comply with numerous and varying regulatory requirements of
such other countries regarding safety, efficacy, chemistry,
manufacturing and controls, clinical trials, commercial sales,
pricing and distribution of our product candidates. Even if we are
successful in obtaining approval in one jurisdiction, we cannot
ensure that we will obtain approval in any other jurisdictions.
Failure to obtain marketing authorization for our product
candidates will result in our being unable to market and sell such
products. If we fail to obtain approval in any jurisdiction, the
geographic market for our product candidates could be limited.
Similarly, regulatory agencies may not approve the labeling claims
that are necessary or desirable for the successful
commercialization of our product candidates.
If Serious Adverse, Undesirable Or Unacceptable Side Effects Are
Identified During The Development Of Our Product Candidates Or
Following Regulatory Approval, If Any, We May Need To Abandon Our
Development Of Such Product Candidates.
If our product candidates are associated with serious adverse,
undesirable or unacceptable side effects, we may need to abandon
their development or limit development to certain uses or
sub--populations in which such side effects are less prevalent,
less severe or more acceptable from a risk--benefit perspective.
Many compounds that initially showed promise in preclinical or
early stage testing have later been found to cause side effects
that restricted their use and prevented further development of the
compound for larger indications.
Discovery of previously unknown problems, or increased focus on
a known problem, with an approved product may result in
restrictions on its permissible uses, including withdrawal of the
medicine from the market.
Additionally, if one or more of our product candidates receives
regulatory approval, and we or others later identify undesirable
side effects caused by such product(s), a number of potentially
significant negative consequences could result, including, but not
limited to:
-- withdrawal by regulatory authorities of approvals of such product;
-- seizure of the product by regulatory authorities;
-- recall of the product;
-- restrictions on the marketing of the product;
-- requirement by regulatory authorities of additional warnings
on the label, such as a black box warning;
-- requirement that we create and implement a Risk Evaluation
and Mitigation Strategy (REMS), that may include a medication guide
outlining the risks of such side effects for distribution to
patients, or a restricted distribution system; commitment to
expensive additional safety studies prior to launch as a
prerequisite of approval by regulatory authorities of such
product;
-- commitment to expensive post--marketing studies as a
prerequisite of approval by regulatory authorities of such
product;
-- initiation of legal action against us claiming to hold us
liable for harm caused to patients; and
-- harm to our reputation and resulting harm to physician or
patient acceptance of our products.
Any of these events could prevent us from achieving or
maintaining market acceptance of the particular product candidate,
if approved, and could significantly harm our business, financial
condition, and results of operations.
We May Find It Difficult To Enroll Patients In Our Clinical
Trials Given The Limited Number Of Patients Who Have The Diseases
For The Treatment Of Which Our Product Candidates Are Being
Studied. Difficulty In Enrolling Patients In Our Clinical Trials
Could Delay Or Prevent Clinical Trials Of Our Product
Candidates.
Successful and timely completion of clinical trials will require
that we enroll a sufficient number of patient candidates. Clinical
trials may be subject to delays as a result of patient enrollment
taking longer than anticipated or patient withdrawal. Patient
enrollment depends on many factors, including the size and nature
of the patient population, eligibility criteria for the clinical
trial, the proximity of patients to clinical sites, the design of
the clinical protocol, the availability of competing clinical
trials, the availability of new drugs approved for the indication
the clinical trial is investigating, and clinicians' and patients'
perceptions as to the safety and potential advantages of the
product candidate being studied in relation to other available
therapies.
Because we are focused on addressing rare diseases, there are
limited patient pools from which to draw in order to complete our
clinical trials in a timely and cost--effective manner. Delays in
the completion of any clinical trial of our product candidates will
increase our costs, slow down our product candidate development and
approval process, and delay or potentially jeopardize our ability
to commence product sales and generate revenue. In addition, many
of the factors that may lead to a delay in the commencement or
completion of clinical trials may also ultimately lead to the
denial of regulatory approval of our product candidates.
We May Become Exposed To Costly And Damaging Liability Claims,
Either When Testing Our Product Candidates In The Clinic Or At The
Commercial Stage, And Our Product Liability Insurance May Not Cover
All Damages From Such Claims.
We are exposed to potential product liability and professional
indemnity risks that are inherent in the research, development,
manufacturing, marketing, and use of pharmaceutical products. We
currently have no products that have been approved for commercial
sale. However, the current and future use of product candidates by
us in clinical trials, and the sale of any approved products in the
future, may expose us to liability claims. These claims might be
made by patients that use the product, healthcare providers,
pharmaceutical companies, or others selling such products. Any
claims against us, regardless of their merit, could be difficult
and costly to defend, and could compromise the market acceptance of
our product candidates or any prospects for commercialization of
our product candidates, if approved.
Although the clinical trial process is designed to identify and
assess potential side effects, it is always possible that a drug,
even after regulatory approval, may exhibit unforeseen side
effects. If any of our product candidates were to cause adverse
side effects during clinical trials or after approval of the
product candidate, we may be exposed to substantial liabilities.
Physicians and patients may not comply with any warnings that
identify known potential adverse effects and patients who should
not use our product candidates.
We purchase liability insurance in connection with our clinical
trials. It is possible that our liabilities could exceed our
insurance coverage. We intend to expand our insurance coverage to
include the sale of commercial products if we obtain regulatory
approval for any of our product candidates. However, we may not be
able to maintain insurance coverage at a reasonable cost or obtain
insurance coverage that will be adequate to satisfy any liability
that may arise. If a successful product liability claim or series
of claims is brought against us for uninsured liabilities or in
excess of insured liabilities, our assets may not be sufficient to
cover such claims and our business operations could be
impaired.
Risks Related To Commercialization Of Our Product Candidates
We Have Never Commercialized A Product Candidate And We May Lack
The Necessary Expertise, Personnel And Resources To Successfully
Commercialize Any Of Our Products That Receive Regulatory Approval
On Our Own Or Together With Suitable Partners.
We have never commercialized a product candidate. Our operations
to date have been limited to organizing and staffing our company,
business planning, raising capital, in--licensing or acquiring our
product candidates, identifying potential product candidates and
undertaking preclinical studies and clinical trials of our product
candidates. We currently have no sales force or marketing or
distribution capabilities. To achieve commercial success of our
product candidates, if approved, we will have to develop our own
sales, marketing and supply capabilities or outsource these
activities to a third-party.
Factors that may affect our ability to commercialize our product
candidates on our own include recruiting and retaining adequate
numbers of effective sales and marketing personnel, obtaining
access to or persuading adequate numbers of physicians to prescribe
our product candidates and other unforeseen costs associated with
creating an independent sales and marketing organization.
Developing a sales and marketing organization requires significant
investment, is time consuming and could delay the launch of our
product candidates. We may not be able to build an effective sales
and marketing organization in the United States or other key global
markets. If we are unable to build our own distribution and
marketing capabilities or to find suitable partners for the
commercialization of our product candidates, we may not generate
revenues from them.
If We Are Successful In Commercializing Iclaprim, We May Be
Subject To Claims From F. Hoffman--La Roche Ltd. And Hoffmann--La
Roche Inc. In Connection With Payments On The Net Sales Of Iclaprim
For Certain Countries.
Pursuant to the terms of the merger agreement we entered into
with Nuprim on December 31, 2014, we agreed to assume Nuprim's
obligations under certain agreements. We do not believe that the
Sale and Purchase Agreement, dated June 1, 2001, by and between F.
Hoffman--La Roche Ltd. and Hoffmann--La Roche Inc., together the
Hoffmann--La Roche Seller, and Arpida Ltd., the Hoffman--La
Roche/Arpida Agreement, was assigned to Nuprim or the party for
which it was a successor in interest with regards to the iclaprim
assets and therefore we do not have obligations under such
agreement.
The Hoffmann--La Roche/Arpida Agreement provides that the
Hoffmann--La Roche Seller will be entitled to receive a royalty of
1 to 5% of net sales of a Drug (as defined in such agreement), such
amount depending on various factors (e.g., the final drug
composition, timing of commercialization, country of sales). While
we do not believe we are a successor to such agreement and it is
unlikely our iclaprim product would fit the factors requiring
payment under such agreement, if it were determined that we are a
successor in interest to the Hoffman--La Roche/Arpida Agreement and
our iclaprim product is determined to fit the criteria of being a
Drug as defined in such agreement, we could have a payment
obligation of 1 to 5% of net sales of our iclaprim product for
certain countries for a period of ten years from first commercial
sale in such country.
We Operate In A Highly Competitive And Rapidly Changing
Industry, Which May Result In Our Competitors Discovering,
Developing Or Commercializing Competing Products Before Or More
Successfully Than We Do, Or Our Entering A Market In Which A
Competitor Has Commercialized An Established Competing Product, And
We May Not Be Successful In Competing With Them.
The development and commercialization of new drug products is
highly competitive and subject to significant and rapid
technological change. Our success is highly dependent upon our
ability to in--license, acquire, develop and obtain regulatory
approval for new and innovative drug products on a cost--effective
basis and to market them successfully. In doing so, we face and
will continue to face intense competition from a variety of
businesses, including large, fully integrated, well--established
pharmaceutical companies who already possess a large share of the
market, specialty pharmaceutical companies and biopharmaceutical
companies, academic institutions, government agencies and other
private and public research institutions in the United States and
other jurisdictions.
We are currently aware of various companies that are marketing
existing antibiotics or may introduce new products that compete
with our product candidates such as Allergan, Cempra, Melinta,
Merck & Co., Inc., and Paratek. We anticipate this competition
to increase in the future as new companies enter the novel
antibiotics market. In addition, the healthcare industry is
characterized by rapid technological change, and new product
introductions or other technological advancements could make some
or all of our products obsolete.
The highly competitive nature of and rapid technological changes
in the biotechnology and pharmaceutical industries could render our
product candidates or our technology obsolete or non--competitive.
Our competitors may, among other things:
-- have similar or better product candidates or technologies;
-- possess greater financial and human resources as well as supporting clinical data;
-- develop and commercialize products that are safer, more
effective, effective in a broader range of indications, less
expensive, or more convenient or easier to administer;
-- obtain regulatory approval more quickly;
-- establish superior proprietary positions;
-- have access to greater manufacturing capacity;
-- seek patent protection that competes with our product candidates;
-- implement more effective approaches to sales and marketing; or
-- enter into more advantageous collaborative arrangements for
research, development, manufacturing and marketing of products.
The Successful Commercialization Of Our Product Candidates Will
Depend In Part On The Extent To Which Governmental Authorities And
Health Insurers Establish Adequate Coverage And Reimbursement
Levels And Pricing Policies.
The successful commercialization of our product candidates, if
approved, will depend, in part, on the extent to which coverage and
reimbursement for our products or procedures using our products
will be available from government and health administration
authorities, private health insurers and other third--party payors.
To manage healthcare costs, many governments and third--party
payors increasingly scrutinize the pricing of new technologies and
require greater levels of evidence of favorable clinical outcomes
and cost--effectiveness before extending coverage and adequate
reimbursement to such new technologies. In the United States, the
Medicare Prescription Drug, Improvement, and Modernization Act of
2003, or the Medicare Modernization Act, changed the way Medicare
covers and pays for pharmaceutical products. The legislation
expanded Medicare coverage for drug purchases by the elderly under
a new Part D and introduced a new reimbursement methodology based
on average sale prices for physician--administered drugs. In
addition, this legislation provided authority for limiting the
number of drugs that will be covered in any therapeutic class.
Cost--reduction initiatives and other provisions of this
legislation could decrease the coverage and reimbursement that we
receive for any approved products. While the Medicare Modernization
Act applies only to drug benefits for Medicare beneficiaries,
private payors often follow Medicare coverage policy and payment
limitations in setting their own reimbursement rates. Therefore,
any reduction in reimbursement that results from the Medicare
Modernization Act may result in a similar reduction in payments
from private payors. In light of such challenges to prices and
increasing levels of evidence of the benefits and clinical outcomes
of new technologies, we cannot be sure that coverage will be
available for any product candidate that we commercialize, and, if
available, that the reimbursement rates will be adequate. If we are
unable to obtain adequate levels of coverage and reimbursement for
our product candidates, our ability to generate revenue will be
compromised.
Our potential customers, including hospitals, physicians and
other healthcare providers that purchase certain injectable drugs
administered during a procedure, such as our product candidates,
generally rely on third--party payors to pay for all or part of the
costs and fees associated with the drug and the procedures
administering the drug. These third--party payors may pay
separately for the drug or may bundle or otherwise include the
costs of the drug in the payment for the procedure. We are unable
to predict at this time whether our product candidates, if
approved, will be eligible for such separate payments. To the
extent there is no separate payment for our product candidates,
there may be further uncertainty as to the adequacy of
reimbursement amounts. Nor can we predict at this time the adequacy
of payments, whether made separately for the drug and procedure or
with a bundled or otherwise aggregate payment amount for the drug
and procedure. In addition, obtaining and maintaining adequate
coverage and reimbursement status is time consuming and costly.
Because each third--party payor individually approves coverage
and reimbursement levels, obtaining coverage and adequate
reimbursement is a time consuming, costly and sometimes
unpredictable process. We may be required to provide scientific and
clinical support, medical necessity or both for the use of any
product to each third--party payor separately with no assurance
that approval would be obtained, and we may need to conduct
expensive pharmacoeconomic studies in order to demonstrate the
cost--effectiveness, medical necessity or both of our products.
This process could delay the market acceptance of any product and
could have a negative effect on our future revenues and operating
results.
Third--party payors may deny coverage and reimbursement status
altogether of a given drug product, or cover the product, but may
also establish prices at levels that are too low to enable us to
realize an appropriate return on our investment in product
development or impose coverage restrictions and/or limits that
could affect our ability to successfully commercialize our products
and impact our profitability, results of operations, financial
condition and future success. Because the rules and regulations
regarding coverage and reimbursement change frequently, in some
cases on short notice, even when there is favorable coverage and
reimbursement, future changes may occur that adversely impact such
favorable coverage and reimbursement status. Further, the net
reimbursement for drug products may be subject to additional
reductions if there are changes to laws that presently restrict
imports of drugs from countries where they may be sold at lower
prices than in the United States.
The unavailability or inadequacy of third--party coverage and
reimbursement could negatively affect the market acceptance of our
product candidates and the future revenues we may expect to receive
from those products. In addition, we are unable to predict what
additional legislation or regulation relating to the healthcare
industry or third--party coverage and reimbursement may be enacted
in the future, or what effect such legislation or regulation would
have on our business.
Our Products May Not Gain Market Acceptance, In Which Case We
May Not Be Able To Generate Product Revenues.
Even if the FDA, EMA or any comparable foreign regulatory agency
approves the marketing of any product candidates that we develop,
physicians, healthcare providers, patients or the medical community
may not accept or use them. Efforts to educate the medical
community and third--party payors on the benefits of our product
candidates may require significant resources and may not be
successful. If iclaprim or any other product candidate that we
develop does not achieve an adequate level of acceptance, we may
not generate significant product revenues or any profits from
operations. The degree of market acceptance of iclaprim or any of
our product candidates that are approved for commercial sale will
depend on a variety of factors, including, but not limited to:
-- whether clinicians and potential patients perceive our
product candidates to have better or broader efficacy, safety and
tolerability profile, and ease of use compared with our
competitors;
-- the timing of market introduction;
-- the number of competing products;
-- our ability to provide acceptable evidence of safety and efficacy;
-- the prevalence and severity of any side effects;
-- relative convenience and ease of administration;
-- cost--effectiveness;
-- patient diagnostics and screening infrastructure in each market;
-- marketing and distribution support; and
-- availability of coverage, reimbursement and adequate payment
from health maintenance organizations and other third--party
payors, both public and private.
In addition, the potential market opportunity for iclaprim,
MTF--101 or any other product candidate we may develop is difficult
to estimate precisely. Our estimates of the potential market
opportunity are predicated on several key assumptions such as
industry knowledge and publications, third--party research reports
and other surveys. While we believe that our internal assumptions
are reasonable, these assumptions may be inaccurate. If any of the
assumptions proves to be inaccurate, then the actual market for
iclaprim or our other product candidates could be smaller than our
estimates of the potential market opportunity. If the actual market
for iclaprim or our other product candidates is smaller than we
expect, or if the products fail to achieve an adequate level of
acceptance by physicians, healthcare payors and patients, our
product revenue may be limited and we may be unable to achieve or
maintain profitability. Further, given the limited number of
treating physicians, if we are unable to convince a significant
number of such physicians of the value of our product candidates,
we may be unable to achieve a sufficient market share to make our
products, if approved, profitable.
Bacteria Might Develop Resistance To Iclaprim, Which Would
Decrease Its Efficacy And Commercial Viability.
Drug resistance is primarily caused by the genetic mutation of
bacteria resulting from sub--optimal exposure to antibiotics where
the drug does not kill all of the bacteria. While antibiotics have
been developed to treat many of the most common infections, the
extent and duration of their use worldwide has resulted in new
mutated strands of bacteria resistant to current treatments. If
physicians, rightly or wrongly, associate bacterial resistance
issues with iclaprim, physicians might not prescribe iclaprim. If
bacteria develop resistance to iclaprim, its efficacy would
decline, which would negatively affect our potential to generate
revenues from its commercialization.
Risks Related To Our Reliance On Third-Parties
We Rely On Third-Parties To Conduct Our Nonclinical And Clinical
Trials And If These Third-Parties Perform In An Unsatisfactory
Manner, Our Business Could Be Substantially Harmed.
We have relied upon and plan to continue to rely upon
third--party CROs to conduct and monitor and manage data for our
ongoing nonclinical and clinical programs, and may not currently
have all of the necessary contractual relationships in place to do
so. Once we have established contractual relationships with such
third--party CROs, we will have only limited control over their
actual performance of these activities. Nevertheless, we are
responsible for ensuring that each of our trials is conducted in
accordance with the applicable protocol, legal, regulatory,
environmental and scientific standards and our reliance on the CROs
does not relieve us of our regulatory responsibilities.
We and our CROs and other vendors are required to comply with
current Good Manufacturing Practices, or cGMP, current Good
Clinical Practices, or cGCP, and Good Laboratory Practice, or GLP,
which are regulations and guidelines enforced by the FDA, the
Competent Authorities of the Member States of the EU and any
comparable foreign regulatory agency for all of our product
candidates in nonclinical and clinical development. Regulatory
authorities enforce these regulations through periodic inspections
of study sponsors, principal investigators, trial sites and other
contractors. If we or any of our CROs or vendors fail to comply
with applicable regulations, the data generated in our nonclinical
and clinical trials may be deemed unreliable and the FDA, EMA or
any comparable foreign regulatory agency may require us to perform
additional nonclinical and clinical trials before approving our
marketing applications. We cannot assure you that upon inspection
by a given regulatory authority, such regulatory authority will
determine that all of our clinical trials comply with cGCP
regulations. In addition, our clinical trials must be conducted
with products produced under cGMP regulations. Our failure to
comply with these regulations may require us to repeat clinical
trials, which would delay the regulatory approval process.
Our business involves the controlled use of hazardous materials,
chemicals, biologicals and radioactive compounds. Substantially all
such use is outsourced to third--party CRO manufacturers and
clinical sites. Although we believe that our third--party CROs
safety procedures for handling and disposing of such materials
comply with industry standards, there will always be a risk of
accidental contamination or injury. By law, radioactive materials
may only be disposed of at certain approved facilities. If liable
for an accident, or if it suffers an extended facility shutdown, we
or our CROs could incur significant costs, damages or
penalties.
Our CROs are not our employees, and except for remedies
available to us under our agreements with such CROs, we cannot
control whether or not they devote sufficient time and resources to
our ongoing nonclinical and clinical programs. If our CROs do not
successfully carry out their contractual duties or obligations or
meet expected deadlines, if they need to be replaced or if the
quality or accuracy of the data they obtain is compromised due to
the failure to adhere to our protocols, regulatory requirements or
for other reasons, our clinical trials may be extended, delayed or
terminated, and we may not be able to obtain regulatory approval
for or successfully commercialize our product candidates. Our CROs
may also generate higher costs than anticipated. As a result, our
results of operations and the commercial prospects for our product
candidates would be harmed, our costs could increase, and our
ability to generate revenue could be delayed.
If any of our relationships with these third--party CROs
terminates, we may not be able to enter into arrangements with
alternative CROs or to do so on commercially reasonable terms. If
we are able to replace a CRO, switching or adding additional CROs
involves additional cost and requires management time and focus and
there is a natural transition period when a new CRO commences work.
As a result, delays could occur, which could hurt our ability to
meet our desired clinical development timelines. Though we
carefully manage our relationships with our CROs, there can be no
assurance that we will not encounter similar challenges or delays
in the future.
The Failure Of Our Suppliers To Supply Us With The Agreed Upon
Drug Substance Or Drug Product Could Hurt Our Business.
We do not currently, and do not expect to in the future,
independently conduct manufacturing activities for our product
candidates. We expect to rely on third--party suppliers for the
drug substance and drug product for our product candidates. The
failure of these suppliers to perform as contracted, or the need to
identify new suppliers, could result in a delay in the development
of our product candidates. A delay in the development of our
product candidates or having to enter into a new agreement with a
different third-party on less favorable terms than we have with our
current suppliers could hurt our business.
We And Our Collaborators And Contract Manufacturers Are Subject
To Significant Regulation With Respect To Manufacturing Our Product
Candidates. The Manufacturing Facilities On Which We Rely May Not
Continue To Meet Regulatory Requirements Or May Not Be Able To Meet
Supply Demands.
All entities involved in the preparation of therapeutics for
clinical trials or commercial sale, including our existing contract
manufacturers for our product candidates, are subject to extensive
regulation. A finished therapeutic product and the active
pharmaceutical ingredient ("API") for such product (whether
investigational or approved for commercial sale) must be
manufactured in accordance with cGMP. These regulations govern
manufacturing processes and procedures, including record keeping,
and the implementation and operation of quality systems to control
and assure the quality of investigational products and products
approved for sale. Poor control of production processes can lead to
the introduction of contaminants or to inadvertent changes in the
properties or stability of our product candidates that may not be
detectable in final product testing. We, our collaborators or our
contract manufacturers must supply all necessary documentation in
support of an NDA or foreign equivalent on a timely basis and must
adhere to GLP and cGMP regulations enforced by the FDA and other
regulatory agencies through their facilities inspection program.
Some of our contract manufacturers have never produced a
commercially approved pharmaceutical product and therefore have not
obtained the requisite regulatory authority approvals to do so. The
facilities and quality systems of some or all of our collaborators
and third--party contractors must pass a pre--approval inspection
for compliance with the applicable regulations as a condition of
regulatory approval of our product candidates or any of our other
potential products. In addition, the regulatory authorities may, at
any time, audit or inspect a manufacturing facility involved with
the preparation of our product candidates or our other potential
products or the associated quality systems for compliance with the
regulations applicable to the activities being conducted. Although
we oversee the contract manufacturers, we cannot control the
manufacturing process of, and are completely dependent on, our
contract manufacturing partners for compliance with the regulatory
requirements. If these facilities do not pass a pre--approval plant
inspection, regulatory approval of the products may not be granted
or may be substantially delayed until any violations are corrected
to the satisfaction of the regulatory authority, if ever.
The regulatory authorities also may, at any time before or
following approval of a product for sale, inspect the manufacturing
facilities of our collaborators and third-party contractors. If any
such inspection or audit identifies a failure to comply with
applicable regulations or if a violation of our product
specifications or applicable regulations occurs independent of such
an inspection or audit, approval may be delayed or denied, and we
or the relevant regulatory authority may require remedial measures
that may be costly and/or time consuming for us or a third--party
to implement, and that may include the temporary or permanent
suspension of a clinical trial or commercial sales or the temporary
or permanent closure of a facility.
If we, our collaborators or any of our third--party
manufacturers fail to maintain regulatory compliance, the FDA or
another applicable regulatory authority could impose regulatory
sanctions including, among other things, refusal to approve a
pending application our product candidates, withdrawal of an
approval or suspension of production, civil or criminal
prosecution, or prosecution under the False Claims Act (with the
potential for qui tam suits by relators for perceived violation) in
connection with any sales of our drug to the U.S. government or
related healthcare programs.
Additionally, if the supply from one approved manufacturer is
interrupted, an alternative manufacturer would need to be qualified
through an NDA supplement or equivalent foreign regulatory filing,
which could result in further delay. The regulatory agencies may
also require additional studies if a new manufacturer is relied
upon for commercial production. Switching manufacturers may involve
substantial costs and is likely to result in a delay in our desired
clinical and commercial timelines.
These factors could cause us to incur higher costs and could
cause the delay or termination of clinical trials, regulatory
submissions, required approvals or commercialization of our product
candidates. Furthermore, if our suppliers fail to meet contractual
requirements and we are unable to secure one or more replacement
suppliers capable of production at a substantially equivalent cost,
our clinical trials may be delayed or we could lose potential
revenue.
Our Reliance On Third-Parties Requires Us To Share Our Trade
Secrets And Other Proprietary Confidential Information, Which
Increases The Possibility That A Competitor Will Discover Them Or
That Our Trade Secrets Will Be Misappropriated Or Disclosed.
Because we rely on third-parties to develop and manufacture our
product candidates, we must, at times, share trade secrets and
other proprietary confidential information with them. We seek to
protect our proprietary technology in part by entering into
confidentiality agreements and, if applicable, material transfer
agreements, collaborative research agreements, consulting
agreements or other similar agreements with our collaborators,
advisors, employees, and consultants prior to beginning research or
disclosing proprietary information. These agreements typically
limit the rights of the third-parties to use or disclose our
confidential information, such as trade secrets. Despite the
contractual provisions employed when working with third-parties,
the need to share trade secrets and other confidential information
increases the risk that such trade secrets become known by our
competitors, are inadvertently incorporated into the technology of
others, or are disclosed or used in violation of these agreements.
Given that our proprietary position is based, in part, on our
know--how and trade secrets, a competitor's discovery of our trade
secrets or other unauthorized use or disclosure of our proprietary
confidential information could impair our competitive position and
may harm our business.
Risks Related To Our Intellectual Property
If We Or Any Of Our Future Licensors Are Unable To Obtain And
Maintain Effective IP Rights For Our Technologies, Product
Candidates Or Any Future Product Candidates, Or If The Scope Of The
IP Rights Obtained Is Not Sufficiently Broad, We May Not Be Able To
Compete Effectively In Our Markets.
We expect to rely upon a combination of marketing exclusivity,
data exclusivity, patents, trade secret protection and contractual
confidentiality obligation to protect the intellectual property
related to our technologies and product candidates. Our success
depends in large part on our and our eventual licensors', if any,
ability to obtain and maintain intellectual property protection in
the United States and in other countries with respect to our
proprietary technology and product candidates.
Our only patent, related to iclaprim, expired on December 2,
2016. Iclaprim has been designated as a Qualified Infectious
Disease Product ("QIDP") by the FDA. This designation qualifies
iclaprim for five years of marketing exclusivity to be added to the
five years of exclusivity already provided by the Food, Drug, and
Cosmetic Act. This therefore will provide 10 years of market
exclusivity from the date of approval. In addition, we have filed
additional patents around the new formulation of iclaprim. As part
of this QIDP designation, FDA's review of our drug application,
when submitted, will also be expedited. We have filed and will
continue to file patent applications in the United States and
abroad related to our novel and inventive technologies and products
that are important to our business. This process is expensive and
time consuming, and we may not be able to file and prosecute all
necessary or desirable patent applications at a reasonable cost, in
a timely manner or in all jurisdictions. It is also possible that
we will fail to identify patentable aspects of our research and
development output before it is too late to obtain patent
protection. Moreover, in some circumstances, we may not have the
right to control the preparation, filing and prosecution of patent
applications, or to maintain any issued patents, covering
technology that we license from third-parties. Therefore, any
issued patents and our patent applications may not be prosecuted
and enforced in a manner consistent with the best interests of our
business.
The patent position of biotechnology and pharmaceutical
companies generally is highly uncertain and involves complex legal
and factual questions for which legal principles are evolving or
remain unsolved. Any patent applications that we own or in--license
may fail to result in issued patents with claims that cover our
product candidates in the United States or in foreign countries.
Publications of discoveries in the scientific literature often lag
behind the actual discoveries, and patent applications in the
United States and other jurisdictions remain confidential for a
period of time after filing, and some remain so until issued.
Therefore, we cannot be certain that we were the first to file any
patent application related to our product candidates, or whether we
were the first to make the inventions claimed in our owned patents
or pending patent applications, nor can we know whether those from
whom we license patents were the first to make the inventions
claimed or were the first to file. As a result, the issuance,
scope, validity, enforceability and commercial value of any patent
rights we obtain are highly uncertain. There is no assurance that
all potentially relevant prior art relating to any patents we
obtain and patent applications has been found, which can invalidate
a patent or prevent a patent from issuing from a pending patent
application, of affect the scope of any claims issuing from a
pending patent application. Even if patents do successfully issue,
and even if such patents cover our product candidates,
third-parties may challenge their validity, enforceability or
scope, which may result in such patents being narrowed, found
unenforceable or invalidated, which could allow third-parties to
commercialize our technology or products and compete directly with
us, without payment to us, or result in our inability to
manufacture or commercialize products without infringing
third--party patent rights. Furthermore, even if they are
unchallenged, any patents we obtain and patent applications may not
adequately protect our intellectual property, provide exclusivity
for our product candidates, prevent others from designing around
our claims or provide us with a competitive advantage. Any of these
outcomes could impair our ability to prevent competition from
third-parties.
We cannot offer any assurances about which, if any, patents will
issue and in which jurisdictions, the breadth of any such patent,
or whether any issued patents will be found invalid and
unenforceable or will be challenged by third-parties. Any
successful opposition to these patents or any other patents owned
by or licensed to us after patent issuance could deprive us of
rights necessary for the successful commercialization of any
product candidates that we may develop. Further, if we encounter
delays in regulatory approvals, the period of time during which we
could market a product candidate under patent protection could be
reduced.
We May Not Have Sufficient Patent Terms To Effectively Protect
Our Products And Business.
Patents have a limited lifespan. In the United States, the
natural expiration of a patent is generally 20 years after it is
first filed in the United States as a non--provisional patent
application. Although various extensions or term adjustments may be
available, the life of a patent, and the protection it affords, is
limited. Given the amount of time required for the development,
testing and regulatory review of new product candidates, patents
protecting such candidates might expire before or shortly after
such product candidates are commercialized. As a result, any patent
portfolio that we may own or license may not provide us with
sufficient rights to exclude others from commercializing products
similar or identical to ours or otherwise provide us with a
competitive advantage. Even if patents covering our product
candidates are obtained, once the patent life has expired for a
product, we may be open to competition from generic
medications.
While patent term extensions in the United States and under
supplementary protection certificates in the EU may be available to
extend the patent exclusivity term for our product candidates based
on the time spent in regulatory review before the FDA or EMA,
respectively, we cannot provide any assurances that any such patent
term extension will be obtained and, if so, for how long.
Patent Policy And Rule Changes Could Increase The Uncertainties
And Costs Surrounding The Prosecution Of Our Patent Applications
And The Enforcement Or Defense Of Our Issued Patents.
Changes in either the patent laws or interpretation of the
patent laws in the United States and other countries may diminish
the value of our patents or narrow the scope of our patent
protection. The laws of foreign countries may not protect our
rights to the same extent as the laws of the United States, and
vice versa. Assuming the other requirements for patentability are
met, in the United States prior to March 15, 2013, the first to
invent the claimed invention is entitled to the patent, while
outside the United States, the first to file a patent application
is entitled to the patent. After March 15, 2013, under the
Leahy--Smith America Invents Act, or the AIA, enacted on September
16, 2011, the United States has moved to a first inventor to file
system. The AIA also includes a number of significant changes that
affect the way patent applications will be prosecuted and may also
affect patent litigation. The effects of these changes are
currently unclear as the U.S. Patent and Trademark Office, or the
USPTO, is still implementing various regulations, the courts have
yet to address many of these provisions and the applicability of
the act and any new regulation's effect on specific patent
applications discussed herein have not been determined and would
need to be reviewed. In general, the AIA and its implementation
could increase the uncertainties and costs surrounding the
prosecution of our patent applications and the enforcement or
defense of our issued patents. In addition, recent U.S. Supreme
Court rulings have narrowed the scope of patent--eligible subject
matter and of patent protection available in certain circumstances
and weakened the rights of patent owners in certain situations. In
addition to increasing uncertainty with regard to our ability to
obtain patents in the future, this combination of events has
created uncertainty with respect to the value of patents, once
obtained. Depending on future actions by the U.S. Congress, the
federal courts and the USPTO, the laws and regulations governing
patents could change in unpredictable ways that would weaken our
ability to obtain new patents or to enforce our existing patents
and patents that we might obtain in the future.
Third--Party Claims Of Intellectual Property Infringement May
Expose Us To Substantial Liability Or Prevent Or Delay Our
Development And Commercialization Efforts.
Our commercial success depends in part on our ability to
develop, manufacture, market and sell our product candidates, if
approved, and use our proprietary technology without alleged or
actual infringement, misappropriation or other violation of the
patents and proprietary rights of third-parties. There have been
many lawsuits and other proceedings involving patent and other
intellectual property rights in the biotechnology and
pharmaceutical industries, including patent infringement lawsuits,
interferences, oppositions and reexamination proceedings before the
USPTO and corresponding foreign patent offices. Numerous U.S. and
foreign issued patents and pending patent applications, which are
owned by third-parties, exist in the fields in which we are
developing product candidates. Some claimants may have
substantially greater resources than we do and may be able to
sustain the costs of complex intellectual property litigation to a
greater degree and for longer periods of time than we could. In
addition, patent holding companies that focus solely on extracting
royalties and settlements by enforcing patent rights may target us.
As the biotechnology and pharmaceutical industries expand and more
patents are issued, the risk increases that our product candidates
may be subject to claims of infringement of the intellectual
property rights of third-parties.
Third-parties may assert that we are employing their proprietary
technology without authorization. There may be third--party patents
or patent applications with claims to compositions, formulations,
methods of manufacture or methods of treatment related to the use
or manufacture of our product candidates. We cannot be sure that we
know of each and every patent and pending application in the United
States and abroad that is relevant or necessary to the
commercialization of our product candidates. Because patent
applications can take many years to publish or issue, there may be
currently pending patent applications that may later result in
issued patents upon which our product candidates may infringe. In
addition, third-parties may obtain patents in the future and claim
that use of our technologies infringes upon these patents. If any
third--party patents were held by a court of competent jurisdiction
to cover the manufacturing process of any of our product
candidates, any compositions formed during the manufacturing
process or any final product itself, the holders of any such
patents may be able to block our ability to commercialize such a
product candidate unless we obtained a license under the applicable
patents, or until such patents expire or are finally determined to
be invalid or unenforceable. Similarly, if any third--party patents
were held by a court of competent jurisdiction to cover aspects of
our compositions, formulations, or methods of treatment,
prevention, manufacture or use, the holders of any such patents may
be able to block our ability to develop and commercialize the
applicable product candidate unless we obtained a license or until
such patent expires or is finally determined to be invalid or
unenforceable. In either case, such a license may not be available
on commercially reasonable terms, or at all. Even if we were able
to obtain a license, it could be non--exclusive, thereby giving our
competitors access to the same technologies licensed to us.
Parties making claims against us may obtain injunctive or other
equitable relief, which could effectively block our ability to
further develop and commercialize one or more of our product
candidates, if approved. Defense of these claims, regardless of
their merit, would involve substantial litigation expense and would
be a substantial diversion of employee resources from our business.
In the event of a successful claim of infringement against us, we
may have to pay substantial damages, including treble damages and
attorneys' fees for willful infringement, pay royalties, redesign
our allegedly infringing products or processes or obtain one or
more licenses from third-parties, which may be impossible or
require substantial time and monetary expenditure.
Additional Competitors Could Enter The Market With Generic
Versions Of Our Products, Which May Result In A Decline In Sales Of
Affected Products.
Under the Hatch--Waxman Act, in the United States, a
pharmaceutical manufacturer may file an abbreviated new drug
application (ANDA), seeking approval of a generic copy of an
approved innovator product. Under the Hatch--Waxman Act, a
manufacturer may also submit an NDA under Section 505(b)(2) that
references the FDA's prior approval of the innovator product. A
505(b)(2) NDA product may be for a new or improved version of the
original innovator product. Hatch--Waxman also provides for certain
periods of regulatory exclusivity, which require the FDA to delay
FDA approval, or, in some circumstances, FDA filing and reviewing,
of an ANDA or 505(b)(2) NDA. These include, subject to certain
exceptions, the periods during which an FDA--approved drug is
subject to New Chemical Entity exclusivity, new clinical study
exclusivity, pediatric exclusivity, Orphan Drug exclusivity and/or
QIDP exclusivity. In addition to the benefits of regulatory
exclusivity, an innovator NDA holder may have patents claiming the
active ingredient, product formulation or an approved use of the
drug, which would be listed with the product in the FDA
publication, "Approved Drug Products with Therapeutic Equivalence
Evaluations, " known as the "Orange Book." If there are patents
listed in the Orange Book, an ANDA or 505(b)(2) applicant that
seeks to market its product before expiration of the patents must
include in the ANDA what is known as a "Paragraph IV
certification," challenging the validity or enforceability of, or
claiming non--infringement of, the listed patent or patents. Notice
of the certification must be given to the innovator, too, and if
within 45 days of receiving notice the innovator sues to protect
its patents, approval of the ANDA or 505(b)(2) NDA is stayed for 30
months, or as lengthened or shortened by the court.
Accordingly, if any of our product candidates are approved,
competitors could file ANDAs for generic versions of our product
candidates, or 505(b)(2) NDAs that reference our product
candidates, respectively. If there are patents listed for our
product candidates in the Orange Book, those ANDAs and 505(b)(2)
NDAs would be required to include a certification as to each listed
patent indicating whether the ANDA applicant does or does not
intend to challenge the listed patent(s). We cannot predict whether
any patents issuing from our pending patent applications will be
eligible for listing in the Orange Book, how any generic competitor
would address such patents, whether we would sue on any such
patents or the outcome of any such suit.
We believe that approval of iclaprim for marketing in the United
States and the EU would be the first regulatory approval of this
drug substance in either jurisdiction. As such, iclaprim should be
entitled to five years of regulatory exclusivity in the United
States as a New Chemical Entity, beginning from the date of
marketing approval ("NCE Exclusivity"). Iclaprim also received QIDP
designation from the FDA for both ABSSSI and HABP in July 2015,
pursuant to the Generating Antibiotic Incentives Now Act ("GAIN
Act") enacted under Title VIII of the FDA Safety and Innovation Act
("FDASIA") in 2012. The QIDP designation grants iclaprim, if
approved for one of the QIDP-designated indications, an additional
five years of market exclusivity added sequentially to the NCE
Exclusivity, for a total of 10 years exclusivity from the date of
marketing approval, and also makes iclaprim's NDA eligible to
receive Fast Track designation and Priority Review. The FDA could
disagree with our characterization of iclaprim as being entitled to
NCE Exclusivity, rescind the QIDP designation, or third-parties
could successfully challenge the iclaprim NCE Exclusivity or QIDP
determinations, which could shorten or eliminate the relevant
exclusivity periods and subject iclaprim to an earlier generic
competition. Such generic competition would likely cause sales of
iclaprim to decline rapidly and materially, and if so we may have
to write off a portion or all of the intangible assets associated
with the affected product and our ability to generate revenue could
be compromised.
We may not be successful in securing or maintaining proprietary
patent protection for products and technologies we develop or
license. Moreover, if any patents that are granted and listed in
the Orange Book are successfully challenged by way of a Paragraph
IV certification and subsequent litigation, the affected product
could immediately face generic competition and its sales would
likely decline rapidly and materially. Should sales decline, we may
have to write off a portion or all of the intangible assets
associated with the affected product and our ability to generate
revenue could be compromised.
Although We Are Not Currently Involved In Any Litigation, We May
Be Involved In Lawsuits To Protect Or Enforce Our Patents Or The
Patents Of Our Licensors, Which Could Be Expensive, Time Consuming
And Unsuccessful.
Competitors may infringe upon our patents or the patents of our
licensors. Although we are not currently involved in any
litigation, if we or one of our licensing partners were to initiate
legal proceedings against a third-party to enforce a patent
covering one of our product candidates, the defendant could
counterclaim that the patent covering our product candidate is
invalid and/or unenforceable, or request declaratory judgment that
there is no infringement. They could also challenge the patent
being enforced against them in an administrative proceeding before
the USPTO, European Patent Office or other relevant national or
regional government body. In patent litigation in the United
States, defendant counterclaims alleging invalidity,
noninfringement and/or unenforceability are commonplace. Grounds
for a validity challenge could be an alleged failure to meet any of
several statutory requirements, including lack of novelty,
obviousness, non--enablement or lack of written description.
Grounds for an unenforceability assertion could be an allegation
that someone connected with prosecution of the patent withheld
material relevant information from the USPTO, or made a misleading
statement, during prosecution. The outcome following legal
assertions of invalidity and unenforceability is unpredictable. An
infringement litigation defendant may also instigate an Inter
Partes Review of the patent at issue before the USPTO, concurrent
with the infringement suit. The Inter Partes Review could result in
a stay of the infringement litigation, which could significantly
extend the cost and time to resolve the matter, and could also
result in the USPTO declaring some of all of the patent claims to
be invalid. Such an invalidity ruling by the USPTO could materially
compromise our ability to enforce some or all of the patent claims
against a competitor in a timely manner.
Interference or derivation proceedings provoked by third-parties
or brought by us or declared by the USPTO may be necessary to
determine the priority of inventions with respect to our patents or
patent applications or those of our licensors. An unfavorable
outcome could require us to cease using the related technology or
to attempt to license rights to it from the prevailing party. Our
business could be harmed if the prevailing party does not offer us
a license on commercially reasonable terms, or at all. Our defense
of litigation or interference/derivation proceedings may fail and,
even if successful, may result in substantial costs, and distract
our management and other employees.
In addition, the uncertainties associated with litigation and/or
administrative proceedings before any patent offices could
compromise our ability to raise the funds necessary to continue our
clinical trials, continue our research programs, license necessary
technology from third-parties or enter into development
partnerships that would help us bring our product candidates to
market, if approved.
Furthermore, because of the substantial amount of discovery
required in connection with intellectual property litigation, there
is a risk that some of our confidential information could be
compromised by disclosure during this type of litigation. There
could also be public announcements of the results of hearings,
motions or other interim proceedings or developments. If securities
analysts or investors perceive these results to be negative, it
could hurt the market price of the ADSs and our ordinary
shares.
We Have Not Yet Registered A Trademark And Failure To Secure Or
Maintain Adequate Protection For Our Trademarks Could Adversely
Affect Our Business.
We have filed a United States, Canadian and International
(Madrid Protocol) trademark application designating Australia,
China, European Community, India, Israel, Japan, Mexico and Turkey
for the mark, "Motif Bio." If the United States or any foreign
trademark offices raise any objections, we may be unable to
overcome such objections. In addition, in the USPTO and in
comparable agencies in many foreign jurisdictions, third-parties
are given an opportunity to oppose pending trademark applications
and to seek to cancel registered trademarks. If opposition or
cancellation proceedings are filed against our trademarks, our
trademarks may not survive such proceedings.
Furthermore, third-parties may allege in the future, that a
trademark, trade name or trade dress, or a United States Adopted
Name (USAN) or International Nonproprietary Name (INN) that we
elect to use for our product candidates may cause confusion in the
marketplace and/or not be acceptable to the relevant regulatory
agencies. We evaluate such potential allegations in the course of
our business, and such evaluations may cause us to change our
commercialization or branding strategy for our product candidates,
which may require us to incur additional costs. Moreover, any name
we propose to use with our product candidate in the United States
must be approved by the FDA, regardless of whether we have
registered it, or applied to register it, as a trademark. The FDA
typically conducts a review of proposed product names, including an
evaluation of potential for confusion with other product names, or
implied product claims suggested by a trade name that the FDA, may
deem to be misleading. If the FDA objects to any of our proposed
proprietary product names, we may be required to expend significant
additional resources in an effort to identify a suitable substitute
name that would qualify under applicable trademark laws, not
infringe the existing rights of third-parties and be acceptable to
the FDA.
At times, competitors may adopt trademarks, trade names or trade
dress similar to ours, thereby impeding our ability to build brand
identity and possibly leading to market confusion. Over the long
term, if we are unable to establish name recognition based on our
trademarks, trade names and/or trade dress, then we may not be able
to compete effectively and our business may be adversely affected.
Our efforts to enforce or protect our proprietary rights related to
trademarks (including trade names and trade dress), domain names or
copyrights may be ineffective and could result in substantial costs
and diversion of resources.
In addition, there could be potential domain name, trade name,
trade dress or trademark infringement claims brought by owners of
other registered trademarks alleging that the use of a corporate
name or logo, product names or other signs by which we distinguish
our products and services are infringing their trademark rights.
The outcome of such claims is uncertain and may adversely affect
our freedom to use our corporate name or other relevant signs. If
litigation arises in this area, it may lead to significant costs
and diversion of management and employee attention.
We May Be Subject To Claims That Our Employees, Consultants Or
Independent Contractors Have Wrongfully Used Or Disclosed
Confidential Information Of Third-Parties Or That Our Employees
Have Wrongfully Used Or Disclosed Alleged Trade Secrets Of Their
Former Employers.
We may employ individuals who were previously employed at
universities or other biotechnology or pharmaceutical companies,
including our competitors or potential competitors. Although we try
to ensure that our employees, consultants and independent
contractors do not use the proprietary information or know--how of
others in their work for us, and we are not currently subject to
any claims that our employees, consultants or independent
contractors have wrongfully used or disclosed confidential
information of third-parties, we may in the future be subject to
such claims. Litigation may be necessary to defend against these
claims. If we fail in defending any such claims, in addition to
paying monetary damages, we may lose valuable intellectual property
rights or personnel. Even if we are successful in defending against
such claims, litigation could result in substantial costs and be a
distraction to management and other employees.
We May Be Subject To Claims Challenging The Inventorship Of Our
Patents And Other Intellectual Property.
Although we are not currently experiencing any claims
challenging the inventorship of our patent applications or
ownership of our intellectual property, we may in the future be
subject to claims that former employees, collaborators or other
third-parties have an interest in our patent applications, patents
or other intellectual property as an inventor or co--inventor. For
example, we may have inventorship disputes arise from conflicting
obligations of consultants or others who are involved in developing
our product candidates. Litigation may be necessary to defend
against these and other claims challenging inventorship. If we fail
in defending any such claims, in addition to paying monetary
damages, we may lose valuable intellectual property rights, such as
exclusive ownership of, or right to use, valuable intellectual
property. Even if we are successful in defending against such
claims, litigation could result in substantial costs and be a
distraction to management and other employees.
We May Not Be Able To Protect Our Intellectual Property Rights
Throughout The World.
Filing, prosecuting and defending patents on product candidates
in all countries throughout the world would be prohibitively
expensive, and our intellectual property rights in some countries
outside the United States can be less extensive than those in the
United States. In addition, the laws of some foreign countries do
not protect intellectual property rights to the same extent as
federal and state laws in the United States. Further, licensing
partners may not prosecute patents in certain jurisdictions in
which we may obtain commercial rights, thereby precluding the
possibility of later obtaining patent protection in these
countries. Consequently, we may not be able to prevent
third-parties from practicing our inventions in all countries
outside the United States, or from selling or importing products
made using our inventions in and into the United States or other
jurisdictions. Competitors may use our technologies in
jurisdictions where we have not obtained patent protection to
develop their own products and may also export infringing products
to territories where we have patent protection, but enforcement is
not as strong as that in the United States. These products may
compete with our products, and our patents or other intellectual
property rights may not be effective or sufficient to prevent them
from competing.
Many companies have encountered significant problems in
protecting and defending intellectual property rights in foreign
jurisdictions. The legal systems of certain countries, particularly
certain developing countries, do not favor the enforcement of
patents, trade secrets and other intellectual property protection,
particularly those relating to biotechnology products, which could
make it difficult for us to stop the infringement of our patents or
marketing of competing products in violation of our proprietary
rights generally. Proceedings to enforce our patent rights in
foreign jurisdictions, whether or not successful, could result in
substantial costs and divert our efforts and attention from other
aspects of our business, could put our patents at risk of being
invalidated or interpreted narrowly and our patent applications at
risk of not issuing, and could provoke third-parties to assert
claims against us. We may not prevail in any lawsuits that we
initiate and the damages or other remedies awarded, if any, may not
be commercially meaningful. Accordingly, our efforts to enforce our
intellectual property rights around the world may be inadequate to
obtain a significant commercial advantage from the intellectual
property that we develop or license.
Risks Related To Government And Regulation
Even If One Or More Of Our Product Candidates Obtains Regulatory
Approval, We Will Be Subject To Ongoing Obligations And Continued
Regulatory Requirements, Which May Result In Significant Additional
Expense.
If regulatory approval is obtained for any of our product
candidates, the product will remain subject to continual regulatory
review. Any regulatory approvals that we receive for our product
candidates may be subject to limitations on the approved indicated
uses for which the product may be marketed or to the conditions of
approval, or contain requirements for potentially costly
post--marketing testing, including Phase 4 clinical trials and
surveillance to monitor the safety and efficacy of the product
candidate. In addition, if the FDA, the EMA or any comparable
foreign regulatory authority approves any of our product
candidates, we will be subject to ongoing regulatory obligations
and oversight by regulatory authorities, including with respect to
the manufacturing processes, labeling, packing, distribution,
adverse event reporting, storage, advertising and marketing
restrictions, and recordkeeping and, potentially, other
post--marketing obligations, all of which may result in significant
expense and limit our ability to commercialize such products. These
requirements include submissions of safety and other
post--marketing information and reports, registration, as well as
continued compliance with cGMPs and cGCPs for any clinical trials
that we conduct post--regulatory approval.
In addition, approved products, manufacturers and manufacturers'
facilities, as well as suppliers, contract manufacturers and their
facilities, are subject to continual review and periodic
inspections. Later discovery of new or previously unknown problems
with a product, including adverse events of unanticipated type,
severity or frequency, or with our third--party manufacturers or
manufacturing processes, or failure to comply with regulatory
requirements, may result in, among other things:
-- restrictions on the marketing or manufacturing of the product;
-- withdrawal of the product from the market, or voluntary or mandatory product recalls;
-- fines, disgorgement of profits or revenues, warning letters or holds on clinical trials;
-- refusal by the FDA to approve pending applications or
supplements to approved applications filed by us;
-- suspension or revocation of product approvals;
-- product seizure or detention, or refusal to permit the import or export of products; and
-- injunctions or the imposition of civil or criminal penalties.
If any of these events occurs, our ability to sell such product
may be impaired, and we may incur substantial additional expense to
comply with regulatory requirements. The policies of the FDA, the
EMA or any comparable foreign regulatory agency may change, and
additional government regulations may be enacted that could
prevent, limit or delay regulatory approval of our product
candidates. If we are slow or unable to adapt to changes in
existing requirements or the adoption of new requirements or
policies, or if we are not able to maintain regulatory compliance,
we may lose any regulatory approval that we may have obtained,
which would compromise our ability to achieve or sustain
profitability.
Enacted And Future Legislation May Increase The Difficulty And
Cost For Us To Obtain Regulatory Approval Of And Commercialize Our
Product Candidates, And May Affect The Prices We May Set.
In the United States and the EU, there have been a number of
legislative, regulatory and proposed changes regarding the
healthcare system. These changes could prevent or delay regulatory
approval of our product candidates, restrict or regulate
post--approval activities, and affect our ability to sell
profitably any products for which we obtain regulatory approval and
begin to commercialize.
As a result of legislative proposals and the trend toward
managed healthcare in the United States, third--party payors are
increasingly attempting to contain healthcare costs by limiting
both coverage and the level of reimbursement of new drugs. In the
United States, the Medicare Modernization Act changed the way
Medicare covers and pays for pharmaceutical products. The
legislation expanded Medicare coverage for drug purchases by the
elderly under a new Part D and introduced a new reimbursement
methodology based on average sale prices for
physician--administered drugs. In addition, this legislation
provided authority for limiting the number of drugs that will be
covered in any therapeutic class. Cost--reduction initiatives and
other provisions of this legislation could decrease the coverage
and reimbursement that we receive for any approved products. While
the Medicare Modernization Act applies only to drug benefits for
Medicare beneficiaries, private payors often follow the Medicare
coverage policy and payment limitations in setting their own
reimbursement rates. Therefore, any reduction in reimbursement that
results from the Medicare Modernization Act may result
in a similar reduction in payments from private payors.
In March 2010, President Obama signed into law the Patient
Protection and Affordable Care Act, as amended by the Health Care
and Education Reconciliation Act, or collectively, PPACA, a
sweeping law intended, among other things, to broaden access to
health insurance, reduce or constrain the growth of healthcare
spending, enhance remedies against fraud and abuse, add new
transparency requirements for healthcare and health insurance
industries, impose new taxes and fees on the health industry, and
impose additional health policy reforms. PPACA, among other things:
increased the statutory minimum Medicaid rebates a manufacturer
must pay under the Medicaid Drug Rebate Program; addressed a new
methodology by which rebates owed by manufacturers under the
Medicaid Drug Rebate Program are calculated for drugs that are
inhaled, infused, instilled, implanted or injected; and established
a new Medicare Part D coverage gap discount program in which
manufacturers must provide 50% point--of--sale discounts on
negotiated prices of applicable brand drugs to eligible
beneficiaries during their coverage gap period as a condition for
the manufacturer's outpatient drugs to be covered under Part D and
implemented payment system reforms, including a national pilot
program on payment bundling to encourage hospitals, physicians and
other providers to improve the coordination, quality and efficiency
of certain healthcare services through bundled payment models.
Further, PPACA imposed a significant annual nondeductible fee on
entities that manufacture or import specified branded prescription
drug products and biologic agents, apportioned among these entities
according to their market share in certain government healthcare
programs. We expect that additional healthcare reform measures will
likely be adopted in the future, any of which may increase our
regulatory burdens and operating costs and limit the amounts that
federal, state and foreign governments will reimburse for
healthcare products and services, which could result in reduced
demand for our products, if approved, or additional pricing
pressures.
Moreover, other legislative changes have also been proposed and
adopted in the United States since PPACA was enacted. On August 2,
2011, the Budget Control Act of 2011, among other things, created
measures for spending reductions by Congress. A Joint Select
Committee on Deficit Reduction tasked with recommending a targeted
deficit reduction of at least $1.2 trillion for the years 2013
through 2021 was unable to reach required goals, thereby triggering
the legislation's automatic reduction to several government
programs. This includes aggregate reductions to Medicare payments
to providers of up to 2% per fiscal year, which went into effect on
April 1, 2013 and will stay in effect through 2024 unless
additional Congressional action is taken. On January 2, 2013,
President Obama signed into law the American Taxpayer Relief Act of
2012, which, among other things, further reduced Medicare payments
to several providers, including hospitals, imaging centers and
cancer treatment centers, and increased the statute of limitations
period for the government to recover overpayments to providers from
three to five years. These new laws may result in additional
reductions in Medicare and other healthcare funding, which could
compromise the ability of patients and third--party payors to
purchase our product candidates.
It is unclear how PPACA and other laws ultimately will be
implemented. Some of the provisions of PPACA have yet to be fully
implemented, while certain provisions have been subject to judicial
and Congressional challenges. Thus, while the full impact of PPACA,
or any law replacing elements of it, on our business remains
unclear, if we ever obtain regulatory approval and
commercialization of one or more of our product candidates, these
laws may result in reductions in healthcare funding, which could
have a material adverse effect on our customers and accordingly,
our financial operations. We cannot be sure whether additional
legislative changes will be enacted, or whether FDA regulations,
guidance or interpretations will be changed, or what the impact of
such changes on the marketing approvals of our product candidates
may be.
In the EU, proposed new clinical trial regulations will
centralize clinical trial approval, which eliminates redundancy,
but in some cases this may extend timelines for clinical trial
approvals due to potentially longer wait times. Proposals to
require specific consents for use of data in research, among other
measures, may increase the costs and timelines for our product
development efforts. Austerity measures in certain European nations
may also affect the prices we are able to seek if our products are
approved, as discussed below.
Both in the United States and in the EU, legislative and
regulatory proposals have been made to expand post--approval
requirements and restrict sales and promotional activities for
pharmaceutical products. We do not know whether additional
legislative changes will be enacted, whether the regulations,
guidance or interpretations will be changed, or what the impact of
such changes on the regulatory approvals of our product candidates,
if any, may be.
Our Relationships With Customers, Consultants And Payors Will Be
Subject To Applicable Fraud And Abuse, Privacy And Security,
Transparency And Other Healthcare Laws And Regulations, Which, If
Violated, Could Expose Us To Criminal Sanctions, Civil Penalties,
Exclusion From Government Healthcare Programs, Contractual Damages,
Reputational Harm And Diminished Profits And Future Earnings.
Healthcare providers, physicians and others play a primary role
in the recommendation and prescription of any products for which we
may in the future obtain regulatory approval and commercialize. Our
current and future arrangements with third--party payors,
consultants, customers, physicians and others may expose us to
broadly applicable fraud and abuse and other healthcare laws and
regulations, including federal and state laws and regulations in
the United States, that may constrain the business or financial
arrangements and relationships through which we market, sell and
distribute our products for which we obtain regulatory approval.
Potentially applicable healthcare laws and regulations include, but
are not limited to, the following:
-- the federal Anti--Kickback Statute, which prohibits, among
other things, persons or entities from knowingly and willfully
soliciting, offering, receiving or paying remuneration, directly or
indirectly, overtly or covertly, in cash or in kind, to induce or
in return for, purchasing, leasing, ordering, arranging for, or
recommending the purchase, lease, or order of, any good, facility,
item or service for which payment may be made in whole or in part
under a U.S. government-funded healthcare program such as Medicare
or Medicaid;
-- the federal civil and criminal false claims laws and civil
monetary penalties laws, including civil whistleblower or qui tam
actions, which prohibit, among other things, any person or entity
from knowingly presenting, or causing to be presented, a false or
fraudulent claim for payment or approval to the federal government
or knowingly making, using or causing to be made or used a false
record or statement material to a false or fraudulent claim to the
federal government, or knowingly concealing or knowingly and
improperly avoiding or decreasing an obligation to pay or transmit
money or property to the federal government;
-- though we are not currently regulated under the Privacy Rule
or the Security Rule of the Health Insurance Portability and
Accountability Act of 1996, or HIPAA, as amended by the Health
Information Technology for Economic and Clinical Health Act, or
HITECH, and its implementing regulations, which impose various
obligations with respect to safeguarding the privacy, security and
transmission of individually identifiable health information, it
may implicate certain aspects of our business relationships;
-- the healthcare fraud provisions of HIPAA, which impose
criminal liability for, among other things, knowingly and willfully
executing, or attempting to execute, a scheme to defraud any
healthcare benefit program, including private third--party payors,
or to obtain, by means of false or fraudulent pretenses,
representations or promises, any of the money or property owned by,
or under the custody or control of, any healthcare benefit program,
and knowingly and willfully falsifying, concealing or covering up a
material fact or making any materially false, fictitious or
fraudulent statement in connection with the delivery of, or payment
for, healthcare benefits, items or services;
-- the federal Physician Payments Sunshine Act under PPACA and
its implementing regulations, which requires certain manufacturers
of drugs, devices, biologics and medical supplies to annually
report to the Centers for Medicare & Medicaid Services
information related to payments and other transfers of value made
by such manufacturers to physicians and teaching hospitals, and
ownership and investment interests held by physicians or their
immediate family members; and
-- analogous laws and regulations, such as state anti--kickback
and false claims laws, which may apply to sales or marketing
arrangements, research, distribution and claims involving
healthcare items or services reimbursed by state governmental and
non--governmental third--party payors, including private insurers,
state laws that require pharmaceutical companies to comply with the
pharmaceutical industry's voluntary compliance guidelines and the
relevant compliance guidance promulgated by the federal government,
and state requirements for manufacturers to report information
related to payments to physicians and other healthcare providers or
marketing expenditures and other restrictions on drug manufacturer
marketing practices.
Because of the breadth of these laws and the narrowness of the
statutory exceptions and regulatory safe harbors available under
the U.S. federal Anti--Kickback Statute and analogous state laws,
it is possible that some of our current and future business
activities could be subject to challenge under one or more of such
laws. In addition, recent healthcare reform legislation has
strengthened these laws. For example, PPACA, among other things,
amends the intent requirement of the U.S. federal Anti--Kickback
Statute and criminal healthcare fraud statutes. A person or entity
no longer needs to have actual knowledge of these statutes or
specific intent to violate them in order to be in violation.
Moreover, PPACA provides that the government may assert that a
claim including items or services resulting from a violation of the
U.S. federal Anti--Kickback Statute constitutes a false or
fraudulent claim for purposes of the federal False Claims Act.
Efforts to ensure that our business arrangements with
third-parties will comply with applicable healthcare laws and
regulations will involve substantial costs. It is possible that
governmental authorities will conclude that our business practices
may not comply with current or future statutes, regulations, agency
guidance or case law involving applicable healthcare laws and
regulations. If our operations are found to be in violation of any
of these laws or any other governmental regulations that may apply
to us, we may be subject to, without limitation, significant civil,
criminal and administrative penalties, damages, fines, exclusion
from U.S. government funded healthcare programs, such as Medicare
and Medicaid, imprisonment, disgorgement, enhanced government
reporting and oversight, contractual damages, reputational harm,
diminished profits and future earnings and/or the curtailment or
restructuring of our operations. Any action against us for
violation of these laws, even if we successfully defend against it,
could cause us to incur significant legal expenses or divert our
management's attention from the operations of our business. If any
of the physicians or other providers or entities with whom we
expect to do business are found to be not in compliance with
applicable laws, they may be subject to similar penalties,
including, without limitation, criminal, civil or administrative
sanctions, including exclusions from government--funded healthcare
programs.
We Are Subject To U.S. And Certain Foreign Export And Import
Controls, Sanctions, Embargoes, Anti--Corruption Laws And
Anti--Money Laundering Laws And Regulations. Compliance With These
Legal Standards Could Impair Our Ability To Compete In Domestic And
International Markets. We Can Face Criminal Liability And Other
Serious Consequences For Violations Which Can Harm Our
Business.
We are subject to export control and import laws and
regulations, including the U.S. Export Administration Regulations,
U.S. Customs regulations, various economic and trade sanctions
regulations administered by the U.S. Treasury Department's Office
of Foreign Assets Controls, the U.S. Foreign Corrupt Practices Act
of 1977, as amended, the U.S. domestic bribery statute contained in
18 U.S.C. -- 201, the U.S. Travel Act, the USA PATRIOT Act and
other state and national anti--bribery and anti--money laundering
laws in the countries in which we conduct activities.
Anti--corruption laws are interpreted broadly and prohibit
companies and their employees, agents, contractors and other
partners from authorizing, promising, offering, or providing,
directly or indirectly, improper payments or anything else of value
to recipients in the public or private sector. We may engage
third-parties for clinical trials outside of the United States, to
sell our products abroad once we enter a commercialization phase
and/or to obtain necessary permits, licenses, patent registrations
and other regulatory approvals. We have direct or indirect
interactions with officials and employees of government agencies or
government--affiliated hospitals, universities and other
organizations. We can be held liable for the corrupt or other
illegal activities of our employees, agents, contractors and other
partners, even if we do not explicitly authorize or have actual
knowledge of such activities. Any violations of the laws and
regulations described above may result in substantial civil and
criminal fines and penalties, imprisonment, the loss of export or
import privileges, debarment, tax reassessments, breach of contract
and fraud litigation, reputational harm and other consequences.
Risks Related To The Ownership Of The ADSs, The ADS Warrants And
Our Ordinary Shares
The Market Price Of The ADSs, The ADS Warrants And Our Ordinary
Shares Is Likely To Be Volatile And May Continue to Fluctuate Due
To Factors Beyond Our Control.
The trading price of our ADSs and ordinary shares has
fluctuated, and is likely to continue to fluctuate, substantially.
The trading price of our securities depends on a number of factors,
including those described in this "Risk Factors" section, many of
which are beyond our control and may not be related to our
operating performance.
Our ADSs were sold in our initial public offering on the NASDAQ
Capital Market in November of 2016 at a public offering price of
$6.98 per ADS and ADS Warrant combination. During the period
beginning on November 23, 2016 and ending on April 14, 2017, the
price per ADS has ranged from as low as $5.25, to as high as $7.35.
During the same period, our ordinary share prices have ranged from
as low as GBP0.21 to as high as GBP0.32. The market price of our
securities may fluctuate significantly in response to numerous
factors, many of which are beyond our control, including:
-- positive or negative results of testing and clinical trials
by us, strategic partners or competitors;
-- delays in in--licensing or acquiring additional complementary product candidates;
-- any delay in the commencement, enrollment and the ultimate completion of clinical trials;
-- technological innovations or commercial product introductions by us or competitors;
-- failure to successfully develop and commercialize any of our
product candidates, if approved;
-- changes in government regulations;
-- developments concerning proprietary rights, including patents and litigation matters;
-- public concern relating to the commercial value or safety of any of our product candidates;
-- financing or other corporate transactions, or inability to obtain additional funding;
-- failure to meet or exceed expectations of the investment community;
-- announcements of significant licenses, acquisitions,
strategic partnerships or joint ventures by us or our
competitors;
-- publication of research reports or comments by securities or industry analysts;
-- general market conditions in the pharmaceutical industry or in the economy as a whole;
-- actual or anticipated fluctuations in our operating results;
-- our cash position;
-- changes in financial estimates or recommendations by securities analysts;
-- potential acquisitions;
-- the trading volume of ADSs on NASDAQ;
-- sales of our ADSs or ordinary shares by us, our executive
officers and directors or our shareholders in the future;
-- the impact on the financial markets or otherwise of the
expected withdrawal of the United Kingdom from the European
Union;
-- general economic and market conditions and overall
fluctuations in the United States equity markets; and
-- changes in accounting principles.
The share price of publicly traded emerging biopharmaceutical
and drug discovery and development companies has been highly
volatile and is likely to remain highly volatile in the future. In
addition, the stock market in general has experienced extreme price
and volume fluctuations that have often been unrelated or
disproportionate to the operating performance of individual
companies. Broad market and industry factors may hurt the market
price of companies' stock, including ADSs, regardless of actual
operating performance. Investors may lose some or all of their
investment. Our ordinary shares have been, and continue to be,
quoted on London's AIM. Continued quotation in this market could
contribute to volatility in the ADS and ADS Warrant price.
Future Sales, Or The Possibility Of Future Sales, Of A
Substantial Number Of The ADSs, The ADS Warrants Or Our Ordinary
Shares Could Adversely Affect The Market Price Of The ADSs, The ADS
Warrants Or Our Ordinary Shares.
Future sales of a substantial number of the ADSs, the ADS
Warrants or our ordinary shares, or the perception that such sales
will occur, could cause a decline in the market price of the ADSs,
the ADS Warrants and/or our ordinary shares. As of December 31,
2016, we had 195,741,528 ordinary shares outstanding (including
ordinary shares represented by ADSs), which includes 48,769,820
ordinary shares represented by ADSs. Approximately 20% of our
ordinary shares (including those represented by ADSs) are subject
to lock--up agreements for up to 180 days from November 17, 2016,
the date of the final prospectus issued in connection with our
initial public offering in the United States. If, after the
expiration of such lock--up agreements, these shareholders sell
substantial amounts of our ordinary shares, ADSs or ADS Warrants in
the public market, or the market perceives that such sales may
occur, the market price of our ordinary shares, the ADSs and the
ADS Warrants and our ability to raise capital through an issue of
equity securities in the future could be adversely affected.
If Securities Or Industry Analysts Do Not Publish Research, Or
Publish Inaccurate Or Unfavorable Research, About Our Business, The
Market Price Of The ADSs, The ADS Warrants And/Or Our Ordinary
Shares And Our Trading Volume Could Decline.
The trading market for the ADSs, the ADS Warrants and our
ordinary shares will depend in part on the research and reports
that securities or industry analysts publish about us or our
business. If no or too few securities or industry analysts commence
coverage of our company, the trading price for the ADSs, the ADS
Warrants and our ordinary shares would likely be negatively
affected. In the event securities or industry analysts initiate
coverage, if one or more of the analysts who cover us downgrade the
ADSs, the ADS Warrants and/or our ordinary shares or publish
inaccurate or unfavorable research about our business, the price of
the ADSs, the ADS Warrants and/or our ordinary shares would likely
decline. If one or more of these analysts cease coverage of our
company or fail to publish reports on us regularly, demand for the
ADSs, the ADS Warrants and/or our ordinary shares could decrease,
which might cause the price of the ADSs, the ADS Warrants and/or
our ordinary shares and trading volume to decline.
We Incur Significant Costs As A Result Of The Listing Of The
ADSs and ADS Warrants For Trading On The NASDAQ Capital Market And
Being A Public Company In The United States And Our Management Is
Required To Devote Substantial Time To Compliance Initiatives As
Well As To Compliance With Ongoing U.S. Reporting Requirements.
We are a publicly traded company in the United States. As a
public company in the United States, we incur significant
accounting, legal and other expenses that we did not incur before
our initial public offering in the United States. We also incur
costs associated with corporate governance requirements of the SEC
and the NASDAQ Capital Market, as well as requirements under
Section 404 and other provisions of the Sarbanes--Oxley Act. These
rules and regulations increase our legal and financial compliance
costs, including costs such as investor relations, stock exchange
listing fees and shareholder reporting, and make some activities
more time consuming and costly. The implementation and testing of
such processes and systems may require us to hire outside
consultants and incur other significant costs. Any future changes
in the laws and regulations affecting public companies in the
United States, including Section 404 and other provisions of the
Sarbanes--Oxley Act, and the rules and regulations adopted by the
SEC and the NASDAQ Capital Market, for so long as they apply to us,
will result in increased costs to us as we respond to such changes.
These laws, rules and regulations could make it more difficult or
more costly for us to obtain certain types of insurance, including
director and officer liability insurance, and we may be forced to
accept reduced policy limits and coverage or incur substantially
higher costs to obtain the same or similar coverage. The impact of
these requirements could also make it more difficult for us to
attract and retain qualified persons to serve on our board of
directors, our board committees, if any, or as executive
officers.
Certain Shareholders Have The Ability To Exert Significant
Influence With Respect To Corporate Activities And Their Interests
May Not Coincide With Yours.
As of March 31, 2017, the Amphion Group and Invesco Asset
Management Limited beneficially own approximately 22.24% and 25.23%
of our outstanding ordinary shares, respectively. As a result, they
may be able to strongly influence the outcome of certain matters
requiring shareholder approval, including mergers and other
transactions. Their interests may not always coincide with your
interests or the interests of our shareholders. The concentrated
holdings of our ordinary shares may prevent or discourage
unsolicited acquisition proposals or offers that you may feel are
in your best interests as one of our shareholders. Moreover, this
concentration of share ownership may also adversely affect the
trading price of our ordinary shares and ADSs if investors perceive
a disadvantage in owning shares of a company with a controlling
shareholder.
The Dual Listing Of Our Ordinary Shares On AIM And The ADSs And
ADS Warrants On The NASDAQ Capital Market May Adversely Affect The
Liquidity And Value Of The ADSs, The ADS Warrants And/Or the
Ordinary Shares.
Our ADSs and ADS Warrants are traded on the NASDAQ Capital
Market, and our ordinary shares are listed on AIM. The dual listing
of our ordinary shares on AIM and the ADSs and ADS Warrants on The
NASDAQ Capital Market may dilute the liquidity of these securities
in one or both markets. The price of the ADSs and ADS Warrants
could also be adversely affected by trading in our ordinary shares
on AIM, and vice versa.
Although our ordinary shares remain listed on AIM, we may decide
at some point in the future to propose to our ordinary shareholders
to delist our ordinary shares from AIM, and our ordinary
shareholders may approve such delisting. We cannot predict the
effect such delisting of our ordinary shares on AIM would have on
the market price of the ADSs and ADS Warrants on the NASDAQ Capital
Market.
Fluctuations In The Exchange Rate Between The U.S. Dollar And
The Pound Sterling May Increase The Risk Of Holding The ADSs, The
ADS Warrants And The Ordinary Shares.
Our share price is quoted on AIM in pence sterling, while the
ADSs and ADS Warrants trade on the NASDAQ Capital Market in U.S.
dollars. Fluctuations in the exchange rate between the U.S. dollar
and the pound sterling may result in temporary differences between
the value of the ADSs and ADS Warrants and the value of our
ordinary shares, which may result in heavy trading by investors
seeking to exploit such differences. In addition, as a result of
fluctuations in the exchange rate between the U.S. dollar and the
pound sterling, including those caused by Brexit, the U.S. dollar
equivalent of the proceeds that a holder of the ADSs and ADS
Warrants would receive upon a sale in the United Kingdom of any
shares withdrawn from the depositary and the U.S. dollar equivalent
of any cash dividends paid in pound sterling on our shares
represented by the ADSs and ADS Warrants could also decline.
We Have Never Paid Cash Dividends, Do Not Expect To Pay
Dividends In The Foreseeable Future And Our Ability To Pay
Dividends, Or Repurchase Or Redeem The ADSs And Ordinary Shares, Is
Limited By Law.
We have not paid any dividends since our inception and do not
anticipate paying any dividends on the ADSs and ordinary shares in
the foreseeable future. Even if future operations lead to
significant levels of distributable profits, we currently intend
that any earnings will be reinvested in our business and that
dividends will not be paid until we have an established revenue
stream to support continuing dividends. The proposal to pay future
dividends to shareholders will in addition effectively be at the
sole discretion of our board of directors after taking into account
various factors our board of directors deems relevant, including
our business prospects, capital requirements, financial performance
and new product development.
We Are A Foreign Private Issuer And, As A Result, We Are Not
Subject To U.S. Proxy Rules And Are Subject To Exchange Act
Reporting Obligations Under The Securities Exchange Act of 1934, As
Amended, That, To Some Extent, Are More Lenient And Less Frequent
Than Those Of A U.S. Domestic Public Company.
We report under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), as a non--U.S. company with foreign private
issuer status. Because we qualify as a foreign private issuer under
the Exchange Act and although we are subject to English laws and
regulations with regard to such matters, we are exempt from certain
provisions of the Exchange Act that are applicable to U.S. domestic
public companies, including: (1) the sections of the Exchange Act
regulating the solicitation of proxies, consents or authorizations
with respect to a security registered under the Exchange Act; (2)
the sections of the Exchange Act requiring insiders to file public
reports of their stock ownership and trading activities and
liability for insiders who profit from trades made in a short
period of time; and (3) the rules under the Exchange Act requiring
the filing with the SEC of quarterly reports on Form 10-Q
containing unaudited financial and other specified information, or
current reports on Form 8--K upon the occurrence of specified
significant events. In addition, foreign private issuers are not
required to file their annual report on Form 20--F until four
months after the end of each financial year, while U.S. domestic
issuers that are accelerated filers are required to file their
annual report on Form 10--K within 75 days after the end of each
fiscal year. Foreign private issuers are also exempt from the
Regulation Fair Disclosure, aimed at preventing issuers from making
selective disclosures of material information. As a result of the
above, you may not have the same protections afforded to
shareholders of companies that are not foreign private issuers. We
intend to furnish quarterly financial information to the SEC
beginning later in this fiscal year.
As A Foreign Private Issuer And As Permitted By The Listing
Requirements Of NASDAQ, We Rely On Certain Home Country Governance
Practices Rather Than The Corporate Governance Requirements Of
NASDAQ.
We continue to be a foreign private issuer as of the date of
this filing. As a result, in accordance with NASDAQ Listing Rule
5615(a)(3), we comply with home country governance requirements and
certain exemptions thereunder rather than complying with certain of
the corporate governance requirements of NASDAQ.
English law does not require that a majority of our board of
directors consist of independent directors or that our board
committees consist of entirely independent directors. Our board of
directors and board committees, therefore, may include fewer
independent directors than would be required if we were subject to
NASDAQ Listing Rule 5605(b)(1). In addition, we are not subject to
NASDAQ Listing Rule 5605(b)(2), which requires that independent
directors must regularly have scheduled meetings at which only
independent directors are present.
Our Articles of Association ("Articles") provide that at any
meeting of shareholders, a shareholder may designate another person
to attend, speak and vote at the meeting on their behalf by proxy,
but no such proxy shall be voted or acted upon at any subsequent
meeting, unless the proxy expressly provides for this. English law
does not require shareholder approval for the issuance of
securities in connection with the establishment of or amendments to
equity--based compensation plans for employees. To this extent, our
practice varies from the requirements of NASDAQ Listing Rule 5635,
which generally requires an issuer to obtain shareholder approval
for the issuance of securities in connection with such events.
For an overview of our corporate governance principles, see
"Item 10. Additional Information." As a result of the above, you
may not have the same protections afforded to shareholders of
companies that are not foreign private issuers.
We May Lose Our Foreign Private Issuer Status, Which Would Then
Require Us To Comply With The Exchange Act's Domestic Reporting
Regime And Cause Us To Incur Significant Legal, Accounting And
Other Expenses.
We are a foreign private issuer and therefore we are not
required to comply with all of the periodic disclosure and current
reporting requirements of the Exchange Act applicable to U.S.
domestic issuers. Losing our status as a foreign private issuer
would require us to comply with all of the periodic disclosure and
current reporting requirements of the Exchange Act applicable to
U.S. domestic issuers, including preparing our consolidated
financial statements in accordance with accounting standards
generally accepted in the United States. In order to maintain our
current status as a foreign private issuer, a majority of our
ordinary shares must continue to be either directly or indirectly
owned of record by non--residents of the United States. If a
majority of our ordinary shares are instead held by U.S. residents
then in order to maintain our foreign private issuer status, (i) a
majority of our executive officers or directors must not be U.S.
citizens or residents, (ii) more than 50% of our assets must not be
located in the United States and (iii) our business must be
administered principally outside the United States. As of the date
of this Annual Report, more than 50% of our assets are located in
the United States and our business is administered principally in
the United States. If we lost this status, we would be required to
comply with the Exchange Act reporting and other requirements
applicable to U.S. domestic issuers, which are more detailed and
extensive than the requirements for foreign private issuers. We may
also be required to make changes in our corporate governance
practices in accordance with various SEC and stock exchange rules.
The regulatory and compliance costs to us under U.S. securities
laws if we are required to comply with the reporting requirements
applicable to a U.S. domestic issuer may be significantly higher
than the cost we would incur as a foreign private issuer. As a
result, we expect that a loss of foreign private issuer status
would increase our legal and financial compliance costs and would
make some activities highly time consuming and costly. We also
expect that if we were required to comply with the rules and
regulations applicable to U.S. domestic issuers, it would make it
more difficult and expensive for us to obtain director and officer
liability insurance, and we may be required to accept reduced
coverage or incur substantially higher costs to obtain coverage.
These rules and regulations could also make it more difficult for
us to attract and retain qualified members of our board of
directors.
ADS Holders Are Not Shareholders And Do Not Have Shareholder
Rights.
The Bank of New York Mellon, as depositary, has registered and
delivered the ADSs on our behalf. Each ADS is a certificate
evidencing a specific number of ADSs. The ADS holders are not
treated as shareholders and do not have the rights of shareholders.
The depositary is the holder of the shares underlying the ADSs.
Holders of the ADSs have ADS holder rights. A deposit agreement
among us, the depositary and the ADS holders, and the beneficial
owners of ADSs, sets out ADS holder rights as well as the rights
and obligations of the depositary. New York law governs the deposit
agreement and the ADSs. Our shareholders have shareholder rights
prescribed by English law. English law governs such shareholder
rights. The ADS holders do not have the same voting rights as our
shareholders. Shareholders are entitled to our notices of general
meetings and to attend and vote at our general meetings of
shareholders. At a general meeting, every shareholder present (in
person or by proxy, attorney or representative) and entitled to
vote has one vote on a show of hands. Every shareholder present (in
person or by proxy, attorney or representative) and entitled to
vote has one vote per fully paid ordinary share on a poll. This is
subject to any other rights or restrictions which may be attached
to any shares. The ADS holders may instruct the depositary to vote
the ordinary shares underlying their ADSs. The ADS holders are not
entitled to attend and vote at a general meeting unless they
withdraw the ordinary shares from the depository. However, the ADS
holders may not know about the meeting far enough in advance to
withdraw the ordinary shares. If we ask for the ADS holders'
instructions, the depositary will notify the ADS holders of the
upcoming vote and arrange to deliver our voting materials and form
of notice to them. The depositary will try, as far as is practical,
subject to the provisions of the deposit agreement, to vote the
shares as the ADS holders instruct. The depositary will not vote or
attempt to exercise the right to vote other than in accordance with
the instructions of the ADS holders. We cannot assure the ADS
holders that they will receive the voting materials in time to
ensure that they can instruct the depositary to vote their
shares.
The ADS Holders Do Not Have The Same Rights To Receive Dividends
Or Other Distributions As Our Shareholders.
Subject to any special rights or restrictions attached to a
share, the directors may determine that a dividend will be payable
on a share and fix the amount, the time for payment and the method
for payment (although we have never declared or paid any cash
dividends on our ordinary shares and we do not anticipate paying
any cash dividends in the foreseeable future). Dividends and other
distributions payable to our shareholders with respect to our
ordinary shares generally will be payable directly to them. Any
dividends or distributions payable with respect to ordinary shares
will be paid to the depositary, which has agreed to pay to the ADS
holders the cash dividends or other distributions it or the
custodian receives on shares or other deposited securities, after
deducting its fees and expenses. The ADS holders will receive these
distributions in proportion to the number of ordinary shares their
ADSs represent. However, the depositary may decide that it is
unlawful or impractical to make a distribution available to any
holders of ADSs. We have no obligation to take any other action to
permit the distribution of the ADSs, ordinary shares, rights or
anything else to holders of the ADSs. This means that you may not
receive the distributions we make on our ordinary shares or any
value from them if it is illegal or impractical to make them
available to you. These restrictions may have a material adverse
effect on the value of your ADSs.
There Are Circumstances Where It May Be Unlawful Or Impractical
To Make Distributions To The Holders Of The ADSs.
The deposit agreement with the depositary allows the depositary
to distribute foreign currency only to those ADS holders to whom it
is possible to do so. If a distribution is payable by us in English
pounds sterling, the depositary will hold the foreign currency it
cannot convert for the account of the ADS holders who have not been
paid. It will not invest the foreign currency and it will not be
liable for any interest. If the exchange rates fluctuate during a
time when the depositary cannot convert the foreign currency, the
ADS holders may lose some of the value of the distribution.
The depositary is not responsible if it decides that it is
unlawful or impractical to make a distribution available to any ADS
holders. This means that the ADS holders may not receive the
distributions we make on our shares or any value for them if it is
illegal or impractical for the depository to make such
distributions available to them.
You May Be Subject To Limitations On Transfer Of Your ADSs.
Your ADSs are transferable on the books of the depositary.
However, the depositary may close its transfer books at any time or
from time to time when it deems expedient in connection with the
performance of its duties. In addition, the depositary may refuse
to deliver, transfer or register transfers of ADSs generally when
our books or the books of the depositary are closed, or at any time
if we or the depositary deems it advisable to do so because of any
requirement of law or of any government or governmental body, or
under any provision of the deposit agreement, or for any other
reason in accordance with the terms of the deposit agreement.
Your Rights As A Shareholder Are Governed By English Law And
Differ From The Rights Of Shareholders Under U.S. Law.
We are a public limited company incorporated under the laws of
England and Wales. Therefore, the rights of holders of ADSs are
governed by English law and by our Articles. These rights differ
from the typical rights of shareholders in U.S. corporations. In
certain cases, facts that, under U.S. law, would entitle a
shareholder in a U.S. corporation to claim damages may not give
rise to a cause of action under English law entitling a shareholder
in an English company to claim damages. For example, the rights of
shareholders to bring proceedings against us or against our
directors or officers in relation to public statements are more
limited under English law than under the civil liability provisions
of the U.S. securities laws.
You may have difficulties enforcing, in actions brought in
courts in jurisdictions located outside the United States,
judgments obtained in the U.S. courts under the U.S. securities
laws. In particular, if you sought to bring proceedings in England
based on U.S. securities laws, the English court might consider
that:
-- it did not have jurisdiction;
-- it was not the appropriate forum for such proceedings;
-- applying English conflict of laws rules, U.S. laws (including
U.S. securities laws) did not apply to the relationship between you
and us or our directors and officers; or
-- the U.S. securities laws were of a penal nature or violated
English public policy and should not be enforced by the English
court.
For further information with respect to your rights as a holder
of the ADSs, see the sections of this Annual Report titled "Item
10. Additional Information" and "Item 16.G. Differences in
Corporate Law Between England and the State of Delaware".
You May Be Unable To Recover Any of Your Investment in the ADS
Warrants.
The value of the ADS Warrants depend on the value of the ADSs or
the Ordinary Shares, as applicable, which will depend on factors
related and unrelated to the success of our commercialization and
product development activities, and cannot be predicted at this
time. The ADS Warrants have an exercise period of five years.
If the price of the ADSs does not increase to an amount
sufficiently above the exercise price of the ADS Warrants during
the exercise period of the ADS Warrants, you may be unable to
recover any of your investment in the ADS Warrants. There can be no
assurance that any of the factors that could impact the trading
price of the ADSs and ordinary shares will result in the trading
price increasing to an amount that will exceed the exercise price
or the price required for you to achieve a positive return on your
investment in the ADS Warrants.
Anti--Takeover Provisions In Our Articles And Under English Law
Could Make An Acquisition Of Us More Difficult, Limit Attempts By
Our Shareholders To Replace Or Remove Our Current Directors And
Management Team, And Limit The Market Price Of The ADSs, The ADS
Warrants And Our Ordinary Shares.
Our Articles contain provisions that may delay or prevent a
change of control, discourage bids at a premium over the market
price of the ADSs, the ADS Warrants and our ordinary shares and
adversely affect the market price of these securities and the
voting and other rights of the holders of such securities. These
provisions include:
-- dividing our board of directors into three classes, with each
class serving a staggered three--year term;
-- permitting our board of directors to issue preference shares
without shareholder approval, with such rights, preferences and
privileges as they may designate;
-- provisions which allow our board of directors to adopt a
shareholder rights plan upon such terms and conditions as it deems
expedient and in our best interests;
-- establishing an advance notice procedure for shareholder
proposals to be brought before an annual meeting, including
proposed nominations of persons for election to our board of
directors; and
-- the ability of our board of directors to fill vacancies on
our board in certain circumstances.
These provisions do not make us immune from takeovers. However,
these provisions will apply even if the offer may be considered
beneficial by some shareholders. In addition, these provisions may
frustrate or prevent any attempts by our shareholders to replace or
remove our current management team by making it more difficult for
shareholders to replace members of our board of directors, which is
responsible for appointing the members of our management.
We Are An "Emerging Growth Company," And We Cannot Be Certain If
The Reduced Reporting Requirements Applicable To "Emerging Growth
Companies" Will Make The ADSs And ADS Warrants Less Attractive To
Investors.
We are an "emerging growth company," as defined in the JOBS Act.
For as long as we continue to be an "emerging growth company," we
may take advantage of exemptions from various reporting
requirements that are applicable to other public companies that are
not "emerging growth companies," including not being required to
comply with the auditor attestation requirements of Section 404,
exemptions from the requirements of holding a nonbinding advisory
vote on executive compensation and shareholder approval of any
golden parachute payments not previously approved. We could be an
"emerging growth company" for up to five years, although
circumstances could cause us to lose that status earlier, including
if the market value of our ordinary shares (including those
represented by ADSs) held by non--affiliates exceeds $700 million
as of any June 30 before that time, in which case we would no
longer be an "emerging growth company" as of the following December
31, our fiscal year end. We cannot predict if investors will find
the ADSs or ADS Warrants less attractive because we may rely on
these exemptions. If some investors find the ADSs or ADS Warrants
less attractive as a result, there may be a less active trading
market for the ADSs or ADS Warrants and the price of the ADSs or
ADS Warrants may be more volatile.
We Believe That We Will Be Treated As A U.S. Domestic
Corporation For U.S. Federal Income Tax Purposes.
As discussed more fully under "Item 10.E. Material U.S. Federal
Income Tax Considerations," we believe that, pursuant to Section
7874 of the U.S. Internal Revenue Code of 1986, as amended (the
"Code"), even though we are organized as a U.K. public limited
company, the Company will be treated as a U.S. domestic corporation
for all purposes of the Code. The Company will therefore be taxed
as a U.S. domestic corporation for U.S. federal income tax
purposes. As a result, the Company will be subject to U.S. federal
income tax on its worldwide income.
In addition, if the Company pays dividends to a Non--U.S.
Holder, as defined in the discussion under the heading "Item 10.E.
Material U.S. Federal Income Tax Considerations," it will be
required to withhold U.S. income tax at the rate of 30%, or such
lower rate as may be provided in an applicable income tax treaty.
Each investor should consult its own tax adviser regarding the U.S.
federal income tax position of the Company and the tax consequences
of holding the ADSs, ADS Warrants or ordinary shares.
We May Have Contingent Liability Arising Out Of A Possible
Violation Of Section 5 Of The Securities Act In Connection With Our
Use Of The Free Writing Prospectus Filed With The Securities And
Exchange Commission On October 13, 2016.
Rule 433(b)(2) of the Securities Act requires that an unseasoned
or non--reporting issuer (such as the company) disseminating a free
writing prospectus must accompany or precede such free writing
prospectus with the most recent statutory prospectus (unless there
have been no changes to a previously provided prospectus).
On October 13, 2016, after filing Amendment No. 7 to the
registration statement on Form F-1, or Amendment No. 7, we filed a
free writing prospectus with the SEC. Because the warrant coverage
ratio had not yet been determined, Amendment No. 7 explained that
each ADS was being sold together with up to 0.4 of an ADS Warrant
in a fixed combination and that each ordinary share was being sold
together with up to 0.4 of an ordinary share warrant in a fixed
combination. We believe that disclosing the maximum warrant
coverage ratio in Amendment No. 7, as opposed to the exact warrant
coverage ratio, complied with Instruction 1 to Regulation S--K Item
501(b)(3), which permits non--reporting issuers to provide a bona
fide estimate of the maximum number of securities to be offered,
and that Amendment No. 7, therefore, qualified as a statutory
prospectus that meets the requirements of Section 10(a) of the
Securities Act. As such, we believe that we complied with the
requirement of Securities Act Rule 433(b)(2) that requires each
free writing prospectus to be accompanied or preceded by the most
recent statutory prospectus, and that we were, therefore, eligible
to use the free writing prospectus that was filed with the SEC on
October 13, 2016 after Amendment No. 7 was filed.
Our use of the October 13, 2016 free writing prospectus, in
reliance on Instruction 1 to Regulation S--K Item 501(b)(3), could
be challenged as a violation of Section 5 of the Securities Act. If
our use of the October 13, 2016 free writing prospectus is
challenged, we could have a contingent liability arising out of the
possible violation of Section 5 of the Securities Act. Any
liability would depend upon the number of ordinary shares and/or
ADSs purchased by the 'recipients' of the October 13, 2016 free
writing prospectus. If a claim were brought by any such
'recipients' of such free writing prospectus and a court were to
conclude that the public dissemination of such free writing
prospectus constituted a violation of Section 5 of the Securities
Act, the 'recipient' may have rescission rights and we could be
required to repurchase the ordinary shares and/or ADSs sold to the
'recipients' who reviewed such free writing prospectus, at the
original purchase price, plus statutory interest from the date of
purchase, for claims brought during a period of one year from the
date of
their purchase of ordinary shares and/or ADSs. We could also
incur considerable expense in contesting any such claims. Such
payments and expenses, if required, could significantly reduce the
amount of working capital we have available for our operations and
business plan, delay or prevent us from completing our plan of
operations, or force us to raise additional funding sooner than
expected, which funding may not be available on favorable terms, if
at all. Additionally, the value of our securities will likely
decline in value in the event we are deemed to have liability, or
are required to make payments or pay expenses in connection with
the potential claim described above.
Item 4. Information on the Company.
A. History And Development Of The Company
Motif Bio Limited was incorporated in England and Wales on
November 20, 2014 with company registration number 09320890. The
Company's registered office is at: 27/28 Eastcastle Street, London
W1W 8DH, U.K. The Company's telephone number at its registered
office is 44 (0)20 7933 8780. On April 1, 2015, Motif Bio Limited
was re--registered as a public company limited by shares and
changed its name to Motif Bio plc. The Company's country of
domicile is the United Kingdom and the Company is subject to
English law. The Company's agent in the United States is National
Registered Agents, Inc., with an address at 160 Greentree Drive,
Suite 101, Dover Delaware, 19904.
Motif BioSciences Inc. was incorporated in the State of Delaware
on December 2, 2003 and has its registered office at 160 Greentree
Drive, Suite 101, Dover, Delaware, 19904. On April 1, 2015, Motif
BioSciences Inc. became a wholly--owned subsidiary of the Company
by way of a group reorganization by plan of merger. Therefore,
Motif BioSciences Inc. is considered to be the predecessor of the
Company prior to the reorganization. The principal place of
business is 125 Park Avenue, 25(th) Floor, New York, NY, 10017,
United States of America. The phone number for such principal place
of business is (212) 210-6248.
The Company is a clinical stage biopharmaceutical company which
specializes in developing novel antibiotics designed to be
effective against serious and life--threatening infections caused
by multi--drug resistant bacteria. Originally founded as a
population genetics company, we have, since 2009, focused on drug
discovery and development. On April 1, 2015, Motif BioSciences Inc.
acquired the assets owned by Nuprim related to iclaprim through its
merger with Nuprim.
In connection with the completion of our initial public offering
on AIM on April 2, 2015, we completed a corporate reorganization
and reclassification of our shares whereby:
-- on February 18, 2015, Motif Bio plc incorporated a Delaware
subsidiary, Motif Acquisition Sub, Inc.
-- on March 27, 2015, Motif BioSciences Inc., Motif Bio plc, and
Motif Acquisition Sub, Inc. entered into a merger agreement where,
just prior to the Company's admission to AIM, Motif Acquisition
Sub, Inc. would merge with and into Motif BioSciences Inc. and
Motif BioSciences Inc. would continue as the surviving entity and
become a wholly owned subsidiary of Motif Bio plc. On April 1,
2015, the merger transaction was completed. Prior to the merger
Motif BioSciences Inc. completed a reverse stock split in order to
increase the share price of Motif BioSciences Inc. so that it was
closer to the Motif Bio plc admission price. The former Motif
BioSciences Inc. stockholders were issued 36,726,242 ordinary
shares in Motif Bio plc in a share--for--share exchange for their
common stock in Motif BioSciences Inc., so that the former Motif
BioSciences Inc. stockholders owned an equivalent number of
ordinary shares in Motif Bio plc as the number of shares of common
stock that they had previously owned in Motif BioSciences Inc. All
outstanding, unexercised, and vested stock options to purchase
shares of common stock in Motif BioSciences Inc. were converted
into options to purchase ordinary shares in Motif Bio plc.
-- On November 18, 2016, we announced the pricing of our
underwritten U.S. public offering. The offering closed on November
23, 2016, and since that time the ADSs and ADSs Warrants have been
trading on the NASDAQ Capital Market.
The audited consolidated financial statements included in this
Annual Report include the accounts of Motif Bio plc and its
wholly--owned subsidiary, Motif BioSciences Inc. (collectively, the
"Group"). The transaction has been accounted for as a group
reorganization and the financial statements are presented as if
Motif Bio plc has always owned Motif BioSciences Inc. The
comparative financial information presented in the audited
consolidated financial statements therefore represent the results
and capital structure of Motif Biosciences Inc.
B. Business Overview
We are a clinical stage biopharmaceutical company engaged in the
research and development of novel antibiotics designed to be
effective against serious and life-threatening infections in
hospitalized patients caused by multi-drug resistant bacteria. The
discovery of new antibiotics has not kept pace with the increasing
incidence of resistant, difficult-to-treat bacteria. One of the
biggest threats of antibiotic resistance is from methicillin
resistant Staphylococcus aureus (MRSA), a leading cause of
hospital-acquired infections and a growing cause of infections in
healthy people in the general community. In 2013, the Centers of
Disease Control (CDC) reported that at least two million people
became infected with antibiotic-resistant bacteria and at least
23,000 Americans died as a direct result of these infections. Our
lead product candidate, iclaprim, is being developed for the
treatment of acute bacterial skin and skin structure infections
(ABSSSI) and hospital-acquired bacterial pneumonia (HABP),
including ventilator-associated bacterial pneumonia (VABP),
infections which are often caused by MRSA. We are currently
conducting a global Phase 3 program (REVIVE) with an IV formulation
of iclaprim, for the treatment of ABSSSI.
Iclaprim is a novel diaminopyrimidine antibiotic that inhibits
an essential bacterial enzyme called "dihydrofolate reductase"
(DHFR). Diaminopyrimidines are a class of chemical compounds that
inhibit different enzymes in the production of tetrahydrofolate, a
form of folic acid, which is required for the production of
bacterial DNA and RNA. The inhibition of DHFR represents a
differentiated and under-utilized mechanism of action compared with
other antibiotics. We acquired iclaprim from Nuprim Inc., or
Nuprim, following the completion of our merger with Nuprim on April
1, 2015. Arpida AG, or Arpida, one of the previous owners of
iclaprim, completed a comprehensive development program for
iclaprim, including two Phase 3 trials in complicated skin and skin
structure infections (cSSSI). Iclaprim has been administered to
more than 1,000 patients and healthy volunteers in Phase 1, 2 and 3
clinical trials and in contrast to vancomycin, a standard of care
antibiotic in hospitalized patients with "Gram-positive"
infections, no evidence of nephrotoxicity (i.e., damage to the
kidneys caused by exposure to a toxic chemical, toxin or
medication) has been observed with iclaprim. Therapeutic drug
monitoring and dosage adjustment in patients with renal impairment
may not be required with iclaprim but this determination will
ultimately be made by FDA, EMA and other regulatory bodies if and
when the drug is approved. "Gram-positive" or "Gram-negative" refer
to how bacteria react to the Gram stain test based on the outer
casing of the bacteria, and the bacteria's cell wall structure.
Each type of bacteria may be associated with different diseases.
Iclaprim has also demonstrated rapid bactericidal activity and a
low propensity for resistance development in vitro.
We believe that iclaprim is an attractive potential candidate
for use as a first-line empiric monotherapy, the initial therapy
administered prior to the identification of the pathogen, in
severely ill patients who are hospitalized with ABSSSI caused by
MRSA and have comorbidities, or also suffer from other health
issues, such as renal impairment or diabetes. Renal impairment
affects up to an estimated 936,000 of the approximately 3.6 million
patients hospitalized with ABSSSI annually in the United
States.
On March 2, 2016, we announced the dosing of the first patient
in our two REVIVE (Randomized Evaluation intraVenous Iclaprim
Vancomycin trEatment) Phase 3 clinical trials in ABSSSI. Topline
data from REVIVE-1 were announced in a press release on April 18,
2017; data from REVIVE-2 are expected in the second half of
2017.
REVIVE-1 is a 600-patient double-blinded, active-controlled,
global, multicenter trial, in patients with ABSSSI that compares
the safety and efficacy of an 80mg intravenous dose of iclaprim
with a 15mg/kg intravenous dose of vancomycin. Treatments were
administered every 12 hours for 5 to 14 days. Iclaprim achieved the
primary endpoint of non-inferiority (10% margin) compared to
vancomycin at the early time point (ETP), 48 to 72 hours after the
start of administration of the study drug, in the intent-to-treat
(ITT) patient population. Iclaprim also achieved NI (10% margin) at
the test of cure (TOC) endpoint, 7 to 14 days after study drug
discontinuation, in the ITT patient population.
Time point Endpoint Iclaprim Vancomycin % Difference
N=298 N=300 (95% CI)
------------ ---------------- ------------ ------------ -------------
Early Clinical
Response
ETP (ECR)* 241 (80.9%) 243 (81.0%) -0.13
(-6.42,
6.17)
----------------------------- ------------ ------------ -------------
Clinical
TOC cure 251 (84.2%) 261 (87.0%) -2.77
(-8.39,
2.85)
----------------------------- ------------ ------------ -------------
*>20% reduction of lesion area at 48-72 hours
The goal of many studies is to determine if novel therapies have
noninferior efficacies to the ones currently in use. For
noninferiority studies, the research hypothesis is that the new
therapy is either equivalent or superior to the current therapy.
The term "equivalent" is not used in the strict sense, but rather
to mean that the efficacies of the two therapies are close enough
so that one cannot be considered superior or inferior to the
other.
In an analysis of a pre-specified secondary endpoint, 60.4% of
patients receiving iclaprim demonstrated resolution or near
resolution at end of therapy (EOT), compared to 58.3% of patients
receiving vancomycin (treatment difference: 2.07%, 95% CI: -5.80%
to 9.94%). In another pre-specified secondary endpoint analysis,
using a modified clinical cure TOC endpoint defined by a >90%
reduction in lesion size at TOC, no increase in lesion size since
ETP and no requirement for additional antibiotics, clinical cure
was seen in 68.5% of patients receiving iclaprim and 73.0% of
patients receiving vancomycin (treatment difference: -4.54%, 95%
CI: -11.83% to 2.74%).
Iclaprim was well tolerated in the study, with most adverse
events categorized as mild.
Iclaprim Vancomycin
N=293 N=297
--------------------- ------------ ------------
TEAEs (Treatment
Emergent Adverse
Events) 151 (51.5%) 128 (43.1%)
--------------------- ------------ ------------
Study drug related
TEAEs 57 (19.5%) 53 (17.8%)
--------------------- ------------ ------------
TEAEs leading
to discontinuation
of study drug 8 (2.7%) 13 (4.4%)
--------------------- ------------ ------------
TEAE-related SAEs
(Serious AEs) 8 (2.7%) 12 (4.0%)
--------------------- ------------ ------------
Deaths 0 (0.0%) 1 (0.3%)
--------------------- ------------ ------------
Data from REVIVE-2, the second Phase 3 trial, which uses an
identical protocol to REVIVE-1 but has different trial centers, are
expected in the second half of 2017.
If successful, we believe that the data from the two REVIVE
trials will satisfy the requirements to submit a New Drug
Application (NDA) in the United States and a Marketing
Authorization Application (MAA) in Europe to obtain marketing
approval for an IV formulation of iclaprim in the treatment of
ABSSSI caused by Gram-positive pathogens, including resistant
strains such as MRSA. Submission of a New Drug Application (NDA)
for iclaprim for the treatment of ABSSSI is anticipated in the
first half of 2018. If approved, we believe that iclaprim can
become a valuable addition to the formulary of life-saving
antibiotics used by hospital physicians.
Our INSPIRE (Iclaprim for NoSocomial PneumonIa gRam- positive
pathogEns) Phase 3 clinical trial with iclaprim in patients with
HABP, including patients with VABP, is planned to start later in
2017, with data read-out expected in 2020. This could further
expand iclaprim's addressable market to include another serious
unmet medical need. There are approximately 1.4 million patients
hospitalized annually in the United States with HABP, including
patients with VABP. We believe that iclaprim is well suited for use
as a first-line empiric therapy for patients with HABP, including
patients with VABP, caused by Gram-positive bacteria, based on data
from a Phase 2 clinical trial, which support the efficacy of
iclaprim in this patient population. Additionally, in a Phase 1
healthy volunteer trial, concentrations of iclaprim at the site of
infection in the lungs were considerably higher than concentrations
in plasma.
In July 2015, the FDA, designated the IV formulation of iclaprim
as a Qualified Infectious Disease Product (QIDP) for ABSSSI and
HABP. QIDP status grants iclaprim regulatory Fast Track
designation, Priority Review and, if approved, a five-year
extension to the statutory market exclusivity period in the United
States, resulting in 10 years of market exclusivity from the date
of approval. If approved by the European Medicines Agency, or EMA,
we expect that iclaprim will qualify for eight years of data
exclusivity and an additional two years of market exclusivity in
the EU. If approved by the Pharmaceuticals and Medical Devices
Agency (PDMA) in Japan, we expect that iclaprim will qualify for
eight years of data exclusivity (which may be extended to ten years
for orphan or pediatric indications) and an additional two years of
market exclusivity in Japan.
Our Strategy
Our goal is to help physicians to treat hospitalized patients
with serious and life--threatening infections by building a
leading, commercially--oriented biopharmaceutical company dedicated
to the development and commercialization of novel antibiotics,
designed to be effective against multi--drug resistant bacteria. We
are pursuing the following strategies:
-- Focus on developing novel antibiotics designed to be
effective against serious and life--threatening infections caused
by multi--drug resistant bacteria. We are developing antibiotic
treatments designed to be effective against the most common and
serious life--threatening infections in hospitalized patients such
as ABSSSI and HABP, including VABP, caused by Gram--positive
pathogens, including resistant strains such as MRSA. These
infections, which have become increasingly prevalent in
hospitalized patients and more recently in healthy people in the
general community (who then require hospitalization), have a high
unmet need for innovative treatment options.
-- Rapidly advance our lead product candidate, iclaprim, through
Phase 3 clinical trials. Our two REVIVE Phase 3 clinical trials are
designed to obtain marketing approval for an IV formulation of
iclaprim for the treatment of ABSSSI. Positive topline data from
REVIVE--1 were announced on April 18, 2017 and data readout from
REVIVE--2 is expected in the second half of 2017. We plan to
evaluate iclaprim in our INSPIRE Phase 3 clinical trial of iclaprim
in HABP, including VABP, patients. Subject to the availability of
funding, we expect to initiate dosing of the first patients in our
INSPIRE trial in 2017.
-- Commercialize iclaprim in the United States. If approved, we
intend to commercialize iclaprim in the United States, and identify
proven commercialization partners in other key global markets. We
believe that our ability to execute this strategy is enhanced by
our focus on the hospital setting and the significant prior
commercial experience of key members of our management team and
board of directors, who were involved in the launch and/or
commercialization of several blockbuster (annual revenues of at
least $1 billion) pharmaceutical products prior to joining our
company.
-- Expand indications of product candidates within our
franchise. We intend to leverage opportunities to develop
internally product candidates for additional indications, including
a potential oral DHFRi. We believe that this approach will enable
us to maximize our commercial potential by utilizing our existing
resources and expertise.
-- Expand our portfolio through acquisition and disciplined
in--licensing. We plan to source new product candidates through
acquisition or in--licensing. Our management team intends to
mitigate the potential risks of this strategy by adhering to our
disciplined criteria of focusing on in--licensing or acquisition of
products that are already commercially available or that have
clinical data that we believe suggest a high probability of success
for development progression and an attractive potential return on
investment.
Our Product Candidates
The following table summarizes the indications for which we are
developing our product candidates and the status of
development.
Background
Antibiotic Market And Scientific Overview
Bacteria are broadly classified as Gram--positive or
Gram--negative. Gram--positive bacteria possess a single membrane
and a thick cell wall and turn dark--blue or violet when subjected
to a laboratory staining method known as a Gram stain. Based on our
analysis of data from industry sources, we estimate that
approximately 84% of all ABSSSI cases are caused by Gram--positive
bacteria. Gram--positive bacteria can also cause other serious
illnesses, including pediatric and adult osteomyelitis, community--
and HABP, including VABP, bacteremia and diabetic foot infection.
Among Gram--positive bacteria, MRSA and vancomycin--resistant
enterococci (VRE) seem to be the most problematic in terms of their
occurrence and impact on the clinical outcomes of hospitalized
patients.
Antibiotics that treat bacterial infections can be classified as
broad spectrum, targeted spectrum or narrow spectrum. Antibiotics
that are active against both Gram--positive and Gram--negative
bacteria are referred to as broad spectrum. Those that are active
against either Gram--positive or Gram--negative bacteria, but not
both, are referred to as targeted spectrum. Antibiotics that are
active only against a select subset of Gram--positive or
Gram--negative are referred to as narrow spectrum. Because it
usually takes from 48 to 72 hours from the time the specimen is
received in the laboratory to diagnose a particular bacterial
infection definitively, effective first--line treatment in hospital
emergency departments of serious infections requires the use of
broad spectrum antibiotics or targeted spectrum antibiotics with
activity against Gram--positive bacteria until the bacterial
infection can be diagnosed.
Since the introduction of antibiotics in the 1940s, numerous
antibiotic classes have been discovered and developed for
therapeutic use. The worldwide antibiotic market has been valued at
over $40 billion and is expected to grow. Two gram positive
hospital antibiotics, Cubicin (daptomycin) and Zyvox (linezolid),
achieved peak global sales in excess of $1 billion over the 2010 to
2015 time horizon.
The development of new antibiotic classes and new antibiotics
within a class is important because of the ability of bacteria to
develop resistance to existing mechanisms of action of currently
approved antibiotics. However, the pace of discovery and
development of new antibiotic classes has slowed considerably in
the past few decades. The CDC estimates that the pathogens
responsible for more than 70% of U.S. hospital infections are
resistant to at least one of the antibiotics most commonly used to
treat them.
Antibiotic resistance is primarily caused by genetic mutations
in bacteria selected by exposure to antibiotics where the drug does
not kill all of the bacteria. In addition to mutated bacteria being
resistant to the drug used for treatment, many bacterial strains
can also be cross--resistant, meaning that the use of a particular
treatment to address one kind of bacteria can result in resistance
to other types of antibiotics. As a result, the effectiveness of
many antibiotics has declined, limiting physicians' options to
treat serious infections and creating a global health issue. In
2013, the CDC reported that at least two million people became
infected with antibiotic--resistant bacteria and at least 23,000
Americans died as a direct result of these infections. Antibiotic
resistance also contributes heavily to healthcare system costs. The
CDC has noted that while the total economic cost of antibiotic
resistance to the U.S. economy has been difficult to calculate,
estimates have ranged as high as $20 billion in excess direct
healthcare costs, with additional costs to society for lost
productivity as high as $35 billion a year (based on a study
completed in 2008). One of the biggest threats of antibiotic
resistance is from MRSA, a leading cause of hospital--acquired
infections and a growing cause of infections in healthy people in
the general community.
In addition to resistance issues, current antibiotic therapies
also have other limitations, including serious side effects. These
side effects may include: DDIs, severe allergic reaction, decreased
blood pressure, nausea and vomiting, suppression of platelets, pain
and inflammation at the site of injection, muscle, renal and other
toxicities, optic and peripheral neuropathies and headaches. Some
of these side effects may be significant enough to require that
therapy be discontinued or not used. As a result, some treatments
require clinicians to closely monitor patients' blood levels and
other parameters, increasing the expense and inconvenience of
treatment. Further, many of the existing antibiotics used to treat
serious infections are difficult or inconvenient to administer.
Many drugs are given twice daily for seven to 14 days or more and
patients can be hospitalized for much or all of this period or
require in--home IV therapy. We believe that there is a need for
new antibiotics that have improved potency and pharmacokinetics,
effectiveness against resistant bacterial strains and improved side
effect profiles.
Currently, the most widely prescribed antibiotic for treating
Gram--positive infections caused by MRSA in the United States,
including ABSSSI, is vancomycin, which is available in both branded
and generic versions. It is estimated that vancomycin had a 74%
share of patient days of therapy for selected Gram--positive
antibiotics for MRSA for 2013, 2014 and 2015. Length of treatment
associated with vancomycin has been estimated to be approximately
13 days, and length of hospitalization associated with vancomycin
has been estimated to be approximately 19 days (including intensive
care unit (ICU) days and additional complications). Based on our
analysis of data from industry sources, we estimate that the cost
of treating ABSSSI caused by MRSA with vancomycin in patients with
renal impairment is approximately $28,000 per patient
(approximately 19% higher than the cost of treating ABSSSI caused
by MRSA with vancomycin in patients without renal impairment, which
has been estimated to be approximately $23,600). However, because
of an increase in MRSA infections that are resistant or not
clinically responsive to treatment with vancomycin and the need for
therapeutic monitoring and dose adjustment, due to nephrotoxicity,
physicians and patients would benefit from more effective options
with demonstrated safety profiles.
Acute Bacterial Skin And Skin Structure Infections (ABSSSI)
ABSSSI are skin and skin structure infections with a lesion size
of at least 75 cm(2) (lesion size measured by the area of redness,
edema or induration), and includes cellulitis/erysipelas, wound
infections and major cutaneous abscesses. In the United States, an
estimated 3.6 million patients are hospitalized annually with
ABSSSI, and up to 26% of these patients, or approximately 936,000
patients are co--morbid with renal impairment. Common
Gram--positive bacteria that may cause ABSSSI include
Staphylococcus aureus, including MRSA, and Streptococcus
pyogenes.
ABSSSI Versus cSSSI
The terms "skin and skin structure infection" (SSSI) and "skin
and soft tissue infection" (SSTI) were coined to describe
infectious processes such as cellulitis, erysipelas, cutaneous
abscesses, and infected wounds, ulcers, or burns. The designation
of more severe SSSI included a lowercase "c" (cSSSI) for
"complicated" skin and skin structure infection and typically
implied a need for inpatient management, surgical procedures, or a
significant underlying comorbidity such as diabetes or systemic
immunosuppression that complicates response to therapy.
In 2013, the FDA issued guidance that standardized the
nomenclature to be used in the evaluation of new antimicrobial
treatments for cSSSI, which are now referred to as ABSSSI. The
rationale for developing this terminology was to provide a
consistent means of identifying infections for which a reliable
drug treatment effect can be estimated.
Hospital Acquired Bacterial Pneumonia (HABP) And Ventilator
Associated Bacterial Pneumonia (VABP)
HABP refers to any pneumonia contracted by a patient in a
hospital at least 48 hours after being admitted. VABP is pneumonia
that develops 48 hours or longer after mechanical ventilation is
given by means of an endotracheal tube or tracheostomy. Symptoms
and signs include malaise, fever, chills, rigor, cough, dyspnea,
and chest pain, but in ventilated patients, pneumonia usually
manifests as worsening oxygenation and increased tracheal
secretions. HABP, including VABP, is a serious and
life--threatening infection associated with a mortality rate of 20%
to 50%, affecting approximately 680,000 patients annually in the
United States, which can lead to increased hospital costs by an
average of approximately $40,000 per patient. One of the major
causative organisms of HABP, including VABP, is Staphylococcus
aureus, including MRSA.
Limitations Of Currently Available Treatment Options
When confronted with a new patient suffering from a serious and
life--threatening infection, a physician may be required to quickly
initiate first--line empiric antibiotic treatment to stabilize the
patient prior to definitively diagnosing the particular bacterial
infection. Currently available antibiotics for serious and
life--threatening infections suffer from significant limitations,
including:
-- Safety, Tolerability and Suitability of Use. Many current
antibiotics are associated with adverse events, including drug
interactions (DDIs), allergic reactions, renal toxicity and high
rates of vomiting and nausea. Adverse events are one of the leading
reasons why patients stop treatment and fail therapy. Vancomycin,
for example, is associated with infusion reactions and can cause
kidney damage or renal toxicity, loss of balance, or vestibular
toxicity, and loss of hearing, or oto--toxicity, in certain
patients. In addition, adjusting the dosage of vancomycin requires
frequent therapeutic drug monitoring to ensure safe administration.
Linezolid is associated with bone marrow suppression and
contraindicated for use in patients taking monoamine oxidase
inhibitors, a class of drugs used as anti--depressants, and should
not be used without careful observation in people taking selective
serotonin reuptake inhibitors, a class of drugs commonly used as
anti--depressants, among other uses. Linezolid also has a label
warning for patients with diabetes since it has been associated
with hypoglycemia in patients receiving insulin or oral
hypoglycemic agents. Daptomycin has been associated with the
development of antibiotic resistance during the course of therapy,
a reduction of efficacy in patients with moderate renal
insufficiency and a side effect profile that includes muscle
damage. In vivo potency at the prescribed dose can be limited by
restrictions around the amount of drug delivered stemming from
safety concerns surrounding some currently available
treatments.
-- Spectrum of Coverage, Resistance Profile and Potency.
Currently available treatments, such as vancomycin, linezolid and
daptomycin, are beginning to show signs of bacterial resistance.
For example, there have been reports of resistance developing
during treatment with daptomycin and concerns about an increasing
frequency of strains of S. aureus with reduced susceptibility to
vancomycin- "vancomycin intermediate" and "vancomycin resistant"
strains (VISA and VRSA). Broad spectrum antibiotics such as the
tetracyclines, macrolides and cephalosporins are considered to have
broad spectrum activity against Gram--positive and Gram--negative
bacteria. In ABSSSI cases, 84% of infections are caused by
Staphylococcus aureus, including MRSA and a targeted Gram--positive
antibiotic is a better choice as fewer non--causal organisms are
exposed to the antibiotic mechanism and there is less selection
pressure to develop resistant strains of bacteria.
-- Cidality and Speed of Effect. Antibiotics are either
bactericidal or bacteriostatic. Bactericidal antibiotics kill the
bacterial pathogen directly, which is particularly important for
patients with weakened immune systems that cannot effectively
eradicate the infecting bacteria on their own. Numerous currently
available treatment options, including linezolid are
bacteriostatic, which means that although they stop bacteria from
growing or reproducing, the patient's own immune system must be
strong enough to kill the static bacteria itself. Currently
available bactericidal treatment options, such as vancomycin act
relatively slow and may extend the period in hospitals for patients
with severe infections.
Market Research
In early 2016 we commissioned BAL Pharma Consulting, LLC, for
whom one of our retained consultants acts as principal, to conduct
an on--line survey of treatment practices for hospitalized MRSA
skin infection and HABP patients. A total of 45 respondents
participated in the 20 minute on--line survey which was conducted
from April to May 2016. Of the 45 participants, 15 were infectious
disease clinicians, 15 were hospital pharmacy directors, ten were
hospitalists or critical care clinicians, and five were emergency
room clinicians. The participants each had between three and 35
years of practice since their residency and more than 70% of them
came from a hospital--based practice (with an average size of 475
beds), with 80% of these participants being affiliated with a
hospital that belonged to an integrated delivery network or
healthcare system and 70% sitting on hospital pharmacy and
therapeutic formulary review committees.
Participants in the survey were asked to provide information
regarding their last 20 patients treated for MRSA skin infections
and HABP. The results indicated that the majority of patients
treated or consulted by these respondents for suspected or proven
MRSA with mild renal impairment received vancomycin (on average 14
of 20 patients). A majority of patients treated or consulted for
suspected proven MRSA skin infections with moderate to severe renal
impairment also received vancomycin (on average 12 of 20 patients).
The results from the survey also found that on average
approximately 32% of MRSA skin infection patients with moderate or
severe renal impairment also required a change of dose or therapy
due to actual/risk of nephrotoxicity from vancomycin, and that
nearly 70% of the respondents identified patients with MRSA skin
infections who develop nephrotoxicity due to vancomycin or other
agents as being candidates for iclaprim.
Participants were also asked to predict their use of iclaprim
(if on formulary) for their next 20 patients treated for MRSA skin
infections and HABP. Respondents on average indicated that they
would expect to treat approximately eight of their next 20 MRSA
skin infection patients with moderate to severe renal impairment
with iclaprim, approximately six of their next 20 MRSA skin
infection patients with mild renal impairment with iclaprim, and
approximately four of their next 20 patients with suspected or
proven MRSA skin infections with iclaprim. Respondents also
estimated that on average more than 35% of skin infection patients
have moderate to severe renal impairment, and many expect the
percentage of skin infection patients with moderate to severe renal
impairment to modestly increase in the future.
Investors are cautioned not to place undue reliance on the
future predictions made by participants in this survey with respect
to their future use of iclaprim or the future increase in the
percentage of skin infection patients with moderate to severe renal
impairment, as such predictions constitute forward--looking
statements. See "Cautionary Note Regarding Forward--Looking
Statements." Such predictions are based only on the current
expectations of the participants in the survey, based on
information that was known to the participants at the time they
completed the survey. These predictions are subject to numerous
risks, uncertainties and other factors which may cause their actual
future use of iclaprim or the future percentage of skin infection
patients with moderate to severe renal impairment to differ from
their earlier predictions.
Generating Antibiotics Incentives Now (GAIN) Act
In July 2012, the Generating Antibiotic Incentives Now Act, or
GAIN Act, was enacted as part of the Food and Drug Administration
Safety and Innovation Act. Under the GAIN provisions, the FDA may
designate a product as a "qualified infectious disease product," or
QIDP. In order to receive this designation, a drug must be an
antibacterial or antifungal drug for human use intended to treat
serious or life--threatening infections, including those caused by
either (1) an antibacterial or antifungal resistant pathogen,
including novel or emerging infectious pathogens, or (2) a
so--called "qualifying pathogen" found on a list of potentially
dangerous, drug--resistant organisms to be established and
maintained by the FDA under the new law. 21 U.S.C. -- 355f(g). A
sponsor must request designation before submitting a marketing
application. 21 U.S.C. --355f(d). The FDA has designated iclaprim
as a QIDP for ABSSSI and HABP.
Drugs that fall under the GAIN provisions may be eligible to
receive Fast Track status and undergo an expedited regulatory
review process with FDA. 21 U.S.C. 356(b). In addition,
QIDP-designated products that are approved under section 505(b)
after the enactment of the GAIN Act receive an additional five
years' exclusivity, 21 U.S.C. -- 355f(a). The extra five years of
market protection is in addition to any existing exclusivity,
including that which may be applicable under the Hatch Waxman Act
(five years or three years), orphan drug (seven years), or
pediatric exclusivity (six months) 21 U.S.C. -- 355f(a)-(b). The
additional five-year exclusivity does not apply to supplements to a
505(b) application; a subsequent application filed by the same
sponsor for a change that results in a new indication, route of
administration, dosing schedule, dosage form, delivery system,
delivery device. or strength; or a product that does not meet the
definition of a qualified infectious disease product. 21 U.S.C. --
355f(c).
Iclaprim
Overview
Iclaprim is a novel diaminopyrimidine that inhibits DHFR, an
essential bacterial enzyme. This represents a differentiated and
under--utilized mechanism of action with recently approved
antibiotics. Iclaprim was designed to be more potent than, and
effective against bacteria that have developed resistance to
trimethoprim (TMP), the only other antibiotic with the DHFRi
mechanism of action. Unlike TMP, iclaprim need not be used in
combination with a sulfonamide to be effective against a range of
Gram--positive bacteria. Iclaprim is rapidly bactericidal and has
shown a low propensity for resistance development in vitro.
Iclaprim was originally discovered by F. Hoffman--La Roche AG.
In 2001, iclaprim was sold to Arpida. A comprehensive development
program was completed by Arpida including the Phase 2 and 3 trials
described below. In 2008, Arpida submitted requests to the FDA and
the EMA for approval to market the compound. In January 2009,
Arpida received a Complete Response Letter (CRL) from the FDA
requesting an additional study or studies to demonstrate
effectiveness of iclaprim; however, no safety concerns were raised
by the agency in the CRL. Subsequently, the application with the
EMA was withdrawn and development was discontinued. On December 31,
2014, Motif BioSciences Inc. entered into a merger agreement with
Nuprim Inc. in order to acquire the assets owned by Nuprim Inc.
related to iclaprim, subject to the completion of an initial public
offering on AIM. The initial public offering on AIM was completed
on April 2, 2015. The merger with Nuprim Inc. and the corporate
reorganization occurred on April 1, 2015, when it was substantially
certain that the initial public offering would close the next day.
We concluded that iclaprim could be returned rapidly to late stage
clinical testing with improvements to the original development
program.
As a result of our merger with Nuprim, we acquired the rights to
purchase up to 613 kg of iclaprim API, which was manufactured
mostly in 2008. We are paying an annual storage fee of 4,800 EUR
and can purchase API at a cost of 600 EUR per kg through the end
December 2017. We have already purchased 100 kg, which was returned
to, and reprocessed by, the original API manufacturer during
October 2015. This reprocessed material was used to manufacture the
clinical trial supplies for the REVIVE Phase 3 program.
Key Attributes Of Iclaprim
We believe that iclaprim is well suited for use as a first-line
empiric monotherapy in patients with ABSSSI who are comorbid with
renal impairment for the following reasons:
-- iclaprim achieved high cure rates against the common
Gram-positive causal organisms, including MRSA, in patients with
cSSSI in completed Phase 2 and 3 trials;
-- iclaprim exhibited safety and tolerability comparable to
vancomycin and linezolid in over 600 patients and healthy
volunteers in completed Phase 1, 2 and 3 trials;
-- iclaprim has not shown nephrotoxicity in clinical studies to
date and no therapeutic drug monitoring or dosage adjustment has
been required in renally impaired patients;
-- no symptomatic hypoglycemia has been reported in
iclaprim-treated patients with diabetes mellitus receiving insulin
or oral hypoglycemic agents;
-- iclaprim has demonstrated no clinically significant drug-drug
interactions (DDIs) with selective serotonin reuptake inhibitors
(SSRIs), or vasopressors; and
-- no myopathy or rhabdomyolysis has been reported in
iclaprim-treated patients who received recent prior or concomitant
therapy with an HMG-CoA reductase inhibitor or in whom elevations
in CPK occur during treatment.
We also believe that iclaprim is well positioned as a first-line
empiric therapy for patients with HABP, including patients with
VABP, for the following reasons:
-- iclaprim achieved high cure rates against the common
Gram-positive causal organisms, including MRSA, in patients with
HABP, including patients with VABP, in a completed Phase 2
trial;
-- iclaprim has demonstrated high and sustained concentrations
in epithelial lining fluid (ELF) and alveolar macrophages which
were 20-30 times the plasma concentration, respectively, throughout
an entire 7-hour sampling period; and
-- iclaprim has demonstrated no clinically significant DDIs with
commonly used antibiotics in patients with combined Gram-positive
and Gram-negative infections.
The table below shows characteristics of iclaprim as compared to
other standard of care therapies.
Clinical Development Plans
Prior to the initiation of REVIVE, our global Phase 3 program in
ABSSSI, Arpida completed two Phase 3 clinical trials (ASSIST--1 and
2) for the treatment of cSSSI, in which 500 patients in total
received iclaprim. In these trials iclaprim was compared to
linezolid, a standard of care treatment. The primary efficacy
endpoint for each of these trials was the noninferiority of
iclaprim compared to linezolid based on a pre--determined
noninferiority margin. Noninferiority comparisons of drugs are the
standard for most antibiotic drug development, and noninferiority
margins are used in the statistical analysis comparing two
treatment arms in a study to distinguish the degree of potential
difference between antibiotics being evaluated.
Effective standards of care have been developed in many clinical
settings, and it is increasingly more difficult to develop new
therapies with higher efficacy than the standard of care.
Accordingly, the goal of many studies is to determine if novel
therapies have noninferior efficacies to the ones currently in use.
For noninferiority studies, the research hypothesis is that the new
therapy is either equivalent or superior to the current therapy.
The term "equivalent" is not used in the strict sense, but rather
to mean that the efficacies of the two therapies are close enough
so that one cannot be considered superior or inferior to the other.
This concept is formalized in the definition of a constant called
the equivalence margin, denoted by . The equivalence margin defines
a range of values for which the efficacies are "close enough" to be
considered equivalent. In practical terms, the margin is the
maximum clinically acceptable difference that one is willing to
accept in return for the secondary benefits of the new therapy. The
equivalence margin is the most distinctive feature of
non-inferiority testing. In summary, the equivalence of a new
therapy is established when the data provide enough evidence to
conclude that its efficacy is within units from that of the current
therapy. Similarly, non-inferiority is established if the evidence
suggests that the efficacy of the new therapy is no more than units
less than that of the current therapy.
Non-inferiority is most easily assessed using a confidence
interval approach. Firstly, a non-inferiority margin is specified.
The non-inferiority margin is the maximum difference investigators
are prepared to tolerate in a given direction if the new treatment
is not to be considered (clinically) inferior. If a 95% confidence
interval for the difference between treatment means lies above or
below this boundary value (in a favorable direction) then
non-inferiority is deemed to have been established.
During the period iclaprim was being developed, particularly
during calendar years 2007 and 2008, the FDA was re--evaluating the
requirement of the non--inferiority margin to support marketing
approval. When the iclaprim Phase 3 clinical trials were first
initiated in cSSSI an acceptable non--inferiority margin was
--12.5%. However, during 2008, the FDA decided to evaluate NDAs for
the treatment of skin and skin structure infections using a
non--inferiority margin of --10% instead of --12.5%.
Arpida's two Phase 3 clinical trials of iclaprim (ASSIST--1 and
2) were designed and conducted pursuant to the FDA's prior
guidance, and based on Arpida's analysis, iclaprim met the
originally agreed upon non-inferiority margin of --12.5%. However,
after trial completion, the FDA revised the non-inferiority margin
to --10%. The FDA requested an advisory committee meeting to
discuss the approval of iclaprim for cSSSI. The advisory committee
evaluated the efficacy of the two Phase 3 ASSIST trials using a
non--inferiority margin of --10% consistent with the FDA's revised
requirement. Iclaprim did not achieve the revised non-inferiority
margin of --10% in one of the two trials and was not, therefore,
based on Arpida's analysis of the data, approved by the FDA.
The FDA did not provide Arpida with any feedback or concerns
related to the method or structure of Arpida's Phase 3 trials. The
FDA indicated in its letter that they could not approve the
application for iclaprim in its current form, however, and that
additional clinical data would be required to demonstrate efficacy
for the treatment of cSSSI within an acceptable non--inferiority
margin in order to gain approval.
To address this deficiency, the FDA requested an additional
study or studies to demonstrate the effectiveness of iclaprim. An
additional study showing non--inferiority of iclaprim to an
approved comparator may be sufficient to meet this requirement,
depending on the study results.
We believe that had the revised non-inferiority margin of --10%
been agreed upon prior to initiating the ASSIST Phase 3 trials,
Arpida would have enrolled a greater number of patients in the
trials to meet the required non-inferiority endpoints. We believe
that we have developed a clinical and regulatory strategy for
iclaprim, addressing the deficiencies in the original development
program and have designed our Phase 3 clinical trials for iclaprim
to demonstrate adequate non-inferiority and satisfy the regulatory
requirements for approval. Since those prior phase 3 studies were
completed, we have modified the formulation and administration of
iclaprim to improve safety and efficacy, specifically to improve
pharmacodynamic parameters and to reduce peak plasma levels.
On April 14, 2015, the FDA agreed to our proposed Phase 3
clinical development program for the treatment of ABSSSI with
iclaprim. The Phase 3 program is designed to obtain marketing
approval for an IV formulation of iclaprim in the treatment of
ABSSSI and HABP, including VABP, caused by Gram--positive
pathogens, including resistant strains such as MRSA.
ABSSSI
We have initiated two Phase 3 global trials with input from the
FDA and the Dutch Health Authorities, the lead rapporteur for
Arpida's MAA for iclaprim, to study iclaprim compared to vancomycin
for the treatment of ABSSSI. These two global, 600--patient,
randomized, double--blind Phase 3 trials will have two arms and
assign patients to receive either iclaprim or vancomycin. These
trials will incorporate both the FDA endpoint of an early clinical
response of at least 20% reduction in lesion size at 48--72 hours
and the EMA endpoint of clinical cure at test of cure one to two
weeks after antibiotic treatment ends. Vancomycin, the most used
standard of care treatment for Gram--positive hospitalized
infections caused by MRSA, will be the comparator in the REVIVE--1
and --2 trials. A sample size of 1,200 subjects will be studied to
demonstrate safety and efficacy with a non-inferiority margin of
--10% for the primary endpoint. A fixed dose of 80 mg of iclaprim,
based on modelling and simulation of pharmacokinetic (PK) data from
previous Phase 3 clinical trials of cSSSI, optimizes the potential
clinical efficacy and safety outcomes for the REVIVE--1 and --2
studies. We believe these additions based on previous experience
maximize the probability of success for iclaprim in our REVIVE
program. Iclaprim may be an important addition to the armamentarium
of antibiotics needed to combat antimicrobial resistance.
On April 18, 2017, we announced positive topline results from
REVIVE-1. Iclaprim achieved the primary endpoint of non-inferiority
at the early time point after start of study drug administration as
well as non-inferiority for the test of cure endpoint. Given its
differentiated mechanism, potency, spectrum, safety and efficacy of
iclaprim, if approved, could provide a valuable new antibiotic
treatment option to offset the rising problem of bacterial
resistance. Iclaprim was well tolerated in the study, with most
adverse events categorized as mild.
Data from REVIVE-2, the second Phase 3 trial, which uses an
identical protocol to REVIVE-1 but has different trial centers, are
expected in the second half of 2017. We believe that the successful
completion of these two pivotal Phase 3 trials satisfy both FDA and
EMA requirements for regulatory submission for an IV formulation of
iclaprim in the treatment of ABSSSI. Submission of a New Drug
Application (NDA) for iclaprim for the treatment of ABSSSI is
anticipated in the first half of 2018.
The diagram below summarizes the design of our REVIVE Phase 3
program.
REVIVE--1 and --2 Phase 3 Trial Design in ABSSSI; 600 patients
per trial
Hospital Acquired Bacterial Pneumonia (HABP), Including
Ventilator Associated Bacterial Pneumonia (VABP)
We have designed a double--blind, randomized, comparator
controlled international study to determine the efficacy and safety
of iclaprim for the treatment of patients with HABP, including
VABP. We have completed preparations for our global INSPIRE Phase 3
clinical trial of iclaprim for HABP, including VABP, in the first
quarter of 2017. Subject to the availability of funding, we would
look to start dosing patients thereafter and to complete the trial
approximately 36 months after the first dosing. Linezolid will be
the comparator in the INSPIRE trial. The duration of treatment of
both iclaprim and linezolid is 7 to 14 days. A large sample size of
720 subjects will be studied with a non-inferiority margin of -10%
for this trial. The primary endpoint for the study will be all
cause mortality at Day 28. We believe the key secondary endpoint is
clinical cure at one to two weeks after antibiotic treatment ends.
We believe that the successful completion of this pivotal Phase 3
trial would satisfy both FDA and EMA requirements for regulatory
approval.
The diagram below summarizes the design of our INSPIRE Phase 3
program.
Clinical Experience
Prior to our acquisition of iclaprim from Nuprim, Arpida had
completed a total of two Phase 3, two Phase 2, and 14 Phase 1
clinical trials, in which more than 600 patients have been dosed
with iclaprim.
Acute Bacterial Skin And Skin Structure Infections (ABSSSI)
Phase 3 Clinical Trials
Two parallel Phase 3 studies, ASSIST--1 and ASSIST--2, were
conducted by Arpida in patients with cSSSI. Both were
evaluator--blinded, randomized, multicenter studies designed to
compare the efficacy and safety of IV iclaprim to linezolid in the
treatment of patients with cSSSI known or suspected to be caused by
susceptible pathogens. The primary objective of the studies was to
compare the clinical cure rates at the test--of--cure visit (7--14
days after the end treatment). The trials were designed to
demonstrate noninferiority to linezolid with a lower bound on the
95% confidence interval of -12.5%.
ASSIST--1. In December 2006, Arpida reported positive results
from a Phase 3 clinical trial, dubbed ASSIST--1, of iclaprim for
the treatment of cSSSI. The trial was designed to compare iclaprim
to linezolid, a standard of care treatment for cSSSI. This
international, randomized, double--blind trial enrolled 497
subjects with cSSSI. Subjects were assigned (1:1) to receive IV
iclaprim (0.8 mg/kg) or IV linezolid (600mg) for 10 to 14 days and
were evaluated during treatment. The test--of--cure visit took
place 7--14 days after the end of treatment. Treatment was
generally well tolerated. Based on Arpida's analysis of the data,
the primary endpoint, statistical non-inferiority in the clinical
cure rate at the test--of--cure visit, was reached. The overall
clinical cure rates for the Intent--To--Treat (ITT) population of
497 subjects, were 83.1% and 88.7% for iclaprim and linezolid,
respectively (treatment difference and 95% CI: -5.6% [-11.7% to
0.6%]). The incidence of any possible drug--related adverse events
was higher in the linezolid arm compared to the iclaprim arm (20.2%
versus 16.4%, respectively). The microbiological eradication rates
for methicillin--susceptible MSSA bacteria were 85.0% and 86.5% for
iclaprim and linezolid, respectively, and for MRSA 80.0% and 83.8%,
respectively.
ASSIST--2. In July 2007, Arpida reported positive results from a
Phase 3 clinical trial, dubbed ASSIST--2, of iclaprim for the
treatment of cSSSI. This randomized, blinded, comparator controlled
trial enrolled 494 subjects internationally. The trial was designed
to compare IV iclaprim to linezolid. The primary efficacy endpoint,
statistical non-inferiority in the clinical cure rate at the
test--of--cure visit, was achieved based on Arpida's analysis of
the data. The overall clinical cure rates were 81.3% and 81.9% for
iclaprim and linezolid, respectively (treatment difference and 95%
CI: -0.6% [-7.7% to 6.5%]). The microbiological eradication rates
for methicillin--susceptible MSSA bacteria were 82.2% and 83.4% for
iclaprim and linezolid, respectively, and for MRSA 74.3% and 75.0%,
respectively. The incidence of drug--related adverse events was
higher in the linezolid arm compared to the iclaprim arm (34.6%
versus 27.9%, respectively).
Efficacy Results. For the combined dataset, the clinical cure
rates were similar between the iclaprim and linezolid arms for the
Intent to Treat (ITT) population (82.2% and 85.3% in the iclaprim
and linezolid arms, respectively; treatment difference and 95%
confidence interval (CI) (-3.1% [-7.9% to 1.6%]).
Regulatory Review of ASSIST--1 and ASSIST--2. Based on Arpida's
analysis of the data, for the ASSIST--1, the lower bound of the 95%
confidence interval was within the pre-specified -12.5%
non-inferiority margin but just outside of the -10% non-inferiority
margin at -11.7%. For ASSIST--2, the lower bound of the 95%
confidence interval was within both the pre-specified -12.5% and
-10% non-inferiority margin at -7.7%, which demonstrates
non-inferiority of iclaprim to linezolid for the treatment of
cSSSI. While the ASSIST--1 and ASSIST--2 trials met the originally
agreed standards for non-inferiority of -12.5%, after trial
completion, the FDA determined to require a -10% non-inferiority
margin. As a result of the changed endpoints, in January 2009,
Arpida received a CRL from the FDA requesting an additional study
or studies to demonstrate the effectiveness of iclaprim. We believe
that had the new guidance been in place prior to the commencement
of the trials, Arpida would have enrolled a greater number of
patients in the trials to meet the required non-inferiority
endpoints.
Safety Results. Overall, iclaprim was found to exhibit a safety
and tolerability profile in the Phase 3 ASSIST trials comparable to
that demonstrated by linezolid. The FDA has not, however, made any
determination regarding the safety and efficacy of iclaprim.
Adverse events were comparable among patients treated with iclaprim
as compared to linezolid. There were 22 serious adverse events
(SAEs) experienced by 20 (4%) of the iclaprim--treated patients
with the most frequent events characterized as effecting the
infections and infestation, cardiac, renal and urinary system organ
classes. There were 21 SAEs experienced by 16 (3.3%) of the
linezolid--treated patients with the most frequent events
characterized as effecting the infections and infestations,
vascular, and gastrointestinal system organ classes. The table
below describes the combined adverse events reported for at least
5% of patients in either treatment group.
Six deaths were reported during the ASSIST--1 study (five in the
iclaprim group and one in the linezolid group). Two deaths were
recorded in ASSIST--2 (one in the iclaprim group and one in the
linezolid group). The investigators found all deaths to be
unrelated to iclaprim and instead attributable to serious
underlying diseases. Four of the six deaths occurred well beyond
five half--lives of the drug (3--12 days after the last dose of
iclaprim). The causes of the six deaths in the iclaprim group were
sepsis or septic shock (two patients), alcoholic cardiomyopathy
(one patient), acute cardiac failure (one patient), acute renal
failure (one patient), and colon cancer (one patient). The deaths
were not ever proven to be directly related to iclaprim.
With respect to cardiac effects, results from the Phase 3
clinical trials indicated that the incidence of QTc prolongation (a
measure of the delay in the depolarization and repolarization of
the heart's ventricles) in the iclaprim treatment arms was similar
to that observed in the linezolid treatment arms. No cases of QTc
prolongation or other treatment--related cardiac effects classified
as treatment--related adverse effect were reported in these
studies. Iclaprim treatment was associated with a mean increase of
the QTc interval of about 5 to 6 msec greater than that observed
with linezolid, which is not considered to be a QTc--prolonging
drug.
Post--hoc Analyses of ASSIST--1 and --2. At the 2015 ID Week
Conference, we presented post--hoc analyses of data pooled from
ASSIST--1 and --2 comparing iclaprim to linezolid in the treatment
of patients with cSSSI. The post--hoc analyses evaluated the
endpoint of cessation of the spread of lesion and absence of fever
at a 72--hour visit from the commencement of treatment in the
intent to treat (ITT) population. The total ITT population
comprised 991 (iclaprim: 500; linezolid: 491). Staphylococcus
aureus (591 isolates) accounted for 69.9% of all Gram--positive
pathogens, of which 39.9% were methicillin--resistant (MRSA). 73%
had a fever greater than 38degC, and 94% had an erythema score of
moderate or severe. A high lesion response and fever resolution
occurred at 72 hours in the ITT population: 73.6% for iclaprim and
72.5% for linezolid recipients (difference 1.1%, 95% CI = --4.5% to
6.6%). In this post--hoc analyses, at 72 hours, iclaprim achieved a
high rate of cessation of spread of erythema and fever resolution
in patients with cSSSI. This was comparable to that seen with
linezolid.
In addition, in a separate analysis, in the subset of patients
with renal impairment, iclaprim compared favorably to
linezolid.
Phase 2 Clinical Trials
Phase 2 cSSSI Trial. In December 2003, Arpida completed a Phase
2 clinical trial of iclaprim, for the treatment of cSSSI. This
randomized, double--blind comparator controlled trial enrolled 87
hospitalized patients with cSSSI and compared the safety and
efficacy of two doses of iclaprim with a standard of care agent,
vancomycin. Patients were treated with either iclaprim 0.8 mg/kg or
iclaprim 1.6 mg/kg or vancomycin 1g. All drugs were administered by
IV infusion two or three times daily for 10 days and patients were
examined for clinical and microbiological responses at the
conclusion of therapy and 20 days after therapy. The primary
endpoint was clinical cure and secondary endpoints included
tolerability and microbiological responses at the test of cure
visit.
Iclaprim demonstrated high clinical and microbiological response
rates when compared with vancomycin. Moreover, as in earlier
clinical trials, iclaprim was shown to exhibit a safety and
tolerability profile comparable to that demonstrated by vancomycin
and linezolid in clinical trials. The FDA has not, however, made
any determination regarding the safety and efficacy of
iclaprim.
Outcomes in evaluable patients demonstrated a clinical cure rate
of 92.9% (26/28 patients) with iclaprim 0.8 mg/kg, 90.3% (28/31
patients) with iclaprim 1.6 mg/kg and 92.9% (26/28 patients) with
vancomycin. Microbiological success (Gram--positive eradication
rate) was 89.7% and 80.0% with iclaprim 0.8 mg/kg and iclaprim 1.6
mg/kg, respectively, and compared favorably with vancomycin 72.0%.
Iclaprim was well tolerated and adverse events were infrequent and
similar across all study arms. There were no trends in any lab
abnormalities in patients receiving iclaprim.
Phase 2 cSSSI trial versus vancomycin: 87 patients
Phase 2 HABP, including VABP, Trial. In a similar study, a
double--blind, randomized (1:1:1), dose ranging Phase 2 proof of
concept study, patients with HABP, including VABP, treated with
iclaprim, also showed comparable efficacy to vancomycin in that
population, with end of treatment cure rates in the
Intent--To--Treat (ITT) population of 73.9% and 62.5% for 0.8mg/kg
and 1.2 mg/kg iclaprim, respectively, compared to 52.2% for
vancomycin 1g, all doses administered two or three times daily.
Patients treated with iclaprim also experienced fewer deaths within
28 days than patients treated with vancomycin.
Phase 2 HABP, including VABP trial versus vancomycin: 70
patients
Phase 1 Clinical Trials
The effects of iclaprim have been studied in 14 Phase 1 clinical
trials conducted in Europe in which iclaprim was administered to
247 patients.
Single Ascending Dose/Multiple Dose Studies. Iclaprim given as a
single IV infusion diluted with normal saline at doses up to 3.2
mg/kg exhibited a safety and tolerability profile comparable to
that demonstrated by vancomycin and linezolid in clinical trials.
The FDA has not, however, made any determination regarding the
safety and efficacy of iclaprim. In Phase 1 and Phase 2 studies,
repeated doses of 60 or 120 mg of iclaprim administered twice daily
for 10 days to healthy volunteers, as well as doses of 0.8 mg/kg
twice daily and 1.6 mg/kg twice daily administered to patients for
up to 10 days, exhibited safety and tolerability results compared
to vancomycin and linezolid. No treatment--related abnormalities in
laboratory parameters were observed in any of the treated subjects.
No serious adverse events (SAEs) were reported in Phase 1 studies
with IV iclaprim.
Formal QT/QTc Studies. Dose--dependent transient and rapidly
reversible prolongation of the corrected QT interval (QTc) was
observed. However, dosing with iclaprim with 0.8 mg/kg and 1.6
mg/kg infused over 30-- and 60--minute intervals, respectively,
were assessed to be safe for clinical application. At the end of
the infusion, when maximum plasma levels were achieved, the mean
maximum time--matched, placebo--corrected QTc increase following
0.8 mg/kg infused for 30 minutes (the dose regimen in the Phase 3
cSSSI studies) was about 10 ms and declined rapidly thereafter. No
gender--dependent differences or clinical signs and symptoms of
arrhythmia related to treatment were observed.
Iclaprim concentrations in plasma, epithelial lining fluid, and
alveolar macrophages in healthy volunteers. In a Phase 1 clinical
trial, a validated microbiological assay was used to measure
concentrations of iclaprim in plasma, alveolar macrophages (AM) and
ELF after a single 1.6 mg/kg intravenous infusion of iclaprim among
24 healthy male volunteers. Iclaprim concentrations in ELF and AM
exceeded serum concentrations by 20 and 30 times, respectively.
Furthermore, iclaprim exceeded the MIC90 for Streptococcus
pneumoniae and methicillin--resistant Staphylococcus aureus for the
seven--hour sampling period. Compared to linezolid and vancomycin,
antibiotics approved for HABP including VABP caused by
Gram--positive pathogens, iclaprim achieves high and sustained
concentrations in ELF and AM that should be effective in the
treatment of HABP including VABP.
Antibiotic Concentrations in Epithelial Lining Fluid (ELF)
and
Alveolar Macrophages (AM) Compared with Serum Levels
Preclinical Development
We commissioned JMI Laboratories to conduct a worldwide
microbiological survey to determine the activity of iclaprim and
other antibiotics against Gram--positive clinical isolates of MSSA
and MRSA and beta--hemolytic Streptococci spp. (including S.
pyogenes, S. agalactiae). The 2012--2014 isolates were from
patients with skin and skin structure infections and HABP. S.
aureus is the most common Gram--positive bacterial cause of both
ABSSSI and HABP, including VABP. These microbiological data
demonstrate that iclaprim is 16 fold more potent than TMP, for S.
aureus, the only DHFRi approved. These data also demonstrate that
iclaprim is potent compared to other approved antibiotics for the
treatment of ABSSSI and HABP.
Additionally, iclaprim was compared with other antibiotics
against 20 isolates of MRSA and MSSA. The MIC and MBC of iclaprim
was found to be essentially identical against these isolates, with
no difference between MRSA and MSSA.
Comparison of the Activity (MIC(90) ug/mL) of Iclaprim and Other
Anti--infectives against Clinical Isolates (2012--2014) from US,
Europe, Latin America, and Asia Pacific Associated with ABSSSI and
HABP
Abbreviations: n = number of isolates; ICL = iclaprim; LIN =
linezolid; MIC(90) = minimum concentration required to inhibit 90%
of isolates; TMP = trimethoprim; VAN = vancomycin
As illustrated in the figure below, serial passage studies were
conducted to determine the propensity for bacteria, TMP--sensitive
and -resistant, to develop resistance to iclaprim. Bacteria were
passaged in the presence of sub--inhibitory concentrations of
antibiotics with different mechanism of actions. Thirty S. aureus
strains were tested. Even after 22 passages, S. aureus resistance
to iclaprim was small compared to resistance to TMP and rifampin,
which was large, and observed as early as after three passages. In
addition, even after 22 passages, no stable mutations in DHFR genes
were observed among isolates tested. These data suggest that
iclaprim may be an appropriate empiric first--line antibiotic
because it is potent and rapidly bactericidal even after continued
exposure to iclaprim.
As illustrated in the figure below, iclaprim demonstrated
rapidly bactericidal activity in vitro, achieving 99.9% kill
against MRSA within four to six hours of iclaprim 2x minimum
inhibitory concentrations (MIC), versus eight to ten hours for
vancomycin 8xMIC:
Microbiology
Iclaprim exhibits activity against a wide range of
Gram--positive and a select range of Gram--negative isolates as
well as several intracellular bacteria. It is rapidly bactericidal
against Gram--positive clinical isolates and exerts a significant
sub--MIC, post--antibiotic--effect (PAE) aligned with the PK
profile of iclaprim after clinical administration that would
generally cover an entire 12--hour dosing interval. No synergistic
action with antibiotics other than sulfonamides was demonstrated,
nor was there any observed antagonism with other antibiotic
classes. Human plasma did not significantly affect the MICs of
iclaprim against MSSA. The activity of iclaprim was not influenced
by the mode of administration in in vivo rodent infection models.
Current in vitro data suggest that the propensity for resistance
development is predicted to be low.
-- Iclaprim exhibited potent activity against Gram--positive
clinical isolates of many genera of staphylococci (including MSSA
and MRSA), streptococci (including Streptococcus pyogenes,
Streptococcus agalactiae, Streptococcus pneumoniae) and enterococci
(e.g., Enterococcus faecalis) and was also active against bacterial
isolates clinically resistant to antibiotics in use. Overall,
iclaprim has antibacterial activity against Gram--positive
causative pathogens of ABSSSI (including MRSA) and of HABP,
including VABP.
-- Iclaprim exhibits select activity against a variety of
Gram--negative isolates including Haemophilus influenzae, Moraxella
catarrhalis, Legionella pneumophila and Neisseria gonorrhoea.
Against Enterobacteriaceae, iclaprim exhibits only modest activity
and is generally inactive against non--fermenters including
Pseudomonas aeruginosa, and Stenotrophomonas maltophila.
-- Iclaprim also exhibits potent activity against several
intracellular bacteria including Chlamydia pneumoniae, Chlamydia
trachomatis, and Listeria monocytogenes. Furthermore, in a cellular
Pneumocystis jirovecii infection model, iclaprim compared favorably
with TMP/sulfamethoxazole (SMX), the current empirical prophylaxis
and treatment for P. jirovecii pneumonia.
-- Iclaprim was rapidly bactericidal against Gram--positive
clinical isolates and exhibited a significant post--antibiotic
sub--microbial MIC effect.
Even when iclaprim concentrations are below the MIC, it
generally covers an entire 12--hour dosing interval, which is in
line with the PK profile after clinical administration.
-- Based on in vitro data, the propensity for resistance development is predicted to be low.
-- Iclaprim showed synergistic action with sulfonamides and no
antagonism with other antibiotic classes.
-- Human plasma did not significantly affect the MICs of iclaprim against MSSA or MRSA.
-- Iclaprim was active when administered by both IV and oral
routes in in vivo rodent infection models.
Mechanism Of Action
X--ray crystallography studies have been undertaken to determine
the binding properties of iclaprim and its enantiomers in S. aureus
TMP--susceptible and TMP--resistant DHFRs. These studies
demonstrate that iclaprim has additional binding affinity to the
DHFRs, as compared with TMP. These interactions form the structural
basis of the increased affinity of iclaprim for DHFR and result in
sufficient overall binding affinity to also inhibit the
TMP--resistant (TMP--R) F98Y mutant enzyme. These interactions
occur in a highly conserved region of the bacterial enzyme that is
important for substrate binding. Considering the highly conserved
nature of the bacterial DHFR active site, we believe similar
binding is likely to occur with streptococcal DHFR.
Enzymatic studies demonstrate that iclaprim potently inhibits
bacterial DHFR as reflected in its inhibitory activity against
Gram--positive bacterial strains, which include Gram--positive
pathogens implicated in ABSSSI infection (i.e., S. aureus, S.
pyogenes and S. agalactiae). Importantly, iclaprim does not exhibit
any significant activity against human DHFR at concentrations 4--5
orders of magnitude higher than those needed to inhibit microbial
DHFR.
Safety Pharmacology
Assessment of general behavior, locomotor activity,
cardiovascular system, respiratory parameters, and the in vitro
activity on cardiac ion channels in animal models treated with
iclaprim did not reveal any major safety issues.
Pharmacokinetics
There were no major differences in the PK profile between IV or
oral administration, gender or the duration of treatment in the
species studied. These results are in good agreement with human
data. Toxicokinetic studies showed that PK parameters did not
change following repeat--dose administration, and no accumulation
of iclaprim was seen. Overall, the quantitative differences
observed were consistent with the known interspecies differences in
the activities of the metabolizing enzymes. Metabolism in animal
models was similar to that observed in humans, with all major human
metabolites also being major metabolites in these species.
Toxicology
In acute toxicity studies, the median lethal dose (LD50) of
iclaprim per IV route ranged from 75 mg/kg in mice to 150 mg/kg in
rats. Repeated--dose toxicity studies in rats showed
histopathological changes at the injection sites at dosing regimens
of >=10 mg/kg/day.
Repeated--dose toxicity studies in marmoset and mini--pig
resulted in no observed adverse effect levels (NOAELs) of 30
mg/kg/day and 20 mg/kg, respectively.
Reproductive toxicity studies did not reveal adverse effects on
embryo--fetal survival or growth in rats receiving 20 mg/kg/day
iclaprim; however, since a small number of fetuses showed the major
abnormality of bent scapula, a clear NOAEL for embryo--fetal
development was not established. In a Segment II study in
mini--pigs by IV administration, no fetal NOAEL could be
established and maternal toxicity was observed in all groups
treated with iclaprim. Iclaprim was not mutagenic or clastogenic in
genotoxicity studies.
Pediatric Indications
We intend to study iclaprim for the treatment of pediatric
patients with serious and life threatening indications in adequate
and well--controlled comparator controlled studies of
Gram--positive infections in pediatric patients ranging in age from
birth through 11 years. Preclinical studies and a pediatric IV
formulation work is ongoing.
MTF--101
In addition to our clinical programs, we have a preclinical
development program underway to identify a formulation of iclaprim
suitable for adolescent and pediatric patients. We are also
developing IV and oral formulations of MTF-101, a diaminopyrimidine
that may be suitable for testing in clinical trials to demonstrate
safety and efficacy in patients with osteomyelitis and patients
with prosthetic joint infections.
Additional Portfolio Plans
We intend to build a portfolio of novel antibiotics by licensing
preclinical and/or clinical stage programs from academic centers
and pharmaceutical companies specializing in antibacterial
research. Several programs are under review, including compounds
designed to be effective against Gram--positive and Gram--negative
bacteria.
Intellectual Property
Iclaprim has been designated by FDA as a QIDP for ABSSSI and
HABP. Under the GAIN Act, if approved for marketing by the FDA,
iclaprim would benefit from a five--year extension to an NCE (New
Chemical Entity) exclusivity period of five years, if NCE
exclusivity is granted for iclaprim, for a potential total of 10
years of market exclusivity, starting on the date of marketing
approval. During this period of exclusivity, FDA is not permitted
to accept any ANDA or Section 505(b)(2) filing until at least the
ninth year after marketing approval, and is not permitted to
approve any such applications until at least the tenth year after
marketing approval. As discussed below, we have filed and plan to
file patent applications covering iclaprim which, once issued in
the United States, may be eligible to be listed in the FDA
publication, "Approved Drug Products with Therapeutic Equivalence
Evaluations," known as the "Orange Book." If there are patents
listed in the Orange Book, a generic or 505(b)(2) applicant that
seeks to market its product before expiration of the patents must
include what is known as a "Paragraph IV certification,"
challenging the validity or enforceability of, or claiming
non--infringement of, the listed patent or patents. Notice of the
certification must be given to us as well, and we would intend to
sue the generic challenger within the proscribed 45 day period
after receiving notice of the certification for infringement of our
listed patent or patents. Upon initiation of our infringement law
suit, approval of the ANDA or 505(b)(2) application would be stayed
for a further 30 months, or as lengthened or shortened by the
court. In Europe, the generation of additional data in our Phase 3
clinical trials is expected to result in 10 years of data
exclusivity. In Japan, the generation of additional data in our
Phase 3 clinical trials is expected to result in eight years of
data exclusivity (which may be extended to 10 years for orphan or
pediatric indications) and an additional two years of market
exclusivity.
NCE-type exclusivity periods are expected to be granted for
iclaprim in other key markets. We have exclusive access to the
complete U.S. and European data packages for iclaprim, generated to
support the original regulatory submissions in 2008. In addition to
providing critical input into our clinical and regulatory strategy
development, we believe the existing data will provide supportive
information to future regulatory reviews. Having access to this
existing data will avoid the need for us to complete an entire
development program starting from scratch, representing a
considerable advantage in terms of time and cost compared to more
traditional drug development programs.
We are building a patent estate to provide additional protection
for iclaprim and MTF--101. We own a provisional patent application
covering the fixed dose of iclaprim being used in our Phase 3
trials, which has been filed. This patent application is designed
to protect a number of proprietary categories, including kits
comprising a dosage form and instructions for administration,
dosing regimens, and the use of a dosage for treatment of
infection. Other patent applications have been and are expected to
be filed that are designed to protect our proprietary technologies,
including processes for manufacturing the iclaprim and MTF--101
active pharmaceutical ingredient and therapeutic formulations,
their use in pharmaceutical preparations and methods of treating
disease with iclaprim or MTF--101.
Commercialization Strategy
We have no products approved for commercialization and have
never generated any revenue from product sales. We will not
generate revenue from product sales unless and until we
successfully complete the development of, obtain regulatory
approval for and commercialize one or more of our product
candidates. If approved, we intend to commercialize iclaprim, our
lead product candidate, in the United States, and identify proven
commercialization partners in other key global markets, including
Japan and countries in the EU. We believe that our ability to
execute this strategy is enhanced by our focus on the hospital
setting and the significant prior commercial experience of key
members of our management team. Prior to joining us, members of our
management team and board of directors were involved in the launch
or commercialization of several blockbuster (annual revenues of at
least $1 billion) pharmaceutical products.
Competition
The biopharmaceutical and pharmaceutical industries are
characterized by rapidly advancing technologies, intense
competition and a strong emphasis on proprietary products. We face
potential competition from many different sources, including major
pharmaceutical, specialty pharmaceutical and biotechnology
companies, academic institutions, governmental agencies and public
and private research institutions. Any product candidates that we
successfully develop and commercialize will compete with existing
products and new products that may become available in the future.
Many of our competitors, alone or with their strategic partners,
have greater experience than we do in conducting preclinical
studies and clinical trials, and obtaining FDA, EMA and other
regulatory approvals, and have substantially greater financial,
technical and other resources than we do, such as larger research
and development, clinical, marketing and manufacturing
organizations. As a result, these companies may obtain regulatory
approval for competing products more rapidly than we are able and
may be more effective in selling and marketing their products.
Companies that complete clinical trials, obtain required regulatory
authority approvals and commence commercial sale of their drugs
before their competitors may achieve a significant competitive
advantage, and our commercial opportunity could be reduced or
eliminated if competitors develop and commercialize products that
are safer, more effective, have fewer or less severe side effects,
are more convenient or are less expensive than any products that we
may develop. Drugs resulting from our research and development
efforts or from our joint efforts with collaboration partners
therefore may not be commercially competitive with our competitors'
existing products or products under development.
We are not currently aware of any other company with a DHFRi in
clinical development for antibacterial use. Other companies are
developing antibiotics that are not DHFRis and that work
differently from our compounds. For example, Durata Therapeutics,
Inc. developed and gained approval for dalbavancin and The
Medicines Company developed and gained approval for oritavancin.
Both antibiotics are glycopeptides, the same class as vancomycin,
one of the most commonly prescribed antibiotics and both
antibiotics were required by the FDA to conduct additional studies
around the same time as Arpida received the CRL for iclaprim. Other
companies are developing various classes of antibiotics, including
tetracyclines (Tetraphase, Paratek), cephalosporins (Basilea,
GlaxoSmithKline, Merck), quinolones (Melinta, Actavis),
oxazolidinones (Melinta, Merck), macrolides (Cempra), carbapenems
(Merck, The Medicines Company), aminoglycosides (Achaogen) and
defensin--mimetics (Cellceutix). To avert the pending antibiotic
crisis, several classes with different mechanisms will likely be
needed and it is our belief that our product will assist in
diversifying the antibiotic products available on the market.
Government Regulation
Product Approval Process
The clinical testing, manufacturing, labeling, storage,
distribution, record keeping, advertising, promotion, import,
export and marketing, among other things, of our product candidates
are subject to extensive regulation by governmental authorities in
the United States and other countries. The FDA under the Federal
Food, Drug, and Cosmetic Act regulates pharmaceutical products in
the United States. Failure to comply with applicable FDA
requirements at any time during the product development process,
approval process, or after approval, may subject a company to a
range of administrative and judicial enforcement actions, which
could include refusal to approve pending applications, withdrawal
of an approval, a clinical hold, untitled or warning letters,
product recalls, products seizures, total or partial suspension of
production or distribution, injunctions, fines, refusals of
government contracts, restitution, disgorgement, or civil or
criminal penalties.
The steps required before a drug may be approved for marketing
in the United States generally include:
-- the completion of preclinical laboratory tests and animal
tests conducted under Good Laboratory Practices, or GLPs, and other
applicable regulations;
-- the submission to the FDA of an IND application for human
clinical testing, which must be reviewed by the FDA and become
effective before human clinical trials commence;
-- approval by an independent IRB prior to initial of a clinical
trial at a particular study site, and ongoing oversight of the
trial by the IRB;
-- the successful performance of adequate and well--controlled
human clinical trials conducted in accordance with Good Clinical
Practices to establish the safety and efficacy of the product
candidate for each proposed indication;
-- analysis of clinical trial data and preparation of submission to the FDA of an NDA;
-- the submission to the FDA of an NDA;
-- the FDA's acceptance of the NDA;
-- satisfactory completion of an FDA inspection of the
manufacturing facilities at which the product is made to assess
compliance with cGMPs to assure that the facilities, methods and
controls are adequate to preserve the drug's identity, strength,
quality and purity;
-- if clinical investigators are investigated satisfactory
completion of FDA inspections of their clinical trial sites under
GCP;
-- satisfactory completion of FDA inspections of clinical trial
sites and GLP toxicology studies; and
-- the FDA's review and approval of an NDA prior to any
commercial marketing or sale of the drug in the United States.
The testing and approval process requires substantial time,
effort and financial resources, and the receipt and timing of any
approval is uncertain.
Preclinical studies include laboratory evaluations of the
product candidate, as well as animal studies to assess the
potential safety and efficacy of the product candidate. The results
of the preclinical studies, together with manufacturing
information, analytical data and a proposed clinical trial
protocol, are submitted to the FDA as part of the IND, which must
become effective before clinical trials may be commenced. The IND
will become effective automatically 30 days after receipt by the
FDA, unless the FDA raises concerns or questions about the conduct
of the clinical trials as outlined in the IND prior to that time
and places the IND on clinical hold. In this case, the IND sponsor
and the FDA must resolve any outstanding concerns before clinical
trials can proceed. A clinical hold may occur at any time during
the life of an IND, due to safety concerns or non--compliance, and
may affect one or more specific studies or all studies conducted
under the IND.
Clinical trials involve the administration of the product
candidates to (depending on the phase, explained below) healthy
volunteers or patients with the disease to be treated under the
supervision of a qualified principal investigator. Clinical trials
are conducted under protocols detailing, among other things, the
objectives of the clinical trial, the parameters to be used in
monitoring safety, and the efficacy criteria to be evaluated. A
protocol for each clinical trial and any subsequent protocol
amendments must be submitted to the FDA as part of the IND.
Further, each clinical trial must be reviewed and approved by an
independent institutional review board, or IRB, either centrally or
individually at each institution at which the clinical trial will
be conducted. The IRB will consider, among other things, ethical
factors, the safety of human subjects and the possible liability of
the institution. Progress reports detailing the status of the
clinical trials must be submitted to the FDA annually. Sponsors
must also report to the FDA serious and unexpected adverse
reactions, any clinically important increase in the rate of a
serious suspected adverse reaction over that listed in the protocol
or investigation brochure, or any findings from other studies or
animal or in vitro testing that suggest a significant risk in
humans exposed to the drug. There are also requirements governing
the reporting of ongoing clinical trials and clinical trial results
to public registries (e.g., ClinicalTrials.gov).
Clinical trials are typically conducted in three sequential
phases prior to approval, but the phases may overlap. These phases
generally include the following:
Phase 1. Phase 1 clinical trials represent the initial introduction of a product candidate into human
subjects, frequently healthy volunteers. In Phase 1, the product candidate is usually tested
for safety, including adverse effects, dosage tolerance, absorption, distribution, metabolism,
excretion and pharmacodynamics.
Phase 2. Phase 2 clinical trials usually involve studies in a limited patient population to: (1) evaluate
the efficacy of the product candidate for specific indications; (2) determine dosage tolerance
and optimal dosage; and (3) identify possible adverse effects and safety risks.
Phase 3. Phase 3 clinical trials are conducted to further demonstrate clinical efficacy, optimal dosage
and safety within an expanded patient population at geographically dispersed clinical trial
sites, and to provide sufficient data for the statistically valid evidence of safety and efficacy.
Concurrent with clinical studies, companies usually complete
additional animal studies and must also develop additional
information about the chemistry and physical characteristics of the
product and finalize a process for manufacturing the product in
commercial quantities in accordance with cGMP requirements. The
manufacturing process must be capable of consistently producing
quality batches of the product candidate and, among other things,
the manufacturer must develop methods for testing the identity,
strength, quality and purity of the final product. Additionally,
appropriate packaging must be selected and tested and stability
studies must be conducted to demonstrate that the product candidate
does not undergo unacceptable deterioration over its shelf
life.
Phase 4 clinical trials, whether conducted voluntarily or
mandated by the FDA, are often conducted after approval to gain
additional experience from the treatment of patients in the
intended therapeutic indication and to document a clinical benefit
in the case of drugs approved under accelerated approval
regulations, or when otherwise requested by the FDA in the form of
post--market requirements or commitments. Failure to promptly
conduct any required Phase 4 clinical trials could result in
withdrawal of approval.
Clinical trials are inherently uncertain and any phase may not
be successfully completed. A clinical trial may be suspended or
terminated by the FDA, IRB or sponsor at any time on various
grounds, including a finding that the subjects or patients are
being exposed to an unacceptable health risk. Additionally, some
clinical trials are overseen by an independent group of qualified
experts organized by the clinical trial sponsor, known as a data
safety monitoring board or committee. This group provides ongoing
oversight and safety reviews to determine whether or not a clinical
trial may move forward at designated check points based on access
to certain data from the clinical trial. We may also suspend or
terminate a clinical trial based on evolving business objectives
and/or competitive climate.
Sponsors have the opportunity to meet with the FDA at certain
points during the development of a new drug to share information
about the data gathered to date and for the FDA to provide advice
on the next phase of development. These meetings may be held prior
to the submission of an IND, at the end of Phase 2 and/or before an
NDA is submitted. Meetings may be requested at other times as
well.
The results of preclinical studies and clinical trials,
including negative or ambiguous results as well as positive
findings, together with detailed information on the manufacture,
composition and quality of the product, proposed labeling and other
relevant information are submitted to the FDA in the form of an NDA
requesting approval to market the product. The NDA must be
accompanied by a significant user fee payment. The FDA has
substantial discretion in the approval process and may refuse to
accept any application, for example if the NDA is not sufficiently
complete, or decide that the data are insufficient for approval and
require additional preclinical, clinical or other studies.
In addition, under the Pediatric Research Equity Act, or PREA,
an NDA or supplement to an NDA must contain data to assess the
safety and effectiveness of the drug for the claimed indications in
all relevant pediatric subpopulations and to support dosing and
administration for each pediatric subpopulation for which the
product is safe and effective. The FDA may grant deferrals for
submission of data or full or partial waivers. In 2012, the FDASIA
amended the FDCA to require that a sponsor who is planning to
submit such an application submit an initial Pediatric Study Plan
(PSP) within sixty days of an end-of-phase 2 meeting or as may be
agreed between the sponsor and the FDA. The FDA and the sponsor
must reach agreement on the PSP. Unless otherwise required by
regulation, PREA does not apply to any drug for an indication for
which orphan drug designation has been granted. However, if only
one indication for a product has orphan drug designation, a
pediatric assessment may still be required for any applications to
market that same product for the non--orphan indication(s). We note
that we do not currently have orphan drug designation for any of
our product candidates.
Once the NDA submission has been submitted, the FDA has 60 days
after submission of the NDA to conduct an initial review to
determine whether it is sufficient to accept for filing. NDAs
receive either a standard or priority review. Under the
Prescription Drug User Fee Act, the FDA sets a goal date by which
it plans to complete its review. For a standard review, this is
typically 12 months from the date of submission of the NDA
application. The review process is often extended by FDA requests
for additional information or clarification. Before approving an
NDA, the FDA will inspect the facilities at which the product is
manufactured and will not approve the product unless the
manufacturing facility complies with cGMPs and may also inspect
clinical trial sites for integrity of data supporting safety and
efficacy. The FDA may also convene an advisory committee of
external experts to provide input on certain review issues relating
to risk, benefit and interpretation of clinical trial data. The FDA
is not bound by the recommendations of an advisory committee, but
generally follows such recommendations in making its decisions. The
FDA may delay approval of an NDA if applicable regulatory criteria
are not satisfied and/or the FDA requires additional testing or
information. The FDA may require post--marketing testing and
surveillance to monitor safety or efficacy of a product.
Priority Review is granted where there is evidence that the
proposed product would be a significant improvement in the safety
or effectiveness of the treatment, diagnosis, or prevention of a
serious condition. Priority review designation does not change the
scientific or medical standard for approval or the quality of
evidence necessary to support approval. Also, FDA has a Fast Track
program that is intended to expedite or facilitate the process for
reviewing new drugs that meet certain criteria. Specifically, new
drugs are eligible for Fast Track designation if they are intended
to treat a serious or life-threatening disease or condition for
which there is no effective treatment and demonstrate the potential
to address unmet medical needs for the condition. Fast Track
designation applies to the combination of the product and the
specific indication for which it is being studied. The sponsor of a
new drug or biologic may request the FDA to designate the drug or
biologic as a Fast Track product concurrently with, or at any time
after, submission of an IND, and the FDA must determine if the
product candidate qualifies for Fast Track designation within 60
days of receipt of the sponsor's request. The FDA may initiate
review of sections of a Fast Track drug's NDA before the
application is complete. This rolling review is available if the
applicant provides, and the FDA approves, a schedule for the
submission of each portion of the NDA and the applicant pays
applicable user fees. However, the FDA's time period goal for
reviewing an application does not begin until the last section of
the application is submitted. Additionally, the Fast Track
designation may be withdrawn by the FDA if the FDA believes that
the designation is no longer supported by data emerging in the
clinical study process.
Before approving an NDA, the FDA will often inspect the
facilities at which the product is manufactured, FDA will not
approve the product unless it finds adequate assurance (through
inspection or otherwise) that the manufacturing facility complies
with cGMPs FDA may also inspect clinical trial sites for integrity
of data supporting safety and efficacy. The FDA may also convene an
advisory committee of external experts to provide input on certain
review issues relating to risk, benefit and interpretation of
clinical trial data. The FDA is not bound by the recommendations of
an advisory committee, but generally follows such recommendations
in making its decisions. The FDA may delay approval of an NDA if
applicable regulatory criteria are not satisfied and/or the FDA
requires additional testing or information. The FDA may require
post--marketing testing and surveillance to monitor safety or
efficacy of a product.
After the FDA evaluates the NDA and evaluates manufacturing
facilities where the drug product and/or its API will be produced,
it may issue an approval letter or a Complete Response Letter. An
approval letter authorizes commercial marketing of the drug with
specific prescribing information for specific indications. A
Complete Response Letter generally outlines the deficiencies in the
NDA submission and may require substantial additional clinical
testing, such as an additional pivotal Phase 3 clinical trial(s),
clinical data, and/or other significant, expensive and time
consuming requirements related to clinical trials, preclinical
studies or manufacturing. Even if such additional information is
submitted, the FDA may ultimately decide that the NDA does not
satisfy the criteria for approval.
The FDA may approve the NDA with a REMS plan to mitigate risks,
which could include medication guides, physician communication
plans, or elements to assure safe use, such as restricted
distribution methods, patient registries and other risk
minimization tools. The FDA also may condition approval on, among
other things, changes to proposed labeling, development of adequate
controls and specifications, or a commitment to conduct one or more
post--market studies or clinical trials. Such post--market testing
may include Phase 4 clinical trials and surveillance to further
assess and monitor the product's safety and effectiveness after
commercialization.
Post--Approval Requirements
Drugs manufactured or distributed pursuant to FDA approvals are
subject to pervasive and continuing regulation by the FDA,
including, among other things, requirements relating to
recordkeeping, periodic reporting, product distribution,
advertising and promotion and reporting of adverse experiences with
the product. After approval, most changes to the approved product,
such as adding new indications or other labeling claims, are
subject to prior FDA review and approval and may require additional
clinical trials and NDA submissions. There also are continuing,
annual user fee requirements for any marketed products and the
establishments at which such products are manufactured, as well as
new application fees for supplemental applications with clinical
data.
In addition, drug manufacturers and other entities involved in
the manufacture and distribution of approved drugs are required to
register their establishments with the FDA and state agencies and
are subject to periodic unannounced inspections by the FDA and
these state agencies for compliance with cGMP requirements. Changes
to the manufacturing process are strictly regulated and often
require prior FDA approval before being implemented. FDA
regulations also require investigation and correction of any
deviations from cGMP and impose reporting and documentation
requirements upon the sponsor and any third--party manufacturers
that the sponsor may decide to use. Accordingly, manufacturers must
continue to expend time, money, and effort in the area of
production and quality control to maintain cGMP compliance.
Once an approval is granted, the FDA may withdraw the approval
if compliance with regulatory requirements and standards is not
maintained, or if problems occur after the product reaches the
market. Later discovery of previously unknown problems with a
product, including adverse events of unanticipated type, severity
or frequency, with manufacturing processes, or failure to comply
with regulatory requirements, may result in revisions to the
approved labeling to add new safety information, imposition of
post--market studies or clinical trials to assess new safety risks,
or imposition of distribution or other restrictions under a REMS
program. Other potential consequences include, but are not limited
to:
-- restrictions on the marketing or manufacturing of the
product, complete withdrawal of the product from the market or
product recalls;
-- fines, warning letters or holds on post--approval clinical trials;
-- refusal of the FDA to approve pending NDAs or supplements to
approved NDAs, or suspension or revocation of product license
approvals;
-- product seizure or detention, or refusal to permit the import or export of products; or
-- injunctions or the imposition of civil or criminal penalties.
The FDA, as well as the Department of Justice, strictly
regulates marketing, labeling, advertising and promotion of
products that are placed on the market. Drugs may be promoted only
for the approved indications and in accordance with the provisions
of the approved label. The FDA, DOJ and other agencies actively
enforce the laws and regulations prohibiting the promotion of
off--label uses, and a company that is found to have improperly
promoted off--label uses may be subject to significant liability.
Although recent court decisions and FDA Guidances suggest that
certain off-label communications (e.g., truthful and non-misleading
speech) may be protected under the First Amendment, the scope of
any such protection is unclear and there are still significant
risks in this area as it is unclear how these court decisions will
impact the FDA's enforcement practices, and there is likely to be
substantial disagreement and difference of opinion regarding
whether any particular statement is truthful and not
misleading.
Moreover, the federal Drug Supply Chain Security Act (DSCSA)
imposes obligations on manufacturers of pharmaceutical products,
among others, related to product tracking and tracing. Among the
requirements of DSCSA, manufacturers will be required to provide
certain information regarding the drug product to individuals and
entities to which product ownership is transferred, label drug
product with a product identifier, and keep certain records
regarding the drug product. Further, under DSCSA manufacturers will
have drug product investigation, quarantine, disposition, and
notification responsibilities related to counterfeit, diverted,
stolen, and intentionally adulterated products, as well as products
that are the subject of fraudulent transactions or which are
otherwise unfit for distribution such that they would be reasonably
likely to result in serious health consequences or death.
Foreign Regulation
In order to market any product outside of the United States, we
would need to comply with numerous and varying regulatory
requirements of other countries and jurisdictions regarding
quality, safety and efficacy and governing, among other things,
clinical trials, marketing authorization, commercial sales and
distribution of our products. Whether or not we obtain FDA approval
for a product, we would need to obtain the necessary approvals by
the comparable foreign regulatory authorities before we can
commence clinical trials or marketing of the product in foreign
countries and jurisdictions. Although many of the issues discussed
above with respect to the United States apply similarly in the
context of the EU, the approval process varies between countries
and jurisdictions and can involve additional product testing and
additional administrative review periods. Furthermore, in light of
the recent Brexit vote, it is unclear at this time what impact
Brexit could have on the pharmaceutical industry and the process
for approving product candidates in the United Kingdom. The time
required to obtain approval in other countries and jurisdictions
might differ from and be longer than that required to obtain FDA
approval. Regulatory approval in one country or jurisdiction does
not ensure regulatory approval in another, but a failure or delay
in obtaining regulatory approval in one country or jurisdiction may
negatively impact the regulatory process in others.
Other Healthcare Laws
In addition to FDA restrictions on the marketing of
pharmaceutical products, federal and state healthcare laws restrict
certain business practices in the biopharmaceutical industry.
Although we currently do not have any products on the market, we
may be subject, and once our product candidates are approved and we
begin commercialization, will be subject to additional healthcare
laws and regulations enforced by the federal government and by
authorities in the states and foreign jurisdictions in which we
conduct our business. These laws include, but are not limited to,
anti--kickback, false claims, data privacy and security, and
transparency statutes and regulations.
The federal Anti--Kickback Statute prohibits, among other
things, knowingly and willfully offering, paying, soliciting or
receiving any remuneration, directly or indirectly, overtly or
covertly, in cash or in kind, to induce, or in return for,
purchasing, leasing, arranging for, ordering or recommending any
good, facility, item or service for which payment is made, in whole
or in part, under Medicare, Medicaid or any other federal
healthcare program. The term "remuneration" has been broadly
interpreted to include anything of value, including for example,
gifts, discounts, the furnishing of supplies or equipment, credit
arrangements, payments of cash, waivers of payment, ownership
interests and providing anything at less than its fair market
value. The federal Anti--Kickback Statute has been interpreted to
apply to arrangements between pharmaceutical manufacturers on the
one hand, and prescribers, purchasers and formulary managers on the
other. Although there are a number of statutory exceptions and
regulatory safe harbors protecting certain common activities from
prosecution, the exceptions and safe harbors are drawn narrowly,
and our future practices may not in all cases meet all of the
criteria for a statutory exception or safe harbor protection.
Practices that involve remuneration that may be alleged to be
intended to induce prescribing, purchases or recommendations may be
subject to scrutiny if they do not qualify for an exception or safe
harbor. Failure to meet all of the requirements of a particular
applicable regulatory safe harbor does not make the conduct per se
illegal under the federal Anti--Kickback Statute. Instead, the
legality of the arrangement will be evaluated on a case--by--case
basis based on a cumulative review of all of its facts and
circumstances. Several courts have interpreted the statute's intent
requirement to mean that if any one purpose of an arrangement
involving remuneration is to induce referrals of federal healthcare
program covered business, the statute has been violated.
Additionally, the Patient Protection and Affordable Care Act, as
amended by the Health Care and Education Reconciliation Act, or
collectively, PPACA, amended the intent requirement under the
Anti--Kickback Statute and criminal healthcare fraud statutes
(discussed below) such that a person or entity no longer needs to
have actual knowledge of the statute or the specific intent to
violate it in order to have committed a violation. In addition,
PPACA provides that the government may assert that a claim
including items or services resulting from a violation of the
federal Anti--Kickback Statute constitutes a false or fraudulent
claim for purposes of the civil False Claims Act (discussed below).
Furthermore, many states have adopted anti-kickback laws similar to
the federal Anti-Kickback Statute. Some of these state
anti-kickback laws are more extensive than the federal law,
including state kickback prohibitions that apply to items and
services not reimbursed by private third-party payors and/or
cash-giving patients. Due to the breadth of these federal and state
anti--kickback laws, and the potential for additional legal or
regulatory change in this area, it is possible
that our current and future sales and marketing practices and/or
our future relationships with physicians might be challenged under
these laws, which could cause harm to us.
The civil monetary penalties statute imposes penalties against
any person or entity who, among other things, is determined to have
presented or caused to be presented a claim to a federal health
program that the person knows or should know is for an item or
service that was not provided as claimed or is false or
fraudulent.
The federal false claims laws prohibit, among other things, any
person or entity from knowingly presenting, or causing to be
presented, a false or fraudulent claim for payment or approval to
the federal government or knowingly making, using or causing to be
made or used a false record or statement material to a false or
fraudulent claim to the federal government. As a result of a
modification made by the Fraud Enforcement and Recovery Act of
2009, a claim includes "any request or demand" for money or
property presented to the U.S. government. Multiple pharmaceutical
and other healthcare companies have been prosecuted under these
laws for, among other things, allegedly providing free product to
customers with the expectation that the customers would bill
federal programs for the product. Other companies have been
prosecuted for causing false claims to be submitted because of the
companies' marketing of the product for unapproved, and thus
non--covered, uses.
The Health Insurance Portability and Accountability Act of 1996,
or HIPAA, created new federal criminal statutes that prohibit
knowingly and willfully executing, or attempting to execute, a
scheme to defraud or obtain, by means of false or fraudulent
pretenses, representations, or promises, any of the money or
property owned by, or under the custody or control of, any
healthcare benefit program, including private third--party payors,
and knowingly and willfully falsifying, concealing or covering up a
material fact or making any materially false, fictitious or
fraudulent statement in connection with the delivery of, or payment
for, healthcare benefits, items or services.
In addition, we may be subject to data privacy and security
regulation by both the federal government and the states in which
we conduct our business. HIPAA, as amended by the Health
Information Technology for Economic and Clinical Health Act, or
HITECH, and its implementing regulations, imposes certain
requirements relating to the privacy, security and transmission of
individually identifiable health information. Among other things,
HITECH makes HIPAA's security standards directly applicable to
business associates-independent contractors or agents of covered
entities that receive or obtain protected health information in
connection with providing a service on behalf of a covered entity.
HITECH also created four new tiers of civil monetary penalties, and
newly empowered state attorneys general with the authority to
enforce HIPAA. In January 2013, the Office for Civil Rights of the
U.S. Department of Health and Human Services issued the Final
Omnibus Rule under HIPAA pursuant to HITECH that makes significant
changes to the privacy, security, and breach notification
requirements and penalties. The Final Omnibus Rule generally took
effect in September 2013 and enhances certain privacy and security
protections, and strengthens the government's ability to enforce
HIPAA. The Final Omnibus Rule also enhanced requirements for both
covered entities and business associates regarding notification of
breaches of unsecured protected health information. In addition,
state laws govern the privacy and security of health information in
certain circumstances, many of which differ from each other in
significant ways. These state laws may not have the same effect and
often are not preempted by HIPAA, thus complicating compliance
efforts.
Additionally, PPACA also included the federal Physician Payments
Sunshine Act, which requires certain manufacturers of drugs,
devices, biologicals and medical supplies for which payment is
available under Medicare, Medicaid or the Children's Health
Insurance Program (with certain exceptions) to report annually
information related to certain payments or other transfers of value
made or distributed to physicians and teaching hospitals, or to
entities or individuals at the request of, or designated on behalf
of, the physicians and teaching hospitals and to report annually
certain ownership and investment interests held by physicians and
their immediate family members. Failure to comply with required
reporting requirements could subject applicable manufacturers and
others to substantial civil money penalties.
Also, many states have similar healthcare statutes or
regulations that apply to items and services reimbursed under
Medicaid and other state programs, or, in several states, apply
regardless of the payor. Certain states require pharmaceutical
companies to implement a comprehensive compliance program that
includes a limit or outright ban on expenditures for, or payments
to, individual medical or health professionals and/or require
pharmaceutical companies to track and report gifts and other
payments made to physicians and other healthcare providers.
Because we intend to commercialize products that could be
reimbursed under federal and other governmental healthcare
programs, we plan to develop a comprehensive compliance program
that establishes internal controls to facilitate adherence to the
state and federal rules and healthcare program requirements.
Although compliance programs and adherence thereto may mitigate the
risk of violation of and subsequent investigation and prosecution
for violations of the above laws, the risks cannot be entirely
eliminated. If our operations are found to be in violation of any
of the healthcare laws or regulations described above or any other
laws that apply to us, we may be subject to penalties, including
potentially significant criminal, civil and/or administrative
penalties, damages, fines, disgorgement, individual imprisonment,
exclusion of products from reimbursement under government programs,
contractual damages, reputational harm, administrative burdens,
diminished profits and future earnings and/or the curtailment or
restructuring of our operations, any of which could adversely
affect our ability to operate our business and our results of
operations. To the extent that any of our products will be sold in
a foreign country, we may be subject to similar foreign laws and
regulations, which may include, for instance, applicable
post--marketing requirements, including safety surveillance, fraud
and abuse and conflict of interest laws, and implementation of
corporate compliance programs and reporting of payments or
transfers of value to healthcare professionals.
Pharmaceutical Coverage, Pricing And Reimbursement
In both domestic and foreign markets, our sales of any future
approved products, if and when commercialized, will depend in part
on the availability of coverage and adequate reimbursement from
third--party payors. Third--party payors include government
authorities, managed care providers, private health insurers and
other organizations. Patients who are prescribed treatments for
their conditions and providers performing the prescribed services
generally rely on third--party payors to reimburse all or part of
the associated healthcare costs. Patients are unlikely to use our
products, if approved, unless coverage is provided and
reimbursement is adequate to cover a significant portion of the
cost of our products. Sales of our products will therefore depend
substantially, both domestically and abroad, on the extent to which
the costs of our products will be paid by third--party payors.
These third--party payors are increasingly focused on containing
healthcare costs by challenging the price, imposing coverage
restrictions or limits and examining the cost--effectiveness of
medical products and services.
In addition, significant uncertainty exists as to the coverage
and reimbursement status of newly approved healthcare product
candidates. The market for our product candidates for which we may
receive regulatory approval will depend significantly on access to
third--party payors' drug formularies, or lists of medications for
which third--party payors provide coverage and reimbursement. The
industry competition to be included in such formularies often leads
to downward pricing pressures on pharmaceutical companies. Also,
third--party payors may refuse to include a particular branded drug
in their formularies or otherwise restrict patient access to a
branded drug when a less costly generic equivalent or other
alternative is available. Furthermore, third--party payor
reimbursement to providers for our product candidates may be
subject to a bundled payment that also includes the procedure
administering our products. To the extent there is no separate
payment for our product candidates, there may be further
uncertainty as to the adequacy of reimbursement amounts. Because
each third--party payor individually approves coverage and
reimbursement levels, obtaining coverage and adequate reimbursement
is a time consuming, costly and sometimes unpredictable process. We
may be required to provide scientific and clinical support for the
use of any product to each third--party payor separately with no
assurance that approval would be obtained, and we may need to
conduct expensive pharmacoeconomic studies in order to demonstrate
the cost--effectiveness and/or medical necessity of our products.
This process could delay the market acceptance of any product and
could have a negative effect on our future revenues and operating
results. We cannot be certain that our product candidates will be
considered cost--effective or medically necessary. Because coverage
and reimbursement determinations are made on a payor--by--payor
basis, obtaining acceptable coverage and reimbursement from one
payor does not guarantee the Company will obtain similar acceptable
coverage or reimbursement from another payor. A payor's decision to
provide coverage
for a product does not imply that an adequate reimbursement rate
will be approved. If we are unable to obtain adequate coverage of,
and adequate reimbursement and payment levels for, our product
candidates from third--party payors, physicians may limit how much
or under what circumstances they will prescribe or administer them
and patients may decline to purchase them. This in turn could
affect our ability to successfully commercialize our products and
impact our profitability, results of operations, financial
condition and future success.
Furthermore, in many foreign countries, particularly the
countries of the EU, the pricing of prescription drugs is subject
to government control. In some non--U.S. jurisdictions, the
proposed pricing for a drug must be approved before it may be
lawfully marketed. The requirements governing drug pricing vary
widely from country to country. For example, the EU provides
options for its member states to restrict the range of medicinal
products for which their national health insurance systems provide
reimbursement and to control the prices of medicinal products for
human use. A member state may approve a specific price for the
medicinal product or it may instead adopt a system of direct or
indirect controls on the profitability of the company placing the
medicinal product on the market. We may face competition for our
product candidates from lower--priced products in foreign countries
that have placed price controls on pharmaceutical products. In
addition, there may be importation of foreign products that compete
with our own products, which could negatively impact our
profitability.
Healthcare Reform
In the United States and foreign jurisdictions, there have been,
and we expect there will continue to be, a number of legislative
and regulatory changes to the healthcare system that could affect
our future business and operations if and when we begin to directly
commercialize our products.
In particular, there have been and continue to be a number of
initiatives at the U.S. federal and state level that seek to reduce
healthcare costs. Initiatives to reduce the federal deficit and to
reform healthcare delivery are increasing cost--containment
efforts. We anticipate that Congress, state legislatures and the
private sector will continue to review and assess alternative
controls on healthcare spending through limitations on the growth
of private health insurance premiums and Medicare and Medicaid
spending, the creation of large insurance purchasing groups, price
controls on pharmaceuticals and other fundamental changes to the
healthcare delivery system. Any proposed or actual changes could
limit or eliminate our spending on development projects and affect
our ultimate profitability.
In March 2010, PPACA was signed into law. PPACA has
substantially changed the way healthcare is financed by both
governmental and private insurers. PPACA, among other things:
established an annual, nondeductible fee on any entity that
manufactures or imports certain branded prescription drugs and
biologic agents, apportioned among these entities according to
their market share in certain government healthcare programs;
revised the methodology by which rebates owed by manufacturers for
covered outpatient drugs under the Medicaid Drug Rebate Program are
calculated; increased the statutory minimum Medicaid rebates owed
by most manufacturers under the Medicaid Drug Rebate Program;
addressed a new methodology by which rebates owed by manufacturers
under the Medicaid Drug Rebate Program are calculated for drugs
that are inhaled, infused, instilled, implanted, or injected;
extended the Medicaid Drug Rebate Program to prescriptions of
individuals enrolled in Medicaid managed care organizations;
required manufacturers to offer 50% point--of--sale discounts on
negotiated prices of applicable brand drugs to eligible
beneficiaries during their coverage gap period, as a condition for
the manufacturer's outpatient drugs to be covered under Medicare
Part D; and implemented payment system reforms including a national
pilot program on payment bundling to encourage hospitals,
physicians and other providers to improve the coordination, quality
and efficiency of certain healthcare services through bundled
payment models.
In the future, there may continue to be additional proposals
relating to the reform of the U.S. healthcare system, some of which
could further limit the prices we will be able to charge for our
product candidates, or the amounts of reimbursement available for
our product candidates. If future legislation were to impose direct
governmental price controls and/or access restrictions, it could
have a significant adverse impact on our business. Managed care
organizations, as well as Medicaid and other government agencies,
continue to seek price discounts. Some states have implemented, and
other states are considering, measures to reduce costs of the
Medicaid program, and some states are considering implementing
measures that would apply to broader segments of their populations
that are not Medicaid--eligible. Due to the volatility in the
current economic and market dynamics, we are unable to predict the
impact of any unforeseen or unknown legislative, regulatory, payor
or policy actions, which may include cost containment and
healthcare reform measures. Such policy actions could have a
material adverse impact on our profitability.
C. Organizational Structure.
As described above under the heading "Item 4.A. History And
Development Of The Company", in connection with the corporate
reorganization, Motif Bio plc became the holding company for Motif
BioSciences, Inc. Information about Motif Bio plc's ownership
position in Motif BioSciences Inc. is included in the table
below.
Method
used
Country Percentage to account
Company of Percentage voting for
name incorporation shareholding power investment
------------------- ---------------- -------------- ----------- --------------
Motif BioSciences Delaware,
Inc.......... U.S. 100% 100% Consolidation
D. Property, Plants and Equipment.
We do not own or lease any material office space, manufacturing
facilities or equipment and do not have any current plans to
construct or acquire any facilities.
Item 4A. Unresolved Staff Comments.
Not applicable.
Item 5. Operating and Financial Review and Prospects.
You should read the following discussion and analysis of our
financial condition and results of operations together with our
audited consolidated financial statements and the related notes
appearing elsewhere in this Annual Report. Some of the information
contained in this discussion and analysis or set forth elsewhere in
this Annual Report, including information with respect to our plans
and strategy for our business and its related financing, includes
forward-looking statements that involve risks and uncertainties. As
a result of many factors, including those factors set forth in the
"Risk Factors" section of this Annual Report, our actual results
could differ materially from the results described in or implied by
the forward-looking statements contained in the following
discussion and analysis.
All amounts included herein with respect to the years ended
December 31, 2016, 2015 and 2014 are derived from our audited
consolidated financial statements included elsewhere in this Annual
Report. The audited consolidated financial statements as of
December 31, 2016 and 2015 and for the years ended December 31,
2016, 2015 and 2014 have been prepared in accordance with IFRS as
issued by the IASB, and in accordance with IFRS as endorsed for use
in the European Union. As permitted by the rules of the SEC for
foreign private issuers, we do not reconcile our financial
statements to U.S. generally accepted accounting principles.
Overview
We are currently conducting a global Phase 3 program (REVIVE)
with an IV formulation of iclaprim, for the treatment of ABSSSI. On
April 18, 2017, we announced positive topline results from
REVIVE-1, our global Phase 3 clinical trial in patients with
ABSSSI. Iclaprim achieved the primary endpoint of non-inferiority
at the early time point after start of study drug administration as
well as non-inferiority for the test of cure endpoint. Iclaprim was
well tolerated in the study, with most adverse events categorized
as mild. Data from REVIVE-2, the second Phase 3 trial, which uses
an identical protocol to REVIVE-1 but has different trial centers,
are expected in the second half of 2017 and submission of a New
Drug Application (NDA) for iclaprim for the treatment of ABSSSI is
anticipated in the first half of 2018.
Based on our current plans, we do not expect to generate
significant revenue unless and until we obtain marketing approval
for, and commercialize, iclaprim. We do not expect to obtain
marketing approval before 2018, if at all. Accordingly, we will
need to obtain additional funding in connection with our continuing
operations, including completion of the REVIVE-1 and REVIVE-2
trials and our plans to conduct our INSPIRE Phase 3 clinical trial
of iclaprim in HABP, including VABP, patients. Adequate additional
financing may not be available to us on acceptable terms, or at
all. If we are unable to raise capital when needed or on attractive
terms, we could be forced to delay, reduce or eliminate our
research and development programs or any future commercialization
effort.
We expect to continue to incur significant expenses and
increasing operating losses for at least the next several years. We
expect our expenses to increase substantially in connection with
our ongoing activities, particularly as we continue the development
of and seek marketing approval for iclaprim and, possibly, other
product candidates and continue our research activities. Our
expenses will increase if we suffer any delays in our Phase 3
clinical programs for iclaprim. If we obtain marketing approval for
iclaprim or any other product candidate that we develop, we expect
to incur significant commercialization expenses related to product
sales, marketing, distribution and manufacturing.
Furthermore, as of November 18, 2016, our American Depositary
Receipts are now publicly traded on the Nasdaq Capital Market. As a
result, we are now incurring additional costs associated with
operating as a public company in the United States.
A. Operating Results
The following discussion sets forth certain components of our
statements of operations as well as factors that impact those
items.
Revenues
To date, we have not generated any revenues from product sales
and we do not expect to recognize any revenue from the sale of
products, even if approved, for the next few years. Our success
depends primarily on the successful development and regulatory
approval of our product candidates and our ability to finance
operations. If our development efforts result in clinical success
and regulatory approval, or we enter into collaboration agreements
with third-parties for our product candidates, we may generate
revenue from those product candidates. Our ability to generate
product revenue and become profitable depends upon our ability to
obtain regulatory approval for and to successfully commercialize
our product candidates.
Research and Development
Our research and development expenses consist primarily of costs
incurred in connection with the development of our product
candidates, including:
-- personnel-related costs, such as salaries, bonuses, benefits,
travel and other related expenses, including share-based
compensation;
-- expenses incurred under our agreements with CROs, clinical
sites, contract laboratories, medical institutions and consultants
that plan and conduct our preclinical studies and clinical trials,
including, in the case of consultants, share-based
compensation;
-- costs associated with regulatory filings;
-- costs of acquiring preclinical assay and clinical trial materials; and
-- costs associated with preclinical development, formulation
development and process development.
To date, we have expensed all research and development costs as
incurred. Clinical development expenses for our product candidates
are a significant component of our current research and development
expenses as we progress our product candidates into and through
clinical trials. Product candidates in later stage clinical
development generally have higher research and development costs
than those in earlier stages of development, primarily due to
increased size and duration of the clinical trials. We recognize
costs for each grant project, preclinical study or clinical trial
that we conduct based on our evaluation of the progress to
completion, using information and data provided to us by our
research and development vendors and clinical sites.
If we meet the following conditions, we would be able to
capitalize expenditures on drug development activities:
-- it is probable that the asset will create future economic benefits;
-- the development costs can be measured reliably;
-- technical feasibility of completing the intangible asset can be demonstrated;
-- there is the intention to complete the asset and use or sell it;
-- there is the ability to use or sell the asset; and
-- adequate technical, financial, and other resources to
complete the development and to use or sell the asset are
available.
These conditions are generally met when a filing is made for
regulatory approval for commercial production. At this time, we do
not meet all conditions and therefore, development costs are
recorded as expense in the period in which the cost is
incurred.
We expect our research and development expenses to increase over
the next few years as a result of our ongoing and anticipated Phase
3 clinical trials and as we prepare for commercial launch of our
products, if approved. The process of conducting the necessary
clinical research to obtain regulatory approval of a product
candidate is costly and time consuming. We will require additional
funding to fund our continuing operations, including completion of
the REVIVE-1 and REVIVE-2 trials and our plans to conduct our
INSPIRE Phase 3 clinical trial of iclaprim in HABP, including VABP,
patients. The probability that any of our product candidates
receives regulatory approval and eventually is able to generate
revenue depends on a variety of factors, including the quality of
our product candidates, early clinical data, investment in our
clinical program, competition, manufacturing capability and
commercial viability. As a result of these uncertainties, we are
unable to determine the duration and completion costs of our
research and development projects or if, when and to what extent we
will generate revenue from the commercialization and sale of any of
our product candidates, if approved. We may never succeed in
achieving regulatory approval for any of our product
candidates.
We do not allocate personnel-related research and development
costs, including share-based compensation or other indirect costs,
to specific programs, as they are deployed across multiple projects
under development.
General and Administration
General and administrative expenses include personnel costs,
costs for outside professional services and other allocated
expenses. Personnel costs consist of salaries, bonuses, benefits,
travel and share-based compensation. Outside professional services
consist of legal, accounting and audit services, commercial
evaluation and strategy services, and other consulting services. We
expect general and administrative expenses to increase in the near
future with the expansion of our staff and management team to
include new personnel responsible for finance, legal, information
technology and later, sales and business development functions. We
also expect to incur additional general and administrative costs as
a result of operating as a U.S. public company, including expenses
related to compliance with the rules and regulations of the SEC and
those of any national securities exchange on which our securities
are traded, additional insurance expense, investor relations
activities and other administrative and professional services. We
also expect to incur additional expenses related to in-licenses,
acquisitions or similar transactions that we may pursue as part of
our strategy, including legal, accounting and audit services and
other consulting fees.
Interest Income, Expense
Interest income consists of interest earned on our cash and cash
equivalents. Interest expense consists of interest paid or payable
on financial liabilities.
Net Foreign Exchange Losses
Items included in our consolidated financial statements are
measured using the currency of the primary economic environment in
which we operate ("the functional currency"). The consolidated
financial statements are presented in United States Dollars (US$),
which is our functional and presentation currency.
Foreign currency transactions are translated into the functional
currency using the exchange rates at the dates of the transactions.
Foreign exchange gains and losses resulting from the settlement of
such transactions and from the translation of monetary assets and
liabilities denominated in foreign currencies at year end exchange
rates are generally recognized in profit or loss. They are deferred
in equity if they relate to qualifying cash flow hedges and
qualifying net investment hedges or are attributable to part of the
net investment in a foreign operation.
Foreign exchange gains and losses that relate to borrowings are
presented in the statement of profit or loss, within finance costs.
All other foreign exchange gains and losses are presented in the
statement of profit or loss on a net basis within other income or
other expenses.
Non-monetary items that are measured at fair value in a foreign
currency are translated using the exchange rates at the date when
the fair value was determined. Translation differences on assets
and liabilities carried at fair value are reported as part of the
fair value gain or loss. For example, translation differences on
non-monetary assets and liabilities such as equities held at fair
value are recognized in profit or loss as part of the fair value
gain or loss and translation differences on non-monetary assets
such as equities classified as available-for-sale financial assets
are recognized in other comprehensive income.
Historically, our cash and cash equivalents have been held
primarily in U.S. dollars, in the United Kingdom and most of our
expenses have been U.S. dollar-denominated.
The following table sets forth our results of operations for the
years ended December 31, 2016, 2015 and 2014.
Year ended December 31,
----------------------------------------------------
2016 2015 2014
------------------ --------------- ---------------
(in thousands, except share and per share data)
Consolidated Statement of Comprehensive Loss
Operating expenses:
General and
administrative..............................................
........................... $(4,912) $(3,577) $(1,096)
Research and
development.................................................
....................... (34,794) (4,681) -
Gains on settlement of contract
disputes................................................. 83 5 360
------------------ --------------- ---------------
Total operating
expenses................................................
....................... $(39,623) $(8,253) $(736)
------------------ --------------- ---------------
Operating
loss..........................................................
......................................... (39,623) (8,253) (736)
Other income (expense), net
Interest
income......................................................
....................................... 70 15 -
Interest
expense.....................................................
...................................... (383) (268) (449)
Loss from revaluation of derivative
liability........................... (136) - -
Net foreign exchange
losses......................................................
................ (251) (10) -
------------------ --------------- ---------------
Total other expense,
net.....................................................
.................... $(700) $(263) $(449)
------------------ --------------- ---------------
Loss before income
taxes.........................................................
....................... (40,323) (8,516) (1,185)
Income tax
loss..........................................................
....................................... (1) (1) (1)
------------------ --------------- ---------------
Net
loss..........................................................
.................................................... $(40,324) $(8,517) $(1,186)
================== =============== ===============
Total comprehensive
loss..........................................................
..................... $(40,324) $(8,517) $(1,186)
================== =============== ===============
Comparison of the year ended December 31, 2016 and December 31,
2015
General and Administrative Expense
General and administrative expenses increased by US$1.3 million,
to US$4.9 million, in the year ended December 31, 2016 from US$3.6
million in the year ended December 31, 2015. This increase was
primarily attributable to an increase in legal and other
professional fees, including: (i) the costs associated with being a
public company in the United Kingdom and in the United States; (ii)
the costs associated with the filing of a registration statement on
Form F-1 with the U.S. Securities and Exchange Commission relating
to the U.S. public offering of American Depositary Shares; and
(iii) increases in the costs of outside professional services,
including commercial evaluation and strategy services, investor
relations and other consulting services.
Research and Development Expense
Research and development expenses increased by US$30.1 million
to US$34.8 million in the year ended December 31, 2016 from US$4.7
million in the year ended December 31, 2015. This increase was
primarily attributable to the commencement of iclaprim clinical
development. For the year ended December 31, 2016, US$30.4 million
was spent in relation to contract research organization expenses,
US$2.2 million in relation to clinical operations and US$2.1
million in relation to chemistry and manufacturing development and
other non-clinical development.
Loss from Revaluation of Derivative Liability
In November 2016, we issued warrants that are classified as a
liability due to a potential variability in the number of shares
that may be issued upon exercise if we fail to maintain an
effective registration statement. This liability is carried at fair
value and is remeasured each reporting period using the
Black-Scholes option pricing model. The increase in the fair value
of the warrant liability from issuance to December 31, 2016 was
primarily attributable to an increase in our stock price.
Net Foreign Exchange Loss
The net foreign exchange loss for the year ended December 31,
2016 was US$ 250,926, as compared to a loss of US$ 9,644 in the
year ended December 31, 2015. In both periods the loss recognized
relates to the re-measurement of our Sterling denominated cash
deposits to US dollars at the closing US dollar to Sterling
exchange rate as well as the gains and losses resulting from the
settlement of transactions denominated in foreign currency.
Sterling denominated cash deposits totaled GBP14,424 and
GBP1,774,741 at December 31, 2016 and 2015, respectively.
Comparison of the year ended December 31, 2015 and December 31,
2014
General and Administrative Expense
General and administrative expenses increased by US$2.5 million,
to US$3.6 million, in the year ended December 31, 2015 from US$1.1
million in the year ended December 31, 2014. The increase was
primarily due to an increase of US$0.8 million in personnel related
expenses which increased to two key management personnel from none
in the year ended December 31, 2014, a US$0.7 million increase in
legal and other professional fees and higher other costs associated
with being a public company in the United Kingdom.
Research and Development Expense
Research and development expenses were US$4.7 million in the
year ended December 31, 2015. There were no research and
development expenses in the year ended December 31, 2014. The
increase was primarily attributed to the commencement of iclaprim
clinical development. For the year ended December 31, 2015 US$3.1
million was spent in relation to contract research organization
expenses, US$0.7 million on clinical operations and US$0.9 million
in relation to chemistry and manufacturing development and other
non-clinical development.
Gains on Settlement Of Contract Disputes
The gain of $0.4 million in the year ended December 31, 2014
includes $0.3 million due to a write off of salary owed to a
director, for his services as Chief Executive Officer, which was
written off as part of a settlement agreement in 2014.
B. Liquidity and Capital Resources
At December 31, 2016 and 2015, we had cash and cash equivalents
of approximately US$21.8 million and US$28.6 million, respectively.
We do not expect to generate significant revenue from product sales
unless and until we obtain regulatory approval for and
commercialize our current or any future product candidates. We
anticipate that we will continue to generate losses for the
foreseeable future, and we expect our losses to increase as we
continue the development of and seek regulatory approvals for our
product candidates and begin to commercialize any approved
products. We are subject to all of the risks applicable to the
development of new products, and we may encounter unforeseen
expenses, difficulties, complications, delays and other unknown
factors that may harm our business.
Our operations have been financed primarily by net proceeds from
the issuance of ADSs on the NASDAQ Capital Market, the issuance of
ordinary shares on AIM, and the issuance of convertible promissory
notes to related parties. Our primary uses of capital are, and we
expect will continue, at least in the short term, to be,
third-party expenses associated with the planning and conduct of
preclinical and clinical trials, costs of process development
services and manufacturing of our product candidates, and
compensation-related expenses. We also expect our cash needs to
increase to fund potential in-licenses, acquisitions or similar
transactions as we pursue our strategy.
Cash used to fund operating expenses is affected by the timing
of when we pay expenses, as reflected in the change in our
outstanding accounts payable and accrued expenses.
Our future funding requirements will depend on many factors,
including the following:
-- the scope, rate of progress, results and cost of our
preclinical studies and clinical trials and other related
activities;
-- the cost of formulation, development, manufacturing of
clinical supplies and establishing commercial supplies of our
product candidates and any other product candidates that we may
develop, in-license or acquire;
-- the cost, timing and outcomes of pursuing regulatory approvals;
-- the cost and timing of establishing administrative, sales,
marketing and distribution capabilities;
-- the terms and timing of any collaborative, licensing and
other arrangements that we may establish, including any required
milestone and royalty payments thereunder; and
-- the emergence of competing technologies and their achieving
commercial success before we do or other adverse market
developments.
We expect to continue to incur losses. Our ability to achieve
and maintain profitability depends upon the successful development,
regulatory approval and commercialization of our product candidates
and achieving a level of revenues adequate to support our cost
structure. We may never achieve profitability, and unless and until
we do, we will continue to need to raise additional capital. If we
need to raise additional capital to fund our operations and
complete our ongoing and planned clinical trials, funding may not
be available to us on acceptable terms, or at all.
We will need to raise additional capital through equity or debt
financings to continue to fund our operations and meet our capital
funding needs. On April 18, 2017, we announced positive topline
results from REVIVE-1, our global Phase 3 clinical trial in
patients with ABSSSI. Iclaprim achieved the primary endpoint of
non-inferiority at the early time point after start of study drug
administration as well as non-inferiority for the test of cure
endpoint. Iclaprim was well tolerated in the study, with most
adverse events categorized as mild. We believe that this new data
and the fact that REVIVE-2, the second Phase 3 trial, uses an
identical protocol to REVIVE-1 but has different trial centers,
could provide the basis for increased investor interest in us and,
hence, potentially provide greater opportunities to raise
additional capital
The sale of additional equity would result in additional
dilution to our shareholders. The incurrence of debt financing
would result in debt service obligations and the instruments
governing such debt could provide for operating and financing
covenants that would restrict our operations. If we are not able to
secure adequate additional funding, we may be forced to make
reductions in spending, extend payment terms with suppliers, sell
assets where possible or suspend or curtail planned programs. In
addition, lack of funding would limit any strategic initiatives to
in-license or acquire additional product candidates or
programs.
Cash Flows
Year ended December 31,
--------------------------------
2016 2015 2014
------------ ---------- ------
(in thousands, except share
and per share data)
Net cash (used in) / provided
by:
Operating activities (27,942) (7,998) (2)
Financing activities 21,428 36,599 5
Effect of exchange rate
changes on cash and cash
equivalents (251) (11) -
(6,765) 28,590 3
============ ========== ======
Operating Activities
Net cash used in operating activities was US$27.9 million in the
year ended December 31, 2016, which reflects the continuation of
the clinical development of iclaprim, including a US$11.3 million
increase in trade payables. In addition, pursuant to a Sale and
Purchase Agreement with Acino Pharma AG ("Acino"), we are obligated
to pay Acino US$500,000 upon completion of any iclaprim Phase 3
clinical study. As a result of the REVIVE-1 read out in April 2017,
the Acino milestone has been reclassified as a current liability as
of December 31, 2016. Net cash used in operating activities was
approximately US$8.0 million for the year ended December 31, 2015,
reflecting the commencement of clinical development of iclaprim.
Our activities in 2014 were comprised of building medicinal
chemistry plans, seeking new capital, and pursuing additional
in-licensing opportunities.
Financing Activities
Net cash provided by financing activities amounted to US$21.4
million in the year ended December 31, 2016, resulting from our
November 2016 offering as described further below. Net cash
provided by financing activities was US$36.6 million in the year
ended December 31, 2015, resulting from (i) the issuance of
promissory notes; (ii) our initial public offering on AIM, pursuant
to which we issued 14,186,140 of our ordinary shares at a price of
GBP0.20 (US$0.30) per share; and (iii) our follow on offering on
AIM, pursuant to which we issued 44,000,000 of our ordinary shares
at a price of GBP0.50 (US$0.79) per share.
On November 18, 2016, we announced the pricing of our
underwritten U.S. public offering and European placement, which
were concurrently conducted, of 71,633,248 ordinary shares,
comprised of 22,863,428 ordinary shares plus 2,438,491 ADSs
(representing 48,769,820 ordinary shares at a 20 to 1 ratio). We
offered 48,769,820 ordinary shares in a U.S. firm commitment public
offering in the form of 2,438,491 American Depositary Shares or
ADSs, together with warrants to purchase 1,219,246 ADS Warrants.
Each ADS represents 20 of our ordinary shares and was sold together
with 0.5 of an ADS Warrant in a fixed combination. Each full ADS
Warrant is exercisable for one ADS at an exercise price of $8.03
per ADS, exercisable from the date of issuance until five years
thereafter. In Europe, we offered in a concurrent placement on a
best efforts basis 22,863,428 ordinary shares, together with
warrants to purchase 11,431,714 ordinary shares. Each ordinary
share was sold together with 0.5 of an Ordinary Share Warrant in a
fixed combination. Each full Ordinary Share Warrant is exercisable
for one ordinary share at an exercise price of GBP0.32 ($0.40),
exercisable from the date of issuance until five years thereafter.
The public offering price of the ADSs and ADS Warrants in the U.S.
offering was $6.98 per ADS and ADS Warrant combination, and the
public offering price of our ordinary shares and Ordinary Share
Warrants in the European placement was GBP0.28 ($0.35) per ordinary
share and Ordinary Share Warrant combination.
On December 22, 2016, we announced that, at our General Meeting,
our shareholders authorized our directors to (i) allot relevant
securities up to an aggregate nominal value of GBP313,938.23 in
connection with the exercise of various share options, warrants and
convertible securities granted by the Company between April 1, 2015
and December 22, 2016, and (ii) allot relevant securities for
purposes other than those identified in (i) above, up to an
aggregate nominal amount of GBP270,965.62. Our shareholders further
authorized our directors to disapply statutory preemptive rights,
but only with respect to the two aforementioned allotments.
On April 28, 2017, we announced the appointment of Peel Hunt LLP
as nominated adviser and joint corporate broker with immediate
effect.
Critical Accounting Policies And Significant Judgments And
Estimates
A description of our principal accounting policies, critical
accounting estimates and key judgments is set out in Note 2
("Significant accounting policies") to our audited consolidated
financial statements included elsewhere in this Annual Report.
Recent Accounting Pronouncements
For a discussion of the new standards and interpretations not
yet adopted by us, see Note 2 ("Significant accounting policies-New
standards and interpretations not yet adopted") to our consolidated
audited financial statements which appear elsewhere in this Annual
Report.
C. Research and Development
For a discussion of our research and development activities, see
"Item 4.B. Business Overview" and "Item 5.A. Operating
Results."
D. Trend Information
For a discussion of trends, see "Item 4.B. Business Overview,"
"Item 5.A. Operating Results" and "Item 5.B. Liquidity and Capital
Resources."
E. Off-Balance Sheet Arrangements
We do not have variable interests in variable interest entities
or any off-balance sheet arrangements.
F. Tabular Disclosure of Contractual Obligations
The following table discloses aggregate information about
material contractual obligations and periods in which payments were
due as of December 31, 2016. Future events could cause actual
payments to differ from these estimates.
Between 1 Between 3 Over
< 1 year and 3 years and 5 years 5 years
At December 31, 2016 $ $ $ $ Total
---------------------------------------------------- --------- ------------- ------------- --------- ------
(in thousands)
Milestone
payments............................................
.......................... 500 - - - 500
--------- ------------- ------------- --------- ------
Total 500 - - - 500
--------- ------------- ------------- --------- ------
We have entered into an agreement with an independent contract
research organization for clinical trials and with vendors for
preclinical studies and other services and products for operating
purposes, which are cancelable at any time by us, generally upon 60
days prior written notice. Future payment obligations under these
agreements are not included in the contractual obligations table
above or our consolidated balance sheets, as the amount and timing
of these milestones are not probable and estimable at this
time.
G. Safe Harbor.
This Annual Report contains forward-looking statements within
the meaning of Section 27A of the Securities Act and Section 21E of
the Exchange Act and as defined in the Private Securities
Litigation Reform Act of 1995. See "Cautionary Note Regarding
Forward-Looking Statements."
Item 6. Directors, Senior Management and Employees.
A. Directors and Senior Management.
The following table sets forth information regarding our
executive officers and directors, including their ages, as of
December 31, 2016. Unless otherwise indicated, the current business
addresses for our executive officers and non-employee directors is
125 Park Avenue 25th Floor, New York, NY 10011, United States.
Name Age Position
--------------------------------------------------------------------------------- ---- ----------------------------
Executive Officers
Graham George Lumsden........................................... 57 Chief Executive Officer and
Executive Director
Robert Dickey IV......................................................... 61 Chief Financial Officer
David Huang................................................................ 42 Chief Medical Officer
Non--Employee Directors
Richard Cecil Eversfield 72 Non--Executive Chairman
Morgan(1)(2).....................
Robert Bertoldi............................................................ 63 Executive Director
Charlotta Ginman--Horrell(1)....................................... 51 Non--Executive Director
Jonathan Gold(1)......................................................... 44 Non--Executive Director
Zaki Hosny(2).............................................................. 68 Non--Executive Director
Mary Lake Polan (3).................................................... 73 Non--Executive Director
Bruce Andrew Williams(1)(2).................................... 62 Non--Executive Director
(1) Member of the audit committee. Mr. Morgan was a member of
the audit committee until being replaced by Mr. Williams in
December 2016.
(2) Member of the remuneration committee.
(3) Member of the nomination committee.
Executive Officers
Graham Lumsden has served as our Chief Executive Officer and
Executive Director since May 2013. Prior to joining the Company,
Dr. Lumsden was a senior executive at Merck & Co., Inc. (NYSE:
MRK) (from 1985 to 2011), where he held various commercial
worldwide leadership positions, with global responsibility for
osteoporosis and then contraceptives. He also served as Chief
Executive Officer of TieMed LLC (from 2012 to 2014), and as a
principal of Carnethy Consulting LLC (from 2012 to 2014). Dr.
Lumsden is a member of the Royal College of Veterinary Surgeons
(MRCVS). He obtained a postgraduate diploma in marketing from the
Chartered Institute of Marketing in London, United Kingdom in 1998,
and his BVM&S in veterinary medicine and surgery from the Royal
School of Veterinary Studies in Edinburgh, Scotland in 1982.
Dr. David Huang has served as our Chief Medical Officer since
October 2014. Prior to joining the Company, Dr. Huang served as a
clinical consultant for several start-up companies developing
anti-infectives and as an attending physician in emergency medicine
at the Veterans Affairs Medical Center in Houston, which he
continues to do. Prior to his clinical consultant role, Dr. Huang
served as the former Chief Medical Officer at ContraFect
Corporation (NASDAQ: CFRX) (from 2011 to 2014), where he had
responsibility for the development of biologic anti-infectives,
including bacteriophage lysins and monoclonal antibodies. Dr. Huang
also led drug development groups in anti-infectives at Pfizer Inc.
(NYSE: PFE) (from 2008 to 2011) and Boehringer Ingelheim (from 2005
to 2008). Dr. Huang has 15 years of clinical, academic and research
experience in medicine and in the subspecialty of infectious
diseases. He served as a faculty member at Baylor College of
Medicine and is currently an adjunct Assistant Professor at Rutgers
New Jersey Medical School (since 2009). He is well versed in the
design, execution and close out of Phase 1-3 clinical trials for
both antibacterials and antiviral agents. Dr. Huang completed his
medical school at the University of Texas at Houston Medical
School, and completed his internship and residency in internal
medicine at the University of Texas Southwestern and fellowship in
infectious diseases at Baylor College of Medicine.
Robert Dickey IV has served as our Chief Financial Officer since
January 2017. Mr. Dickey is an accomplished financial professional
with senior leadership experience in private and public healthcare
companies. Prior to joining Motif Bio, he was CFO at Tyme
Technologies Inc., a NASDAQ-listed clinical stage oncology company.
Robert previously held senior leadership positions at NeoStem, Inc.
(now known as Caladrius Biosciences Inc.), Hemispherx Biopharma
Inc., Stemcyte Inc., Locus Pharmaceuticals Inc. and Protarga Inc.
Mr. Dickey began his career as an Investment Banker at Lehman
Brothers and Legg Mason Wood Walker Inc. He has an MBA from The
Wharton School, University of Pennsylvania, and an AB from
Princeton University.
Non--Employee Directors
Richard Cecil Eversfield Morgan has served as the Non--Executive
Chairman of our board of directors since 2004. He is also Chief
Executive Officer of Amphion Innovations plc (the successor firm to
Amphion Capital Partners LLC, which Mr. Morgan co--founded), a
position he has held since 2005. Over the course of his career, Mr.
Morgan has been directly involved in the start--up and development
of more than 35 companies in the biopharma, healthcare, and IT
industries, including Celgene Corporation (NASDAQ: CELG) (from 1987
to 2016) and Sequus Pharmaceuticals, Inc. He was also the managing
general partner of Amphion Partners LLC (formerly known as
Wolfensohn Partners, LP), a position which he retains, although the
partnership is no longer active. Before joining Wolfensohn, Mr.
Morgan spent 15 years with Schroders plc, a British merchant bank,
as a member of the board and head of the Schroder Strategy Group,
which he founded. Mr. Morgan currently serves as Chairman of four
other Amphion Partner Companies (Axcess International Inc. (since
May 2004), FireStar Software, Inc. (since June 2005),
PrivateMarkets, Inc. (since 2007) and WellGen, Inc. (since November
2007) and is also a director of DataTern, Inc. (since 2008). He
graduated with a B. Engineering First Class Honors from the
University of Auckland, New Zealand. In 1982 he completed the
Advanced Management Program at Harvard Business School. We believe
that Mr. Morgan is qualified to serve on our board of directors
because of his extensive experience in the healthcare and
biotechnology industries as well as his extensive background in
finance.
Robert Bertoldi has served as an executive director of the
Company since November 2014. He is also President and Chief
Financial Officer of Amphion Innovations plc (since July 2014). Mr.
Bertoldi was a founder President and Chief Financial Officer of
Amphion Capital Partners LLC (the predecessor to Amphion
Innovations plc) (from 1995 to 2004) and VennWorks LLC (from 1999
to 2016). Mr. Bertoldi is also a general partner of Amphion
Partners LLC (formerly known as Wolfensohn Partners, LP) (since
1995). Prior to that, he served as Chief Financial Officer for
James D. Wolfensohn, Inc. (from 1988 to 1995) and Hambro America
Inc. (from 1982 to 1988). He began his career at KPMG and left as a
manager in the investment services department. Mr. Bertoldi was a
director of Axcess International, Inc. (OTCBB: AXSI.OB) from 2000
to 2013. Mr. Bertoldi received a B.A. in Accounting and Economics
from Queens College, New York in 1976 and became a Certified Public
Accountant in 1978. He is a member of the AICPA and NYSCPA. We
believe that Mr. Bertoldi is qualified to serve on our board of
directors because of his extensive
background in finance and accounting.
Charlotta Ginman--Horrell has served as a non--executive
director of the Company since April 2015. Ms. Ginman--Horrell is
also a non--executive director of Polar Capital Technology Trust
plc (since February 2015), Pacific Assets Trust plc (since October
2014), Consort Medical plc (since February 2015), Unicorn AIM VCT
plc (since July 2016) and acts as the audit committee chair for
Polar Capital Technology Trust plc and Pacific Assets Trust plc.
Ms. Ginman--Horrell was formerly a non--executive director of
Wolfson Microelectronics plc (from July 2013 to August 2014) and
Kromek plc (from February 2014 to December 2015). She held senior
positions in the investment banking (UBS, Deutsche Bank, and
JPMorgan) and telecom sectors (Nokia Corporation and Vertu Ltd). A
qualified chartered accountant in England and Wales, Ms.
Ginman--Horrell also holds a MSc. in Economics from the Swedish
School of Economics and Business Administration in Helsinki. We
believe that Ms. Ginman--Horrell is qualified to serve on our board
of directors because of her substantial experience in financial and
operational management gained during her career in investment
banking and global telecommunications.
Jonathan Gold was a founding officer of the Company and has
served as a non--executive director since 2004. Mr. Gold is a
managing director of JEG Capital LLC, a family office and asset
manager (since August 2012). Previously he was a portfolio manager
for the Federated Kaufmann Funds (from 2004 to 2012). Prior to
that, Mr. Gold was a partner at Amphion Capital Partners LLC (the
predecessor to Amphion Innovations plc) (from 1996 to 2004) and
Wolfensohn Partners (originally affiliates of James D. Wolfensohn
Inc.) (from 1995 to 2004), where he was active in financing and
growing early stage life sciences and information technology
companies. Early in his career, Mr. Gold was a financial analyst
for Prudential's Realty Group (from 1995 to 1996), which managed
over $10 billion in equity and mortgage real estate investments.
Mr. Gold received his Bachelor of Science and MBA in Finance from
New York University's Stern School of Business. We believe that Mr.
Gold is qualified to serve on our board of directors because of his
extensive background in finance.
Zaki Hosny has served as a non--executive director of the
Company since 2006. Mr. Hosny is an independent consultant to life
sciences companies. Mr. Hosny spent most of his career at Merck
& Co, Inc. (NYSE: MRK) (from 1998 to 2007) in marketing and
general management positions around the world, including management
responsibility for the company's business in major markets in
Europe. He also held senior marketing positions in the United
States and several European countries in general management,
marketing roles with worldwide responsibility for cardiovascular
and other franchises, and was closely involved in the clinical
development of some of the company's major products. Mr. Hosny was
Chief Executive Officer of Motif Biosciences, Inc. (from 2006 to
2013) and Deputy Chairman of its Board of Directors (from 2006 to
2013). Mr. Hosny is currently a Senior Advisor to the Albright
Stonebridge Group, a strategic consultancy firm based in
Washington, DC and a consultant to Harel Consulting of New Jersey,
Mettle Consulting Limited of the United Kingdom and Mansfield
Consulting LLC. Mr. Hosny is based in Princeton, New Jersey, and is
a graduate of Cambridge University with an M.A. in History and Law.
We believe that Mr. Hosny is qualified to serve on our board of
directors because of his extensive experience in the pharmaceutical
and biotechnology industries.
Dr. Mary Lake Polan has served as a non--executive director of
the Company since February 2004. Dr. Polan is a Clinical Professor
in the Department of Obstetrics, Gynecology, and Reproductive
Sciences at Yale University School of Medicine (since 2014). From
2008 to 2014, Dr. Polan served as adjunct professor in the
Department of Obstetrics and Gynecology at Columbia University
School of Medicine. She served as chair and emeritus professor in
the Department of Obstetrics and Gynecology at Stanford Medical
School from 1990 to 2006. Dr. Polan specializes in reproductive
endocrinology and infertility and hormonal issues related to
gynecology patients and menopause. Dr. Polan served on the board of
Wyeth (NYSE: WYE) (from 1995 to 2009) prior to its acquisition by
Pfizer Inc. and currently serves on the board of Quidel Corp.
(NASDAQ: QDEL) (since 1993), and on the boards of several privately
held life sciences companies. She chairs a Scientific Advisory
Board on Women's Health for the Proctor and Gamble Company and
several other advisory boards of private life sciences companies.
She is also Managing Director of Golden Seeds, an angel investing
group which invests in women led companies. She received her
bachelor's degree from Connecticut College, her Ph.D. in Molecular
Biophysics and Biochemistry, her M.D. from Yale University, and
completed her residency and Reproductive Endocrine Fellowship at
the Department of Obstetrics and Gynecology at the Yale School of
Medicine. Dr. Polan received her M.P.H. (Maternal and Child Health
Program) from the University of California, Berkeley. As a medical
doctor, Dr. Polan brings an important practicing physician
perspective in evaluating and overseeing the Company's performance
and strategic direction.
Bruce Andrew Williams has served as a non--executive director of
the Company since February 2004. Mr. Williams served as the Chief
Executive Officer of WellGen, Inc. (from November 2010 to May 2011)
and Head of Commercial Operations at Corcept Therapeutics
Incorporated (from March 2010 to November 2010). Mr. Williams was
Senior Vice President, Sales and Marketing at Genta Incorporated
(from February 2001 to March 2005), where he led the negotiation of
a licensing and co--development/co--marketing agreement with
Aventis for the company's lead product. Mr. Williams was previously
Senior Vice President of Sales and Marketing at Celgene Corporation
(from June 1996 to February 2001), where he built the company's
commercial and distribution infrastructure to support the launch of
its first product, Thalomid (thalidomide). Mr. Williams was an
executive director of Ortho Biotech Products LP (from July 1989 to
June 1996), where he led the marketing of this Johnson &
Johnson subsidiary's lead product, Procrit (epoetin alfa), from
pre--launch to its fifth year on the market. Mr. Williams currently
serves on the boards of Motif, Inc., the Company's subsidiary
(since February 2004), and Afaxys, Inc. (since February 2011). Mr.
Williams obtained his MBA in finance and accounting from Columbia
Business School in 1982, and obtained his BA in biology from
Syracuse University in 1976. We believe that Mr. Williams is
qualified to serve on our board of directors due to his significant
operational experience in the pharmaceutical and biotechnology
industries, as well as his marketing background.
Family Relationships
There are no family relationships among any of our executive
officers or directors.
Arrangements with Major Shareholders, Customers, Supplies or
Others.
There are no arrangements or understandings with any major
shareholder, customer, supplier or other, pursuant to which any
person referred to above was selected as a director or member of
senior management.
B. Compensation.
The following discussion provides the amount of compensation
paid, and benefits in kind granted, by us to our current directors
and executive officers for services provided in all capacities to
us for the year ended December 31, 2016. Mr. Dickey did not join
our company until January 2017 and his compensation information,
is, therefore, not reflected in the table below. For additional
detail regarding the compensation offered to our directors and
executive officers, please see "Item 7.B. Related Party
Transactions - Agreements with Directors, Executive Officers and
Others."
Salaries Social
and Fees Bonuses Security Total
Name ($) ($) ($) ($)
-------------------------------------------------------------------- ---------- -------- ---------- --------
Executive Officers:
Graham
Lumsden(1)........................................................
...................................... 425,000 50,000 13,510 488,510
Chief Executive Officer and Director
Pete
Meyers(2).........................................................
. 235,577 - 10,763 246,340
Chief Financial Officer
David
Huang(1)..........................................................
........................................... 400,000 50,000 13,147 463,147
Chief Medical Officer
Non--Employee Directors:
Richard Cecil Eversfield
Morgan(3).........................................................
.......... 114,950 62,775 - 177,725
Non--Executive Chairman
Robert
Bertoldi..........................................................
............................................ 127,500 - 10,283 137,783
Executive Director
Charlotta
Ginman--Horrell...................................................
.................................. 57,475 - - 57,475
Non--Executive Director
Jonathan
Gold(4)...........................................................
........................................ 114,094 - - 114,094
Non--Executive Director
Zaki
Hosny.............................................................
................................................ 57,475 - - 57,475
Non--Executive Director
Mary Lake
Polan.............................................................
...................................... 54,094 - - 54,094
Non--Executive Director
John Wilbur Stakes
III(5)............................................................
......................... 30,869 - - 30,869
Non--Executive Director
Bruce Andrew
Williams..........................................................
............................. 54,094 - - 54,094
Non--Executive Director
(1) In addition to the bonuses included in the table above,
contingent bonuses of $50,000 and $35,000 were awarded to Dr.
Lumsden and Mr. Huang, respectively, for services provided in 2016.
These bonuses were not accrued for at December 31, 2016, as the
payments are contingent upon: the closing of the next significant
financing; continued service; and no material adverse conditions
impacting us.
(2) Mr. Meyers, our former Chief Financial Officer, resigned
from the Company effective January 13, 2017.
(3) Mr. Morgan was awarded a bonus of 100,000 pounds sterling by
the Board of Directors in March 2017 for services provided in 2016.
Half of the bonus was payable upon board approval in March 2017;
the remainder is contingent upon us completing a financing of at
least US$20 million.
(4) Mr. Gold received $60,000 in 2016 for services provided
under a consulting agreement to us.
(5) Mr. Stakes resigned from our board of directors effective July 1, 2016.
Basic salary
Basic salaries for Executive Directors are reviewed annually
having regard to individual performance and market practice.
Annual Bonuses
Each calendar year, a bonus may be awarded at the discretion of
the board of directors having considered the recommendations of the
remuneration committee to reward the executives' contribution to
the achievement of our strategic and financial targets and personal
performance objectives.
Discretionary bonuses were awarded to Executive Directors and
the Chairman in recognition of their extraordinary service in
successfully completing the acquisition of Nuprim assets, the AIM
listing, a secondary fund raising, QIDP designation from the FDA
and the initiation of the Phase 3 clinical trials.
Longer term incentives
In order to further incentivize the Executive Directors and
align their interests with shareholders, we granted share options.
See "Outstanding Equity Awards, Grants and Option Exercise" below
for information regarding the share options that are held by our
directors and executive officers.
Outstanding Equity Awards, Grants and Option Exercise
The table below sets out information on outstanding options to
purchase ordinary shares held by our current directors and
executive officers as of December 31, 2016. See "Employment
Agreement With Robert Dickey IV" below for a description of the
share option granted to Mr. Dickey upon his joining our company in
January 2017.
January December
1, 31, Exercise Grant Expiry
2016 Granted 2016 price date date
-------------------------- ------------------ -------------- -------------------- ---------- --------- --------
Richard Morgan 73,215 - 73,215 $0.70 1/1/10 1/1/20
Non-Executive
Chairman 6,179 - 6,179 $0.70 1/1/11 1/1/21
502,950 - 502,950 $0.14 12/4/14 12/4/24
582,344 - 582,344
------------------ -------------- --------------------
Robert Bertoldi 53,887 - 53,887 $0.70 1/1/10 1/1/20
Executive Director 251,475 - 251,475 $0.14 12/4/14 12/4/24
305,362 - 305,362
------------------ -------------- --------------------
Charlotta Ginman-Horrell 251,475 - 251,475 $0.14 12/4/14 12/4/24
Non-Executive
Director 251,475 - 251,475
------------------ -------------- --------------------
Jonathan Gold 73,502 - 73,502 $0.70 1/1/10 1/1/20
Non-Executive
Director 5,964 - 5,964 $0.70 1/11/11 1/11/21
251,475 - 251,475 $0.14 12/4/14 12/4/24
330,941 - 330,941
------------------ -------------- --------------------
Zaki Hosny 53,888 - 53,888 $0.70 6/18/09 6/18/19
Non-Executive
Director 14,370 - 14,370 $0.70 1/1/10 1/1/20
2,587 - 2,587 $0.70 1/1/11 1/1/21
107,774 - 107,774 $0.14 1/30/13 1/30/23
251,475 - 251,475 $0.14 12/4/14 12/4/24
430,094 - 430,094
------------------ -------------- --------------------
Graham Lumsden 574,800 - 574,800 $0.14 5/25/13 5/25/23
Chief Executive
Officer and
Executive Director 2,874,000 - 2,874,000 $0.14 12/4/14 12/4/24
3,448,800 - 3,448,800
------------------ -------------- --------------------
Mary Lake Polan 67,036 - 67,036 $0.70 1/1/10 1/1/20
Non-Executive
Director 5,461 - 5,461 $0.70 1/1/11 1/1/21
251,474 - 251,474 $0.14 12/4/14 12/4/24
323,971 - 323,971
------------------ -------------- --------------------
John Stakes(1) 62,366 - 62,366 $0.70 1/1/10 1/1/20
Non-Executive
Director 2,802 - 2,802 $0.70 1/1/11 1/1/21
251,474 - 251,474 $0.14 12/4/14 12/4/24
316,642 - 316,642
------------------ -------------- --------------------
Bruce Williams 67,252 - 67,252 $0.70 1/1/10 1/1/20
Non-Executive
Director 28,740 - 28,740 $0.70 1/16/10 1/16/20
71,850 - 71,850 $0.70 11/15/10 1/16/20
2,802 - 2,802 $0.70 1/1/11 1/1/21
251,474 - 251,474 $0.14 12/4/14 12/4/24
422,118 - 422,118
------------------ -------------- --------------------
Pete Meyers(2)
Chief Financial
Officer - 2,961,577 2,961,577 GBP0.405 4/21/16 4/21/26
------------------ -------------- --------------------
- 2,961,577 2,961,577
------------------ -------------- --------------------
David Huang 718,500 - 718,500 $0.14 12/4/14 12/4/24
Chief Medical
Officer 100,000 - 100,000 GBP0.4775 6/02/15 6/02/25
------------------ -------------- --------------------
818,500 - 818,500
------------------ -------------- --------------------
(1) Mr. Stakes resigned from our board of directors effective July 1, 2016.
(2) Mr. Meyers, our former Chief Financial Officer, resigned
from the Company effective January 13, 2017.
In addition to the above, in February 2017, we granted options
to purchase ordinary shares at an exercise price of 26 pence per
share. The Chief Executive Officer was granted 1,700,000 options of
which 1,000,000 options will vest monthly over four years from the
date of grant and 700,000 options will vest monthly over 4 years
from the date of the data read out on the REVIVE-1 trial, which was
April 18, 2017. The Chief Medical Officer was granted 1,000,000
options that will vest monthly over four years from the date of
grant. The Chief Financial Officer was granted 600,000 options of
which 150,000 options will vest on the anniversary date of the
commencement of his employment and 450,000 options will vest over
the following 3 years. The options will expire ten years from the
date of grant.
Share Option Plan
On December 4, 2014, Motif, Inc. adopted the Motif BioSciences,
Inc. Share Option Plan. Upon our admission to AIM, we adopted Motif
Inc.'s Share Option Plan and assumed all stock options that had
been granted by Motif BioSciences, Inc. under the Share Option
Plan, which are now exercisable for our ordinary shares.
Participation in the Share Option Plan is limited to our employees.
Options may be granted to non--employees (consultants and
directors) by way of a sub--plan, governed by the same rules of the
Share Option Plan unless the context otherwise provides. The Share
Option Plan has the following key terms:
-- the number of shares that may be allocated on any day shall
not, when added to the aggregate number of shares allocated under
the Share Option Plan in the previous ten years and any other
employees' share option scheme adopted by the Company, exceed the
number of shares that represents 10% of the ordinary share capital
of the Company in issue immediately prior to that day;
-- the maximum total number of shares that may be issued under
the Share Option Plan is 12,993,000 and such share options shall
consist of authorized but unissued or reacquired shares or any
combination thereof;
-- the exercise price for each share option will not be less
than the nominal value of the relevant shares if the share options
are to be satisfied by a new issue of shares by the Company. The
exercise price is to be established by the board of directors;
however, must not be less than the fair market value at the
effective date of grant of the share option, as judged by the board
of directors if the Company's shares are not listed on a securities
exchange, or by reference to a closing price, if the Company's
shares are listed on a securities exchange;
-- the share options may be exercised at such time or times, or
upon such event or events and subject to such terms, conditions,
performance criteria and restrictions as determined by the board
and set out in the share option agreements evidencing the share
options. However, no share option shall be exercisable after the
expiration of ten years after the effective date of grant;
-- subject to earlier termination of a share option as otherwise
provided by the Share Option Plan, an option shall terminate upon
the option holder's termination of service to the Company, whether
as employee, director or consultant. A share option terminated in
this way must be exercised within three months after the date on
which the share option holder's service to the Company
terminated;
-- upon a change of control of the Company, the board may
provide for acceleration of the exercisability and/or vesting in
connection with any share options acquired pursuant to the change
of control. The board also has the absolute discretion to determine
that any share options outstanding immediately prior to a change of
control shall be cancelled in return for payment. The entity
acquiring the Company may assume or continue the Company's rights
and obligations in relation to each share option that has been
granted; and
-- the board may amend, suspend or terminate the Share Option Plan at any time.
Limitations On Liability And Indemnification Matters
To the extent permitted by the United Kingdom Companies Act
2006, we are empowered to indemnify our directors against any
liability they incur by reason of their directorship. We maintain
directors' and officers' insurance to insure such persons against
certain liabilities.
C. Board Practices.
Our board of directors consists of eight members, including a
non-executive chairman, two executive directors and six
non-executive directors. The following table sets forth the names
of our directors and the years of their initial appointment as
directors.
Year of
Initial
Name Current Position Appointment
----------------------------- ----------------- -------------
Richard Cecil Eversfield Non--Executive
Morgan(1)(2) Chairman 2004
Executive
Graham Lumsden Director 2013
Non--Executive
Charlotta Ginman--Horrell(1) Director 2015
Non--Executive
Jonathan Gold(1) Director 2004
Non--Executive
Zaki Hosny(2) Director 2006
Non--Executive
Mary Lake Polan(3) Director 2004
Non--Executive
Bruce Williams(1)(2) Director 2004
Executive
Robert Bertoldi Director 2014
(1) Member of Audit Committee. Mr. Morgan was a member of the
audit committee until being replaced by Mr. Williams in December
2016.
(2) Member of Remuneration Committee
(3) Member of Nomination Committee
Our board of directors meets regularly, generally every two
months with two meetings per year in person and four meetings per
year telephonically. Its direct responsibilities include setting
annual budgets, reviewing trading performance, approving
significant capital expenditure, ensuring adequate funding, setting
and monitoring strategy, and reporting to shareholders. The
non--executive directors have a particular responsibility to ensure
that the strategies proposed by the executive directors are fully
considered.
As an AIM--listed company, we are subject to the continuing
requirements of the AIM Rules for Companies as published by the
London Stock Exchange plc. Our board also adheres to the principles
of the Quoted Companies Alliance's Corporate Governance Code for
Small and Mid--Size Quoted Companies in such respects as it
considers appropriate for our size and the nature of our
business.
Our board is responsible to our shareholders for our proper
management and setting our overall direction and strategy,
reviewing scientific, operational and financial performance, and
advising on management appointments. All key operational and
investment decisions are subject to board approval.
There is a clear separation of the roles of chief executive
officer and non--executive chairman. The chairman is responsible
for overseeing the running of our board, ensuring that no
individual or group dominates our board's decision--making and
ensuring that the non--executive directors are properly briefed on
matters. The chief executive officer has the responsibility for
implementing the strategy of our board and managing our
day--to--day business activities.
All of our directors are subject to election by shareholders at
the first annual general meeting after their appointment to our
board. Following this initial appointment by the shareholders, the
directors are subject to retirement by rotation. At each annual
general meeting of the Company, one--third of the directors or, if
their number is not three or a multiple of three, then the number
nearest to one--third shall retire from office by rotation. A
director who retires at a general meeting shall be eligible for
reappointment if such director is willing to be re--elected. In
addition, a non--executive director who would not otherwise be
required to retire at an annual general meeting will retire if he
has been in office for a continuous period of nine years or more at
the date of the meeting. Such non--executive director will not be
taken into account when determining the directors required to
retire by rotation.
The Sarbanes--Oxley Act of 2002, as well as related rules
subsequently implemented by the SEC, requires foreign private
issuers, including our company, to comply with various corporate
governance practices. In addition, NASDAQ rules provide that
foreign private issuers may follow home country practice in lieu of
the NASDAQ corporate governance requirements, subject to certain
exceptions and except to the extent that such exemptions would be
contrary to U.S. federal securities laws.
The home country practices we will follow so long as we qualify
as a foreign private issuer in lieu of NASDAQ rules are described
below:
-- We do not follow NASDAQ's quorum requirements applicable to
meetings of shareholders. Such quorum requirements are not required
under English law. In accordance with generally accepted business
practice, our Articles provide alternative quorum requirements that
are generally applicable to meetings of shareholders.
-- We do not follow NASDAQ's requirement that our board of directors consist of a majority of "independent" directors (as defined by NASDAQ rules), or that our board committees are comprised of entirely independent directors; although our audit committee will consist of entirely independent directors (as required by Rule 10A--3 of the Exchange Act) within one year of the effectiveness of our registration statement, in accordance with the phase in rules of the Exchange Act.
-- We do not follow NASDAQ's requirements that non--management
directors meet on a regular basis without management present. Our
board of directors may choose to meet in executive session at their
discretion.
-- We do not follow NASDAQ's requirements to seek shareholder
approval for the implementation of certain equity compensation
plans and issuances of ordinary shares under such plans. In
accordance with English law, we are not required to seek
shareholder approval to allot ordinary shares in connection with
applicable employee equity compensation plans.
We intend to take all actions necessary for us to maintain
compliance as a foreign private issuer under the applicable
corporate governance requirements of the Sarbanes--Oxley Act of
2002, the rules adopted by the SEC and NASDAQ's listing
standards.
Because we are a foreign private issuer, our directors and
senior management are not subject to short--swing profit and
insider trading reporting obligations under Section 16 of the
Exchange Act. They will, however, be subject to the obligations to
report changes in share ownership under Section 13 of the Exchange
Act and related SEC rules.
Director Independence
Based upon information requested from and provided by each
director concerning their background, employment and affiliations,
including family relationships, our board of directors has
determined that each of Charlotta Ginman--Horrell, Mary Lake Polan
and Bruce Williams, representing three of our eight directors, is
independent under the applicable rules and regulations of NASDAQ.
In making such determinations, the board of directors considered
the relationships that each such non--employee director has with us
and all other facts and circumstances the board of directors deemed
relevant in determining their independence.
Director Service Agreements
Role of the Board in Risk Oversight
Our board of directors is primarily responsible for the
oversight of our risk management activities and has delegated to
the audit committee the responsibility to assist our board in this
task. While our board oversees our risk management, our management
is responsible for day-to-day risk management processes. Our board
of directors expects our management to consider risk and risk
management in each business decision, to proactively develop and
monitor risk management strategies and processes for day-to-day
activities and to effectively implement risk management strategies
adopted by the board of directors. We believe this division of
responsibilities is the most effective approach for addressing the
risks we face.
Corporate Governance Practices
Board Committees
The standing committees of our board of directors consist of an
audit committee, a remuneration committee and a nomination
committee. Each committee operates under a charter. Copies of each
committee's charter are posted on the Investors section of our
website, which is located at www.motifbio.com.
Audit Committee
Currently, the members of our audit committee are Charlotta
Ginman--Horrell (Chair), Jonathan Gold and Bruce Williams. Mr.
Morgan was a member of the audit committee until being replaced by
Mr. Williams in December 2016. The audit committee meets at least
three times a year. The audit committee met seven times in
2016.
Our board of directors has determined that Ms. Ginman--Horrell
and Mr. Williams are independent under Rule 10A--3 of the Exchange
Act, and that Ms. Ginman--Horrell is also independent under the
applicable listing requirements of NASDAQ, and that each member of
our audit committee satisfies the other listing requirements of
NASDAQ for audit committee membership. In accordance with our
NASDAQ listing, our audit committee members must each be
independent under Rule 10A--3 of the Exchange Act. However, as a
foreign private issuer, our audit committee members are not subject
to the additional independence requirements imposed by NASDAQ. We
intend to rely on the phase--in rules of the Exchange Act with
respect to the independence of our audit committee. These rules
permit us to have an audit committee that has one member who is
independent upon the effectiveness of our registration statement, a
majority of members who are independent within 90 days of
effectiveness and all members who are independent within one year
of effectiveness. Our board of directors has also determined that
Charlotta Ginman--Horrell qualifies as an "audit committee
financial expert," as such term is defined by the SEC, and that Ms.
Ginman--Horrell has the requisite level of financial sophistication
required by the continued listing standards of NASDAQ.
The audit committee advises the board of directors on the
appointment of external auditors and on their remuneration (both
for audit and non--audit work) and discusses the nature, scope, and
results of the audit with the auditors. The audit committee reviews
the extent of the non--audit services provided by the auditors and
reviews with them their independence and objectivity. The Chairman
of the audit committee reports the outcome of the audit committee
meetings to the board of directors and the board of directors
receives the minutes of the meetings.
Remuneration Committee
The current members of our remuneration committee are Zaki Hosny
(Chair), Richard Morgan, and Bruce Williams. The remuneration
committee met six times in 2016. Our board of directors has
determined that Mr. Williams and Mr. Morgan are independent under
the applicable listing requirements of NASDAQ. The remuneration
committee is responsible for making recommendations to our board of
directors, within agreed terms of reference, on our framework of
executive remuneration and cost. The committee determines the
contract terms, remuneration, and other benefits for each of our
executive directors, including performance related bonus schemes
and pension rights.
Nomination Committee
As of the date of this Annual Report, Mary Lake Polan is the
sole member of our nomination committee. Our board of directors
determined that Ms. Polan is independent under the applicable
listing requirements of NASDAQ. We intend to appoint another
director to this committee. The nomination committee met one time
in 2016. The nomination committee monitors the size and composition
of the board of directors and the other committees and is
responsible for identifying suitable candidates to join our board
of directors.
Code Of Business Conduct And Ethics
We have adopted a Code of Business Conduct and Ethics, or the
Code of Conduct, that is applicable to all of our employees,
executive officers and directors. A copy of the Code of Conduct is
available on our website at www.motifbio.com.
Scientific Advisory Board
Our board of directors has created a Scientific Advisory
Committee, which meets twice a year. The role of the Scientific
Advisory Committee is to advise on and oversee our research and
development efforts of the company and be certain that all clinical
development performed is of the highest ethical and moral
standards. The Scientific Advisory Committee reviews all clinical
protocols and monitors issues throughout said protocol to ensure
patient safety.
D. Employees.
As of December 31, 2016, we had six employees, five based in the
United States and one based in the United Kingdom. We consider our
labor relations to be good.
E. Share Ownership.
For information regarding the share ownership of our directors
and executive officers, see "Item 6.B. Compensation" and "Item 7.A.
Major Shareholders."
Item 7. Major Shareholders and Related Party Transactions
A. Major shareholders.
The following table presents information relating to the
beneficial ownership of our ordinary shares as of March 31,
2017.
The number of ordinary shares beneficially owned by each entity,
person, executive officer or director is determined in accordance
with the rules of the SEC, and the information is not necessarily
indicative of beneficial ownership for any other purpose. Under
such rules, beneficial ownership includes any ordinary shares over
which the individual has sole or shared voting power or investment
power as well as any ordinary shares that the individual has the
right to acquire within 60 days of March 31, 2017 through the
exercise of any option or other right. Except as otherwise
indicated, and subject to applicable community property laws, the
persons named in the table have sole voting and investment power
with respect to all ordinary shares held by that person.
Ordinary shares that a person has the right to acquire within 60
days of March 31, 2017 are deemed outstanding for purposes of
computing the percentage ownership of the person holding such
rights, but are not deemed outstanding for purposes of computing
the percentage ownership of any other person, except with respect
to the percentage ownership of all executive officers and directors
as a group. The percentage of beneficial ownership of our ordinary
shares is based on an aggregate of 195,885,228 shares outstanding
as of March 31, 2017. As of March 31, 2017, we believe
approximately 13.25% of our ordinary shares, are held by 19 record
holders in the United States. None of our major shareholders have
different voting rights than other shareholders.
Unless otherwise indicated, the current business address for
each executive officer and director named below is 125 Park Avenue
25th Floor, New York, NY 10017, United States.
Ordinary Shares
Beneficially Owned
----------------------
Percent
Name of Beneficial Owner Total (%)
---------------------------------------------------------------------------------------- ------------ --------
5% Shareholders
Invesco Asset Management Limited(1)...................................................... 49,416,000 25.23%
Amphion
Group(2)................................................................................
......... 43,657,290 22.24%
Executive Officers and Directors
Graham George
Lumsden(3).......................................................................... 2,807,383 1.41%
Robert Dickey
IV.......................................................................................
..... - -
Robert
Bertoldi(4).............................................................................
.............. 43,961,034 18.33%
David
Huang(5).................................................................................
............. 676,375 *
Richard Cecil Eversfield
Morgan(6)............................................................. 44,304,812 18.45%
Charlotta
Ginman--Horrell(7).......................................................................
... 292,650 *
Jonathan
Gold(8)..................................................................................
.......... 416,680 *
Zaki
Hosny(9).................................................................................
................ 582,775 *
Mary Lake
Polan(10)................................................................................
...... 274,103 *
Bruce Andrew
Williams(11).......................................................................... 464,400 *
All Current Executive Officers and Directors as a Group (10 persons)(12) 49,324,696 20.37%
* Indicates beneficial ownership of less than 1% of the total
outstanding ordinary shares.
(1) The principal address of Invesco Asset Management is
Perpetual Park, Perpetual Park Drive, Henley--on--Thames, R69 1HH,
United Kingdom.
(2) This number includes 42,881,395 shares held by Amphion
Innovations plc and 359,250 shares held by MSA Holdings B.S.C., a
wholly--owned subsidiary of Amphion Innovations plc. It also
includes 98,096 shares and 318,549 shares issuable upon the
exercise of warrants held by Amphion Innovations plc and Amphion
Innovations US, Inc., respectively, that are currently exercisable
or will become exercisable within 60 days of March 31, 2017. The
principal address of the Amphion Group is Fort Anne, Douglas, Isle
of Man, IM1 5PD.
(3) This number consists of 2,807,383 ordinary shares that are
issuable pursuant to share options that are currently exercisable
or will become exercisable within 60 days of March 31, 2017.
(4) This number includes 242,493 ordinary shares that are
issuable pursuant to share options that are currently exercisable
or will become exercisable within 60 days of March 31, 2017, and
also includes the ordinary shares beneficially owned by the Amphion
Group, of which Mr. Bertoldi may be deemed to be a beneficial
owner.
(5) This number represents 676,375 ordinary shares that are
issuable pursuant to share options that are currently exercisable
or will become exercisable within 60 days of March 31, 2017.
(6) This number includes 456,606 ordinary shares that are
issuable pursuant to share options that are currently exercisable
or will become exercisable within 60 days of March 31, 2017, and
also includes the ordinary shares beneficially owned by the Amphion
Group, of which Mr. Morgan may be deemed to be a beneficial
owner.
(7) This number includes 167,650 ordinary shares that are
issuable pursuant to share options that are currently exercisable
or will become exercisable within 60 days of March 31, 2017.
(8) This number includes 268,072 ordinary shares that are
issuable pursuant to share options that are currently exercisable
or will become exercisable within 60 days of March 31, 2017.
(9) This number includes 367,225 ordinary shares that are
issuable pursuant to share options that are currently exercisable
or will become exercisable within 60 days of March 31, 2017.
(10) This number includes 261,103 ordinary shares that are
issuable pursuant to share options that are currently exercisable
or will become exercisable within 60 days of March 31, 2017.
(11) This number includes 359,250 ordinary shares that are
issuable pursuant to share options that are currently exercisable
or will become exercisable within 60 days of March 31, 2017.
(12) This number includes 5,606,155 ordinary shares that are
issuable to our officers and directors pursuant to share options
that are currently exercisable or will become exercisable within 60
days of March 31, 2017 and also includes the ordinary shares
beneficially owned by the Amphion Group, of which Mr. Bertoldi
and/or Mr. Morgan may be deemed to be a beneficial owner.
B. Related Party Transactions.
Since January 1, 2016, we have engaged in the following
transactions with our directors, executive officers and holders of
5% or more of our ordinary shares, and affiliates of our directors,
executive officers and holders of more than 5% of our ordinary
shares. We believe the terms obtained or consideration that we paid
or received, as applicable, in connection with the transactions
described below were comparable to terms available or the amounts
that would be paid or received, as applicable, in transactions with
unrelated third-parties.
Transactions With Amphion Innovations plc And Amphion
Innovations US, Inc.
As of the date of this Annual Report, the Amphion Group
collectively owns approximately 22% of our outstanding ordinary
shares. Since 2008, Amphion Innovations plc and its wholly owned
subsidiary, Amphion Innovations US, Inc., or collectively, the
Amphion Group, have provided funding for the activities of Motif
BioSciences Inc. through the issue of convertible interest bearing
loan notes. Mr. Morgan is Chief Executive Officer of Amphion
Innovations plc and Robert Bertoldi is President and Chief
Financial Officer of Amphion Innovations plc.
On September 7, 2016, we amended and restated the convertible
notes with Amphion Innovations plc and Amphion Innovations US Inc.
to provide that any outstanding principal under the notes as of the
maturity date will be paid to the holders on the maturity date, at
our election, through the issuance of (i) a number of our ordinary
shares, based on the conversion price set forth in the notes, or
(ii) a number of ADSs, which is equal to a number determined by
dividing the number of ordinary shares the holder would otherwise
be entitled to by the then applicable ADS to ordinary share ratio.
The amended and restated convertible promissory notes also provide
that except in the event of a default, no interest will accrue or
be payable with respect to the amounts due under notes. In
consideration for its agreement to forego interest payments under
its convertible promissory notes, we issued 409,000 ordinary shares
to Amphion Innovations plc. The amended and restated notes also
permit us or the holders to convert all or any portion of the
outstanding principal under the notes into ordinary shares or ADSs
(as determined by us) at any time prior to the maturity date.
On December 21, 2016, we announced that Amphion Innovations plc
and Amphion Innovations US Inc. exercised their right to convert
their convertible promissory notes scheduled to mature on December
31, 2016 into ordinary shares. At the time of conversion, the notes
totaled $3,550,786, and were converted in accordance with their
terms at US$ 0.2447 per share. Following the conversion, the
Amphion Group holds no further convertible promissory notes. As of
March 31, 2017, their holdings total is 43,240,645 ordinary shares,
representing 22% of the company. The shares, ranking pari passu
with the existing ordinary shares, were admitted to trading on AIM
on December 29, 2016.
Advisory And Consultancy Agreement With Amphion Innovations US,
Inc. And Shared Office Space
On April 1, 2015, we entered into an Advisory and Consultancy
Agreement with Amphion Innovations US, Inc. The consideration for
the services is $120,000 per annum. The agreement provides that in
the event that we raised a minimum of GBP5,000,000 (US$7,333,000)
in gross proceeds on AIM admission or in a follow--on offering, a
one--time payment of US$300,000 would be required to be paid to
Amphion Innovations US, Inc. Accordingly, we paid US$300,000 to
Amphion Innovations US, Inc. on July 21, 2015 in connection with
our follow--on offering on AIM. The agreement was for an initial
period of 12 months and will automatically renew each year on the
anniversary date unless either party notifies the other by giving
90 days' written notice prior to expiration. The agreement was
amended in December 2016 so that either party may terminate the
agreement at any time, for any reason, upon giving the other party
ninety days' advance written notice. We paid US$120,000 to Amphion
Innovations US, Inc. in 2016 in accordance with the terms of the
agreement. At the date of this Annual Report, the agreement
continues to be in force.
Amphion Innovations US, Inc. also bills us on a pass--through
rate for office space and shared workspace.
Consultancy Agreement With Amphion Innovations Plc
On April 1, 2015, we entered into a Consultancy Agreement with
Amphion Innovations plc for the services of Robert Bertoldi, an
employee of Amphion Innovations plc. The consideration for his
services was $5,000 per month. On November 1, 2015, the
consideration was increased to $180,000 per annum. On July 1, 2016,
the consideration decreased to US $75,000. The agreement was for an
initial period of 12 months and would automatically renew each year
on the anniversary date unless either party notifies the other by
giving 90 days' written notice prior to expiration. The agreement
was amended in December 2016 so that either party may terminate the
agreement at any time, for any reason, upon giving the other party
ninety days' advance written notice. We paid Robert Bertoldi
US$127,500 in 2016 in accordance with the terms of the
agreement.
Consultancy Agreement with Amphion Innovations US, Inc.
On September 7, 2016, we entered into a Consultancy Agreement
with Amphion Innovations US, Inc., pursuant to which Amphion
Innovations US, Inc. will, following and subject to the closing of
the November 2016 offering, provide consultancy services in
relation to our obligations as a NASDAQ listed company. The
consideration for the services is $15,500 per month. The agreement
is for an initial period of 12 months, after which the agreement
will terminate automatically unless renewed by the parties by
mutual agreement. We paid US$19,633 in 2016 pursuant to the terms
of this agreement.
Agreements with Directors, Executive Officers and Others
Service Agreement with Graham Lumsden
On April 1, 2015, we entered into a service agreement with
Graham Lumsden pursuant to which Dr. Lumsden is employed as our
Chief Executive Officer on a full--time basis. Under the terms of
the agreement Dr. Lumsden received an initial gross annual salary
of $360,000. In February 2016, our board of directors increased Dr.
Lumsden's gross annual salary to $425,000. Dr. Lumsden is eligible
to participate in the Company's discretionary annual bonus program
in an amount to be determined by the board of directors in its
absolute discretion. The agreement contains customary
confidentiality, non--competition and non--solicitation
provisions
Dr. Lumsden is employed by us on a permanent contract and his
employment will continue until terminated by either party giving
notice to the other as follows:
-- for the first two years of the employment, Dr. Lumsden's
employment can be terminated by one party giving the other three
months' notice of termination of the agreement; and
-- thereafter Dr. Lumsden's employment can be terminated by one
party giving the other one month's notice for each complete year of
the Dr. Lumsden's period of continuous employment up to a maximum
of 12 months' notice. In addition, we may terminate Dr. Lumsden's
employment without notice in certain circumstances by making a
payment to Dr. Lumsden in lieu of notice, which payment will be
equal to the portion of his annual salary due him for the duration
of the notice period. The agreement also contains garden leave
provisions which can be utilized in event that Dr. Lumsden's
employment is terminated by us.
Employment Agreements with Robert Dickey IV and Dr. David
Huang
Employment Agreement with Robert Dickey IV
On January 16, 2017, our subsidiary, Motif BioSciences Inc.,
entered into an employment agreement with Mr. Dickey, our Chief
Financial Officer. Under the terms of the agreement, Mr. Dickey
received a base salary of $320,000 per year, subject to upward or
downward adjustment from time to time in the Company's discretion.
He was also granted a stock option award of 1,500,000 shares that
vest over four years. Mr. Dicky is eligible to participate in the
Company's discretionary annual bonus program in an amount to be
determined by the board of directors. He is also eligible to
participate in any and all group health, disability insurance, life
insurance, incentive, savings, retirement, and other benefit plans
which are made generally available to similarly--situated employees
of the Company. The employment agreement contains customary
confidentiality, non--competition and non--solicitation
provisions.
Employment Agreement with David Huang
On May 1, 2015, our subsidiary, Motif BioSciences Inc., entered
into an employment agreement with Dr. Huang, our Chief Medical
Officer. Under the terms of the agreement, Dr. Huang received a
base salary of $300,000 per year, subject to upward or downward
adjustment from time to time in the Company's discretion. Effective
January 1, 2016, our board of directors increased Dr. Huang's base
salary to $400,000. Dr. Huang is eligible to participate in the
Company's discretionary annual bonus program in an amount to be
determined by the board of directors. He is also eligible to
participate in any and all group health, disability insurance, life
insurance, incentive, savings, retirement, and other benefit plans
which are made generally available to similarly--situated employees
of the Company. The employment agreement contains customary
confidentiality, non--competition and non--solicitation
provisions.
Payments To Be Made Upon Termination Of Employment
The employment agreements with each of Mr. Dickey and Dr. Huang
provide that their employment will be considered "at will" in
nature and, accordingly, either the Company or the employee may
terminate their respective employment agreements and employee's
employment at any time and for any reason, with or without cause or
prior notice. The employment agreements also provide that if the
employee's employment with the Company is terminated by the Company
without "Cause" or by the employee with "Good Reason" (subject to a
notice and cure period provided for in the agreement) prior to or
upon the second anniversary of the effective date of the employment
agreement, the employee will be entitled to receive upon such
termination: (i) any accrued but unused vacation pay; (ii) any
earned but unpaid annual salary; and (iii) subject to the
employee's execution of a general release of the Company, an amount
equal to three months of his then--current annual salary.
Under the employment agreements, if Mr. Dickey's or Dr. Huang's
employment with the Company is terminated by the Company without
Cause following the second anniversary of the effective date of the
employment agreement, the employee will be entitled to receive upon
such termination: (i) any accrued but unused vacation pay; (ii) any
earned but unpaid annual salary; and (iii) subject to the
employee's execution of a general release of the Company, an amount
equal to three months of his then--current annual salary, plus one
additional month of his then--current annual salary for each full
year of employment with the Company, up to a maximum of nine
additional months above the three--month initial entitlement, which
will be paid in twelve substantially equal monthly installments
commencing with the first regular payroll of the Company following
his execution of the general release.
The term "Cause" means: (a) any act or omission of employee
that, in connection with his employment with the Company, amounts
to or constitutes a breach of a fiduciary duty, gross negligence,
willful misconduct, or material misconduct, or that amounts to or
constitutes fraud, embezzlement, or misappropriation; (b)
employee's breach of any term(s) of the employment agreement; (c)
employee's violation of any policy(ies) established, adopted, or
maintained by the Company; (d) any act or omission of employee
that, in the Company's sole discretion, is demonstrably and
materially injurious to the Company; (e) any act or omission of
employee that causes the Company to suffer or endure public
disgrace, disrepute, or economic harm; or (f) employee's
misappropriation of corporate assets or corporate
opportunities.
The term "Good Reason" means the occurrence of either of the
following events without the consent of the employee: (a) a
material breach of the employment agreement by the Company; or (b)
a material reduction in employee's responsibility, authority, or
duties relative to employee's responsibility, authority, or duties
in effect immediately prior to such reduction, except for any
change in title or reporting relationship (such title or reporting
change will not constitute Good Reason); provided, however, that
"Good Reason" will not be deemed to exist for purposes of the
agreement unless employee has first provided written notice of such
reason to the Company no later than 30 days after the event or
occurrence constituting Good Reason first arises, with such notice
affording the Company 30 days, from the date of the Company's
receipt of such notice to cure the deficiency, and further provided
that the Company has failed to cure such deficiency within the time
frame prescribed in such written notice.
Consultancy Agreement for Pete Meyers
On January 16, 2017, we entered into a consulting agreement with
Pete Meyers, our former Chief Financial Officer. Under the
agreement, Mr. Meyers will provide services for a three month
period to facilitate the transition of his prior duties as the
Chief Financial Officer to our new Chief Financial Officer. He will
be paid $30,000 for the first month of services and $10,000 for the
second and third month of services. Additionally, provided the
consulting services are performed, the vesting on 740,934 of the
stock options granted on April 21, 2016 will be accelerated as of
May 1, 2017. Mr. Meyers has until December 31, 2018 to exercise
such options.
Consultancy Agreement With Jonathan Gold
On April 13, 2016, we entered into a consultancy agreement with
Jonathan Gold, a member of our board of directors. Under the terms
of this agreement, Mr. Gold received a fixed fee of $10,000 per
month for strategic financial expert advice and guidance. The term
of this agreement was six months, commencing January 1, 2016. The
term of the agreement would automatically renew each month
following the initial term, provided that each party provided its
mutual agreement to renew in a signed writing, no later than 30
days prior to the expiration of the term. This agreement was not
extended beyond the initial term.
On April 7, 2017, we entered into a new consultancy agreement
with Jonathan Gold. Under the terms of this agreement, Mr. Gold
received a fixed fee of $16,167 per month for strategic financial
expert advice and guidance. The term of this agreement was twelve
months, commencing January 1, 2017. The term of the agreement would
automatically renew each month following the initial term, as long
as either party did not provide notice to the other party of its
election not to continue to renew the agreement with at least 30
days advance notice.
Non--Executive Directors' Letters Of Appointment
With the exception of Robert Bertoldi whose services are to be
provided by Amphion Innovations plc as described above, each of our
non--executive directors, being Richard Morgan, Charlotta
Ginman--Horrell, Jonathan Gold, Zaki Hosny, Mary Lake Polan and
Bruce Williams, entered into a letter of appointment with us on
April 1, 2015, pursuant to which they each agreed to act as
non--executive directors. Jonathan Gold is also performing services
for us under a consultancy agreement, as described above.
The non--executive directors have agreed to act for a period of
three years from the date of our admission to AIM (subject to
re--election by our shareholders as required by our Articles),
however, the appointment can be terminated prior to the end of this
three--year period by either party giving one month's prior written
notice of termination to the other. We also have the right to
terminate the appointment without notice in certain specified
circumstances. At the end of the initial three--year appointment
term, the parties may agree, by mutual consent, to renew the
appointment for a further term.
Effective January 1, 2016, Richard Morgan receives a fee of
GBP85,000 for his participation as our non--executive Chairman and
his participation on our audit committee and remuneration
committees. Each of the other non--executive directors, except
Jonathan Gold, receives a fee of GBP35,000 per annum for their
services as a non--executive director and an additional fee of
GBP5,000 for their participation with a committee of our board of
directors. The committee chairs also receive an additional fee of
GBP2,500 for their participation as committee chairs.
Transactions With Key Management Personnel
From April 2015 through January 2016 we paid Zaki Hosny, one of
our non--executive directors, $195,000 as a settlement for salary
owed to him for his service as our Chief Executive Officer from
2006 to 2013. For additional information regarding transactions
with key management personnel, see "Item 6.B. Compensation."
Policies And Procedures For Related Party Transactions
The members of the board who are not conflicted by the
particular related party transaction under review have the primary
responsibility for reviewing and approving or disapproving related
party transactions, which are transactions between us and related
persons in which we or a related person has or will have a direct
or indirect material interest. For purposes of this policy, a
related person will be defined as a director, executive officer,
nominee for director and/or any greater than 5% beneficial owner of
our ordinary shares, in each case since the beginning of the most
recently completed year, and their immediate family members.
C. Interests of Experts and Counsel.
Not applicable.
Item 8. Financial Information
A. Consolidated Statements and Other Financial Information.
See Item 18. Financial Statements.
Legal Proceedings
From time to time we may become involved in legal proceedings or
be subject to claims arising in the ordinary course of our
business. We are not presently a party to any legal proceedings
that, if determined adversely to us, would individually or taken
together have a material adverse effect on our business, results of
operations, financial condition or cash flows. Regardless of the
outcome, litigation can have an adverse impact on us because of
defense and settlement costs, diversion of management resources and
other factors.
Dividend Distribution Policy
Subject to the rights attached to any ordinary share, all
dividends and other distributions, including any surplus in the
event of a liquidation, are to be apportioned and paid pro rata
according to the amounts paid up on the ordinary shares, or
otherwise in accordance with the terms concerning entitlement to
dividends on which shares were issued. Any dividend unclaimed for
12 years from the date on which it became payable shall revert to
the Company. The board may, where authorized by shareholders at an
annual general meeting, offer scrip dividends to shareholders,
whereby shareholders can opt to receive an allotment of new
ordinary shares in lieu of any dividend declared by the board.
B. Significant Changes.
There have been no significant changes since December 31,
2016.
Item 9. The Offer and Listing.
A. Offer and Listing Details.
Our ordinary shares are currently listed on the AIM Market of
the London Stock Exchange, or AIM, under the symbol "MTFB." Prior
to the U.S. offering, neither the ADSs nor the ADS Warrants were
listed on any stock exchange. The ADSs and ADS Warrants are now
listed on The NASDAQ Capital Market under the symbols "MTFB" and
"MTFBW," respectively. The following tables set forth for the
periods indicated the reported high and low sale prices per ADS and
ADS Warrants, as applicable, in U.S. dollars, and per ordinary
share in pounds sterling.
Nasdaq Capital Market
Per ADS
-------------
High Low
------ -----
Annual US $ US $
2016 (beginning November 23, 2016) 6.40 5.25
Quarterly
Fourth Quarter 2016 6.40 5.25
Month Ended:
November 2016 6.09 5.37
December 2016 6.40 5.25
January 2017 6.65 5.36
February 2017 6.69 6.02
March 2017 6.50 5.80
April 2017 (through April 21, 2017 10.79 6.09
Per ADS Warrant
------------------
High Low
-------- --------
Annual
2016 (beginning November 23, 2016) 1.50 0.89
Quarterly
Fourth Quarter 2016 1.50 0.89
Month Ended:
November 2016 1.50 1.05
December 2016 1.40 0.89
January 2017 1.47 1.12
February 2017 1.50 1.25
March 2017 1.55 1.21
April 2017 (through April 21, 2017 2.65 1.41
AIM Market of the London Stock Exchange
Period High Low
------------------------------------ ----- ----
Annual GBP GBP
2015 (beginning April 2, 2015) .77 .25
2016 .68 .21
Quarterly
Second Quarter 2015 .77 .25
Third Quarter 2015 .70 .47
Fourth Quarter 2015 .64 .39
First Quarter 2016 .47 .36
Second Quarter 2016 .57 .38
Third Quarter 2016 .68 .42
Fourth Quarter 2016 .54 .21
Month Ended
September 2016 .57 .46
October 2016 .54 .40
November 2016 .44 .22
December 2016 .27 .21
January 2017 .28 .23
February 2017 .28 .23
March 2017 .27 .24
April 2017 (through April 21, 2017 .45 .25
On April 21, 2017 the closing price of the ADSs on NASDAQ was
$10.28 per ADS, and the last reported closing price of the ordinary
shares on AIM was GBP0.39 per share.
B. Plan of Distribution.
Not applicable.
C. Markets.
Our ordinary shares are currently listed on the AIM Market of
the London Stock Exchange, or AIM, under the symbol "MTFB." Prior
to the U.S. offering, neither the ADSs nor the ADS Warrants were
listed on any stock exchange. The ADSs and ADS Warrants are now
listed on The NASDAQ Capital Market under the symbols "MTFB" and
"MTFBW," respectively.
D. Selling Shareholders.
Not applicable.
E. Dilution.
Not applicable.
F. Expenses of the Issue.
Not applicable.
Item 10. Additional Information.
A. Share Capital.
Not applicable.
B. Memorandum and Articles of Association.
The information called for by this item has been reported
previously in our prospectus dated November 17, 2016, filed with
the SEC pursuant to Rule 424(b)(4), under the headings "Description
of Share Capital and Articles of Association" and "Description of
American Depositary Shares", and is incorporated by reference into
this Annual Report.
C. Material Contracts.
Potential Milestone Payments
We are party to a number of material contracts, some of which
may require milestone and royalty payments upon the occurrence of
certain future events. Pursuant to the terms of the merger
agreement we entered into with Nuprim on December 31, 2014, we
agreed to assume Nuprim's obligations under certain agreements. We
do not believe that the Sale and Purchase Agreement, dated June 1,
2001, by and between F. Hoffman--La Roche Ltd. and Hoffmann--La
Roche Inc., together the Hoffmann--La Roche Seller, and Arpida
Ltd., the Hoffman--La Roche/Arpida Agreement, was assigned to
Nuprim or the party for which it was a successor in interest with
regards to the iclaprim assets and therefore we do not have
obligations under such agreement.
The Hoffmann--La Roche/Arpida Agreement provides that the
Hoffmann--La Roche Seller will be entitled to receive a royalty of
1 to 5% of net sales of a Drug (as defined in such agreement), such
amount depending on various factors (e.g., the final drug
composition, timing of commercialization, country of sales). While
we do not believe we are a successor to such agreement and it is
unlikely our iclaprim product would fit the factors requiring
payment under such agreement, if it were determined that we are a
successor in interest to the Hoffman--La Roche/Arpida Agreement and
our iclaprim product is determined to fit the criteria of being a
Drug as defined in such agreement, we could have a payment
obligation of 1 to 5% of net sales of our iclaprim product for
certain countries for a period of ten years from first commercial
sale in such country. In addition, pursuant to a Sale and Purchase
Agreement with Acino Pharma AG (Acino), we are obligated to pay
Acino US$500,000 upon completion of any iclaprim Phase 3 clinical
study.
Ongoing Obligations Related to Our Initial Public Offering in
the United States
In connection with our initial public offering in the United
States, we agreed to pay to H.C. Wainwright & Co., LLC
("Wainwright"), a cash fee equal to 5% of the gross proceeds from
any exercise of the ADS Warrants issued as part of such offering,
provided that such fee shall be 2% of gross proceeds in connection
with any exercise of the ADS Warrants by Invesco Asset Management
Limited.
We also agreed to pay Wainwright a tail fee equal to the cash
compensation percentage paid in connection with our initial public
offering in the United States, if any investor introduced to us by
Wainwright with whom we have had an in person meeting or conference
call arranged during the term of its engagement provides us with
further capital in any public or private offering in the United
States of our equity securities (excluding debt securities, even if
convertible into equity securities) during the twelve-month period
following the expiration or termination of the term of Wainwright's
engagement, subject to certain limitation and exclusions.
Subject to certain conditions, we granted to Wainwright, for a
period of twelve months after the date of consummation of this
offering, a right of first refusal to act as a lead underwriter,
placement agent or manager for debt financing transaction or any
public or private equity offerings in the United States.
We, our executive officers and directors and certain
shareholders, agreed not to sell or transfer any ADSs, ordinary
shares or securities convertible into, exchangeable for,
exercisable for, or repayable with ADSs or ordinary shares, for up
to 180 days after the date of the final prospectus issued in
connection with our initial public offering in the United States,
without first obtaining the written consent of Wainwright.
Specifically, we and these other persons have agreed, with certain
limited exceptions, not to directly or indirectly:
-- offer, pledge, sell or contract to sell any ADSs or ordinary shares,
-- sell any option or contract to purchase any ADSs or ordinary shares,
-- purchase any option or contract to sell any ADSs or ordinary shares,
-- grant any option, right or warrant for the sale of any ADSs or ordinary shares,
-- lend or otherwise dispose of or transfer any ADSs or ordinary shares,
-- request or demand that we file a registration statement
related to the ADSs or ordinary shares, or
-- enter into any swap or other agreement that transfers, in
whole or in part, the economic consequence of ownership of any ADSs
or ordinary shares whether any such swap or transaction is to be
settled by delivery of shares or other securities, in cash or
otherwise.
This lock-up provision applies to ordinary shares, ADSs and to
securities convertible into or exchangeable or exercisable for or
repayable with ADSs or ordinary shares. It also applies to ADSs or
ordinary shares owned now or acquired later by the person executing
the agreement or for which the person executing the agreement later
acquires the power of disposition.
For additional information on our material contracts, please see
"Item 4. Information on the Company," Item 5.F. Tabular Disclosure
of Contractual Obligations," "Item 6. Directors, Senior Management
and Employees," and "Item 7.B. Related Party Transactions" of this
Annual Report on 20-F. Except as otherwise disclosed in this Annual
Report (including the exhibits thereto), we are not currently, and
have not been in the last two years, party to any material
contract, other than contracts entered into in the ordinary course
of our business.
D. Exchange Controls.
There are no governmental laws, decrees, regulations or other
legislation in the United Kingdom that may affect the import or
export of capital, including the availability of cash and cash
equivalents for use by us, or that may affect the remittance of
dividends, interest, or other payments by us to non-resident
holders of our ordinary shares or ADSs, other than withholding tax
requirements. There is no limitation imposed by English law or our
Articles on the right of non-residents to hold or vote ordinary
shares.
E. Taxation.
The following summary contains a description of the material
U.K. tax consequences and U.S. federal income tax consequences of
the acquisition, ownership and disposition of ordinary shares, ADSs
or Warrants, but it does not purport to be a comprehensive
description of all the tax considerations that may be relevant to a
decision to purchase ordinary shares, ADSs or Warrants. The summary
is based upon the tax laws of England and regulations thereunder
and on the tax laws of the United States and regulations thereunder
as of the date hereof, which are subject to change.
Material U.K. Tax Considerations
The comments set out below are based on current U.K. tax law as
applied in England and HM Revenue & Customs, or HMRC, practice
(which may not be binding on HMRC) as of the date of this Annual
Report, both of which are subject to change, possibly with
retrospective effect. They are intended as a general guide and
(unless otherwise stated) apply only to our shareholders resident
and, in the case of an individual, domiciled for tax purposes in
the United Kingdom and to whom "split year" treatment does not
apply (except insofar as express reference is made to the treatment
of non--U.K. residents), who hold ADSs, ordinary shares or Warrants
as an investment and who are the absolute beneficial owners
thereof. The discussion does not address all possible tax
consequences relating to an investment in ADSs, ordinary shares or
Warrants. Certain categories of shareholders, including those
carrying on certain financial activities (including dealers in
securities, collective investment schemes and insurance companies),
those subject to specific tax regimes or benefitting from certain
reliefs or exemptions (such as pension funds and charities),
those connected with us, those that own (or are deemed to own)
5% or more of our shares and/or voting power (either alone or
together with connected persons) and those for whom the ADSs,
ordinary shares or Warrants are employment--related securities may
be subject to special rules and this summary does not apply to such
shareholders and any general statements made in this disclosure do
not take them into account. This summary does not address any
inheritance tax considerations.
Any reference in this summary to shareholders are to holders of
ADSs or ordinary shares in the Company (but not to holders of
Warrants). Any references in this summary to warrant holders are to
holders of ADS Warrants. This summary is for general information
only and is not intended to be, nor should it be considered to be,
legal or tax advice to any particular investor. It does not address
all of the tax considerations that may be relevant to specific
investors in light of their particular circumstances or to
investors subject to special treatment under U.K. tax law. In
particular:
POTENTIAL INVESTORS SHOULD SATISFY THEMSELVES PRIOR TO INVESTING
AS TO THE OVERALL TAX CONSEQUENCES, INCLUDING, SPECIFICALLY, THE
CONSEQUENCES UNDER U.K. TAX LAW AND HMRC PRACTICE OF THE
ACQUISITION, OWNERSHIP AND DISPOSAL OF THE SHARES, ADSs OR WARRANTS
IN THEIR OWN PARTICULAR CIRCUMSTANCES BY CONSULTING THEIR OWN TAX
ADVISORS.
Taxation Of Dividends
We will not be required to withhold amounts on account of U.K.
tax at source when paying a dividend.
The Finance Act 2016 includes legislation pursuant to which a
U.K. resident individual shareholder will no longer be entitled to
a tax credit on dividends paid after April 5, 2016 nor be taxed on
a grossed--up amount of those dividends. Instead, a dividend
allowance of GBP5,000 per tax year will apply regardless of the tax
rate band of the individual shareholder. Dividends falling within
this allowance will not be subject to income tax. If an individual
shareholder receives dividends in excess of this allowance in a tax
year, the excess will be taxed at the following rates:
-- Individual shareholders liable to income tax at no more than
the basic rate-7.5% (the "dividend ordinary rate");
-- Individual shareholders liable to income tax at the higher
rate-32.5% (the "dividend higher rate"); and
-- Individual shareholders liable to income tax at the
additional rate-38.1% (the "dividend additional rate").
The annual dividend allowance available to individuals will not
be available to U.K. resident trustees of a discretionary trust.
From April 6, 2016, U.K. resident trustees of a discretionary trust
in receipt of dividends are liable to income tax at a rate of
38.1%, which mirrors the dividend additional rate.
Although shareholders who are within the charge to corporation
tax would strictly be subject to corporation tax on dividends paid
by us (subject to special rules for such shareholders that are
"small" companies), generally such dividends will fall within an
exempt class and will not be subject to corporation tax (provided
certain conditions are met and anti--avoidance rules are
satisfied). However, each shareholder's position will depend on its
own individual circumstances and shareholders within the charge to
corporation tax should consult their own professional advisers.
U.K. pension funds and charities are generally exempt from tax
on dividends that they receive.
Non--U.K. resident shareholders may be subject to foreign
taxation on dividend income under local law. Shareholders who are
not resident for tax purposes in the United Kingdom should obtain
their own tax advice concerning tax liabilities on dividends
received from us.
Taxation Of Capital Gains On Disposals Of ADSs, Ordinary Shares
or Warrants
U.K. Shareholders and Warrantholders
Shareholders or warrant holders who are resident in the United
Kingdom, and individual shareholders or warrant holders who are
temporarily non--resident and subsequently resume residence in the
United Kingdom within a certain time, may depending on their
circumstances and the availability of applicable exemptions or
reliefs (including, for example, the annual exempt amount for
individuals and indexation allowance for corporate shareholders or
warrant holders), be liable to U.K. taxation on chargeable gains in
respect of gains arising from a sale or other disposal (or deemed
disposal) of their ADSs, ordinary shares or Warrants.
Any gains or losses in respect of currency fluctuations over the
period of holding the ordinary shares, ADSs or Warrants would also
be brought into account on the disposal.
Non--U.K. Shareholders and Warrant holders
An individual holder who is not a U.K. resident shareholder or
warrant holder will not be liable to U.K. capital gains tax on
chargeable gains realized on the disposal of his or her ADSs,
ordinary shares or Warrants unless such shareholder or warrant
holder carries on (whether solely or in partnership) a trade,
profession or vocation in the United Kingdom through a branch or
agency in the United Kingdom to which the ordinary shares, ADSs or
Warrants are attributable. In these circumstances, such shareholder
or warrant holder may, depending on his or her individual
circumstances, be chargeable to U.K. capital gains tax on
chargeable gains arising from a disposal of his or her ADSs,
ordinary shares or Warrants.
A corporate holder of ordinary shares, ADSs or Warrants who is
not a U.K. resident shareholder or warrant holder will not be
liable for U.K. corporation tax in England on chargeable gains
realized on the disposal of its ADSs, ordinary shares or Warrants
unless it carries on a trade in the United Kingdom through a
permanent establishment to which the ADSs, ordinary shares or
Warrants are attributable. In these circumstances, a disposal of
ADSs, ordinary shares or Warrants by such shareholder or warrant
holder may give rise to a chargeable gain or an allowable loss for
the purposes of U.K. corporation tax in England.
Stamp Duty And Stamp Duty Reserve Tax (SDRT)
The statements in this section entitled "Stamp Duty and Stamp
Duty Reserve Tax (SDRT)" are intended as a general guide to the
current U.K. stamp duty and SDRT position in England. The
discussion below relates to shareholders wherever resident, but
investors should note that certain categories of person are not
liable to stamp duty or SDRT and others may be liable at a higher
rate or may, although not primarily liable for tax, be required to
notify and account for SDRT under the Stamp Duty Reserve Tax
Regulations 1986. Investors who are uncertain with regard to their
stamp duty or SDRT position should consult their own advisers.
General
No stamp duty or SDRT will arise on the issue of ordinary shares
in registered form by the Company or on the issue of ADSs by the
Depository Trust Company, or DTC.
Stamp duty will not arise on the grant or issue of ADS Warrants,
provided that the instrument or agreement giving rise to such grant
or issue is not executed in England and Wales and does not relate
to any property situated, or to any matter or thing done or to be
done in England and Wales.
Any liability for stamp duty arising in respect of the grant or
issue of Warrants will be the responsibility of the relevant
warrant holder.
Neither U.K. stamp duty nor SDRT should arise on transfers of
ordinary shares (including instruments transferring ordinary shares
and agreements to transfer ordinary shares) on the basis that the
ordinary shares are admitted to trading on AIM, provided the
following requirements are (and continue to be) met:
-- the ordinary shares are admitted to trading on AIM, but are
not listed on any market (with the term "listed" being construed in
accordance with section 99A of the Finance Act 1986), and this has
been certified to Euroclear; and
-- AIM continues to be accepted as a "recognised growth market"
as construed in accordance with section 99A of the Finance Act
1986).
In the event that either of the above requirements is not met,
stamp duty or SDRT will apply to transfers of, or agreements to
transfer, ordinary shares. Where applicable, the purchaser normally
pays the stamp duty or SDRT.
No stamp duty will be payable on a transfer of ADSs or ADS
Warrants, provided that any instrument of transfer is not executed
in England and Wales and does not relate to any property situated,
or to any matter or thing done or to be done in England and
Wales.
Except in relation to depositary receipt systems and clearance
services (to which the special rules outlined below apply), an
agreement to transfer ADSs or ADS Warrants should be outside the
scope of SDRT (on the basis that ADSs are interests in depositary
receipts for SDRT purposes and on the basis that ADS Warrants are
issued by a body corporate not incorporated in the United Kingdom
and are not registered in a register kept in the United Kingdom by
or on behalf of the body corporate by which they are issued and are
not paired with shares issued by a body corporate incorporated in
the United Kingdom).
If a duly stamped transfer completing an agreement to transfer
is produced within six years of the date on which the agreement is
made (or, if the agreement is conditional, the date on which the
agreement becomes unconditional), any SDRT already paid is
generally repayable, normally with interest, and any SDRT charge
yet to be paid is cancelled.
Any cancellation of an ADS in return for the relevant
shareholder's receipt of the underlying ordinary shares should not
give rise to any charge to stamp duty or SDRT.
Depositary Receipt Systems And Clearance Services
Following the European Court of Justice decision in C--569/07
HSBC Holdings Plc, Vidacos Nominees Limited v. The Commissioners of
Her Majesty's Revenue & Customs and the First--tier Tax
Tribunal decision in HSBC Holdings Plc and The Bank of New York
Mellon Corporation v. The Commissioners of Her Majesty's Revenue
& Customs, HMRC has confirmed that a charge to 1.5% SDRT is no
longer payable when new shares are issued to a clearance service
(such as, in our understanding, DTC) or depositary receipt
system.
HMRC remains of the view that where shares or securities are
transferred (a) to, or to a nominee or an agent for, a person whose
business is or includes the provision of clearance services or (b)
to, or to a nominee or an agent for, a person whose business is or
includes issuing depositary receipts, stamp duty or SDRT will
generally be payable at the higher rate of 1.5% of the amount or
value of the consideration given or, in certain circumstances, the
value of the relevant shares or securities unless the transfer is
an integral part of a raising of capital.
There is an exception from the 1.5% charge for the transfer of
ordinary shares to the DTC on the basis that the ordinary shares
are admitted to trading on AIM, provided that the requirements set
out in the bullet points above are (and continue to be) met. There
is also an exception from the 1.5% charge on the transfer to, or to
a nominee or agent for, a clearance service where the clearance
service has made and maintained an election under Section 97A(1) of
the Finance Act 1986 which has been approved by HMRC and which
applies to the relevant shares or securities. In these
circumstances, SDRT at the rate of 0.5% of the amount or value of
the consideration payable for the transfer will arise on any
transfer of ADSs, ordinary shares or Warrants into such an account
and on subsequent agreements to transfer the relevant shares or
securities within that account. It is our understanding that DTC
has not made an election under Section 97A(1) of the Finance Act of
1986 in respect of the ordinary shares, ADSs or Warrants, and that
therefore transfers or agreements to transfer ordinary shares, ADSs
or ADS Warrants held in book entry (i.e., electronic) form within
the facilities of DTC should not be subject to U.K. stamp duty or
SDRT at the rate of 0.5%.
Any liability for stamp duty or SDRT which does arise in respect
of a transfer into a clearance service or depositary receipt
system, or in respect of a transfer within such a service, will
strictly be accountable by the clearance service or depositary
receipt system operator or their nominee, as the case may be, but
will, in practice, be payable by the participants in the clearance
service or depositary receipt system.
The Proposed Financial Transactions Tax (FTT)
On February 14, 2013, the European Commission published a
proposal, or the Commission's Proposal, for a Directive for a
common FTT in Belgium, Germany, Estonia, Greece, Spain, France,
Italy, Austria, Portugal, Slovenia and Slovakia, or, collectively,
the participating Member States.
The Commission's Proposal had very broad scope and, if
introduced, could have applied to certain dealings in ADSs or
ordinary shares (including secondary market transactions) in
certain circumstances.
Although the Commission's Proposal has failed to obtain
unanimous support from all EU Member States, the participating
Member States remain committed to implement an FTT through enhanced
co--operation, without the support of the remaining Member States.
As of the date of this Annual Report, the FTT proposal remains
subject to negotiation between the participating Member States, and
the scope of any such tax is uncertain. Additional EU Member States
may decide to participate.
Prospective holders of ADSs or ordinary shares are advised to
seek their own professional advice in relation to the FTT.
Reporting Obligations
Investors who hold ADSs indirectly through a broker or other
financial institution should note that such broker or other
financial institution may be required to provide certain
information (including with regard to the relevant investor's
identity and his or her investment) to a tax authority in the
relevant investor's jurisdiction of residence for the purpose of
such information being shared with tax authorities in other
relevant jurisdictions, under one or more of the following regimes
for the exchange of information:
-- Sections 1471 to 1474 of the U.S. Internal Revenue Code of
1986 and any associated regulations, or the Foreign Accounting Tax
Compliance Act, or the FATCA;
-- any agreements between the United States and other
jurisdictions for the purpose of improving international tax
compliance and implementing FATCA;
-- Council Directive on Administrative Co--operation 2011/16/EU, or the DAC;
-- the Multilateral Competent Authority Agreement on Automatic
Exchange of Financial Account Information and the OECD Common
Reporting Standard, or the CRS; and
-- any other applicable legislation (including legislation
implementing FATCA, the DAC and/or the CRS in any jurisdiction) or
any other intergovernmental agreement, convention, treaty, or any
official interpretation or official guidance relating thereto, that
provides for, or is intended to secure, the exchange of information
related to taxation.
Material U.S. Federal Income Tax Considerations
The following is a description of the material U.S. federal
income tax consequences to the U.S. Holders and Non--U.S. Holders
(each defined below) of owning and disposing of the ADSs or
ordinary shares or Warrants acquired in this offering, but it does
not purport to be a comprehensive description of all tax
considerations that may be relevant to a particular person's
decision to acquire the ADSs or ordinary shares or Warrants. This
discussion applies only to U.S. Holders and Non--U.S. Holders that
hold ADSs or ordinary shares or Warrants as capital assets purposes
(generally property held for investment) within the meaning of
Section 1221 of the Code. In addition, it does not describe all of
the tax consequences that may be relevant in light of the U.S.
Holder's or Non--U.S. Holder's particular circumstances, including
alternative minimum tax consequences, any state or local tax
considerations, any U.S. federal gift, estate or
generation--skipping transfer tax consequences and tax consequences
applicable to U.S. Holders or Non--U.S. Holders subject to special
rules, such as:
-- certain financial institutions;
-- brokers;
-- dealers or traders in securities who use a mark--to--market method of tax accounting;
-- real estate investment trusts;
-- insurance companies;
-- persons holding ordinary shares as part of a hedging
transaction, straddle, wash sale, conversion transaction or
integrated transaction or persons entering into a constructive sale
with respect to the ordinary shares;
-- regulated investment companies;
-- persons whose functional currency for U.S. federal income tax
purposes is not the U.S. dollar;
-- entities classified as partnerships or other pass--through
entities for U.S. federal income tax purposes, including persons
that will hold our ordinary shares through such an entity;
-- tax--exempt entities, including an "individual retirement account" or "Roth IRA;"
-- persons that own or are deemed to own ten percent or more of our voting stock;
-- persons that are U.S. expatriates;
-- persons who acquired our ordinary shares pursuant to the
exercise of an employee stock option or otherwise as compensation;
or
-- persons holding shares in connection with a trade or business
conducted outside of the United States.
This discussion is based on the Code, administrative
pronouncements, judicial decisions, and final, temporary and
proposed Treasury regulations, all as of the date hereof, any of
which is subject to change, possibly with retroactive effect.
Moreover, we can provide no assurance that the tax consequences
contained in this discussion will not be challenged by the Internal
Revenue Service (IRS) or will be sustained by a court if
challenged.
A "U.S. Holder" is a holder who, for U.S. federal income tax
purposes, is a beneficial owner of ADSs or ordinary shares or
Warrants who is:
-- an individual who is a citizen or resident of the United States.;
-- a corporation, or other entity taxable as a corporation,
created or organized in or under the laws of the United States, any
state therein or the District of Columbia;
-- an estate whose income is includible in gross income for U.S.
federal income tax purposes regardless of its source; or
-- a trust if (1) a U.S. court is able to exercise primary
supervision over the administration of the trust and one or more
U.S. persons have authority to control all substantial decisions of
the trust or (2) the trust has a valid election in effect under
applicable Treasury Regulations to be treated as a U.S. person.
A "Non--U.S. Holder" is a beneficial owner of the ADSs or
ordinary shares or Warrants, other than a U.S. Holder or an entity
classified as a partnership or other fiscally transparent entity
for U.S. federal income tax purposes.
If an entity that is classified as a partnership for U.S.
federal income tax purposes holds our ordinary shares, the U.S.
federal income tax treatment of a partner will generally depend on
the status of the partner and the activities of the partnership.
Partnerships holding ADSs or ordinary shares or Warrants and
partners in such partnerships should consult their tax advisers as
to their particular U.S. federal income tax consequences of holding
and disposing of the ADSs or ordinary shares or Warrants.
U.S. Holders and Non--U.S. Holders should consult their tax
advisers concerning the U.S. federal, state, local and foreign tax
consequences of owning and disposing of the ADSs or ordinary shares
or Warrants in their particular circumstances.
Treatment Of The Company As A Domestic Corporation For US
Federal Income Tax Purposes
Even though the Company is organized as an English public
company, it should be treated as a domestic corporation for U.S.
federal income tax purposes pursuant to Section 7874 of the Code.
As such, the Company should generally be subject to U.S. federal
income tax as if it were organized under the laws of the United
States or a state thereof. The Company's status as a domestic
corporation for U.S. federal income tax purposes also has
implications for all shareholders. The remaining discussion
contained in "Item 10.E. Material U.S. Federal Income Tax
Considerations" assumes that the Company will be treated as a
domestic corporation pursuant to Section 7874 of the Code.
Allocation of Purchase Price
U.S. Holders and Non--U.S. Holders will allocate the amount paid
for ADSs or ordinary shares and Warrants based on their relative
fair market values in computing the holder's basis in the ADSs or
ordinary shares and Warrants for U.S. federal income tax
purposes.
ADSs
A U.S. Holder or a Non--U.S. Holder of ADSs generally will be
treated, for U.S. federal income tax purposes, as the owner of the
underlying ordinary shares that are represented by such ADSs.
Accordingly, deposits or withdrawals of ordinary shares for ADSs
will not be subject to U.S. federal income tax.
U.S. Holders
Distributions
Distributions made by the Company in respect of its ADSs or
ordinary shares will be treated as U.S.--source dividends
includible in the gross income of a U.S. Holder as ordinary income
to the extent of the Company's current and accumulated earnings and
profits, as determined under U.S. federal income tax principles. To
the extent the amount of a distribution exceeds the Company's
current and accumulated earnings and profits, the distribution will
be treated first as a non--taxable return of capital to the extent
of a U.S. Holder's adjusted tax basis in the ADSs or ordinary
shares and thereafter as gain from the sale of such shares. Subject
to applicable limitations and requirements, dividends received on
the ADSs or ordinary shares generally should be eligible for the
"dividends received deduction" available to corporate shareholders.
A dividend paid by the Company to a non--corporate U.S. Holder
generally will be eligible for preferential rates if certain
holding period requirements are met.
The U.S. dollar value of any distribution made by the Company in
foreign currency will be calculated by reference to the exchange
rate in effect on the date of the U.S. Holder's actual or
constructive receipt of such distribution, regardless of whether
the foreign currency is in fact converted into U.S. dollars. If the
foreign currency is converted into U.S. dollars on the date of
receipt, the U.S. Holder generally will not recognize foreign
currency gain or loss on such conversion. If the foreign currency
is not converted into U.S. dollars on the date of receipt, such
U.S. Holder will have a basis in the foreign currency equal to its
U.S. dollar value on the date of receipt. Any gain or loss on a
subsequent conversion or other taxable disposition of the foreign
currency generally will be U.S.--source ordinary income or loss to
such U.S. Holder.
Sale Or Other Taxable Disposition Of Ordinary Shares
A U.S. Holder will recognize gain or loss for U.S. federal
income tax purposes upon a sale or other taxable disposition of its
ADSs or ordinary shares in an amount equal to the difference
between the amount realized from such sale or disposition and the
U.S. Holder's adjusted tax basis in the ADSs or ordinary shares. A
U.S. Holder's adjusted tax basis in the ordinary shares generally
will be the U.S. Holder's cost for the shares. Any such gain or
loss generally will be U.S.--source capital gain or loss and will
be long--term capital gain or loss if, on the date of sale or
disposition, such U.S. Holder held the ADSs or ordinary shares for
more than one year. Long--term capital gains derived by
non--corporate U.S. Holders are eligible for taxation at reduced
rates. The deductibility of capital losses is subject to
significant limitations.
Exercise, Expiration and Disposition of Warrants
A U.S. Holder will not recognize gain or loss upon exercise of a
Warrant (except with respect to any cash received in lieu of a
fractional ordinary share or ADS). A U.S. Holder will have a tax
basis in the ADSs received upon the exercise of a Warrant equal to
the sum of its tax basis in the Warrant and the aggregate cash
exercise price paid in respect of such exercise, less any amount
attributable to any fractional ordinary share or ADS. The holding
period of the ordinary shares or ADSs received upon the exercise of
a Warrant will commence on the day after the Warrant is exercised.
If a Warrant expires without being exercised, a U.S. Holder will
recognize a capital loss in an amount equal to its tax basis in the
Warrant.
Upon the sale, exchange or redemption of a Warrant, a U.S.
Holder will recognize a gain or loss equal to the difference
between the amount realized on the sale, exchange or redemption of
the Warrant and the U.S. Holder's tax basis in such Warrant. Such
gain or loss will be long--term capital gain or loss if, at the
time of such sale, exchange, or redemption, the Warrant has been
held for more than one year. Long-term capital gains of individuals
(as well as certain trusts and estates) are subject to U.S. federal
income tax at preferential rates. The deductibility of capital
losses is subject to significant limitations. A U.S. Holder's gain
or loss on the sale, exchange, or redemption of a Warrant will be
treated as U.S. source income or loss for U.S. foreign tax credit
limitation purposes.
Net Investment Income Tax
U.S. Holders that are individuals or estates or trusts that do
not fall into a special class of trusts that are exempt from such
tax, will be required to pay an additional 3.8% tax on the lesser
of (1) the U.S. Holder's "net investment income" for the relevant
taxable year and (2) the excess of the U.S. Holder's modified
adjusted gross income for the taxable year over a certain threshold
(which in the case of individuals will be between $125,000 and
$250,000, depending on the individual's circumstances). A U.S.
Holder's "net investment income" will generally include, among
other things, dividends and capital gains. Such tax will apply to
dividends and to capital gains from the sale or other taxable
disposition of the ordinary shares, unless derived in the ordinary
course of the conduct of a trade or business (other than a trade or
business that consists of certain passive or trading activities).
Potential investors should consult with their own tax advisers
regarding the application of the net investment income tax to them
as a result of their investment in the ADSs or ordinary shares.
Information Reporting And Backup Withholding
Payments of dividends on or proceeds arising from the sale or
other taxable disposition of the ADSs or ordinary shares or
Warrants generally will be subject to information reporting and
backup withholding if a U.S. Holder (i) fails to furnish such U.S.
Holder's correct U.S. taxpayer identification number (generally on
IRS Form W--9), (ii) furnishes an incorrect U.S. taxpayer
identification number, (iii) is notified by the IRS that such U.S.
Holder has previously failed to properly report items subject to
backup withholding or (iv) fails to certify under penalty of
perjury that such U.S. Holder has furnished its correct U.S.
taxpayer identification number and that the IRS has not notified
such U.S. Holder that it is subject to backup withholding.
Backup withholding is not an additional tax. Any amounts
withheld under the backup withholding rules generally will be
allowed as a credit against a U.S. Holder's U.S. federal income tax
liability or will be refunded, if the U.S. Holder furnishes the
required information to the IRS in a timely manner.
Non--U.S. Holders
Distributions
Subject to the discussion under "Foreign Account Tax Compliance
Act" below, distributions treated as dividends (see "U.S. Holders
Distributions" above) by the Company to Non--U.S. Holders will be
subject to U.S. federal withholding tax at a 30% rate, except as
may be provided by an applicable income tax treaty. To obtain a
reduced rate of U.S. federal withholding under an applicable income
tax treaty, a Non--U.S. Holder will be required to certify its
entitlement to benefits under the treaty, generally on a properly
completed IRS Form W--8BEN or W--8BEN--E (as applicable).
However, dividends that are effectively connected with a
Non--U.S. Holder's conduct of a trade or business within the United
States and, where required by an income tax treaty, are
attributable to a permanent establishment or fixed base of the
Non--U.S. Holder, are not subject to the withholding tax described
in the previous paragraph, but instead are subject to U.S. federal
net income tax at graduated rates, provided the Non--U.S. Holder
complies with applicable certification and disclosure requirements,
generally by providing a properly completed IRS Form W--8ECI.
Non--U.S. Holders that are corporations may also be subject to an
additional branch profits tax at a 30% rate, except as may be
provided by an applicable income tax treaty.
Sale Or Other Taxable Disposition
Subject to the discussion under "Foreign Account Tax Compliance
Act" below, a Non--U.S. Holder will not be subject to U.S. federal
income tax in respect of any gain on a sale or other disposition of
the ADSs or ordinary shares or Warrants unless:
-- such gain is effectively connected with the conduct of a
trade or business in the United States by such Non--U.S. Holder, in
which event such Non--U.S. Holder generally will be subject to U.S.
federal income tax on such gain in substantially the same manner as
a U.S. person (except as provided by an applicable tax treaty) and,
if it is treated as a corporation for U.S. federal income tax
purposes, may also be subject to a branch profits tax at a rate of
30% (or a lower rate if provided by an applicable tax treaty),
subject to certain adjustments;
-- such Non--U.S. Holder is an individual who is present in the
United States for 183 days or more during the taxable year of such
sale, exchange or other disposition and certain other conditions
are met, in which event such gain (net of certain U.S. source
losses) generally will be subject to U.S. federal income tax at a
rate of 30% (except as provided by an applicable tax treaty);
or
-- the Company is or has been a "United States real property
holding corporation" for U.S. federal income tax purposes at any
time during the shorter of (x) the five--year period ending on the
date of such sale, exchange or other disposition and (y) such
Non--U.S. Holder's holding period with respect to such ordinary
shares, and certain other conditions are met.
Generally, a corporation is a "United States real property
holding corporation" if the fair market value of its United States
real property interests equals or exceeds 50% of the sum of the
fair market value of its worldwide real property interests and its
other assets used or held for use in a trade or business (all as
determined for U.S. federal income tax purposes). We believe that
we presently are not, and we do not presently anticipate that we
will become, a United States real property holding corporation.
However, because this determination is made from time to time and
is dependent upon a number of factors, some of which are beyond our
control, including the value of our assets, there can be no
assurance that we will not become a United States real property
holding corporation. If we were a United States real property
holding corporation during the period described in the third bullet
point above, gain recognized by a Non--U.S. Holder generally would
be treated as income effectively connected with the conduct of a
trade or business in the United States by such Non--U.S. Holder,
with the consequences described in the first bullet point above
(except that the branch profits tax would not apply), unless such
Non--U.S. Holder owned (directly and constructively) five percent
or less of our ordinary shares during such period and our ordinary
shares are treated as "regularly traded on an established
securities market" at any time during the calendar year of such
sale, exchange or other disposition.
Information Reporting And Backup Withholding
Generally, the Company must report annually to the IRS and to
Non--U.S. Holders the amount of distributions made to Non--U.S.
Holders and the amount of any tax withheld with respect to those
payments. Copies of the information returns reporting such
distributions and withholding may also be made available to the tax
authorities in the country in which a Non--U.S. Holder resides
under the provisions of an applicable income tax treaty or tax
information exchange agreement.
A Non--U.S. Holder will generally not be subject to backup
withholding with respect to payments of dividends, provided the
Company receives a properly completed statement to the effect that
the Non--U.S. Holder is not a U.S. person and the Company does not
have actual knowledge or reason to know that the holder is a U.S.
person. The requirements for the statement will be met if the
Non--U.S. Holder provides its name and address and certifies, under
penalties of perjury, that it is not a U.S. person (which
certification may generally be made on IRS Form W--8BEN or
W--8BEN--E, as applicable) or if a financial institution holding
our ordinary shares on behalf of the Non--U.S. Holder certifies,
under penalties of perjury, that such statement has been received
by it and furnishes the Company or its paying agent with a copy of
the statement.
Except as described below under "Foreign Account Tax Compliance
Act," the payment of proceeds from a disposition of ADSs or
ordinary shares or Warrants to or through a non--U.S. office of a
non--U.S. broker will not be subject to information reporting or
backup withholding unless the non--U.S. broker has certain types of
relationships with the United States. In the case of a payment of
proceeds from the disposition of ADSs or ordinary shares or
Warrants to or through a non--U.S. office of a broker that is
either a U.S. person or such a U.S.--related person, Treasury
Regulations require information reporting (but not backup
withholding) on the payment unless the broker has documentary
evidence in its files that the Non--U.S. Holder is not a U.S.
person and the broker has no knowledge to the contrary.
Backup withholding is not an additional tax. Any amounts
withheld under the backup withholding rules will be allowed as a
refund or a credit against a Non--U.S. Holder's U.S. federal income
tax liability, provided the required information is timely
furnished to the IRS.
Foreign Account Tax Compliance Act
Under the FATCA provisions of the Code and related U.S. Treasury
guidance, or FATCA, a withholding tax of 30% will be imposed in
certain circumstances on payments of (i) dividends on the ADSs or
ordinary shares and (ii) on or after January 1, 2019, gross
proceeds from the sale or other disposition of our ordinary shares.
In the case of payments made to a "foreign financial institution"
(such as a bank, a broker, an investment fund or, in certain cases,
a holding company), as a beneficial owner or as an intermediary,
this tax generally will be imposed, subject to certain exceptions,
unless such institution (i) has agreed to (and does) comply with
the requirements of an agreement with the United States, or an "FFI
Agreement," or (ii) is required by (and does comply with)
applicable foreign law enacted in connection with an
intergovernmental agreement between the United States and a foreign
jurisdiction, ("IGA"), in either case to, among other things,
collect and provide to the U.S. tax authorities or other relevant
tax authorities certain information regarding U.S. account holders
of such institution and, in either case, such institution provides
the withholding agent with a certification as to its FATCA status.
In the case of payments made to a foreign entity that is not a
financial institution (as a beneficial owner), the tax generally
will be imposed, subject to certain exceptions, unless such entity
provides the withholding agent with a certification as to its FATCA
status and, in certain cases, identifies any "substantial" U.S.
owner (generally, any specified U.S. person that directly or
indirectly owns more than a specified percentage of such entity).
If our ordinary shares are held through a foreign financial
institution that has agreed to comply with the requirements of an
FFI Agreement or is subject to similar requirements under
applicable foreign law enacted in connection with an IGA, such
foreign financial institution (or, in certain cases, a person
paying amounts to such foreign financial institution) generally
will be required, subject to certain exceptions, to withhold tax on
payments made to (i) a person (including an individual) that fails
to provide any required information or documentation or (ii) a
foreign financial institution that has not agreed to comply with
the requirements of an FFI Agreement and is not subject to similar
requirements under applicable foreign law enacted in connection
with an IGA. Each Non--U.S. Holder should consult its own tax
advisor regarding the application of FATCA to the ownership and
disposition of the ADSs or ordinary shares.
F. Dividends and Paying Agents.
Not applicable.
G. Statement by Experts.
Not applicable.
H. Documents on Display.
We are subject to the information reporting requirements of the
Exchange Act applicable to foreign private issuers and under those
requirements will file reports with the SEC. Those reports may be
inspected without charge at the locations described below. As a
foreign private issuer, we are exempt from the rules under the
Exchange Act related to the furnishing and content of proxy
statements, and our officers, directors and principal shareholders
are exempt from the reporting and short-swing profit recovery
provisions contained in Section 16 of the Exchange Act. In
addition, we are not required under the Exchange Act to file
periodic reports and financial statements with the SEC as
frequently or as promptly as United States companies whose
securities are registered under the Exchange Act. Nevertheless, we
will file with the SEC an Annual Report containing financial
statements that have been examined and reported on, with and
opinion expressed by an independent registered public accounting
firm.
We maintain a corporate website at www.motifbio.com. We intend
to post our Annual Report on our website promptly following it
being filed with the SEC. Information contained on, or that can be
accessed through, our website does not constitute a part of this
Annual Report. We have included our website address in this Annual
Report solely as an inactive textual reference.
You may also review a copy of this Annual Report, including
exhibits and any schedule filed herewith, and obtain copies of such
materials at prescribed rates, at the SEC's Public Reference Room
in Room 1580, 100 F Street, NE, Washington, D.C. 20549-0102. You
may obtain information on the operation of the Public Reference
Room by calling the SEC at 1-800-SEC-0330. The Securities and
Exchange Commission maintains a website (www.sec.gov) that contains
reports, proxy and information statements and other information
regarding registrants, such as Motif Bio, that file electronically
with the SEC.
With respect to references made in this Annual Report to any
contract or other document of our company, such references are not
necessarily complete and you should refer to the exhibits attached
or incorporated by reference to this Annual Report for copies of
the actual contract or document.
I. Subsidiary Information.
Not required.
Item 11. Quantitative and Qualitative Disclosures About Market
Risk.
Foreign currency risk
The Group undertakes certain transactions denominated in foreign
currencies. Hence, exposures to exchange rate fluctuations arise.
Exchange rate exposures are managed by minimizing the balance of
foreign currencies to cover expected cash flows during periods
where there is strengthening in the value of the foreign currency.
The Group holds part of its cash resources in US dollars and
British pound sterling. The valuation of the cash fluctuates along
with the US dollar/sterling exchange rate. No hedging of this risk
is undertaken.
The carrying amounts of foreign currency denominated monetary
net assets at the reporting date are as follows:
2016 2015
US $ US $
----------------- ------- ----------
Sterling - Cash 17,795 2,617,033
At December 31, 2016, if pounds sterling had
weakened/strengthened by 5% against the US dollar with all other
variables held constant, the loss for the year would have been US
$890 (2015: US $131,000) higher/lower.
Interest rate risk
The Group's exposure to interest rate risk is limited to the
cash and cash equivalent balance of US$21,829,632 and its financing
exposures that are at fixed rates of interest. Changes in interest
rates would have no significant impact on the profit or losses of
the Group.
Capital risk management
The directors define capital as the total equity of the Company.
The directors' objectives when managing capital are to safeguard
the Company's ability to continue as a going concern in order to
provide returns for shareholders and benefits for other
stakeholders and to maintain an optimal structure to reduce the
cost of capital. In order to maintain an optimal capital structure,
the directors may adjust the amount of dividends paid to
shareholders, return capital to shareholders and issue new shares
to reduce debt.
Item 12. Description of Securities Other than Equity
Securities.
A. Debt Securities.
Not applicable.
B. Warrants and Rights.
Not applicable.
C. Other Securities.
Not applicable.
D. American Depositary Shares.
The Bank of New York Mellon, as depositary, will register and
deliver American Depositary Shares, also referred to as ADSs. Each
ADS will represent 20 ordinary shares (or a right to receive 20
shares) deposited with The Bank of New York Mellon, as custodian
for the depositary in Manchester. Each ADS will also represent any
other securities, cash or other property which may be held by the
depositary. The depositary's office at which the ADSs will be
administered is located at 101 Barclay Street, New York, New York
10286. The Bank of New York Mellon's principal executive office is
located at 225 Liberty Street, New York, New York 10286.
A deposit agreement among us, the beneficial owners of ADSs and
the depositary sets out the ADS holder rights as well as the rights
and obligations of the depositary. New York law governs the deposit
agreement and the ADSs. A copy of the deposit agreement is
incorporated by reference as an exhibit to this Annual Report.
Fees And Expenses
Persons depositing or withdrawing shares or ADS holders
must pay: For:
---------------------------------------------------------- ----------------------------------------------------------
$5.00 (or less) per 100 ADSs (or portion of 100 Issuance of ADSs, including issuances resulting from a
ADSs).................. distribution of shares or rights or
other property
$5.00 (or less) per 100 ADSs (or portion of 100 Cancellation of ADSs for the purpose of withdrawal,
ADSs).................. including if the deposit agreement terminates
$.05 (or less) per
ADS......................................................
.................... Any cash distribution to ADS holders
A fee equivalent to the fee that would be payable if
securities distributed to you had been
shares and the shares had been deposited for issuance of Distribution of securities distributed to holders of
ADSs................................................. deposited securities (including rights)
that are distributed by the depositary to ADS holders
$.05 (or less) per ADS per calendar
year........................................... Depositary services (Annual Fee)
Registration or transfer Transfer and registration of shares on our share register
fees..................................................... to or from the name of the depositary
.......... or its agent when you deposit or withdraw shares
Expenses of the Cable, telex and facsimile transmissions (when expressly
depositary............................................... provided in the deposit agreement)
.................. converting foreign currency to U.S. dollars
Taxes and other governmental charges the depositary or
the custodian has to pay on any ADSs
or shares underlying ADSs, such as stock transfer taxes,
stamp duty or withholding
taxes....................................................
....................... As necessary
Any charges incurred by the depositary or its agents for
servicing the deposited
securities.............................................. As necessary
The depositary collects its fees for delivery and surrender of
ADSs directly from investors depositing shares or surrendering ADSs
for the purpose of withdrawal or from intermediaries acting for
them. The depositary collects fees for making distributions to
investors by deducting those fees from the amounts distributed or
by selling a portion of distributable property to pay the fees. The
depositary may collect its annual fee for depositary services by
deduction from cash distributions or by directly billing investors
or by charging the book--entry system accounts of participants
acting for them. The depositary may collect any of its fees by
deduction from any cash distribution payable (or by selling a
portion of securities or other property distributable) to ADS
holders that are obligated to pay those fees. The depositary may
generally refuse to provide fee--attracting services until its fees
for those services are paid.
From time to time, the depositary may make payments to us to
reimburse us for costs and expenses generally arising out of
establishment and maintenance of the ADS program, waive fees and
expenses for services provided to us by the depositary or share
revenue from the fees collected from ADS holders. In performing its
duties under the deposit agreement, the depositary may use brokers,
dealers, foreign currency dealers or other service providers that
are owned by or affiliated with the depositary and that may earn or
share fees, spreads or commissions.
The depositary may convert currency itself or through any of its
affiliates and, in those cases, acts as principal for its own
account and not as agent, advisor, broker or fiduciary on behalf of
any other person and earns revenue, including, without limitation,
transaction spreads, that it will retain for its own account. The
revenue is based on, among other things, the difference between the
exchange rate assigned to the currency conversion made under the
deposit agreement and the rate that the depositary or its affiliate
receives when buying or selling foreign currency for its own
account. The depositary makes no representation that the exchange
rate used or obtained in any currency conversion under the deposit
agreement will be the most favorable rate that could be obtained at
the time or that the method by which that rate will be determined
will be the most favorable to ADS holders, subject to the
depositary's obligations under the deposit agreement. The
methodology used to determine exchange rates used in currency
conversions is available upon request.
Payment Of Taxes
You will be responsible for any taxes or other governmental
charges payable on your ADSs or on the deposited securities
represented by any of your ADSs. The depositary may refuse to
register any transfer of your ADSs or allow you to withdraw the
deposited securities represented by your ADSs until those taxes or
other charges are paid. It may apply payments owed to you or sell
deposited securities represented by your American Depositary Shares
to pay any taxes owed and you will remain liable for any
deficiency. If the depositary sells deposited securities, it will,
if appropriate, reduce the number of ADSs to reflect the sale and
pay to ADS holders any proceeds, or send to ADS holders any
property, remaining after it has paid the taxes.
PART II
Item 13. Defaults, Dividend Arrearages and Delinquencies.
Not applicable.
Item 14. Material Modifications to the Rights of Security
Holders and Use of Proceeds.
Material Modifications to the Rights of Security Holders
Not applicable.
Use of Proceeds
On November 18, 2016, we announced the pricing of our
underwritten U.S. public offering and European placement, which
were concurrently conducted, of 71,633,248 ordinary shares,
comprised of 22,863,428 ordinary shares plus 2,438,491 ADSs
(representing 48,769,820 ordinary shares at a 20 to 1 ratio). We
offered 48,769,820 ordinary shares in a U.S. firm commitment public
offering in the form of 2,438,491 American Depositary Shares or
ADSs, together with warrants to purchase 1,219,246 ADS Warrants.
Each ADS represents 20 of our ordinary shares and was sold together
with 0.5 of an ADS Warrant in a fixed combination. Each full ADS
Warrant is exercisable for one ADS at an exercise price of $8.03
per ADS, exercisable from the date of issuance until five years
thereafter. In Europe, we offered in a concurrent placement on a
best efforts basis 22,863,428 ordinary shares, together with
warrants to purchase 11,431,714 ordinary shares. Each ordinary
share was sold together with 0.5 of an Ordinary Share Warrant in a
fixed combination. Each full Ordinary Share Warrant is exercisable
for one ordinary share at an exercise price of GBP0.32 ($0.40),
exercisable from the date of issuance until five years thereafter.
The public offering price of the ADSs and ADS Warrants in the U.S.
offering was $6.98 per ADS and ADS Warrant combination, and the
public offering price of our ordinary shares and Ordinary Share
Warrants in the European placement was GBP0.28 ($0.35) per ordinary
share and Ordinary Share Warrant combination. Net proceeds to the
Company following the offering, after deducting underwriting
discounts and commissions and offering expenses of approximately
$3.5 million, were approximately $21.5 million. None of the
underwriting discounts and commissions or other offering expenses
were paid to directors or officers of ours or their associates or
to persons owning 10 percent or more of any class of our equity
securities or to any affiliates of ours. H.C. Wainwright & Co.,
LLC was the underwriter for the above described offering.
There has been no material change in our planned use of the net
proceeds from the above described offering as described in our
final prospectus filed with the SEC pursuant to Rule 424(b)(4) on
November 21, 2016.
Our management board retains broad discretion in the allocation
and use of the net proceeds from the above described offering.
Item 15. Controls and Procedures.
Disclosure Controls and Procedures
As of the end of the period covered by this annual report, our
management, with the participation of our Chief Executive Officer
and Chief Financial Officer, has performed an evaluation of the
effectiveness of our disclosure controls and procedures within the
meaning of Rules 13a-15(e) and 15d-15(e) of the Exchange Act. Based
upon this evaluation, our Chief Executive Officer and Chief
Financial Officer concluded that, as of the end of the period
covered by this annual report, our existing disclosure controls and
procedures were not effective due to material weaknesses in
internal control over financial reporting described below in
Management's Annual Report on Internal Control over Financial
Reporting.
Management's Annual Report on Internal Control over Financial
Reporting
Our management is responsible for establishing and maintaining
adequate internal control over financial reporting (as defined in
Rules 13a-15(f) and 15d-15(f) under the Exchange Act). As of
December 31, 2016, our management assessed the effectiveness of our
internal control over financial reporting. In making this
assessment, management used the criteria set forth by the Committee
of Sponsoring Organizations of the Treadway Commission in Internal
Control - Integrated Framework (2013). A material weakness is a
deficiency, or a combination of deficiencies, in internal control
over financial reporting such that there is a reasonable
possibility that a material misstatement of the annual or interim
financial statements will not be prevented or detected on a timely
basis. In connection with this assessment, we identified the
following material weaknesses in internal control over financial
reporting as of December 31, 2016.
We did not maintain an effective control environment as we did
not maintain effective internal controls to ensure processing and
reporting of valid transactions is complete, accurate, and timely
and did not maintain a sufficient complement of resources with an
appropriate level of accounting knowledge, experience, and training
commensurate with their structure and financial reporting
requirements to allow for appropriate monitoring, presentation and
disclosure, and internal control over financial reporting.
Specifically, we have not designed and implemented a sufficient
level of formal accounting policies and procedures that define how
transactions across the business cycles should be initiated,
recorded, processed, authorized, approved and appropriately
reported, including presentation and disclosure, within the
financial statements. Additionally, the limited personnel resulted
in our inability to consistently establish appropriate authorities
and responsibilities in pursuit of our financial reporting
objectives, as demonstrated by, amongst other things, our
insufficient segregation of duties in their finance and accounting
functions.
These control deficiencies resulted in the misclassification of
derivative liabilities in the statement of financial position. In
addition, these control deficiencies resulted in immaterial audit
adjustments to increase our trade and other payables as of December
31, 2016. Additionally, these control deficiencies could result in
a misstatement of the aforementioned account balances or
disclosures that would result in a material misstatement to the
annual or interim consolidated financial statements that would not
be prevented or detected. Accordingly, our management has
determined that these control deficiencies constitute material
weaknesses.
Based on its assessment, our management has concluded that our
internal control over financial reporting is not effective as of
December 31, 2016.
Management's Remediation Initiatives
In an effort to remediate the identified material weaknesses and
to enhance our overall control environment, we are planning on
making substantial changes in our internal control over financial
reporting in the ensuing periods. We are a small and only recently
publicly-traded entity that has had limited time and resources to
build out our finance and accounting functions. Nonetheless, it
should be noted that as a result of having successfully completed
the REVIVE-1 Phase 3 Study, including having met the primary and
secondary efficacy endpoints, we believe we will be able to secure
additional financing which could then be applied, in part, to fund
these and other remediation activities.
We have initiated, or plan to initiate, the following
actions:
-- In January 2017, we hired an Accounting Manager with
considerable experience in financial roles at biopharmaceutical
companies, including public companies listed on the NASDAQ Capital
Market.
-- In March 2017, we retained an accounting and financial
reporting advisory firm with significant experience with publicly
held companies to assist management in preparing our financial
reports.
-- We have recently implemented a new accounting software
package that is maintained on a third-party computer server. As we
create formal accounting policies and procedures over financial
reporting, we will utilize the accounting software to streamline
the approval and review process.
-- We are in the process of creating formal accounting policies
and procedures including those for cash disbursements, general
ledger, accounts payable, and payroll, among others. We are also in
the process of designing and implementing additional controls
related to the period-end financial reporting process, including
the preparation and review of accounting position papers and the
use of financial statement disclosure checklists.
-- We are in the process of implementing the automated
processing of invoices through an outside vendor, allowing for more
streamlined initiation, processing, authorization and approval of
transactions within the payables process
-- We plan to create additional finance and accounting positions and formalize the roles and responsibilities within the accounting function. The timing and extent of such additional positions will likely be determined based on securing additional financing.
Attestation Report of the Registered Public Accounting Firm
This Annual Report does not include an attestation report of the
company's registered public accounting firm due a transition period
established by rules of the Securities and Exchange Commission for
newly public companies.
Changes in Internal Control Over Financial Reporting
No change in our internal control over financial reporting (as
defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act)
occurred during the fiscal year ended December 31, 2016 that has
materially affected, or is reasonably likely to materially affect,
our internal control over financial reporting.
Item 15T. Controls and Procedures.
Not applicable.
Item 16. Reserved.
Item 16A. Audit Committees Financial Expert.
Our board of directors has determined that Ms. Ginman-Horrell
and Mr. Williams are independent under Rule 10A-3 of the Exchange
Act, and that Ms. Ginman-Horrell is also independent under the
applicable listing requirements of NASDAQ, and that each member of
our audit committee satisfies the other listing requirements of
NASDAQ for audit committee membership. In accordance with our
NASDAQ listing, our audit committee members must each be
independent under Rule 10A-3 of the Exchange Act. However, as a
foreign private issuer, our audit committee members are not subject
to the additional independence requirements imposed by NASDAQ. We
intend to rely on the phase in rules of the Exchange Act with
respect to the independence of our audit committee. These rules
permit us to have an audit committee that has one member who is
independent upon the effectiveness of our registration statement, a
majority of members who are independent within 90 days of
effectiveness and all members who are independent within one year
of effectiveness. Our board of directors has also determined that
Charlotta Ginman-Horrell qualifies as an "audit committee financial
expert," as such term is defined by the SEC, and that Ms.
Ginman-Horrell has the requisite level of financial sophistication
required by the continued listing standards of NASDAQ.
Item 16B. Code of Business Conduct and Ethics.
We have adopted a Code of Business Conduct and Ethics, or the
Code of Conduct, that is applicable to all of our employees,
executive officers and directors. A copy of the Code of Conduct is
available on our website at www.motifbio.com.
Item 16C. Principal Accountant Fees and Services.
Our financial statements have been prepared in accordance with
IFRS and in conformity with IFRS as adopted by the European Union.
PricewaterhouseCoopers LLP (United States) has served as our
independent registered public accounting firm for the fiscal year
ended December 31, 2016 and PricewaterhouseCoopers LLP (United
Kingdom) has served as our independent registered public accounting
firm for the fiscal years ended December 31, 2015 and 2014.
PricewaterhouseCoopers LLP (United States) was engaged to act as
our independent public accounting firm in February 2017. Following
the initial public offering in the US, it was decided that
PricewaterhouseCoopers LLP (United States) would thereby become our
Principal Auditor as set forth in the audit standard guidance of
the Public Company Accounting Oversight Board (PCAOB).
PricewaterhouseCoopers LLP (United Kingdom) remains the auditor
under International Standards on Auditing (ISA) for purposes of the
group statutory IFRS statements issued for AIM and UK regulatory
purposes.
In December 2015, following a competitive bidding process, our
audit committee recommended to the board of directors that
PricewaterhouseCoopers LLP (United Kingdom) be appointed to replace
Crowe Clark Whitehill LLP as chartered accountants and registered
auditors in the United Kingdom beginning with the fiscal year
ending December 31, 2015. PricewaterhouseCoopers LLP (United
Kingdom) were engaged to act as our chartered accountants and
registered auditors on January 21, 2016 and Crowe Clark Whitehill
LLP resigned as our statutory auditor on February 17, 2016.
The following table shows the aggregate fees for services
rendered by PricewaterhouseCoopers LLP to us, including our
subsidiary, in fiscal years ended December 31, 2016 and 2015.
Year Ended December
31,
-----------------------
2016 2015
------------ ---------
(Amount in thousands
of US$)
Audit Fees 871,523 73,730
Audit-Related Fees - -
Tax Fees - -
Other Fees - -
------------ ---------
Total 871,523 73,730
============ =========
"Audit Fees" are the aggregate fees billed for the audit of our
annual financial statements, including supporting the filing
requirements of the AIM in the U.K. This category also includes
services that PricewaterhouseCoopers LLP provides, such as consents
and assistance with and review of documents filed with the SEC.
"Audit-Related Fees" are the aggregate fees billed for assurance
and related services that are reasonably related to the performance
of the audit and are not reported under Audit Fees.
"Tax Fees" are the aggregate fees billed for professional
services rendered by PricewaterhouseCoopers LLP for tax compliance,
tax advice and tax planning related services.
"Other Fees" are any additional amounts billed for products and
services provided by PricewaterhouseCoopers LLP.
Audit and Non-Audit Services Pre-Approval Policy
The audit committee has responsibility for appointing, setting
compensation of and overseeing the work of the independent
registered public accounting firm. In recognition of this
responsibility, the audit committee has adopted a policy governing
the pre-approval of all audit and permitted non-audit services
performed by our independent registered public accounting firm to
ensure that the provision of such services does not impair the
independent registered public accounting firm's independence from
us and our management. Unless a type of service to be provided by
our independent registered public accounting firm has received
general pre-approval from the audit committee, it requires specific
pre-approval by the audit committee. The payment for any proposed
services in excess of pre-approved cost levels requires specific
pre-approval by the audit committee. The audit committee may not
delegate its responsibilities to pre-approve services to the
management.
The audit committee has considered the non-audit services
provided by PricewaterhouseCoopers LLP as described above and
believes that they are compatible with maintaining
PricewaterhouseCoopers LLP's independence as our independent
registered public accounting firm.
Item 16D. Exemptions from the Listing Standards for Audit Committees.
In accordance with our NASDAQ listing, our audit committee
members must each be independent under Rule 10A-3 of the Exchange
Act. However, as a foreign private issuer, our audit committee
members are not subject to the additional independence requirements
imposed by NASDAQ. We intend to rely on the phase in rules of the
Exchange Act with respect to the independence of our audit
committee. These rules permit us to have an audit committee that
has one member who is independent upon the effectiveness of our
registration statement, a majority of members who are independent
within 90 days of effectiveness and all members who are independent
within one year of effectiveness.
Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers.
Not applicable.
Item 16F. Change in Registrant's Certifying Accountant.
On February 25, 2017, the audit committee of the board of
directors approved PricewaterhouseCoopers LLP (United States) to
serve as our independent registered public accounting firm for the
year ended December 31, 2016. Contemporaneous with the
determination to appoint PricewaterhouseCoopers LLP (United
States), we dismissed PricewaterhouseCoopers LLP (United Kingdom)
from such role. Following the initial public offering in the US, it
was decided that PricewaterhouseCoopers LLP (United States) would
thereby become our Principal Auditor as set forth in the audit
standard guidance of the Public Company Accounting Oversight Board
(PCAOB). PricewaterhouseCoopers LLP (United Kingdom) remains the
auditor under International Standards on Auditing (ISA) for
purposes of the group statutory IFRS statements issued for AIM and
UK regulatory purposes.
The report of PricewaterhouseCoopers LLP (United Kingdom) on our
consolidated financial statements as of and for the fiscal years
ended December 31, 2015 and 2014 did not contain an adverse opinion
or a disclaimer of opinion, nor were they qualified or modified as
to uncertainty, audit scope or accounting principles, except that
the report for each such fiscal year included a paragraph stating
that there was substantial doubt about our ability to continue as a
going concern.
During the fiscal years ended December 31, 2015 and 2014, there
were no disagreements between us and PricewaterhouseCoopers LLP
(United Kingdom) on any matter of accounting principles or
practices, financial statement disclosure or auditing scope or
procedure which, if not resolved to the satisfaction of
PricewaterhouseCoopers LLP (United Kingdom), would have caused
PricewaterhouseCoopers LLP (United Kingdom) to make reference to
the subject matter of the disagreements in connection with its
reports for such fiscal years; and there were no reportable events
as defined in Item 16F(a)(1)(v) of Form 20-F. Further in the two
years prior to December 31, 2016, we have not consulted with
PricewaterhouseCoopers LLP (United States) regarding either (i) the
application of accounting principles to a specified transaction,
either completed or proposed, or the type of audit opinion that
might be rendered with respect to the consolidated financial
statements of the Group; or (ii) any matter that was the subject of
a disagreement as that term is used in Item 16F(a)(1)(iv) of Form
20-F or a 'reportable event' as described in Item 16F(a)(1)(v) of
Form 20-F.
We have provided PricewaterhouseCoopers LLP (United Kingdom)
with a copy of this annual report on Form 20-F prior to its filing
with the SEC and requested that PricewaterhouseCoopers LLP (United
Kingdom) furnish a letter addressed to the SEC stating whether
PricewaterhouseCoopers LLP (United Kingdom) agrees with the above
statements, and, if not, stating the respects in which it does not
agree. A copy of the PricewaterhouseCoopers LLP (United Kingdom)
letter to the SEC dated May 1, 2017 is included as Exhibit 15.2 to
this annual report.
In December 2015, following a competitive bidding process, our
audit committee recommended to the board of directors that
PricewaterhouseCoopers LLP (United Kingdom) be appointed to replace
Crowe Clark Whitehill LLP as chartered accountants and registered
auditors in the United Kingdom beginning with the fiscal year
ending December 31, 2015. PricewaterhouseCoopers LLP (United
Kingdom) were engaged to act as our chartered accountants and
registered auditors on January 21, 2016 and Crowe Clark Whitehill
LLP resigned as our statutory auditor on February 17, 2016.
Crowe Clark Whitehill LLP performed a non-statutory audit of the
financial statements of Motif BioSciences, Inc., prepared under
International Financial Reporting Standards as adopted by the
European Union, for the fiscal year ending December 31, 2014 in
accordance with International Standards on Auditing (United Kingdom
and Ireland). Neither Crowe Clark Whitehill LLP's report relating
to the non-statutory audit of Motif BioSciences, Inc., nor the
historic financial statements, prepared under International
Financial Reporting Standards as adopted by the European Union, are
included or incorporated by reference in this Annual Report.
Crowe Clark Whitehill LLP's non-statutory audit report on Motif
BioSciences, Inc. did not contain an adverse opinion or a
disclaimer of opinion, and it was not qualified or modified as to
uncertainty, audit scope or accounting principles, although Crowe
Clark Whitehill LLP stated in their statutory audit report
that:
"This report is made solely to the Company's members, as a body,
in accordance with Chapter 3 of Part 16 of the Companies Act 2006.
Our audit work has been undertaken so that we might state to the
Company's members those matters we are required to state to them in
an auditor's report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to
anyone other than the Company and the Company's members as a body,
for our audit work, for this report, or for the opinions we have
formed."
In connection with the non-statutory audit performed by Crowe
Clark Whitehill LLP under International Standards on Auditing
(United Kingdom and Ireland) of the financial statements of Motif
BioSciences, Inc., prepared under International Financial Reporting
Standards as adopted by the European Union, for the fiscal year
ended December 31, 2014, we did not have any disagreements with
Crowe Clark Whitehill LLP on any matters of accounting principles
or practices, financial statement disclosure, or auditing scope or
procedure which, if not resolved to the satisfaction of Crowe Clark
Whitehill LLP would have caused Crowe Clark Whitehill LLP to make
reference to such matter in its report. We have requested that
Crowe Clark Whitehill LLP furnish a letter addressed to the SEC
stating whether Crowe Clark Whitehill LLP agrees with the above
statements, and, if not, stating the respects in which it does not
agree. Such letter is included as Exhibit 15.1 to this Form
20-F.
Item 16G. Corporate Governance.
Differences In Corporate Law Between England And The State Of
Delaware
As a public limited company incorporated under the laws of
England and Wales, the rights of our shareholders are governed by
applicable English law, including the Companies Act, and not by the
law of any U.S. state. As a result, our directors and shareholders
are subject to different responsibilities, rights and privileges
than are applicable to directors and shareholders of U.S.
corporations. We have set below a summary of the differences
between the provisions of the Companies Act applicable to us and
the Delaware General Corporation Law relating to shareholders'
rights and protections. This summary is not intended to be a
complete discussion of the respective rights and it is qualified in
its entirety by reference to English law, Delaware law and our
Articles. Before investing, you should consult your legal advisor
regarding the impact of English corporate law on your specific
circumstances and reasons for investing. The summary below does not
include a description of rights or obligations under the U.S.
federal securities laws or NASDAQ listing requirements. You are
also urged to carefully read the relevant provisions of the
Delaware General Corporation Law and the Companies Act for a more
complete understanding of the differences between Delaware and
English law.
Delaware England
------------------------------------------------------------- -------------------------------------------------------------
Number of Under Delaware law, a corporation must have at least one
Directors.... director and the number of directors Under the Companies Act, a public limited company must have
............. shall be fixed by or in the manner provided in the bylaws, at least two directors and the
...... unless specified in the certificate number of directors may be fixed by or in the manner
of incorporation. provided in a company's Articles of Association.
Removal of Under Delaware law, directors may be removed from office, Under the Companies Act, shareholders may remove a director
Directors.... with or without cause, by a majority without cause by an ordinary resolution
............. shareholder vote, except (a) in the case of a corporation (which is passed by a simple majority of those voting in
.... whose board is classified, shareholders person or by proxy at a general meeting)
may effect such removal only for cause, unless otherwise irrespective of any provisions of any service contract the
provided in the certificate of incorporation, director has with the company,
and (b) in the case of a corporation having cumulative provided that 28 clear days' notice of the resolution is
voting, if less than the entire board given to the company and certain
is to be removed, no director may be removed without cause other procedural requirements under the Companies Act are
if the votes cast against his or followed (such as allowing the director
her removal would be sufficient to elect him or her if then to make representations against his or her removal at the
cumulatively voted at an election meeting and/or in writing).
of the entire board of directors, or, if there are classes
of directors, at an election of
the class of directors of which he or she is a part.
Vacancies on
the Board of Under Delaware law, vacancies and newly created Under English law, the procedure by which directors (other
Directors.... directorships may be filled by a majority than a company's initial directors)
............. of the directors then in office (even though less than a are appointed is generally set out in a company's Articles
............. quorum) or by a sole remaining director of Association, provided that where
......... unless otherwise provided in the certificate of two or more persons are appointed as directors of a public
incorporation or bylaws of the corporation. limited company by resolution of
the shareholders, resolutions appointing each director must
be voted on individually unless
a resolution of the shareholders that such resolutions do
not have to be voted on individually
is first agreed to by the meeting without any vote being
given against it.
Annual Under Delaware law, the annual meeting of shareholders shall Under the Companies Act, a public limited company must hold
General be held at such place, on such an annual general meeting each
Meeting...... date and at such time as may be designated from time to time year. This meeting must be held within six months of the
......... by the board of directors or company's accounting reference date.
as provided in the certificate of incorporation or by the
bylaws.
General Under Delaware law, special meetings of the shareholders may Under the Companies Act, a general meeting of the
Meeting...... be called by the board of directors shareholders of a public limited company
............. or by such person or persons as may be authorized by the may be called by the directors. Shareholders holding at
.......... certificate of incorporation or by least 5% of the paid--up capital of
the bylaws. the company carrying voting rights at general meetings can
also require the directors to call
a general meeting.
Notice of Under Delaware law, written notice of any meeting of the The Companies Act provides that a general meeting (other
General shareholders must be given to each than an adjourned meeting) must be
Meetings.... shareholder entitled to vote at the meeting not less than called by notice of:
ten nor more than 60 days before
the date of the meeting and shall specify the place, date, * in the case of an annual general meeting, at least 21
hour and purpose or purposes of days; and
the meeting.
* in any other case, at least 14 days.
The company's Articles of Association may provide for a
longer period of notice and, in addition,
certain matters (such as the removal of directors or
auditors) require special notice, which
is 28 clear days' notice. The shareholders of a company may
in all cases consent to a shorter
notice period, the proportion of shareholders' consent
required being 100% of those entitled
to attend and vote in the case of an annual general meeting
and, in the case of any other
general meeting, a majority in number of the members having
a right to attend and vote at
the meeting, being a majority who together hold not less
than 95% in nominal value of the
shares giving a right to attend and vote at the meeting.
Quorum....... The certificate of incorporation or bylaws may specify the Subject to the provisions of a company's Articles of
............. number of shares, the holders of Association, the Companies Act provides
............. which shall be present or represented by proxy at any that two shareholders present at a meeting (in person or by
............ meeting in order to constitute a quorum, proxy) shall constitute a quorum.
but in no event shall a quorum consist of less than (1) /(3)
of the shares entitled to vote
at the meeting. In the absence of such specification in the
certificate of incorporation or
bylaws, a majority of the shares entitled to vote, present
in person or represented by proxy,
shall constitute a quorum at a meeting of shareholders.
Proxy........ Under Delaware law, at any meeting of shareholders, a Under the Companies Act, at any meeting of shareholders, a
............. shareholder may designate another person shareholder may designate another
............. to act for such shareholder by proxy, but no such proxy person to attend, speak and vote at the meeting on their
............. shall be voted or acted upon after behalf by proxy (or, in the case
.. three years from its date, unless the proxy provides for a of a shareholder which is a corporate body, by way of a
longer period. corporate representative).
Issue of New Under Delaware law, if the company's certificate of Under the Companies Act, the directors of a company must not
Shares....... incorporation so provides, the directors exercise any power to allot shares
............. have the power to authorize additional stock. The directors or grant rights to subscribe for, or to convert any security
.... may authorize capital stock to into, shares unless they are
be issued for consideration consisting of cash, any tangible authorized to do so by the company's Articles of Association
or intangible property or any or by an ordinary resolution
benefit to the company or any combination thereof. of the shareholders.
Any authorization given must state the maximum amount of
shares that may be allotted under
it and specify the date on which it will expire, which must
be not more than five years from
the date the authorization was given. The authority can be
renewed by a further resolution
of the shareholders.
Liability of
Directors and Under Delaware law, a corporation's certificate of Under the Companies Act, any provision (whether contained
Officers..... incorporation may include a provision eliminating in a company's Articles of Association
............. or limiting the personal liability of a director to the or any contract or otherwise) that purports to exempt a
............. corporation and its shareholders for director of a company (to any extent)
.... monetary damages arising from a breach of fiduciary duty as from any liability that would otherwise attach to him in
a director. However, no provision connection with any negligence, default,
can limit the liability of a director for: breach of duty or breach of trust in relation to the
company is void.
* any breach of the director's duty of loyalty to the
corporation or its shareholders; Any provision by which a company directly or indirectly
provides an indemnity (to any extent)
for a director of the company or of an associated company
against any liability attaching
* acts or omissions not in good faith or that involve to him in connection with any negligence, default, breach
intentional misconduct or a knowing violation of law; of duty or breach of trust in relation
to the company of which he or she is a director is also
void except as permitted by the Companies
Act, which provides exceptions for the company to: (i)
* willful or negligent payment of unlawful dividends or purchase and maintain insurance against
stock purchases or redemptions; or such liability; (ii) provide a "qualifying third-party
indemnity" (being an indemnity against
liability incurred by the director to a person other than
the company or an associated company.
-- any transaction from which the director derives an Such indemnity must not cover criminal fines, penalties
improper personal benefit. imposed by regulatory bodies, the
defense costs of criminal proceedings where the director is
found guilty, the defense costs
of civil proceedings successfully brought against the
director by the company or an associated
company, and the costs of unsuccessful applications by the
director for relief); and (iii)
provide a "qualifying pension scheme indemnity" (being an
indemnity against liability incurred
in connection with the company's activities as trustee of
an occupational pension plan).
Voting Delaware law provides that, unless otherwise provided in the Under English law, unless a poll is demanded by the
Rights....... certificate of incorporation, shareholders of a company or is required
............. each shareholder of record is entitled to one vote for each by the Chairman of the meeting or the company's Articles of
............. share of capital stock held by Association, shareholders shall
.. such shareholder. vote on all resolutions on a show of hands.
Under the Companies Act, a poll may be demanded by: (i) not
fewer than five shareholders having
the right to vote on the resolution; (ii) any shareholder(s)
representing at least 10% of
the total voting rights of all the shareholders having the
right to vote on the resolution
(excluding any voting rights attached to treasury shares);
or (iii) any shareholder (s) holding
shares in the company conferring a right to vote on the
resolution being shares on which an
aggregate sum has been paid up equal to not less than 10% of
the total sum paid up on all
the shares conferring that right. A company's Articles of
Association may provide more extensive
rights for shareholders to call a poll.
Under English law, an ordinary resolution is passed on a
show of hands if it is approved by
a simple majority (more than 50%) of the votes cast by
shareholders present (in person or
by proxy) and entitled to vote. If a poll is demanded, an
ordinary resolution is passed if
it is approved by holders representing a simple majority of
the total voting rights of shareholders
present (in person or by proxy) who (being entitled to vote)
vote on the resolution. Special
resolutions require the affirmative vote of not less than
75% of the votes cast by shareholders
present (in person or by proxy) at the meeting.
Variation of Under Delaware law, the holders of the outstanding shares of The Companies Act provides that rights attached to a class
Class a class shall be entitled to of shares may only be varied or
Rights....... vote as a class upon a proposed amendment, whether or not abrogated in accordance with provision in the company's
....... entitled to vote thereon by the articles for the variation or abrogation
certificate of incorporation, if the amendment would of those rights or, where the company's articles contain no
increase or decrease the aggregate number such provision, if the holders
of authorized shares of such class, increase or decrease the of shares of that class consent to the variation or
par value of the shares of such abrogation. Consent for these purposes
class, or alter or change the powers, preferences or special means:
rights of the shares of such
class so as to affect them adversely. * consent in writing from the holders of at least 75%
in nominal value of the issued shares of that class
(excluding any shares held as treasury shares); or
* a special resolution passed at a separate meeting of
the holders of that class sanctioning the variation.
The Companies Act provides that the quorum for a class
meeting is not less than two persons
holding or representing by proxy at least one--third of the
nominal value of the issued shares
of that class. Following a variation of class rights,
shareholders who amount to not less
than 15% of the shareholders of the class in question who
did not approve the variation may
apply to court to have the variation cancelled. Any
application must be made within 21 days
of the variation. The court may cancel the variation if it
is satisfied having regard to all
the circumstances of the case that the variation would
unfairly prejudice the shareholders
of the class represented by the applicant.
Shareholder
Vote on Generally, under Delaware law, unless the certificate of The Companies Act provides for schemes of arrangement,
Certain incorporation provides for the vote which are arrangements or compromises
Transactions. of a larger portion of the stock, completion of a merger, between a company and any class of shareholders or
............. consolidation, sale, lease or exchange creditors and used in certain types of
............ of all or substantially all of a corporation's assets or reconstructions, amalgamations, capital reorganizations or
dissolution requires: takeovers. These arrangements require:
* the approval of the board of directors; and * the approval at a shareholders' or creditors' meeting
convened by order of the court, of a majority in
number of shareholders or creditors representing 75%
in value of the capital held by, or debt owed to, the
* approval by the vote of the holders of a majority of class of shareholders or creditors, or class thereof
the outstanding stock or, if the certificate of present and voting, either in person or by proxy; and
incorporation provides for more or less than one vote
per share, a majority of the votes of the outstanding
stock of a corporation entitled to vote on the
matter. * the approval of the court.
Under Delaware law, a contract or transaction between the Once approved, sanctioned and effective, all shareholders
company and one or more of its directors and creditors of the relevant class
or officers, or between the company and any other and the company are bound by the terms of the scheme. The
organization in which one or more of its Companies Act also contains certain
directors or officers, are directors or officers, or have a provisions relating to transactions between a director and
financial interest, shall not the company, including transactions
be void solely for this reason, or solely because the involving the acquisition of substantial non--cash assets
director or officer participates in from a director or the sale of substantial
the meeting of the board which authorizes the contract or noncash assets to a director, and loans between a company
transaction, or solely because any and a director or certain connected
such director's or officer's votes are counted for such persons of directors. If such transactions meet certain
purpose, if: thresholds set out within the Companies
Act the approval of shareholders by ordinary resolution
* the material facts as to the director's or officer's will be required.
relationship or interest and as to the contract or
transaction are disclosed or are known to the board,
and the board in good faith authorizes the contract
or transaction by the affirmative votes of a majority
of the disinterested directors, even though the
disinterested directors be less than a quorum;
* the material facts as to the director's or officer's
relationship or interest and as to the contract or
transaction are disclosed or are known to the
shareholders entitled to vote thereon, and the
contract or transaction is specifically approved in
good faith by vote of the shareholders; or
* the contract or transaction is fair as to the
corporation as of the time it is authorized, approved
or ratified, by the board of directors, a committee
or the shareholders.
Standard of
Conduct for Delaware law does not contain specific provisions setting Under English law, a director owes various statutory and
Directors.... forth the standard of conduct of fiduciary duties to the company,
............. a director. The scope of the fiduciary duties of directors including:
............. is generally determined by the
... courts of the State of Delaware. In general, directors have * to act in the way he or she considers, in good faith,
a duty to act without self--interest, would be most likely to promote the success of the
on a well--informed basis and in a manner they reasonably company for the benefit of its shareholders as a
believe to be in the best interest whole;
of the shareholders. Directors of a Delaware corporation
owe fiduciary duties of care and
loyalty to the corporation and to its shareholders. The
duty of care generally requires that * to avoid a situation in which he or she has, or can
a director act in good faith, with the care that an have, a direct or indirect interest that conflicts,
ordinarily prudent person would exercise or possibly conflicts, with the interests of the
under similar circumstances. Under this duty, a director company;
must inform himself or herself of
all material information reasonably available regarding a
significant transaction. The duty
of loyalty requires that a director act in a manner he or * to act in accordance with the company's constitution
she reasonably believes to be in and only exercise his or her powers for the purposes
the best interests of the corporation. The director must for which they are conferred;
not use his or her corporate position
for personal gain or advantage. In addition,
* to exercise independent judgment;
* to exercise reasonable care, skill and diligence;
* not to accept benefits from a third-party conferred
by reason of his or her being a director or doing (or
not doing) anything as a director; and
under Delaware law, when the board of directors of a
Delaware corporation approves the sale * a duty to declare any interest that he or she has,
or break--up of a corporation, the board of directors may, whether directly or indirectly, in a proposed or
in certain circumstances, have existing transaction or arrangement with the company.
a duty to obtain the highest value reasonably available to
the shareholders.
Shareholder Under Delaware law, a shareholder may initiate a derivative Under English law, generally, the company, rather than its
Suits........ action to enforce a right of a shareholders, is the proper claimant
............. corporation if the corporation fails to enforce the right in an action in respect of a wrong done to the company or
....... itself. The complaint must: where there is an irregularity in
the company's internal management. Notwithstanding this
* state that the plaintiff was a shareholder at the general position, the Companies Act
time of the transaction of which the plaintiff provides that (i) a court may allow a shareholder to bring a
complains or that the plaintiff's shares thereafter derivative claim (that is, an
devolved on the plaintiff by operation of law; and action in respect of and on behalf of the company) in
respect of a cause of action arising
from a director's negligence, default, breach of duty or
breach of trust, subject to complying
* allege with particularity the efforts made by the with the procedural requirements under the Companies Act and
plaintiff to obtain the action the plaintiff desires (ii) a shareholder may bring
from the directors and the reasons for the a claim for a court order where the company's affairs have
plaintiff's failure to obtain the action; or been or are being conducted in
a manner that is unfairly prejudicial to some or all of its
shareholders.
* state the reasons for not making the effort.
Additionally, the plaintiff must remain a shareholder
through the duration of the derivative suit.
Other English Law Considerations
Squeeze--Out
Under the Companies Act, if a takeover offer (as defined in
Section 974 of the Companies Act) is made for the shares of a
company and the offeror were to acquire, or unconditionally
contract to acquire: (i) not less than 90% in value of the shares
to which the takeover offer relates (the "Takeover Offer Shares");
and (ii) where those shares are voting shares, not less than 90% of
the voting rights attached to the Takeover Offer Shares, the
offeror could acquire compulsorily the remaining 10% within three
months of the last day on which its offer can be accepted. It would
do so by sending a notice to outstanding shareholders telling them
that it will acquire compulsorily their Takeover Offer Shares and
then, six weeks later, it would execute a transfer of the
outstanding Takeover Offer Shares in its favor and pay the
consideration to the company, which would hold the consideration on
trust for outstanding shareholders. The consideration offered to
the shareholders whose Takeover Offer Shares are acquired
compulsorily under the Companies Act must, in general, be the same
as the consideration that was available under the takeover
offer.
Sell--Out
The Companies Act also gives minority shareholders a right to be
bought out in certain circumstances by an offeror who has made a
takeover offer (as defined in Section 974 of the Companies Act). If
a takeover offer related to all the shares of a company and, at any
time before the end of the period within which the offer could be
accepted, the offeror held or had agreed to acquire not less than
90% of the shares to which the offer relates, any holder of the
shares to which the offer related who had not accepted the offer
could by a written communication to the offeror require it to
acquire those shares. The offeror is required to give any
shareholder notice of his or her right to be bought out within one
month of that right arising. The offeror may impose a time limit on
the rights of the minority shareholders to be bought out, but that
period cannot end less than three months after the end of the
acceptance period. If a shareholder exercises his or her rights,
the offeror is bound to acquire those shares on the terms of the
offer or on such other terms as may be agreed.
Disclosure Of Interest In Shares
Pursuant to Part 22 of the Companies Act, a company is empowered
by notice in writing to require any person whom the company knows
to be, or has reasonable cause to believe to be, interested in the
company's shares or at any time during the three years immediately
preceding the date on which the notice is issued to have been so
interested, within a reasonable time to disclose to the company
details of that person's interest and (so far as is within such
person's knowledge) details of any other interest that subsists or
subsisted in those shares. If a shareholder defaults in supplying
the company with the required details in relation to the shares in
question (the "Default Shares"), the shareholder shall not be
entitled to vote or exercise any other right conferred by
membership in relation to general meetings. Where the Default
Shares represent 0.25% or more of the issued shares of the class in
question, in certain circumstances the directors may direct
that:
(i) any dividend or other money payable in respect of the
Default Shares shall be retained by the company without any
liability to pay interest on it when such dividend or other money
is finally paid to the shareholder; and/or
(ii) no transfer by the relevant shareholder of shares (other
than a transfer approved in accordance with the provisions of the
company's Articles of Association) may be registered (unless such
shareholder is not in default and the transfer does not relate to
Default Shares).
Dividends
Under English law, before a company can lawfully make a
distribution, it must ensure that it has sufficient distributable
reserves. A company's distributable reserves are its accumulated,
realized profits, so far as not previously utilized by distribution
or capitalization, less its accumulated, realized losses, so far as
not previously written off in a reduction or reorganization of
capital duly made. In addition to having sufficient distributable
reserves, a public company will not be permitted to make a
distribution if, at the time, the amount of its net assets (that
is, the aggregate of the company's assets less the aggregate of its
liabilities) is less than the aggregate of its issued and paid--up
share capital and undistributable reserves, or if the distribution
would result in the amount of its net assets being less than that
aggregate.
Purchase Of Own Shares
Under English law, a public limited company may purchase its own
shares only out of the distributable profits of the company or the
proceeds of a new issue of shares made for the purpose of financing
the purchase, provided that it is not restricted from doing so by
its articles. A public limited company may not purchase its own
shares if as a result of the purchase there would no longer be any
issued shares of the company other than redeemable shares or shares
held as treasury shares. Shares must be fully paid in order to be
repurchased.
Subject to the foregoing, because NASDAQ is not a "recognized
investment exchange" under the Companies Act, a company may
purchase its own fully paid shares only pursuant to a purchase
contract authorized by ordinary resolution of the holders of its
ordinary shares before the purchase takes place. Any authority will
not be effective if any shareholder from whom the company proposes
to purchase shares votes on the resolution and the resolution would
not have been passed if such shareholder had not done so. The
resolution authorizing the purchase must specify a date, not being
later than five years after the passing of the resolution, on which
the authority to purchase is to expire.
A share buy-back by a company of its ordinary shares will give
rise to U.K. stamp duty at the rate of 0.5% of the amount or value
of the consideration payable by the company, and such stamp duty
will be paid by the company. Our Articles do not have conditions
governing changes in our capital which are more stringent than
those required by law.
Statutory Pre--Emption Rights
Under English law, a company must not allot equity securities to
a person on any terms unless the following conditions are
satisfied:
(i) it has made an offer to each person who holds ordinary
shares in the company to allot to them on the same or more
favorable terms a proportion of those securities that is as nearly
as practicable equal to the proportion in nominal value held by
them of the ordinary share capital of the company; and
(ii) the period during which any such offer may be accepted has
expired or the company has received notice of the acceptance or
refusal of every offer so made.
For these purposes "equity securities" means ordinary shares in
the company or rights to subscribe for, or to convert securities
into, ordinary shares in the company. "Ordinary shares" means
shares other than shares that, with respect to dividends and
capital, carry a right to participate only up to a specified amount
in a distribution. The statutory pre--emption rights are subject to
certain exceptions, including the issue of ordinary shares for
non--cash consideration, an allotment of bonus shares and the
allotment of equity securities pursuant to an employees' share
scheme. The statutory pre--emption rights may also be disapplied
with the approval of 75% of shareholders.
Shareholder Rights
Certain rights granted under the Companies Act, including the
right to requisition a general meeting or require a resolution to
be put to shareholders at the annual general meeting, are only
available to our members. For English law purposes, our members are
the persons who are registered as the owners of the legal title to
the shares and whose names are recorded in our register of members.
In the case of shares held in a settlement system operated by the
Depository Trust Company ("DTC"), the registered member will be
DTC's nominee, Cede & Co. If a person who holds their ordinary
shares in DTC wishes to exercise certain of the rights granted
under the Companies Act, they may be required to first take steps
to withdraw their ordinary shares from the settlement system
operated by DTC and become the registered holder of the shares in
our register of members. A withdrawal of shares from DTC may have
tax implications, for additional information on the potential tax
implications of withdrawing your shares from the settlement system
operated by DTC, see "Item 10.E. Taxation-Material English Law Tax
Considerations."
U.K. City Code On Takeovers And Mergers
As a U.K. incorporated public company with its registered
officer in the United Kingdom, which is admitted to AIM, we are
subject to the U.K. City Code on Takeovers and Mergers (the
"Takeover Code"), which is issued and administered by the U.K.
Panel on Takeovers and Mergers, or the Panel.
The Takeover Code provides a framework within which takeovers of
companies subject to it are conducted. In particular, the Takeover
Code contains certain rules in respect of mandatory offers. Under
Rule 9 of the Takeover Code, if a person:
-- acquires an interest in our shares which, when taken together
with shares in which he or persons acting in concert with him are
interested, carries 30% or more of the voting rights of our shares;
or
-- who, together with persons acting in concert with him, is
interested in shares that in the aggregate carry not less than 30%
and not more than 50% of the voting rights in us, acquires
additional interests in shares that increase the percentage of
shares carrying voting rights in which that person is
interested,
the acquirer and depending on the circumstances, its concert
parties, would be required (except with the consent of the Panel)
to make a cash offer for our outstanding shares at a price not less
than the highest price paid for any interests in the shares by the
acquirer or its concert parties during the previous 12 months.
Item 16H. Mine Safety Disclosure.
Not applicable.
PART III
Item 17. Financial Statements.
Not applicable, see Item 18.
Item 18. Financial Statements.
The financial statements are filed as part of this Annual Report
beginning on page F-1.
Item 19. Exhibits.
The Exhibits listed in the Exhibit Index at the end of this
Annual Report are filed as Exhibits to this Annual Report.
SIGNATURES
The registrant hereby certifies that it meets all of the
requirements for filing on Form 20-F and that it has duly caused
and authorized the undersigned to sign this Annual Report on its
behalf.
MOTIF BIO PLC
/s/ Graham George Lumsden
By: Graham George Lumsden
Title: Chief Executive Officer
(Principal Executive Officer)
Date: May 1, 2017
EXHIBIT INDEX
1.1 Memorandum and Articles of Association; incorporated by reference to Exhibit 3.1 to the Registrant's
Registration Statement on Form F-1 (SEC File No. 333-212491)
2.1 Form of Deposit Agreement; incorporated by reference to Exhibit 4.1 to the Registrant's Registration
Statement on Form F-1 (SEC File No. 333-212491)
2.2 Form of American Depositary Receipt (included in Exhibit 2.1)
2.3 Form of Warrant Agent Agreement, between Motif Bio plc and The Bank of New York Mellon, as
warrant agent; incorporated by reference to Exhibit 4.3 to the Registrant's Registration Statement
on Form F-1 (SEC File No. 333-212491)
2.4 Form of Global Warrant to Purchase ADSs (included in Exhibit 2.3)
2.5 Form of Ordinary Share Warrant; incorporated by reference to Exhibit 4.5 to the Registrant's
Registration Statement on Form F-1 (SEC File No. 333-212491)
4.1 Convertible Note (US$1,471,700) from Motif BioSciences Inc. to Amphion Innovations plc, dated
April 2, 2015; incorporated by reference to Exhibit 10.1 to the Registrant's Registration
Statement on Form F-1 (SEC File No. 333-212491)
4.2 Convertible Note (US$2,079,085.63) from Motif BioSciences Inc. to Amphion Innovations US,
Inc., dated April 2, 2015; incorporated by reference to Exhibit 10.2 to the Registrant's Registration
Statement on Form F-1 (SEC File No. 333-212491)
4.3 Service Agreement, dated April 1, 2015, by and between Motif Bio Limited and Graham Lumsden;
incorporated by reference to Exhibit 10.3 to the Registrant's Registration Statement on Form
F-1 (SEC File No. 333-212491)
4.4 Employment Agreement, effective May 1, 2016, by and between Motif BioSciences Inc. and Pete
A. Meyers; incorporated by reference to Exhibit 10.4 to the Registrant's Registration Statement
on Form F-1 (SEC File No. 333-212491)
4.5 Employment Agreement, effective May 1, 2015, by and between Motif BioSciences Inc. and David
Huang; incorporated by reference to Exhibit 10.5 to the Registrant's Registration Statement
on Form F-1 (SEC File No. 333-212491)
4.6 Advisory and Consultancy Agreement, dated April 1, 2015, by and between Motif Bio plc and
Amphion Innovation US, Inc.; incorporated by reference to Exhibit 10.6 to the Registrant's
Registration Statement on Form F-1 (SEC File No. 333-212491)
4.7 Consultancy Agreement, dated April 1, 2015, by and between Motif Bio plc and Amphion Innovation
US, Inc. (for the services of Robert Bertoldi); incorporated by reference to Exhibit 10.7
to the Registrant's Registration Statement on Form F-1 (SEC File No. 333-212491)
4.8 Motif Bio plc Share Option Plan; incorporated by reference to Exhibit 10.8 to the Registrant's
Registration Statement on Form F-1 (SEC File No. 333-212491)
4.9 Sale and Purchase Agreement, dated June 1, 2001, by and between F. Hoffman--La Roche Ltd.,
Hoffman--La Roche Inc. and Arpida Ltd.; incorporated by reference to Exhibit 10.9 to the Registrant's
Registration Statement on Form F-1 (SEC File No. 333-212491)
4.10 Sale and Purchase Agreement, dated September 13, 2013, by and between Life Sciences Management
Group, Inc. and Acino Pharma AG; incorporated by reference to Exhibit 10.10 to the Registrant's
Registration Statement on Form F-1 (SEC File No. 333-212491)
4.11 Amended and Restated Convertible Note (US$1,471,700) from Motif BioSciences Inc. to Amphion
Innovations plc, dated September 7, 2016; incorporated by reference to Exhibit 10.11 to the
Registrant's Registration Statement on Form F-1 (SEC File No. 333-212491)
4.12 Amended and Restated Convertible Note (US$2,079,085.63) from Motif BioSciences Inc. to Amphion
Innovations US, Inc., dated September 7, 2016; incorporated by reference to Exhibit 10.12
to the Registrant's Registration Statement on Form F-1 (SEC File No. 333-212491)
4.13 Consultancy Agreement, dated September 7, 2016, by and between Motif Bio plc and Amphion Innovations
US, Inc.; incorporated by reference to Exhibit 10.13 to the Registrant's Registration Statement
on Form F-1 (SEC File No. 333-212491)
4.14 Agreement and Plan of Merger, dated as of December 31, 2014, by and among Nuprim, Inc., Nuprim
Shareholders, Motif BioSciences Inc. and R. Michael Floyd as Nuprim Shareholders' Representative;
incorporated by reference to Exhibit 2.1 to the Registrant's Registration Statement on Form
F-1 (SEC File No. 333-212491)
4.15 Underwriting Agreement, dated as of November 17, 2016, by and between Motif Bio plc and H.C.
Wainwright & Co., LLC
4.16 Agreement and Plan of Merger for the Acquisition of Motif, Inc., dated March 27, 2015, by
and among Motif BioSciences, Inc., Motif Bio plc, Motif Acquisition Sub Inc. and Stephen Austin;
incorporated by reference to Exhibit 2.3 to the Registrant's Registration Statement on Form
F-1 (SEC File No. 333-212491)
4.17 Employment Agreement, effective January 16, 2017, by and between Motif BioSciences Inc. and
Robert Dickey IV
4.18 Consulting Agreement, effective January 16, 2017, by and between Motif BioSciences Inc. and
Pete A. Meyers
4.19 Confidential Separation Agreement and Release, effective as of January 13, 2017, by and between
Motif BioSciences Inc. and Pete A. Meyers
4.20 Independent Contractor Agreement, effective January 1, 2017, by and between Motif BioSciences
Inc. and Jonathan E. Gold
8.1 List of subsidiaries; incorporated by reference to Exhibit 21.1 to the Registrant's Registration
Statement on Form F-1 (SEC File No. 333-212491)
12.1 Certificate of Chief Executive Officer pursuant to Securities Exchange Act Rules 13a-14(a)
and 15d-14(a) as adopted pursuant to --302 of the Sarbanes-Oxley Act of 2002.
12.2 Certificate of Chief Financial Officer pursuant to Securities Exchange Act Rules 13a-14(a)
and 15d-14(a) as adopted pursuant to --302 of the Sarbanes-Oxley Act of 2002.
13.1 Certificate of Chief Executive Officer pursuant to 18 U.S.C. --1350, as adopted pursuant to
--906 of the Sarbanes-Oxley Act of 2002.
13.2 Certificate of Chief Financial Officer pursuant to 18 U.S.C. --1350, as adopted pursuant to
--906 of the Sarbanes-Oxley Act of 2002.
15.1 Letter from Crowe, Clarke Whitehill LLP to the U.S. Securities and Exchange Commission, dated
April 28, 2017
15.2 Letter from PricewaterhouseCoopers LLP to the U.S. Securities and Exchange Commission, dated
May 1, 2017
15.3 Consent of BAL Pharma Consulting, LLC
15.4 Consent of JMI Laboratories
Certain schedules, exhibits and annexes have been omitted
pursuant to Item 601(b)(2) of Regulation S--K. The Company will
furnish supplemental copies of any omitted schedule, exhibit or
annex to the Commission upon request.
Motif Bio plc
Index to Consolidated Financial Statements
Consolidated Financial Statements of Motif Bio
Index to Consolidated Financial Statements of Motif Bio
Report of Independent Registered Public Accounting Firm - PricewaterhouseCoopers LLP (United
States) F-1
Report of Independent Registered Public Accounting Firm - PricewaterhouseCoopers LLP (United
Kingdom) F-2
Consolidated Statements of Comprehensive Loss for the years ended December 31, 2016, 2015
and 2014 F-3
Consolidated Statements of Financial Position as at December 31, 2016 and 2015 F-4
Consolidated Statements of Changes in Equity for the years ended December 31, 2016, 2015 and
2014 F-5
Consolidated Statements of Cash Flows for the years ended December 31, 2016, 2015 and 2014 F-6
Notes to Consolidated Financial Statements F-7
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of Motif Bio plc,
In our opinion, the accompanying consolidated statement of
financial position and the related consolidated statements of
comprehensive loss, changes in equity and of cash flows present
fairly, in all material respects, the financial position of Motif
Bio plc and its subsidiaries at December 31, 2016, and the results
of their operations and their cash flows for the year ended
December 31, 2016 in conformity with International Financial
Reporting Standards as issued by the International Accounting
Standards Board and in conformity with International Financial
Reporting Standards as adopted by the European Union. These
financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
financial statements based on our audit. We conducted our audit of
these statements in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the
overall financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion.
The accompanying consolidated financial statements have been
prepared assuming that the Company will continue as a going
concern. As discussed in Note 1 to the financial statements, the
Company has suffered recurring losses and negative cash flows as a
result of the continuing clinical trials and will require
additional financing. These circumstances raise substantial doubt
about its ability to continue as a going concern. Management's
plans in regards to these matters are also set out in Note 1. The
consolidated financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
/s/ PricewaterhouseCoopers LLP
Florham Park, New Jersey, United States of America
May 1, 2017
Report of Independent Registered Public Accounting Firm
To the board of Directors and Shareholders of Motif Bio plc
In our opinion, the consolidated statement of financial position
as of December 31, 2015 and the related consolidated statements of
loss and comprehensive loss, changes in equity and of cash flows
for each of the two years in the period ended December 31, 2015
present fairly, in all material respects, the financial position of
Motif Bio plc and its subsidiaries as of December 31, 2015, and the
results of their operations and their cash flows for each of the
two years in the period ended December 31, 2015, in conformity with
International Financial Reporting Standards as issued by the
International Accounting Standards Board and in conformity with
International Financial Reporting Standards as adopted by the
European Union. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits. We
conducted our audits of these financial statements in accordance
with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by
management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis
for our opinion.
The accompanying consolidated financial statements have been
prepared assuming that the Company will continue as a going
concern. As discussed in Note 1 to the financial statements, the
Company has suffered recurring losses and negative cash flows as a
result of the continuing clinical trials and will require
additional financing. Management's plans in regards to these
matters is also set out in Note 1. These circumstances raise
substantial doubt about its ability to continue as a going concern.
The consolidated financial statements do not include any
adjustments that might result from the outcome of this
uncertainty.
/s/ PricewaterhouseCoopers LLP
Aberdeen, United Kingdom
16 May, 2016
Except with respect to our opinion on the consolidated financial
statements insofar as it relates to the matters that raise
substantial doubt about the Company's ability to continue as a
going concern described in Note 1, as to which the date is 31
October, 2016.
Motif Bio plc
Consolidated
statements
of comprehensive
loss
For the years
ended
December 31,
2016,
2015 and 2014
Year Year Year
ended ended ended
December
31,
December December
31, 2016 2015 31, 2014
Note US $ US $ US $
----- ------------------------------- ------------------------------------ -----------------------------------
Continuing
operations
General and
administrative
expenses 4 (4,912,150) (3,577,180) (1,096,116)
Research and
development
expenses 4 (34,794,815) (4,680,940) -
Gains on settlement
of contract
disputes 4 83,320 5,027 360,060
Operating loss (39,623,645) (8,253,093) (736,056)
Interest income 4 69,754 15,028 78
Interest expense 4 (383,259) (268,216) (449,036)
Net foreign exchange
losses (250,926) (9,644) -
Loss from
revaluation
of derivative
liabilities (135,939) -
Loss before income
taxes (40,324,015) (8,515,925) (1,185,014)
Income tax 7 (287) (774) (876)
Net loss for the
year (40,324,302) (8,516,699) (1,185,890)
------------------------------- ------------------------------------ -----------------------------------
Total comprehensive
loss for the year (40,324,302) (8,516,699) (1,185,890)
=============================== ==================================== ===================================
Net loss per share 8
Basic and diluted
per share * $(0.35) $(0.14) $(0.03)
=============================== ==================================== ===================================
Weighted average
number of ordinary
shares, basic and
diluted 116,558,191 61,225,922 36,726,342
=============================== ==================================== ===================================
* In accordance with IAS 33 "Earnings per share", shares
are not diluted where the entity has reported a loss
for the period.
The notes are an integral part of these consolidated financial
statements.
Motif Bio plc
Consolidated statements of
financial position
As at December 31, 2016 and
2015
December 31, 2016 December 31, 2015
Note US $ US $
----- --------------------------------------- ---------------------------------
ASSETS
Non-current assets
Intangible assets 9 6,195,748 6,195,748
Total non-current assets 6,195,748 6,195,748
--------------------------------------- ---------------------------------
Current assets
Prepaid expenses and other
receivables 10 401,064 167,657
Cash 21,829,632 28,594,347
Total current assets 22,230,696 28,762,004
--------------------------------------- ---------------------------------
Total assets 28,426,444 34,957,752
======================================= =================================
LIABILITIES
Non-current liabilities
Payable on completion of
clinical trial - 500,000
Total non-current liabilities - 500,000
--------------------------------------- ---------------------------------
Current liabilities
Trade and other payables 12 12,319,117 987,083
Other interest-bearing loans
and borrowings 13 - 3,747,961
Derivative liability 14 5,798,058 -
Payable on completion of
clinical trial 9 500,000 -
Total current liabilities 18,617,175 4,735,044
--------------------------------------- ---------------------------------
Total liabilities 18,617,175 5,235,044
======================================= =================================
Net assets 9,809,269 29,722,708
======================================= =================================
EQUITY
Share capital 17 2,728,199 1,645,291
Share premium 57,348,694 38,534,280
Group reorganization reserve 19 9,938,362 9,938,362
Accumulated deficit (60,205,986) (20,395,225)
Total equity 9,809,269 29,722,708
======================================= =================================
The notes are an integral part of these consolidated financial statements.
The financial statements were approved by the Board of Directors and authorized for issue
on
April 28, 2017. They were
signed on its behalf by:
Director
Richard C.E. Morgan
Motif Bio plc
Consolidated
statements of changes
in equity
For the years ended
December 31, 2016,
2015 and 2014
Group
Share Share reorganization Accumulated
capital premium reserve deficit Total
Note US $ US $ US $ US $ US $
---------------------- ---------- ------------- --------------- ------------- ----------------
Balance at
January 1, 2014 844 3,692,207 (13,969,350) (10,276,299)
Loss for the
year (1,185,890) (1,185,890)
---------- ------------- --------------- ------------- ----------------
Total
comprehensive
loss for the
year (1,185,890) (1,185,890)
Issue of share
capital 211 210,373 - - 210,584
Exercise of
share options 55 61,875 - (28,930) 33,000
Stock based
payments - - - 300,147 300,147
---------- ------------- --------------- ------------- ----------------
Balance at
December 31,
2014 1,110 3,964,455 - (14,884,023) (10,918,458)
Loss for the
year - - - (8,516,699) (8,516,699)
---------- ------------- --------------- ------------- -----------------
Total
comprehensive
loss for the
year - - - (8,516,699) (8,516,699)
Conversion of
promissory
notes 3,573 6,275,213 - - 6,278,786
Group
reorganization 19 539,267 (10,239,668) 9,938,362 - 237,961
Issue of share
capital 17 1,095,805 41,334,240 - - 42,430,045
Cost of issuance - (2,898,693) - - (2,898,693)
Exercise of
share options
and warrants 5,536 98,733 - - 104,269
Issue of
warrants to
acquire assets 9 - - - 2,340,373 2,340,373
Share-based
payments 16 - - - 665,124 665,124
---------- ------------- --------------- ------------- -----------------
Balance at
December 31,
2015 1,645,291 38,534,280 9,938,362 (20,395,225) 29,722,708
========== ============= =============== ============= =================
Loss for the
year - - - (40,324,302) (40,324,302)
---------- ------------- --------------- ------------- -----------------
Total
comprehensive
loss for the
year - - - (40,324,302) (40,324,302)
Issue of share
capital 17 897,812 18,701,566 - - 19,599,378
Cost of issuance 17 - (3,370,155) - - (3,370,155)
Conversion of
promissory
notes 13 177,786 3,373,000 - - 3,550,786
Exercise of
share options
and warrants 17 7,310 110,003 - - 117,313
Share-based
payments 16 - - - 513,541 513,541
---------- ------------- --------------- ------------- -----------------
Balance at
December 31,
2016 2,728,199 57,348,694 9,938,362 (60,205,986) 9,809,269
========== ============= =============== ============= =================
The notes are an integral part of these consolidated financial
statements.
Motif Bio plc
Consolidated statements
of cash flows
For the years ended December
31, 2016, 2015 and 2014
Year ended Year ended Year ended
December December December
31, 2016 31, 2015 31, 2014
Note US $ US $ US $
----- ---------------------------- ------------------------- -----------
Operating activities
Operating loss for the
year (39,623,645) (8,253,093) (736,056)
Adjustments to reconcile
net loss to net cash used
in activities:
Share-based payments 16 513,541 325,908 300,147
Gain on settlement of
contract disputes 4 (83,320) (5,027) (360,060)
Interest receivable 69,754 15,028 78
Taxation payable (287) (774) (876)
Changes in operating assets
and liabilities:
Prepaid expenses, notes
receivable and accounts
receivable (233,407) (155,578) (222,661)
Accounts payable and other
accrued liabilities 11,415,353 75,852 1,017,753
---------------------------- ------------------------- -----------
Net cash used in operating
activities (27,942,011) (7,997,684) (1,675)
Financing activities
Proceeds from issuance
of promissory notes - 704,210 210,364
Proceeds from issue of
share capital 17 24,995,980 38,660,106 210,584
Costs of issuance (3,370,155) (2,559,477) -
Proceeds from exercise
of warrants and options 117,313 62,739 33,000
Interest paid (314,916) (268,216) (449,036)
---------------------------- ------------------------- -----------
Net cash provided by financing
activities 21,428,222 36,599,362 4,912
Net change in cash (6,513,789) 28,601,678 3,237
Cash, beginning of the
year 28,594,347 3,281 44
Effect of foreign exchange
rate changes (250,926) (10,612) -
---------------------------- ------------------------- -----------
Cash, end of the year 21,829,632 28,594,347 3,281
============================ ========================= ===========
Non-cash investment activity
Acquisition of intangible
asset with equity issuances - 6,195,748 -
Non-cash financing activity
Conversion of notes payable
to ordinary shares 3,550,786 - -
Fair value of warrants
issued in conjunction with
issuance of share capital 5,662,119 - -
The notes are an integral part of these consolidated financial
statements.
Motif Bio plc
Notes to the Consolidated Financial Statements
1. General information
Motif Bio plc is a clinical stage biopharmaceutical company
which specializes in developing novel antibiotics designed to be
effective against serious and life-threatening infections caused by
multi-drug resistant bacteria.
Motif Bio Limited ("the Company") was incorporated in England
and Wales on November 20, 2014 with company registration number
09320890. The Company's registered office is at 27/28 Eastcastle
Street, London W1W 8DH, U.K. On April 1, 2015, the Company was
re-registered as a public company limited by shares and changed its
name to Motif Bio plc. Motif BioSciences Inc. was incorporated in
the US State of Delaware on December 2, 2003 and has its registered
office at 160 Greentree Drive, Suite 101, Dover, Delaware, 19904.
On April 1, 2015, Motif BioSciences Inc. became a wholly owned
subsidiary of the Company by way of a group reorganization by plan
of merger. The principal place of business is 125 Park Avenue,
25(th) Floor, New York, NY, 10017, USA. The Company's country of
domicile is the U.K.
The consolidated financial statements include the accounts of
Motif Bio plc and its wholly owned subsidiary, Motif BioSciences
Inc. ("the Group").
The financial statements were approved by the Board of Directors
on April 28, 2017.
Going Concern
As of December 31, 2016, the Group had US$21.8 million in cash.
Net cash used in operating activities was US$27.9 million for the
year ended December 31, 2016. Net loss for the year ended December
31, 2016 was US$40.3 million. The Group expects to incur losses for
the next several years as it expands its research, development and
clinical trials of iclaprim. The Group is unable to predict the
extent of any future losses or when the Group will become
profitable, if at all.
These financial statements have been prepared under the
assumption that the Group will continue as a going concern. Due to
the Group's recurring and expected continuing losses from
operations, the Group has concluded there is substantial doubt in
the Group's ability to continue as a going concern within one year
of the issuance of these financial statements without additional
capital becoming available. The financial statements do not include
any adjustments that might result from the outcome of this
uncertainty.
The Group will be required to raise additional capital within
the next year to continue the development and commercialization of
current product candidates and to continue to fund operations at
the current cash expenditure levels. The Group cannot be certain
that additional funding will be available on acceptable terms, or
at all. To the extent that the Group raises additional funds by
issuing equity securities, its stockholders may experience
significant dilution. Any debt financing, if available, may involve
restrictive covenants that impact the Group's ability to conduct
business. If the Group is unable to raise additional capital when
required or on acceptable terms, it may have to (i) significantly
delay, scale back or discontinue the development and/or
commercialization of one or more product candidates; (ii) seek
collaborators for product candidates at an earlier stage than
otherwise would be desirable and on terms that are less favorable
than might otherwise be available; or (iii) relinquish or otherwise
dispose of rights to technologies, product candidates or products
that the Group would otherwise seek to develop or commercialize
itself on unfavorable terms.
On April 18, 2017, the Group announced positive topline results
from REVIVE-1, its global Phase 3 clinical trial in patients with
ABSSSI. Iclaprim achieved the primary endpoint of non-inferiority
at the early time point after start of study drug administration as
well as non-inferiority for the test of cure endpoint. Iclaprim was
well tolerated in the study, with most adverse events categorized
as mild. The Group believes that this new data and the fact that
REVIVE-2, the second Phase 3 trial, uses an identical protocol to
REVIVE-1 but has different trial centers, could provide the basis
for increased investor interest in the Group and, hence,
potentially provide greater opportunities to raise additional
capital.
Significant events
On November 18, 2016, the Group announced the pricing of the
underwritten U.S. public offering and European placement, which
were concurrently conducted, of 71,633,248 ordinary shares,
comprised of 22,863,428 ordinary shares plus 2,438,491 ADSs
(representing 48,769,820 ordinary shares at a 20 to 1 ratio). The
Group offered 48,769,820 ordinary shares in a U.S. firm commitment
public offering in the form of 2,438,491 American Depository Shares
or ADSs, together with warrants to purchase 1,219,246 ADS Warrants.
Each ADS represents 20 of the Group's ordinary shares and was sold
together with 0.5 of an ADS Warrant in a fixed combination. Each
full ADS Warrant is exercisable for one ADS at an exercise price of
$8.03 per ADS, exercisable from the date of issuance until five
years thereafter. In Europe, the Group offered in a concurrent
placement on a best efforts basis 22,863,428 ordinary shares,
together with warrants to purchase 11,431,714 ordinary shares. Each
ordinary share was sold together with 0.5 of an Ordinary Share
Warrant in a fixed combination. Each full Ordinary Share Warrant is
exercisable for one ordinary share at an exercise price of GBP0.32
($0.40), exercisable from the date of issuance until five years
thereafter. The public offering price of the ADSs and ADS Warrants
in the U.S. offering was $6.98 per ADS and ADS Warrant combination,
and the public offering price of the Group's ordinary shares and
Ordinary Share Warrants in the European placement was GBP0.28
($0.35) per ordinary share and Ordinary Share Warrant combination.
Net proceeds to the Group following the offering, after deducting
underwriting discounts and commissions and offering expenses of
approximately $3.5 million, were approximately $21.5 million. None
of the underwriting discounts and commissions or other offering
expenses were paid to directors or officers of the Group or their
associates or to persons owning 10 percent or more of any class of
the Group's equity securities or to any affiliates of the Group.
H.C. Wainwright & Co., LLC was the underwriter for the above
described offering.
On September 7, 2016, the Group amended and restated the
convertible notes with Amphion Innovations plc and Amphion
Innovations US Inc. to provide that any outstanding principal under
the notes as of the maturity date will be paid to the holders on
the maturity date, at the Group's election, through the issuance of
(i) a number of our ordinary shares, based on the conversion price
set forth in the notes, or (ii) a number of ADSs, which is equal to
a number determined by dividing the number of ordinary shares the
holder would otherwise be entitled to by the then applicable ADS to
ordinary share ratio. The amended and restated convertible
promissory notes also provide that except in the event of a
default, no interest will accrue or be payable with respect to the
amounts due under notes. In consideration for its agreement to
forego interest payments under its convertible promissory notes,
the Group issued 409,000 ordinary shares to Amphion Innovations
plc. The amended and restated notes also permit the Group or the
holders to convert all or any portion of the outstanding principal
under the notes into ordinary shares or ADSs (as determined by the
Group) at any time prior to the maturity date.
In December 2016, the Group issued 14,510,770 new ordinary
shares following the conversion of convertible promissory notes by
Amphion Innovations plc and Amphion Innovations US Inc. The notes
which totaled US $3,550,786 were converted in accordance with their
terms at US $0.2447 per share.
Group reorganization and initial public offering
On February 18, 2015, the Company incorporated a Delaware
subsidiary, Motif Acquisition Sub, Inc. On December 31, 2014 Motif
BioSciences Inc., the Company, and Motif Acquisition Sub, Inc.
entered into an agreement where, upon the Company's admission to
AIM of the London Stock Exchange on April 2, 2015, Motif
Acquisition Sub, Inc. merged with and into Motif BioSciences Inc.
and Motif BioSciences Inc. continued as the surviving entity and
became a wholly-owned subsidiary of the Company. Prior to the
merger, Motif BioSciences Inc. completed a reverse stock split in
order to increase the share price of Motif BioSciences Inc. so that
the share price was closer to the Company's admission price. The
former Motif BioSciences Inc. stockholders were issued 36,726,242
ordinary shares of the Company in a share-for-share exchange for
their common stock in Motif BioSciences Inc. so that the former
Motif BioSciences Inc. stockholders owned an equivalent number of
ordinary shares in the Company as the number of shares of common
stock that they had previously owned in Motif BioSciences Inc. All
outstanding, unexercised, and vested stock options for shares of
common stock in Motif BioSciences Inc. were converted into options
for ordinary shares of the Company (note 16).
This was a common control transaction and therefore outside the
scope of IFRS 3-"Business Combinations." The transaction has
therefore been accounted for as a group reorganization and the
Group is presented as if the Company has always owned Motif
BioSciences Inc. The comparatives presented in these financial
statements therefore represent the results and capital structure of
the Company. The reserve on consolidation represents the difference
between the nominal value of the shares of the Company issued to
the former stockholders of Motif BioSciences Inc. and the share
capital and share premium of Motif BioSciences Inc. at the date of
the transaction. As stated, the nominal value of the Company shares
was used in the calculation of the reorganization reserve.
The consolidated statements of changes in equity and the
additional disclosures in Note 19 explain the accounting for the
share-for-share exchange in more detail.
On April 2, 2015, the Company was admitted to AIM and issued
14,186,140 ordinary shares at a price of GBP0.20 per share.
On July 22, 2015, the Company completed a subsequent placing of
44,000,000 ordinary shares at a price of GBP0.50 per share.
Acquisition of Nuprim Assets
On April 1, 2015, Motif BioSciences Inc. acquired the assets
owned by Nuprim Inc. ("Nuprim"), a Maryland corporation, related to
iclaprim (the "Nuprim Assets"). Motif BioSciences Inc. issued
1,513,040 (post-reverse stock split) shares of common stock to the
shareholders of Nuprim Inc. that were held in escrow until the
closing of the reorganization. These shares of common stock in
Motif BioSciences Inc. were converted into ordinary shares of the
Company upon the Company's admission to AIM on April 2, 2015. Upon
admission, 9,805,400 ordinary shares of the Company and 9,432,033
warrants were issued to the former Nuprim shareholders (note
9).
2. Significant accounting policies
a. Basis of preparation
The accounting policies set out below have been applied
consistently to all periods presented in this financial
information.
The financial statements have been prepared in accordance with
International Financial Reporting Standards ("IFRS") as issued by
the International Accounting Standards Board ("IASB") and in
conformity with IFRS as adopted by the European Union. This basis
of preparation describes how the financial statements have been
prepared in accordance with IFRS. The financial statements have
been prepared under the historical cost convention. A summary of
the more important Group accounting policies is set out below.
The preparation of financial statements in conformity with IFRS
requires the use of estimates and assumptions that affect the
reported amounts of assets and liabilities at the date of the
financial information and the reported amounts of revenue and
expenses during the period. Although these estimates are based on
management's best knowledge of the amount, event or actions, actual
results ultimately may differ from those estimates.
The comparative information for the year ended December 31, 2014
has been prepared on the basis of the financial information of
Motif BioSciences Inc., which is the predecessor of the Company,
for the year then ended.
a. New and amended standards effective from January 1, 2016
There are no new standards and amendments that have been applied
from January 1, 2016, which have had an impact on the Group's
financial statements.
New standards and interpretations not yet effective
Certain new accounting standards and interpretations have been
published that are not mandatory for the reporting periods covered
by these consolidated financial statements and have not been early
adopted by the Group.
The new standards potentially relevant to the Group are
discussed below.
IFRS 9, Financial Instruments (as revised in 2014) - Effective
date - January 1, 2018, with early adoption permitted. The Group
currently plans to apply IRFS 9 initially on January 1, 2018. IFRS
9 includes revised guidance on the classification and measurement
of financial instruments, a new expected credit loss model for
calculating impairment on financial assets, and new general hedge
accounting requirements. Based on the initial assessment, this
standard is not expected to have a material impact on the
Group.
IFRS 15, Revenue from Contracts with Customers - Effective date
- January 1, 2018, with early adoption permitted. - IFRS 15
establishes a comprehensive guideline for determining when to
recognize revenue and how much revenue to recognize. The Group
currently has no revenues, therefore, the adoption of IFRS 15 is
not expected to have a material impact on the Group, however, the
Group will continue to reassess the potential impact of the
adoption of this guidance
IFRS 16, Leases - Effective date - January 1, 2019 - IFRS 16
will replace IAS 17. It will eliminate the distinction between
classification of leases as finance or operating leases for
lessees. The adoption of IFRS 16 is not expected to have a
significant impact on the Group's net results or net assets,
however, the Group will continue to reassess the potential impact
of the adoption of this guidance as the effective date becomes
closer.
Amendments to IAS 7, Disclosure Initiative - Effective date -
January 1, 2017, with early adoption permitted. - The amendments
require disclosures that enable users of financial statements to
evaluate changes in liabilities arising from financing activities,
including both changes arising from cash flow and non-cash changes.
To satisfy the new disclosure requirements, the Group intends to
present a reconciliation between the opening and closing balances
for liabilities with changes arising from financing activities.
Principles of consolidation
Subsidiaries are all entities (including structured entities)
over which the Group has control. The Group controls an entity when
the Group is exposed to, or has rights to, variable returns from
its involvement with the entity and has the ability to affect those
returns through its power to direct the activities of the entity.
Subsidiaries are fully consolidated from the date on which control
is transferred to the Group. They are deconsolidated from the date
that control ceases.
Intercompany transactions, balances, and unrealized gains on
transactions between Group companies are eliminated. Unrealized
losses are also eliminated unless the transaction provides evidence
of an impairment of the transferred asset. Accounting policies of
subsidiaries have been changed where necessary to ensure
consistency with the policies adopted by the Group.
When the Group ceases to consolidate because of a loss of
control, any retained interest in the entity is remeasured to its
fair value with the change in carrying amount recognized in profit
or loss. This fair value becomes the initial carrying amount for
the purposes of subsequently accounting for the retained interest
as an associate, joint venture, or financial asset.
b. Segment reporting
The chief operating decision-maker is considered to be the Board
of Directors of Motif Bio plc. The chief operating decision-maker
allocates resources and assesses performance of the business and
other activities at the operating segment level. In addition, they
review the IFRS consolidated financial statements.
The chief operating decision-maker has determined that Motif has
one operating segment - the development and commercialization of
pharmaceutical formulations. The Group maintains space and has some
activities in the U.K., however, the finance and most other
management functions take place in the U.S.
c. Foreign currency translation
(a) Functional and Presentation Currency
Items included in the financial statements of each of the
Group's entities are measured using the currency of the primary
economic environment in which the entity operates ("the functional
currency"). The consolidated financial statements are presented in
United States Dollars (US $), which is Motif Bio plc's functional
and presentation currency.
(b) Transactions and balances
Foreign currency transactions are translated into the functional
currency using the exchange rates at the dates of the transactions.
Foreign exchange gains and losses resulting from the settlement of
such transactions and from the translation of monetary assets and
liabilities denominated in foreign currencies at year end exchange
rates are generally recognized in profit or loss. They are deferred
in equity if they relate to qualifying cash flow hedges and
qualifying net investment hedges or are attributable to part of the
net investment in a foreign operation.
Foreign exchange gains and losses that relate to borrowings are
presented in the statement of profit or loss, within finance costs.
All other foreign exchange gains and losses are presented in the
statement of profit or loss on a net basis within other income or
other expenses.
Non-monetary items that are measured at fair value in a foreign
currency are translated using the exchange rates at the date when
the fair value was determined. Translation differences on assets
and liabilities carried at fair value are reported as part of the
fair value gain or loss. For example, translation differences on
non-monetary assets and liabilities such as equities held at fair
value are recognized in profit or loss as part of the fair value
gain or loss and translation differences on non-monetary assets
such as equities classified as available-for-sale financial assets
are recognized in other comprehensive income.
d. Research and development costs
Expenditure on drug development activities is capitalized only
if all of the following conditions are met:
-- it is probable that the asset will create future economic benefits;
-- the development costs can be measured reliably;
-- technical feasibility of completing the intangible asset can be demonstrated;
-- there is the intention to complete the asset and use or sell it;
-- there is the ability to use or sell the asset; and
-- adequate technical, financial, and other resources to
complete the development and to use or sell the asset are
available.
These conditions are generally met when a filing is made for
regulatory approval for commercial production. Otherwise, costs on
research activities are recognized as an expense in the period in
which they are incurred.
At this time, the Group does not meet all conditions and
therefore development costs are recorded as expense in the period
in which the cost is incurred.
Our preclinical studies and our clinical trials have been
performed utilizing third-party contract research organizations
("CROs") and other vendors. For preclinical studies, the
significant factors used in estimating accruals include the
percentage of work completed to date and contract milestones
achieved. For clinical trial expenses, the significant factors used
in estimating accruals include the number of patients enrolled,
duration of enrollment, percentage of work completed to date and
contract milestones achieved. We monitor patient enrollment levels
and related activities to the extent possible through internal
reviews, correspondence and status meetings and review of
contractual terms. Our estimates are dependent on the timeliness
and accuracy of data provided by our CROs and other vendors. In
this event, we could record adjustments to research and development
expenses in future periods when the actual activity levels become
known.
e. Intangible assets
Intangible assets acquired separately from a business are
initially stated at cost, net of any amortization and any provision
for impairment. Where a finite useful life of the acquired
intangible asset cannot be determined, the asset is not subject to
amortization but is tested for impairment annually or more
frequently whenever events or changes in circumstances indicate
that the carrying amount may not be recoverable.
f. Impairment of non-financial assets
Assets that have an indefinite useful life are not subject to
amortization and are tested annually for impairment, or more
frequently if events or changes in circumstances indicate that they
might be impaired. Other assets are tested for impairment whenever
events or changes in circumstances indicate that the carrying
amount may not be recoverable. An impairment loss is recognized for
the amount by which the asset's carrying amount exceeds its
recoverable amount. The recoverable amount is the higher of an
asset's fair value less costs of disposal and value in use. For the
purposes of assessing impairment, assets are grouped at the lowest
levels for which there are separately identifiable cash inflows
which are largely independent of the cash inflows from other assets
or groups of assets (cash-generating units). Non-financial assets
other than goodwill that suffered an impairment are reviewed for
possible reversal of the impairment at the end of each reporting
period.
g. Financial instruments-initial recognition and subsequent measurement
A financial instrument is any contract that gives rise to a
financial asset of one entity and a financial liability or equity
instrument of another entity.
a) Financial assets, initial recognition and measurement
All financial assets, such as receivables and deposits, are
recognized initially at fair value plus, in the case of financial
assets not recorded at fair value through profit or loss,
transaction costs that are attributable to the acquisition of the
financial asset.
The Group assesses, at each reporting date, whether there is
objective evidence that a financial asset or a group of financial
assets is impaired. An impairment exists if one or more events that
has occurred since the initial recognition of the asset (an
incurred "loss event"), has an impact on the estimated future cash
flows of the financial asset or the group of financial assets that
can be reliably estimated.
b) Financial liabilities, initial recognition and
measurement
Financial liabilities are classified, at initial recognition, as
financial liabilities at fair value through profit or loss, loans
and borrowings, and payables, as appropriate. All financial
liabilities are recognized initially at fair value and, in the case
of loans and borrowings and payables, net of directly attributable
transaction costs.
The Company's financial liabilities include trade and other
payables, loans and borrowings and warrants classified as
liabilities.
c) Subsequent measurement
The measurement of financial liabilities depends on their
classification. Financial liabilities at fair value through profit
or loss include financial liabilities held for trading and
financial liabilities designated upon initial recognition as at
fair value through profit or loss. Financial assets at fair value
through profit or loss are subsequently carried at fair value.
Loans and receivables are subsequently carried at amortized cost
using the effective interest method if the time value of money is
significant.
h. Financial assets and liabilities
Financial assets and financial liabilities are included in the
Group's balance sheet when the Group becomes a party to the
contractual provisions of the instrument. Financial assets are
derecognized when the rights to receive cash flows from the
investments have expired or have been transferred and the Company
has transferred substantially all risks and rewards of
ownership.
Non-derivative financial instruments
Cash and cash equivalents
Cash and cash equivalents include bank balances, demand
deposits, and other short-term, highly liquid investments (with
less than three months to maturity) that are readily convertible
into a known amount of cash and are subject to an insignificant
risk of fluctuations in value.
Financial liabilities and equity
The Group classifies an instrument, or its component parts, on
initial recognition as a financial liability or an equity
instrument in accordance with the substance of the contractual
arrangement and the definitions of a financial liability and an
equity instrument.
An instrument is classified as a financial liability when it is
either (i) a contractual obligation to deliver cash or another
financial asset to another entity; or (ii) a contract that will or
may be settled in the Group's own equity instruments and is a
non-derivative for which the Group is, or may be, obliged to
deliver a variable number of the Group's own equity instruments or
a derivative that will, or may be, settled other than by the
exchange of a fixed amount of cash or another financial asset for a
fixed number of the Group's own equity instruments.
Incremental costs directly attributable to the issue of new
ordinary shares or options are shown in equity as a deduction, net
of tax, from the proceeds.
An equity instrument is defined as any contract that evidences a
residual interest in the assets of an entity after deducting all of
its liabilities. An instrument is an equity instrument only if the
issuer has an unconditional right to avoid settlement in cash or
another financial asset.
Trade payables
Trade payables are obligations to pay for goods or services that
have been acquired in the ordinary course of business from
suppliers. Trade payables are classified as current liabilities if
payment is due within one year or less (or in the normal operating
cycle of the business if longer). If not, they are presented as
non-current liabilities.
Trade payables are initially measured at fair value, and are
subsequently measured at amortized cost, using the effective
interest rate method.
Equity instruments
Equity instruments issued by the Company are recorded at the
proceeds received. Direct issuance costs are processed as a
deduction on equity.
Derivative financial instruments
The Group does not have a policy of engaging in speculative
transactions, nor does it issue or hold financial instruments for
trading purposes.
The Group has entered into various financing arrangements with
its investors, including convertible loans. These convertible loans
each include embedded financial derivative elements (being the
right to acquire equity in the Group at a future date for a
pre-determined price). Therefore, while the Group does not engage
in speculative trading of derivative financial instruments, it may
hold such instruments from time to time as part of its financing
arrangements. The Group has also entered into financing
arrangements that include the issuance of warrants. These warrants
may be considered derivative financial instruments based on the
terms of the agreements.
Derivatives are initially recognized at fair value on the date a
derivative contract is entered into and are subsequently
re-measured at their fair value. The resulting gain or loss is
recognized in the consolidated income statement, as the Group
currently does not apply hedge accounting.
Impairment of financial assets
The Group assesses at the end of each reporting period whether
there is objective evidence that a financial asset or group of
financial assets is impaired. A financial asset or a group of
financial assets is impaired and impairment losses are incurred
only if there is objective evidence of impairment as a result of
one or more events that occurred after the initial recognition of
the asset (a "loss event") and that loss event (or events) has an
impact on the estimated future cash flows of the financial asset or
group of financial assets that can be reliably estimated.
Evidence of impairment may include indications that the debtors
or a group of debtors is experiencing significant financial
difficulty, default or delinquency in interest or principal
payments, the probability that they will enter bankruptcy or other
financial reorganization, and where observable data indicate that
there is a measurable decrease in the estimated future cash flows,
such as changes in arrears or economic conditions that correlate
with defaults.
For loans and receivables category, the amount of the loss is
measured as the difference between the asset's carrying amount and
the present value of estimated future cash flows (excluding future
credit losses that have not been incurred) discounted at the
financial asset's original effective interest rate. The carrying
amount of the asset is reduced and the amount of the loss is
recognized in the consolidated income statement. If a loan or
held-to-maturity investment has a variable interest rate, the
discount rate for measuring any impairment loss is the current
effective interest rate determined under the contract. As a
practical expedient, the Group may measure impairment on the basis
of an instrument's fair value using an observable market price.
If, in a subsequent period, the amount of the impairment loss
decreases and the decrease can be related objectively to an event
occurring after the impairment was recognized (such as an
improvement in the debtor's credit rating), the reversal of the
previously recognized impairment loss is recognized in the
consolidated income statement.
i. Offsetting financial instruments
Financial assets and liabilities are offset and the net amount
is reported in the balance sheet when there is a legally
enforceable right to offset the recognized amounts and there is an
intention to settle on a net basis, or realize the asset and settle
the liability simultaneously. The legally enforceable right must
not be contingent on future events and must be enforceable in the
normal course of business and in the event of default, insolvency,
or bankruptcy of the Company or the counterparty.
j. Share-based payment transactions
The fair value of options and warrants granted to employees,
directors, and consultants is normally recognized as an expense,
with a corresponding increase in equity, over the period in which
the option and warrant holders become unconditionally entitled to
the options and warrants unless incremental and directly
attributable to an equity transaction in which case it is deducted
from equity. The fair value of the options and warrants granted is
measured using an option valuation model, taking into account the
terms and conditions upon which the options were granted. The
amount recognized as an expense is adjusted to reflect the actual
number of share options and warrants that vest except where
forfeiture is due only to share prices not achieving the threshold
for vesting.
k. Financial income and expenses
Financial income comprises interest receivable on funds
invested. Financial expenses comprise interest payable.
Interest income and interest payable are recognized in the
income statement as they accrue, using the effective interest
method.
l. Taxation
Tax on the profit or loss for the year comprises current and
deferred tax. Tax is recognized in the income statement except to
the extent that it relates to items recognized directly in equity,
in which case it is recognized in equity.
Current tax is the expected tax payable on the taxable income
for the period, using tax rates enacted or substantively enacted at
the balance sheet date and any adjustment to tax payable in respect
of previous years.
Deferred tax is provided on temporary differences between the
carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for taxation purposes. The following
temporary differences are not provided for: the initial recognition
of goodwill; the initial recognition of assets or liabilities that
affect neither accounting nor taxable profit other than in a
business combination; and differences relating to investments in
subsidiaries to the extent that they will probably not reverse in
the foreseeable future. The amount of deferred tax provided is
based on the expected manner of realization or settlement of the
carrying amount of assets and liabilities, using tax rates enacted
or substantively enacted at the balance sheet date.
A deferred tax asset is recognized only to the extent that it is
probable that future taxable profits will be available against
which the temporary difference can be utilized.
m. Earnings per share
The Company presents basic and diluted earnings per share (EPS)
data for its shares. Basic EPS is calculated by dividing the profit
or loss attributable to shares of the Company by the weighted
average number of shares outstanding during the period. Diluted EPS
is determined by adjusting the profit or loss attributable to
shareholders and the weighted average number of shares outstanding
for the effects of all dilutive potential shares, which comprise
share options and warrants granted to employees and non-employees.
In periods when the Company has a loss attributable to
shareholders, diluted EPS equates to basic EPS.
n. Borrowings
Borrowings are recognized initially at fair value, net of
transaction costs incurred. Borrowings are subsequently measured at
amortized cost. Any difference between the proceeds (net of
transaction costs) and the redemption amount is recognized in
profit or loss over the period of the borrowings using the
effective interest method.
Debt issuance costs on loan facilities are recognized as
transaction costs of the loan to the extent that it is probable
that some or all of the facility will be drawn down. In this case,
the fee is deferred until the draw-down occurs. To the extent there
is no evidence that it is probable that some or all of the facility
will be drawn down, the fee is capitalized as a pre-payment for
liquidity services and amortized over the period of the facility to
which it relates.
o. Equity
The Company classifies an instrument, or its component parts, on
initial recognition as a financial liability or an equity
instrument in accordance with the substance of the contractual
arrangement and the definitions of a financial liability and an
equity instrument.
An instrument is classified as a financial liability when it is
either (i) a contractual obligation to deliver cash or another
financial asset to another entity; or (ii) a contract that will, or
may be, settled in the Company's own equity instruments and is a
non-derivative for which the Company is, or may be, obliged to
deliver a variable number of the Company's own equity instruments
or a derivative that will or may be settled other than by the
exchange of a fixed amount of cash or another financial asset for a
fixed number of the Company's own equity instruments.
Incremental costs directly attributable to the issue of new
ordinary shares or options are shown in equity as a deduction, net
of tax, from the proceeds.
An equity instrument is defined as any contract that evidences a
residual interest in the assets of an entity after deducting all of
its liabilities. An instrument is an equity instrument only if the
issuer has an unconditional right to avoid settlement in cash or
another financial asset.
Ordinary Shares
Ordinary shares are classified as equity. Incremental costs
directly attributable to the issue of new shares or options are
shown in equity as a deduction from the proceeds
p. Critical accounting estimates and judgments
In preparing the financial information, the Directors make
judgments on how to apply the Group's accounting policies and make
estimates about the future. The critical judgments that have been
made in arriving at the amounts recognized in the financial
information and the key sources of estimation uncertainty that have
a significant risk of causing a material adjustment to the carrying
value of assets and liabilities in the next financial year, are
discussed below:
Acquisition and valuation of the iclaprim assets
The directors, on assessing if the acquisition of the Nuprim
iclaprim assets was of a business or of a group of assets,
considered:
-- the identified elements of the acquired group;
-- the capability of the acquired group to produce outputs; and
-- the impact that any missing elements have on a market
participant's ability to produce outputs with the acquired
group.
As the acquired group was not accompanied by any associated
processes and because the acquired assets do not have planned
principal activities, or a plan to produce outputs, the Directors
considered the acquisition to be of a group of assets, not a
business.
The Directors use their judgment to identify the separate
intangible assets and then determine a fair value for each based
upon the consideration paid, the nature of the asset, industry
statistics, future potential, and other relevant factors. Asset
acquisitions are measured based on their cost to the acquiring
entity, which generally includes transaction costs. An asset's
acquisition cost or the consideration transferred by the acquiring
entity is assumed to be equal to the fair value of the net assets
acquired, unless contrary evidence exists. These fair values are
tested for impairment annually.
Research and development expenditures
Research expenditures are currently not capitalized because the
criteria for capitalization are not met. At each balance sheet
date, the Group estimates the level of service performed by the
vendors and the associated costs incurred for the services
performed.
Although the Group does not expect the estimates to be
materially different from amounts actually incurred, the
understanding of the status and timing of services performed
relative to the actual status and timing of services performed may
vary and could result in reporting amounts that are too high or too
low in any particular period.
Share based payments and fair value of warrants
The Directors have to make judgments when deciding on the
variables to apply in arriving at an appropriate valuation of share
based compensation and warrants, including appropriate factors for
volatility, risk free interest rate, and applicable future
performance conditions and exercise patterns.
3. Financial risk management
This note explains the Group's exposure to financial risks and
how these risks could affect the Group's future financial
performance.
a. Credit risk
Credit risk arises from cash and cash equivalents, deposits with
banks and financial institutions, and if a counterparty will
default on its contractual obligations resulting in financial loss
to the Group.
The credit risk on liquid funds is limited because cash balances
are held with bank and financial institutions with credit-ratings
assigned by international credit-rating agencies. All deposits are
held with banks with S&P ratings of A-2 and AA- for short term
deposits.
At December 31, 2016, no current asset receivables were aged
over three months. No receivables were impaired.
b. Liquidity risk
Liquidity risk is the risk that the Group will not be able to
meet its financial obligations as they fall due. The principal risk
to which the Group is exposed is liquidity risk. See discussion in
Note 1 as it relates to the Group's ability to continue as a going
concern.
The Group has financed its operations using cash raised through
the issue of debt and equity. The Group manages its liquidity risk
by monitoring cash flows against forecast requirements based on an
18 month cash forecast. The Directors acknowledge that uncertainty
remains over the ability of the Group to have the resources to
fully support the iclaprim trials and that additional funding will
be needed through public markets, private financing, and partnering
opportunities.
The Group would also like to begin clinical trials of iclaprim
in other disease indications. In order to commence these trials,
the Group would need to obtain additional financing. A delay in
beginning these additional trials could lead to a decrease in the
Group's prospects for the commercialization of iclaprim. In order
to continue the current clinical trials of iclaprim and commence
new clinical trials the Group is heavily dependent on the public
markets both in the U.K. and US. A downturn in the public markets,
especially in biotech, may make it difficult for the Group to
obtain sufficient funds to continue its clinical trials and the
commercialization of iclaprim. On March 2, 2016, the Group
announced the dosing of the first patient in its two REVIVE
(Randomized Evaluation intraVenous Iclaprim Vancomycin trEatment)
Phase 3 clinical trials in ABSSSI. On January 30, 2017, the Group
announced that the last patient had finished the treatment phase in
REVIVE-1.On April 18, 2017, the Group announced positive topline
results from REVIVE-1, its global Phase 3 clinical trial in
patients with ABSSSI. Iclaprim achieved the primary endpoint of
non-inferiority at the early time point after start of study drug
administration as well as non-inferiority for the test of cure
endpoint. Iclaprim was well tolerated in the study, with most
adverse events categorized as mild. The Group believes that this
new data and the fact that REVIVE-2, the second Phase 3 trial, uses
an identical protocol to REVIVE-1 but has different trial centers,
could provide the basis for increased investor interest in the
Group and, hence, potentially provide greater opportunities to
raise additional capital
In the event that the Group does not have adequate capital to
maintain or develop its business, additional capital may not be
available to the Group on a timely basis, on favorable terms, or at
all, which could have a material and negative impact on the Group's
business and results of operations.
Contractual maturities of financial liabilities:
Between 1 Between 2
< 1 year and 2 years and 5 years Over 5 years
At December 31, 2016 US $ US $ US $ US $ Total
---------------------- ---------------- -------------------- ------------ ------------- -------------------------
Trade and other
payables 12,319,117 - - - 12,319,117
Payable on completion
of
clinical trial 500,000 - - - 500,000
Derivative liability - - 5,798,058 - 5,798,058
12,819,117 - 5,798,058 - 18,617,175
---------------- -------------------- ------------ ------------- -------------------------
Between 1 Between 2
< 1 year and 2 years and 5 years Over 5 years
At December 31, 2015 US $ US $ US $ US $ Total
---------------------- ---------------- -------------------- ------------ ------------- -------------------------
Trade and other
payables 987,083 - - - 987,083
Accrued interest
payable 197,175 - - - 197,175
Payable on completion
of clinical trial - 500,000 - - 500,000
Other interest
bearing
loans and borrowings 3,550,786 - - - 3,550,786
4,735,044 500,000 - - 5,235,044
---------------- -------------------- ------------ ------------- -------------------------
c. Market risk
Foreign currency risk
The Group undertakes certain transactions denominated in foreign
currencies. Hence, exposures to exchange rate fluctuations arise.
Exchange rate exposures are managed by minimizing the balance of
foreign currencies to cover expected cash flows during periods
where there is strengthening in the value of the foreign currency.
The Group holds part of its cash resources in US dollars and
British pound sterling. The valuation of the cash fluctuates along
with the US dollar/sterling exchange rate. No hedging of this risk
is undertaken.
The carrying amounts of foreign currency denominated monetary
net assets at the reporting date are as follows:
December December
31, 2016 31, 2015
US $ US $
----------------- ---------- ----------
Sterling - Cash 17,795 2,617,033
At December 31, 2016, if pounds sterling had
weakened/strengthened by 5% against the US dollar with all other
variables held constant, the loss for the year would have been US
$890 (2015: US $131,000) higher/lower.
Interest rate risk
The Group's exposure to interest rate risk is limited to the
cash and cash equivalent balance of US $21,829,632 and its
financing exposures that are at fixed rates of interest. Changes in
interest rates would have no significant impact on the profit or
losses of the Group.
d. Capital risk management
The Directors define capital as the total equity of the Group.
The Directors' objectives when managing capital are to safeguard
the Group's ability to continue as a going concern in order to
provide returns for shareholders and benefits for other
stakeholders and to maintain an optimal structure to reduce the
cost of capital. In order to maintain an optimal capital structure,
the Directors may adjust the amount of dividends paid to
shareholders, return capital to shareholders and issue new shares
to reduce debt.
4. Other income and expense items
This note provides a breakdown of the items included in other
income, finance income, and costs and an analysis of expenses by
nature for the years ended December 31, 2016, 2015 and 2014.
a. Other income
Year ended Year ended Year ended
Dec 31, Dec 31, Dec 31,
2016 2015 2014
US $ US $ US $
----------------- ----------- -----------
Gains on settlement of contract
disputes 83,320 5,027 360,060
The gain on settlement of contract disputes for the year ended
December 31, 2016 relates to a write off of a payable due to a
consultant as a result of a settlement with him. The gain on
settlement of contract disputes for the years ended December 31,
2015 and 2014 primarily relates to payables to a Director for
amounts owed to him for his services as Chief Executive Officer.
These amounts were written off in a settlement agreement.
b. Breakdown of expenses by nature
Year ended Year ended Year ended
Dec 31, Dec 31, Dec 31,
2016 2015 2014
US $ US $ US $
-------------------------------- -------------------- ----------------------- -------------------------
General and administrative
expenses
Employee benefits expenses 931,569 1,146,566 302,468
Share-based payments 513,541 - -
Directors' fees 423,051 380,969 -
Advisory fees 139,633 459,904 240,000
Legal and professional fees 2,581,603 1,277,552 510,143
Other expenses 322,753 312,189 43,505
-------------------- ----------------------- -------------------------
4,912,150 3,577,180 1,096,116
-------------------- ----------------------- -------------------------
Research and development
costs
Employee benefits expenses 677,412 - -
Contract research organization
expenses 30,445,967 3,055,421 -
Chemistry and manufacturing -
development and other
non-clinical development 2,145,641 949,466 -
Other research and development
costs 1,525,795 676,053 -
-------------------- ----------------------- -------------------------
34,794,815 4,680,940 -
-------------------- ----------------------- -------------------------
Auditors' Remuneration 2016 2015 2014
US $ US $ US $
------------------------ ----------------------- ----------------------- -----------------------
Audit Fees 871,523 73,730 -
Audit-Related Fees - - -
Tax Fees - - -
Other Fees - - -
----------------------- ----------------------- -----------------------
Total 871,523 73,730 -
------------------------ ----------------------- ----------------------- -----------------------
c. Finance income and costs
Year ended Year ended Year ended
Dec 31, Dec 31, Dec 31,
2016 2015 2014
US $ US $ US $
----------- ----------- -----------
Finance income
Interest from financial assets 69,754 15,028 78
----------- ----------- -----------
69,754 15,028 78
----------- ----------- -----------
Finance costs
Interest paid/payable for
financial liabilities (383,259) (268,216) (449,036)
(383,259) (268,216) (449,036)
Net finance costs (313,505) (253,188) (448,958)
----------- ----------- -----------
5. Employee numbers and costs
The monthly average number of persons employed by the Group
(including Executive Directors but excluding Non-executive
Directors) and key management personnel during the year, analyzed
by category, was as follows:
Year Year ended
ended Dec 31, 2014
Dec 31, Year ended
2016 Dec 31, 2015
Executive Directors 2 2 1
Key management personnel 4 2 -
-------------------------- --------- -------------- --------------
6 4 1
-------------------------- --------- -------------- --------------
The aggregate payroll costs of Executive Directors and key
management personnel were as follows:
Year ended Dec 31, 2016 Year ended Dec 31, 2015 Year ended Dec 31, 2014
US $ US $ US $
---------------------------------------- ------------------------ ------------------------ ------------------------
Short term benefits:
Wages and salaries 1,527,776 935,081 210,000
Social security and other employer
costs 67,410 60,604 -
Share based payments 119,845 150,881 92,468
---------------------------------------- ------------------------ ------------------------ ------------------------
1,715,031 1,146,566 302,468
---------------------------------------- ------------------------ ------------------------ ------------------------
6. Directors' remuneration
Salaries Benefits Social 2016 2015
and fees Bonuses in kind security Total Total
US $ US $ US $ US $ US $ US $
---------------- ------------------ -------------------- ------------------ --------- --------------- -------------
Executive
Graham Lumsden 425,000 50,000 - 13,510 488,510 557,180
Robert Bertoldi 127,500 - - 10,283 137,783 135,126
Non-executive
Richard Morgan 114,950 62,775 - - 177,725 217,072
Charlotta
Ginman-Horrell 57,475 - - - 57,475 32,042
Jonathan Gold 114,094 - - - 114,094 25,881
Zaki Hosny 57,475 - - - 57,475 28,756
Mary Lake Polan 54,094 - - - 54,094 25,881
John Stakes 30,869 - - - 30,869 28,756
Bruce Williams 54,094 - - - 54,094 25,881
---------------- ------------------ -------------------- ------------------ --------- --------------- -------------
Total 1,035,551 112,775 - 23,793 1,172,119 1,076,575
---------------- ------------------ -------------------- ------------------ --------- --------------- -------------
The highest paid director's aggregate emolument was US $488,510
for the year. The director did not exercise share options during
the year. No remuneration was paid to directors for the year ended
December 31, 2014.
Directors of the Company have been awarded rights to subscribe
for shares in the Group as set out below.
January December
1, 31, Exercise Grant Expiry
price
US
2016 Granted 2016 $ date date
----------------- ------------------ -------------- -------------------- --------- -------- --------
Richard Jan 1, Jan 1,
Morgan 73,215 - 73,215 $0.70 2010 2020
Jan 1, Jan 1,
6,179 - 6,179 $0.70 2011 2021
Dec 4, Dec 4,
502,950 - 502,950 $0.14 2014 2024
582,344 - 582,344
------------------ -------------- --------------------
Robert Jan 1, Jan 1,
Bertoldi 53,887 - 53,887 $0.70 2010 2020
Dec 4, Dec 4,
251,475 - 251,475 $0.14 2014 2024
305,362 - 305,362
------------------ -------------- --------------------
Charlotta Dec 4, Dec 4,
Ginman-Horrell 251,475 - 251,475 $0.14 2014 2024
251,475 - 251,475
------------------ -------------- --------------------
Jonathan Jan 1, Jan 1,
Gold 73,502 - 73,502 $0.70 2010 2020
Jan 1, Jan 1,
5,964 - 5,964 $0.70 2011 2021
Dec 4, Dec 4,
251,475 - 251,475 $0.14 2014 2024
330,941 - 330,941
------------------ -------------- --------------------
Jun 18, Jun 18,
Zaki Hosny 53,888 - 53,888 $0.70 2009 2019
Jan 1, Jan 1,
14,370 - 14,370 $0.70 2010 2020
Jan 1, Jan 1,
2,587 - 2,587 $0.70 2011 2021
Jan 30, Jan 30,
107,774 - 107,774 $0.14 2013 2023
Dec 4, Dec 4,
251,475 - 251,475 $0.14 2014 2024
430,094 - 430,094
------------------ -------------- --------------------
Graham May 25, May 25,
Lumsden 574,800 - 574,800 $0.14 2013 2023
Dec 4, Dec 4,
2,874,000 - 2,874,000 $0.14 2014 2024
3,448,800 - 3,448,800
------------------ -------------- --------------------
Mary Lake Jan 1, Jan 1,
Polan 67,036 - 67,036 $0.70 2010 2020
Jan 1, Jan 1,
5,461 - 5,461 $0.70 2011 2021
Dec 4, Dec 4,
251,474 - 251,474 $0.14 2014 2024
323,971 - 323,971
------------------ -------------- --------------------
Jan 1, Jan 1,
John Stakes 62,366 - 62,366 $0.70 2010 2020
Jan 1, Jan 1,
2,802 - 2,802 $0.70 2011 2021
Dec 4, Dec 4,
251,474 - 251,474 $0.14 2014 2024
316,642 - 316,642
------------------ -------------- --------------------
Jan 1, Jan 1,
Bruce Williams 67,252 - 67,252 $0.70 2010 2020
Jan 16, Jan 16,
28,740 - 28,740 $0.70 2010 2020
Nov 15, Jan 16,
71,850 - 71,850 $0.70 2010 2020
Jan 1, Jan 1,
2,802 - 2,802 $0.70 2011 2021
Dec 4, Dec 4,
251,474 - 251,474 $0.14 2014 2024
------------------ -------------- --------------------
422,118 - 422,118
------------------ -------------- --------------------
7. Income tax expense
Recognized in the income statement:
Year Year Year
ended ended ended
Dec 31, Dec 31, Dec 31,
Current tax expense 2016 2015 2014
US $ US $ US $
------------------------ --------- --------- ---------
U.K. Corporation taxes - - -
Overseas taxes 287 774 876
287 774 876
------------------------ --------- --------- ---------
The main rate of U.K. corporation tax was reduced from 21% to
20% from April 1, 2015 and has been reflected in these consolidated
financial statements.
The tax expense recognized for the years ended December 31,
2016, 2015 and 2014 is lower than the standard rate of corporation
tax in the U.K. of 20.25%. The differences are reconciled
below:
Reconciliation of effective tax rate: 2016 2015 2014
US $ US $ US $
--------------------------------------------- ---------------------- -------------------- ------------
Loss on ordinary activities before taxation (40,324,015) (8,515,925) (1,185,014)
--------------------------------------------- ---------------------- -------------------- ------------
U.K. Corporation tax at 20.25% (449,929) (355,889) -
Overseas tax at higher rate (12,954,729) (2,297,873) (402,905)
Effects of:
Unrecognized losses (13,404,371) (2,652,988) (402,029)
Other adjustments-overseas taxes 287 774 876
--------------------------------------------- ---------------------- -------------------- ------------
Total tax charge 287 774 876
--------------------------------------------- ---------------------- -------------------- ------------
There is an unrecognized deferred tax asset of US$377,718,
relating to deferred tax on losses generated of US$2,221,872 in the
U.K.
8. Loss per share
Basic loss per share is calculated by dividing the loss
attributable to equity holders of the Company by the weighted
average number of shares in issue during the year. In accordance
with IAS 33, where the Company has reported a loss for the period,
the shares are anti-dilutive.
Year Year
ended ended
Year ended Dec 31, Dec 31,
Dec 31, 2016 2015 2014
US $ US $ US $
------------------------------------ --------------- -------------- ------------
Loss after taxation (40,324,302) (8,516,699) (1,185,890)
Basic and diluted weighted average
shares in issue 116,558,191 61,225,922 36,726,342
Basic and diluted loss per share (0.35) (0.14) (0.03)
------------------------------------- --------------- -------------- ------------
The following potentially dilutive securities outstanding at
December 31, 2016, 2015 and 2014 have been excluded from the
computation of diluted weighted average shares outstanding, as they
would be antidilutive.
2016 2015 2014
US $ US $ US $
------------------------------ ------------- ------------- -----
Convertible promissory notes - 14,510,770 -
Warrants 5,726,364 6,925,962 -
Share options 6,810,357 7,182,674 -
------------- ------------- -----
12,536,721 28,619,406 -
------------- ------------- -----
9. Intangible assets
As of December 31, 2014
Cost -
Accumulated amortization and impairment -
Net book amount at December 31, 2014 -
Additions 6,195,748
Amortization charge -
Net book amount at December 31, 2015 6,195,748
----------------------------------------- -----------------
As of December 31, 2015
Cost 6,195,748
Accumulated amortization and impairment -
Net book amount at December 31, 2015 6,195,748
Additions -
Amortization charge -
Net book amount at December 31, 2016 6,195,748
----------------------------------------- -----------------
Motif BioSciences Inc., as the result of the merger agreement
with Nuprim Inc., acquired the exclusive rights to Nuprim's
iclaprim assets and the rights to acquire 600 kilograms of iclaprim
API over a period ending December 31, 2017.
The Directors do not believe that the merger between Motif
BioSciences Inc. and Nuprim Inc. meets the definition of an
acquisition of a business as set out in IFRS 3 and is therefore
accounted for as an acquisition of an asset.
The fair value of the assets acquired under the merger
arrangement represent the aggregate estimated value of:
-- 11,318,439 ordinary shares in Motif Bio plc at the placing price of 20 pence per share;
-- 9,432,033 warrants at the placing price of 20 pence per ordinary share; and
-- a milestone payment of US $500,000 to be paid by Motif
BioSciences Inc. to Acino Pharma AG upon completion of the first
Phase III trial.
The value of the warrants has been estimated using the Black
Scholes option pricing model with appropriate factors for
volatility and risk free interest rate. The Directors consider the
separable value of the active pharmaceutical ingredients is
unlikely to constitute a material component of the fair value of
the assets acquired. No discount has been applied to the expected
milestone payment of US $500,000 given the commencement of the
phase III trial and management's expectation that the liability
will be settled by the end of 2017.
Details of the purchase consideration and amounts attributed to
net assets acquired are as follows:
US $
------------------
Purchase consideration:
Ordinary shares in Motif Bio
plc 3,355,375
Warrants to subscribe for
ordinary shares in Motif Bio
plc 2,340,373
Total purchase consideration 5,695,748
------------------
Iclaprim assets 6,195,748
Milestone payment (500,000)
Net assets acquired 5,695,748
------------------
As the IPR&D asset is not yet available for commercial use,
no amortization has been charged to date.
The Group performs an impairment test over the asset on an
annual basis or when a triggering event has occurred. Based on the
results of the test, no impairment was recorded in the years ended
December 31, 2016 or 2015.
10. Prepaid expenses and other receivables
Amounts due within one Dec 31, Dec 31,
year 2016 2015
US $ US $
------------------------ ---------------- ----------------
Other receivables and
prepayments 401,064 167,657
401,064 167,657
------------------------ ---------------- ----------------
The maximum exposure to credit risk at the end of each reporting
period is the fair value of each class of receivables set out
above. The Group held no collateral as security. The Directors
estimate that the carrying value of receivables approximated their
fair value.
11. Cash and cash equivalents
Dec 31, Dec 31,
2016 2015
US $ US $
-------------- ---------------- ----------------
Cash at bank 21,829,632 28,594,347
21,829,632 28,594,347
-------------- ---------------- ----------------
12. Trade and other payables
Amounts due within one Dec 31, Dec 31,
year 2016 2015
US $ US $
----------------------------- ------------------------- ------------------
Trade payables 734,405 108,247
Accrued expenses - Contract
research organization 10,854,531 79,190
Accrued expenses - Other 727,947 798,047
Amounts due to affiliates 78 1,599
Other payable 2,156 -
12,319,117 987,083
----------------------------- ------------------------- ------------------
The Directors estimate that the carrying value of trade and
other payables approximated their fair value.
13. Other interest bearing loans and borrowings
Amounts due within one Dec 31, Dec 31,
year 2016 2015
US $ US $
----------------------------- --------- ---------------
Notes payable to affiliates - 3,550,786
Accrued interest expense
to affiliates - 197,175
----------------------------- --------- ---------------
- 3,747,961
--------------------------------------- ---------------
The notes payable to affiliates are demand notes from a
shareholder of the Group - Amphion Innovations plc and its
subsidiary undertaking, Amphion Innovations US Inc. At December 31,
2014, the notes accrued interest at 5% per annum. If the principal
or accrued interest remained outstanding at such time as Motif
BioSciences Inc. concluded an equity financing that equaled or
exceeded one million US dollars, the note holder could convert all
or part of the principal balance plus accrued but unpaid interest
into the securities of Motif BioSciences Inc. issued in the
financing at a conversion rate equal to the price per security at
which the securities are issued in the financing. On April 1, 2015,
Amphion Innovations plc converted US $6,000,000 of notes and
accrued interest into shares of Motif BioSciences Inc. The shares
were converted into ordinary shares of Motif Bio plc upon admission
under the terms of the Motif Merger Agreement. Convertible
promissory notes were issued for Amphion Innovations plc's
remaining balance of US $1,471,700 and Amphion Innovations US
Inc.'s balance of US $2,079,086 that includes unpaid accrued
interest and advisory and consultancy fees. The new notes accrued
interest at 7% per annum and were to mature on December 31,
2016.
On September 7, 2016, the Group amended and restated the
convertible notes with Amphion Innovations plc and Amphion
Innovations US Inc. to provide that any outstanding principal under
the notes as of the maturity date will be paid to the holders on
the maturity date, at the Group's election, through the issuance of
(i) a number of our ordinary shares, based on the conversion price
set forth in the notes, or (ii) a number of ADSs, which is equal to
a number determined by dividing the number of ordinary shares the
holder would otherwise be entitled to by the then applicable ADS to
ordinary share ratio. The amended and restated convertible
promissory notes also provide that except in the event of a
default, no interest will accrue or be payable with respect to the
amounts due under notes. In consideration for its agreement to
forego interest payments under its convertible promissory notes,
the Group issued 409,000 ordinary shares to Amphion Innovations
plc. The amended and restated notes also permit the Group or the
holders to convert all or any portion of the outstanding principal
under the notes into ordinary shares or ADSs (as determined by the
Group) at any time prior to the maturity date.
In December 2016, the notes, which totaled US $3,550,786, were
converted into 14,510,770 new ordinary shares in the Company at the
rate of US $0.2447 per share.
14. Derivative liability
On November 23, 2016, the Group closed an initial U.S. public
offering of 2,438,491 American Depositary Shares ("ADS") and
1,219,246 warrants over ADS at a price of US $6.98 per ADS/Warrant
combination. Each ADS represents 20 ordinary shares. The warrants
have an exercise price of US $8.03 per ADS and expire on November
23, 2021. In the event the Group fails to maintain the
effectiveness of its Registration Statement and a Restrictive
Legend Event has occurred, the warrant shall only be exercisable on
a cashless basis. This would result in variability in the number of
shares issued and therefore, the warrants were designated as a
financial liability carried at fair value through profit and loss.
On issuance of the ADS warrants, the Group recorded a derivative
liability of US $3,849,160 using the Black-Scholes model. The Group
develops its own assumptions for use in the Black-Scholes option
pricing model that do not have observable inputs or available
market data to support the fair value. This method of valuation
involves using inputs such as the fair value of the Group's common
stock, stock price volatility of comparable companies, the
contractual term of the warrants, risk free interest rates and
dividend yields. The Group has a limited trading history in its
common stock, therefore, expected volatility is based on that of
reasonably similar publicly traded companies. Due to the nature of
these inputs, the valuation of the warrants is considered a Level 3
measurement.
At December 31, 2016, the derivative liability had a fair value
of US $3,967,189 using the Black-Scholes model and the following
assumptions:
December
31, 2016
--------------------------------
Share price (US $) 6.19
Expected volatility 70%
Number of periods to
exercise 4.92
Risk free rate 1.91%
Expected dividends -
In addition, on November 23, 2016 the Group placed 22,863,428
ordinary shares together with 11,431,714 warrants over ordinary
shares at a price of 28 pence per share/warrant combination. The
warrants have an exercise price of GBP0.322 per warrant and expire
on November 23, 2021. In the event that the Group fails to maintain
the effectiveness of the Registration Statement, the warrant shall
only be exercisable on a cashless basis. This would result in
variability in the number of shares issued and therefore, the
warrants were designated as a financial liability carried at fair
value through profit and loss. On issuance of the warrants, the
Group recorded a derivative liability of US $1,812,959 using the
Black-Scholes model. At December 31, 2016, the derivative liability
has a fair value of US $1,830,869 using the Black-Scholes model and
the following assumptions:
December
31, 2016
--------------------------------
Share price (GBP) 0.25
Expected volatility 70%
Number of periods to
exercise 4.92
Risk free rate 1.91%
Expected dividends -
December
Liability warrants 31, 2016
US$
---------------------------
Issued during the year 5,662,119
Gain in value 135,939
Balance at December
31, 2016 5,798,058
---------------------------
15. Contingent liabilities
Contingent bonuses of $50,000 and $35,000 were awarded to the
Chief Executive Officer and Chief Medical Officer for services
provided in 2016. These bonuses were not accrued for at December
31, 2016, as the payments are contingent upon: the closing of the
next significant financing; continued service; and no material
adverse conditions impacting the Group. In addition to these
contingent bonuses, bonuses of $50,000 each were accrued at
December 31, 2016 for the Chief Executive Officer and Chief Medical
Officer for their services in 2016.
A bonus of 100,000 pounds sterling was awarded to Richard Morgan
for his services as a director in 2016. Half of the bonus was
payable upon board of directors approval in March 2017; the
remainder is contingent upon the Group completing a financing of at
least US$20 million.
16. Share based payments
Motif BioSciences Inc. issued options and warrants to employees,
directors, consultants, and note holders. As part of the merger
between Motif Acquisition Sub, Inc. and Motif BioSciences Inc.,
described in note 17, each outstanding share option granted by
Motif BioSciences Inc. was assumed and converted by Motif Bio plc
into options to subscribe for ordinary shares in Motif Bio plc. The
number of share options and the exercise prices have been adjusted
to reflect the reverse stock split in the capital of Motif
BioSciences Inc. on March 13, 2015.
On December 4, 2014, Motif BioSciences Inc. adopted a Share
Option Plan (the "Plan") under which options can be granted to
employees, consultants, and directors. Under the Plan 9,304,575
(post reverse stock split) options were issued in 2014 that will
vest over three years and expire in ten years from the date of
grant.
Motif Bio plc adopted a Share Option Plan (the "New Plan") on
April 1, 2015. This new plan replaces Motif BioSciences Inc.'s
previous share plan. There were no changes to the fair value of
share options granted under the Plan with the only change being to
grant the holders shares in Motif Bio plc rather than Motif
BioSciences Inc. upon exercising options. The exercise price for
each option will be established in the discretion of the Board
provided that the exercise price for each option shall not be less
than the nominal value of the relevant shares if the options are to
be satisfied by a new issue of shares by the Company and provided
that the exercise price per share for an option shall not be less
than the fair market value of a share on the effective date of
grant of the option. Options will be exercisable at such times or
upon such events and subject to such terms, conditions and
restrictions as determined by the Board on grant date. However, no
option shall be exercisable after the expiration of
ten years after the effective date of grant of the option. In
2016, 3,261,577 (2015: 1,000,000) options were issued under the New
Plan that will expire in ten years and vest over four years.
Motif Bio plc issued 1,082,384 warrants to its broker for their
participation in a placing. The warrants have an exercise price of
50 pence per share and expire on the fifth anniversary of
issuance.
For options exercised, the weighted average share price in 2016
was US $0.20 (2015: US $0.22).
Number Weighted
of average
share exercise
options price
US $
---------------------------------- ---------------------- ---------
Outstanding at January 1, 2015 14,135,191 0.349
Granted during the year 12,298,692 0.340
Forfeited during the year (915,923) 0.376
Exercised during the year (363,054) 0.216
Expired during the year (188,320) 4.175
Outstanding at December 31, 2015 24,966,586 0.316
Granted during the year 4,343,961 0.529
Forfeited during the year (287,400) 0.696
Exercised during the year(1) (587,014) 0.200
Expired during the year (574,800) 0.696
Outstanding at December 31, 2016 27,861,333 0.316
----------------------
Exercisable at December 31, 2016 8,884,662 0.301
----------------------
(1) The weighted average share price of options exercised during
the year ended December 31, 2016 was $0.300.
The fair value of options and warrants has been valued using the
Black Scholes option pricing model. Volatility is based on reported
data from selected reasonably similar publicly traded companies for
which the historical information is available. The Group does not
have sufficient history to estimate the volatility of its share
price. The assumptions for each option grant were as follows:
Year ended Year ended
Dec 31, Dec 31,
2016 2015
---------------------------------- ----------- -----------
Weighted average share price (US
$) 0.59 0.53
Weighted average exercise price
(US $) 0.53 0.53
Expected volatility 70-88% 79-94%
Number of periods to exercise 5-10 years 10 years
1.47 - 2.15 -
Risk free rate 1.64% 2.64%
Expected dividends - -
The range of exercise prices of the options at December 31, 2016
were US $0.14-$0.73 (December 31, 2015: US $0.14-$4.18). The
weighted average remaining contractual life of the outstanding
options is 7.3 years. The options will be equity settled. The share
price used for the share option plan prior to being traded on AIM
was based on management's assessment of the valuation of the Group
given the net assets and future potential of the Group at the time
of granting.
The total expense recognized for the years arising from
stock-based payments are as follows:
Year ended Dec 31, 2016 Year ended Dec 31, 2015 Year ended Dec 31, 2015
US $ US $ US $
------------------------------------- ------------------------ ------------------------ ------------------------
Share based payment expense - General
and administrative expense 513,541 325,908 300,147
-------------------------------------- ------------------------ ------------------------ ------------------------
Cost of issuance charged to equity - 339,216 -
-------------------------------------- ------------------------ ------------------------ ------------------------
17. Share capital
Allotted, called up and fully paid: Number US $
------------------------------------- ---------------------- ----------------------
In issue at December 31, 2014 100 -
Issued:
Ordinary shares of 1p each 108,601,496 1,645,291
In issue at December 31, 2015 108,601,496 1,645,291
Issued:
Ordinary shares of 1p each 409,000 5,405
Ordinary shares of 1p each 48,769,820 607,574
Ordinary shares of 1p each 22,863,428 284,833
Ordinary shares of 1p each 119,990 1,509
Ordinary shares of 1p each 467,024 5,801
Ordinary shares of 1p each 14,510,770 177,786
In issue at December 31, 2016 195,741,528 2,728,199
---------------------- ----------------------
On September 9, 2016, Motif Bio plc issued 409,000 ordinary
shares to Amphion Innovations plc as part of the terms of the
renegotiated convertible promissory notes.
On November 23, 2016, Motif Bio plc issued 2,438,491 American
Depositary Shares (ADSs) upon the closing of an initial U.S. public
offering and 1,219,246 warrants over ADS at a price of US $6.98 per
ADS/Warrant combination.
Each ADS represents 20 ordinary shares.
On November 23, 2016, Motif Bio plc issued 22,863,428 ordinary
shares together with 11,431,714 warrants over ordinary shares at a
price of 28 pence per share/warrant combination.
On November 29, 2016, 119,990 ordinary shares were issued upon
the exercise of options.
In December 2016, 467,024 ordinary shares were issued upon the
exercise of options and warrants.
In December 2016, Motif Bio plc issued 14,510,770 new ordinary
shares following the conversion of convertible promissory notes by
Amphion Innovations plc and Amphion Innovations US Inc. The notes
which totaled US $3,550,786 were converted in accordance with their
terms at US $0.2447 per share.
Share premium represents the excess over nominal value of the
fair value consideration received for equity shares net of expenses
of the share issue.
Retained deficit represents accumulated losses.
The group re-organization reserve arose when Motif Bio plc
became the parent of the Group. The transaction, falling as it does
outside the scope of IFRS 3, has been accounted for as a group
re-organization and not a business combination. The re-organization
reserve can be derived by calculating the difference between the
nominal value of the shares in Motif Bio plc issued to the former
shareholders in Motif BioSciences Inc. and the share capital and
share premium of Motif BioSciences Inc. at the date of the
merger.
A minor fair value adjustment is also included in the
reorganization reserve. This represents the uplift to fair value of
the initial deposit shares in Motif BioSciences Inc. issued to the
shareholders of Nuprim Inc. on the execution of the agreed upon
term sheet of the Nuprim merger (note 9), which were converted to
shares in Motif Bio plc on admission to AIM.
18. Financial assets and financial liabilities
The Group holds the following financial instruments:
Financial
assets
at amortized
cost
Financial assets US $
------------------------------ ------------------------------
2016
Prepaid expenses and other
receivables 401,064
Cash and cash equivalents 21,829,632
22,230,696
------------------------------
2015
Prepaid expenses and other
receivables 167,657
Cash and cash equivalents 28,594,347
28,762,004
------------------------------
Financial
liabilities
at amortized
cost
Financial liabilities US $
------------------------------ ------------------------------
2016
Trade and other payables 12,319,117
Payable on completion of
clinical trial 500,000
Derivative liability 5,798,058
18,617,175
------------------------------
2015
Trade and other payables 987,083
Payable on completion of
clinical trial 500,000
Other interest bearing loans
and borrowings 3,747,961
5,235,044
------------------------------
Fair value disclosures
The Group's cash, prepaid expenses and other receivables and
accounts payable are stated at their respective historical carrying
amounts, which approximates fair value due to their short-term
nature. These are measured at fair value using Level 1 inputs. The
Group's derivative liability is measured at fair value using Level
3 inputs. See discussion in Note 14 on the inputs utilized in the
Black-Scholes option pricing model and for a rollforward of the
derivative liability from issuance in November 2016 to December 31,
2016. There were no transfers between fair value levels during the
years ended December 31, 2016 or 2015.
There were no non-recurring fair value measurements for the
years ended December 31, 2016 and 2015.
When measuring the fair value of an asset or a liability, the
Group uses observable market data as far as possible. Fair values
are categorized into different levels in a fair value hierarchy
based on the inputs used in the valuation techniques as
follows:
- Level 1: quoted prices (unadjusted) in active markets for
identical assets or liabilities.
- Level 2: inputs other than quoted prices included in Level 1
that are observable for the asset or liability,
either directly (i.e. as prices) or indirectly (i.e. derived from prices).
- Level 3: inputs for the asset or liability that are not based
on observable market data (unobservable inputs).
19. Group reorganisation by plan of merger
On February 18, 2015, Motif Bio Limited incorporated a Delaware
subsidiary, Motif Acquisition Sub, Inc. On March 27, 2015, Motif
BioSciences Inc., Motif Bio Limited, and Motif Acquisition Sub,
Inc. entered into a plan of merger where, upon admission, Motif
Acquisition Sub, Inc. merged with and into Motif BioSciences Inc.
and Motif BioSciences Inc. continued as the surviving entity and
became a wholly owned subsidiary of Motif Bio plc.
The former Motif BioSciences Inc. shareholders were issued with
36,726,242 ordinary shares in Motif Bio plc in exchange for their
common stock in Motif BioSciences Inc. so that immediately
following the merger the former Motif BioSciences Inc. shareholders
own an equivalent number of ordinary shares in Motif Bio plc as the
number of shares of common stock that they had previously owned in
Motif BioSciences Inc. All outstanding, unexercised, and vested
stock options over shares of common stock in Motif BioSciences Inc.
were converted into options over ordinary shares in Motif Bio
plc.
The Directors consider the acquisition of the entire issued
common stock of Motif BioSciences Inc. by Motif Bio plc in exchange
for equivalent equity participation in Motif Bio plc to be a group
re-organization and not a business combination and to fall outside
the scope of IFRS 3 given it meets the requirements of IAS27
paragraph 13. Having considered the requirements of IAS 8 and the
relevant U.K. and US guidance, the transaction is accounted for on
a merger or pooling of interest basis as if both entities have
always been combined, using book values, with no fair value
adjustments made nor goodwill recognized.
20. Subsidiaries
Method
used
Country to account
of Percentage Percentage for
voting
Company name incorporation shareholding power investment
------------------- --------------- ------------- ----------- --------------
Motif BioSciences Delaware,
Inc. USA 100% 100% Consolidation
The principal activity of Motif BioSciences Inc. is proprietary
drug discovery research and development.
21. Related party transactions
Transactions with Amphion Innovations plc and Amphion
Innovations US Inc.
At December 31, 2016, Amphion Innovations plc owned
approximately 22% of the issued ordinary shares in Motif Bio plc.
In addition, Amphion Innovations plc and its wholly owned
subsidiary undertaking, Amphion Innovations US, Inc., (together the
"Amphion Group") have provided funding for the activities of Motif
BioSciences Inc. through the issue of convertible interest bearing
loan notes. Richard Morgan and Robert Bertoldi were directors of
both Motif Bio plc and Amphion Innovations plc in the period.
Transactions between the Group and the Amphion Group are disclosed
below:
Year Year
ended ended
Dec 31, Dec 31,
2016 2015
US $ US $
-------------------------------------- --------- ----------
Amounts due to Amphion Innovations
US Inc. 78 1,599
Notes payable to Amphion Innovations
plc - 1,471,700
Notes payable to Amphion Innovations
US Inc. - 2,079,086
Accrued and unpaid interest on loan
notes - 189,178
Interest expense 390,485 435,036
--------------------------------------- --------- ----------
Advisory And Consultancy Agreement With Amphion Innovations US,
Inc. And Shared Office Space
On April 1, 2015, the Group entered into an Advisory and
Consultancy Agreement with Amphion Innovations US, Inc. The
consideration for the services is $120,000 per annum. The agreement
provides that in the event that the Group raised a minimum of
GBP5,000,000 (US$7,333,000) in gross proceeds on AIM admission or
in a follow--on offering, a one--time payment of US$300,000 would
be required to be paid to Amphion Innovations US, Inc. Accordingly,
the Group paid US$300,000 to Amphion Innovations US, Inc. on July
21, 2015 in connection with our follow--on offering on AIM. The
agreement was for an initial period of 12 months and will
automatically renew each year on the anniversary date unless either
party notifies the other by giving 90 days' written notice prior to
expiration. The agreement was amended in December 2016 so that
either party may terminate the agreement at any time, for any
reason, upon giving the other party ninety days advance written
notice. The Group paid US$120,000 to Amphion Innovations US, Inc.
in 2016 in accordance with the terms of the agreement. At the date
of this Annual Report, the agreement continues to be in force.
Amphion Innovations US, Inc. also bills the Group on a
pass--through rate for office space and shared workspace.
Consultancy Agreement With Amphion Innovations Plc
On April 1, 2015, the Group entered into a Consultancy Agreement
with Amphion Innovations plc for the services of Robert Bertoldi,
an employee of Amphion Innovations plc. The consideration for his
services was $5,000 per month. On November 1, 2015, the
consideration was increased to $180,000 per annum. On July 1, 2016,
the consideration decreased to US $75,000. The agreement was for an
initial period of 12 months and would automatically renew each year
on the anniversary date unless either party notifies the other by
giving 90 days written notice prior to expiration. The agreement
was amended in December 2016 so that either party may terminate the
agreement at any time, for any reason, upon giving the other party
ninety days advance written notice. The Group paid Robert Bertoldi
US$127,500 in 2016 in accordance with the terms of the
agreement.
Consultancy Agreement with Amphion Innovations US, Inc.
On September 7, 2016, the Group entered into a Consultancy
Agreement with Amphion Innovations US, Inc., pursuant to which
Amphion Innovations US, Inc. will, following and subject to the
closing of the November 2016 offering, provide consultancy services
in relation to the Group's obligations as a NASDAQ listed company.
The consideration for the services is $15,500 per month. The
agreement is for an initial period of 12 months, after which the
agreement will terminate automatically unless renewed by the
parties by mutual agreement. The Group paid US$19,633 in 2016
pursuant to the terms of this agreement.
Consultancy Agreement With Jonathan Gold
On April 13, 2016, the Group entered into a consultancy
agreement with Jonathan Gold, a member of the Group's board of
directors. Under the terms of this agreement, Mr. Gold received a
fixed fee of $10,000 per month for strategic financial expert
advice and guidance. The term of this agreement was six months,
commencing January 1, 2016. The term of the agreement would
automatically renew each month following the initial term, provided
that each party provided its mutual agreement to renew in a signed
writing, no later than 30 days prior to the expiration of the term.
This agreement was not extended beyond the initial term.
On April 7, 2017, the Group entered into a new consultancy
agreement with Jonathan Gold. Under the terms of this agreement,
Mr. Gold received a fixed fee of $16,167 per month for strategic
financial expert advice and guidance. The term of this agreement
was twelve months, commencing January 1, 2017. The term of the
agreement would automatically renew each month following the
initial term, as long as either party did not provide notice to the
other party of its election not to continue to renew the agreement
with at least 30 days advance notice.
The Directors are responsible for planning, directing, and
controlling the activities of the Group. Transactions between the
Group and its Directors and key management personnel and are
disclosed in notes 5 and 6 above.
22. Subsequent events
On January 16, 2017, Robert Dickey IV was appointed as Chief
Financial Officer. Mr. Dickey was granted 1,500,000 non-qualified
stock options with an exercise price of 25.50 pence per share and a
term of ten years. The options vest over four years.
In January 2017, the last patient finished the treatment phase
in REVIVE-1, the Phase 3 clinical trial investigating the safety
and efficacy of iclaprim in patients with acute bacterial skin and
skin structure infections. On April 18, 2017, the Group announced
positive topline results from REVIVE-1, its global Phase 3 clinical
trial in patients with ABSSSI. Iclaprim achieved the primary
endpoint of non-inferiority at the early time point after start of
study drug administration as well as non-inferiority for the test
of cure endpoint. Iclaprim was well tolerated in the study, with
most adverse events categorized as mild. The Group believes that
this new data and the fact that REVIVE-2, the second Phase 3 trial,
uses an identical protocol to REVIVE-1 but has different trial
centers, could provide the basis for increased investor interest in
the Group and, hence, potentially provide greater opportunities to
raise additional capital.
In February 2017, the Company granted options to purchase
ordinary shares at an exercise price of 26 pence per share. The
Chief Executive Officer was granted 1,700,000 options of which
1,000,000 options will vest monthly over four years from the date
of grant and 700,000 options will vest monthly over 4 years from
April 18, 2017, the date of the data read out on the REVIVE-1
trial. The Chief Medical Officer was granted 1,000,000 options that
will vest monthly over four years from the date of grant. The Chief
Financial Officer was granted 600,000 options of which 150,000
options will vest on the anniversary date of the commencement of
his employment and 450,000 options will vest over the following 3
years. The Vice President of Clinical Operations was granted
300,000 options that will vest over four years from the date of
grant. The options will expire ten years from the date of
grant.
On April 7, 2017, the Group entered into a new consultancy
agreement with Jonathan Gold, a member of the Group's board of
directors. Under the terms of this agreement, Mr. Gold received a
fixed fee of $16,167 per month for strategic financial expert
advice and guidance. The term of this agreement was twelve months,
commencing January 1, 2017. The term of the agreement would
automatically renew each month following the initial term, as long
as either party did not provide notice to the other party of its
election not to continue to renew the agreement with at least 30
days advance notice.
On April 28, 2017, the Group announced the appointment of Peel
Hunt LLP as nominated adviser and joint corporate broker with
immediate effect.
Exhibit 4.15
2,438,491 AMERICAN DEPOSITARY SHARES,
EACH REPRESENTING 20 ORDINARY SHARES, GBP0.01 PAR VALUE, AND
WARRANTS TO PURCHASE 1,219,246 AMERICAN DEPOSITARY SHARES
MOTIF BIO PLC
UNDERWRITING AGREEMENT
November 17, 2016
H.C. Wainwright & Co., LLC
As Representative of the Several Underwriters, if any,
listed on Schedule I hereto
430 Park Avenue, 4th Floor
New York, New York 10022
Ladies and Gentlemen:
Motif Bio plc, a public limited company incorporated in England
and Wales (the "Company"), hereby agrees, subject to the terms and
conditions stated in this Underwriting Agreement (the "Agreement"),
to issue and sell to the several Underwriters named in Schedule I
hereto (collectively, the "Underwriters" and, each, an
"Underwriter") for which H.C. Wainwright & Co., LLC is acting
as representative to the several Underwriters (the "Representative"
or "you" and, if there are no Underwriters other than the
Representative, references to multiple Underwriters shall be
disregarded and the term Representative as used herein shall have
the same meaning as Underwriter), an aggregate of (i) 2,438,491
American Depositary Shares of the Company (the "ADSs"), each ADS
representing 20 of the Company's ordinary shares, par value GBP0.01
per share (the "Ordinary Shares"), and (ii) 1,219,246 warrants to
purchase ADSs (the "ADS Warrants"), in substantially the form filed
as an exhibit to the Registration Statement (as hereinafter
defined).
In addition, the Company hereby agrees to sell to the
Underwriters, upon the terms and conditions stated herein, up to an
additional 292,618 ADSs (the "Additional ADSs") and/or an
additional 146,309 ADS Warrants (the "Additional ADS Warrants" and,
collectively with the Additional ADSs, the "Additional Securities")
to cover over-allotments by the Underwriters, if any.
The Firm ADSs (as hereinafter defined), Additional ADSs and
Underlying ADSs (as hereinafter defined) shall be evidenced by
American Depositary Receipts ("ADRs") issued pursuant to a deposit
agreement (the "Deposit Agreement") dated on or about the date
hereof, among the Company, The Bank of New York Mellon, as
depositary (the "Depositary"), and the holders and beneficial
holders from time to time of the ADRs issued by the Depositary.
Upon the satisfaction of the conditions contained in this
Agreement, the following shall occur with respect to the ADSs: (i)
on or prior to the Closing Date (as hereinafter defined), the
Company shall deposit with the Depositary the number of ADS
Ordinary Shares (as hereinafter defined) underlying the Firm
Securities (as hereinafter defined); and (ii) on the Closing Date,
the Depositary shall deliver the Firm Securities to the accounts of
the several Underwriters, against receipt by the Company from the
Underwriters of payment therefor as provided in this Agreement. In
connection with the Warrants (as hereinafter defined), the Company
shall enter into a warrant agent agreement with the Depositary, in
substantially the form filed as an exhibit to the Registration
Statement ("Warrant Agent Agreement"), pursuant to which the
Depositary shall act as warrant agent in connection with the
Warrants (as hereinafter defined).
For purposes of this Agreement,
(i) "ADS Offered Securities" means the Firm Securities (as
hereinafter defined) and the Additional Securities.
(ii) "ADS Ordinary Shares" means, collectively, the Ordinary
Shares underlying the Offered ADSs and the Ordinary Shares
underlying the Underlying ADSs;
(iii) "Offered ADSs" means, collectively, the Firm ADSs (as
hereinafter defined) and the Additional ADSs.
(iv) "Underlying ADSs" means the ADSs issued and issuable upon
exercise of the Firm ADS Warrants (as hereinafter defined) and the
Additional ADS Warrants;
(v) "Warrants" means, collectively, the Firm ADS Warrants and
the Additional ADS Warrants.
Unless the context otherwise requires, (a) each reference to the
Firm ADSs, Additional ADSs, Warrants and ADS Offered Securities
herein also includes the ADS Ordinary Shares, and (b) each
reference to Warrants herein also includes the Underlying ADSs.
The offering of the ADS Offered Securities pursuant to the
Registration Statement shall be referred to herein as the
"Offering."
Concurrently with the Offering, the Company has engaged Zeus
Capital Limited, Northland Capital Partners and MC Services
(collectively, the "Placement Agents") to act as placement agents
in connection with the placement of an aggregate of 22,863,428
Ordinary Shares and 11,431,714 warrants to purchase Ordinary Shares
(collectively, the "European Placement Securities"), on a best
efforts basis, to investors in Europe, for aggregate gross proceeds
to the Company of at least $7,975,312 (GBP6,401,759 at an exchange
rate of $1.2458 per GBP1.00, the noon rate on the date hereof) (the
"European Placement"). The European Placement Securities have been
registered on the Registration Statement. The European Placement
Securities are not included in the Offering or covered by this
Agreement, but the consummation of the European Placement is a
condition to closing of the Offering. The European Placement
Securities and the ADS Offered Securities are referred to herein as
the "Offered Securities."
The Company wishes to confirm as follows its agreement with you
and the other several Underwriters, on whose behalf you are acting
as representative, in connection with the purchase of the ADS
Offered Securities from the Company.
1. Registration Statement and Prospectus. The Company has
prepared and filed with the Securities and Exchange Commission (the
"Commission") in accordance with the provisions of the Securities
Act of 1933, as amended, and the rules and regulations of the
Commission thereunder (collectively, the "Act"), a registration
statement on Form F-1 (File No. 333-212491), including a prospectus
subject to completion, relating to the Offered Securities. Such
registration statement, as amended, including the financial
statements, exhibits and schedules thereto, at the time when such
registration statement becomes effective and as thereafter amended
by any post-effective amendment, is referred to in this Agreement
as the "Registration Statement." The Registration Statement was
declared effective by the Commission on November 17, 2016 (the
"Effective Date"). The prospectus in the form included in the
Registration Statement or, if the prospectus included in the
Registration Statement omits certain information in reliance upon
Rule 430A under the Act and such information is thereafter included
in a prospectus filed with the Commission pursuant to Rule 424(b)
under the Act, or, if applicable, as part of a post-effective
amendment to the Registration Statement after the Registration
Statement becomes effective, the prospectus, as so filed, is
referred to in this Agreement as the "Prospectus." If the Company
files another registration statement with the Commission to
register a portion of the Offered Securities pursuant to Rule
462(b) under the Act (the "Rule 462 Registration Statement"), then
any reference to "Registration Statement" herein shall be deemed to
include the registration statement on Form F-1 (File No.
333-212491) and the Rule 462 Registration Statement, if any, as
each such registration statement may be amended pursuant to the Act
as of the date and time as of which such Registration Statement, or
the most recent post-effective amendment thereto, was declared
effective by the Commission. The
prospectus subject to completion in the form included in the
Registration Statement at the time of the initial filing of such
Registration Statement with the Commission and as such prospectus
is amended from time to time until the date of the Prospectus is
referred to in this Agreement as the "Preliminary Prospectus." A
registration statement on Form F-6 (File No. 333-212638) relating
to the ADSs has been filed by the Depositary with the Commission
and has become effective (such registration statement on Form F-6,
including all exhibits thereto, as amended at the time such
registration statement becomes effective, being hereinafter
referred to as the "ADS Registration Statement").
For purposes of this Agreement, "free writing prospectus" has
the meaning ascribed to it in Rule 405 under the Act, and "Issuer
Free Writing Prospectus" shall mean each free writing prospectus
prepared by or on behalf of the Company or used or referred to by
the Company in connection with the offering of the Offered
Securities. "Time of Sale" shall mean 9:00 p.m. (New York, New York
time) on November 17, 2016. "Time of Sale Information" shall mean,
as of the Time of Sale, the Preliminary Prospectus together with
the free writing prospectuses, if any, each identified in Schedule
II hereto, and the information included on Schedule III hereto, all
considered together. All references in this Agreement to the
Registration Statement, the Rule 462 Registration Statement, the
ADS Registration Statement, a Preliminary Prospectus, the
Prospectus or the Time of Sale Information, or any amendments or
supplements to any of the foregoing, shall be deemed to refer to
and include any documents incorporated by reference therein, and
shall include any copy thereof filed with the Commission pursuant
to its Electronic Data Gathering, Analysis and Retrieval System
("EDGAR").
2. Agreement to Sell and Purchase.
(a) Upon the terms and subject to the conditions set forth
herein, the Company agrees to issue and sell an aggregate of
2,438,491 ADSs (in the aggregate, the "Firm ADSs") and ADS Warrants
to purchase 1,219,246 ADSs (in the aggregate, the "Firm ADS
Warrants," and, collectively with the Firm ADSs, the "Firm
Securities") to the several Underwriters, and each Underwriter
agrees to purchase, severally and not jointly, at the Closing (as
defined below), the following securities of the Company:
(i) The number of Firm ADSs set forth opposite the name of such
Underwriter on Schedule I hereto; and
(ii) Firm ADS Warrants to purchase the number of ADSs set forth
opposite the name of such Underwriter on Schedule I hereto, which
ADS Warrants shall have an exercise price of $8.03 per whole ADS,
subject to adjustment as provided in the ADS Warrants.
(b) The aggregate purchase price for the Firm Securities shall
equal the sum of the amounts set forth opposite the name of each
Underwriter on Schedule I hereto (the "Closing Purchase Price").
The combined purchase price for one ADS and one ADS Warrant to
purchase 0.5 ADS shall be $6.4914 (the "Combined Purchase Price"),
which shall be allocated as $6.4821 per ADS (the "ADS Purchase
Price") and $0.0093 per ADS Warrant (the "ADS Warrant Purchase
Price"), provided that, solely in connection with ADSs and ADS
Warrants that are sold to Invesco Asset Management Limited, the
combined purchase price for one ADS and one ADS Warrant to purchase
0.5 ADS shall be $6.6659.
(c) Upon the basis of the representations, warranties, covenants
and agreements of the Company herein contained, and subject to all
the terms and conditions set forth herein, the Underwriters are
hereby granted an option (the "Over-Allotment Option") to purchase
from the Company, in the aggregate, up to 292,618 Additional ADSs
and 146,309 Additional ADS Warrants, which may be purchased in any
combination of Additional ADSs and/or Additional ADS Warrants at
the ADS Purchase Price and/or the ADS Warrant Purchase Price,
respectively. The Additional Securities may be purchased solely for
the purpose of covering over-allotments, if any, made in connection
with the offering of the Firm Securities. The Over-Allotment Option
may be exercised by the Representative as to all (at any time) or
any part (from time to time) of the Additional Securities at any
time within 30 days after the date of this Agreement. In connection
with an exercise of the Over-Allotment Option, (a) the purchase
price to be paid for the Additional ADSs is equal to the product of
the ADS Purchase Price multiplied by the number of Additional ADSs
and (b) the purchase price to be paid for the Additional ADS
Warrants is equal to the product of the ADS Warrant Purchase Price
multiplied by the number of Additional ADS Warrants (the aggregate
purchase price to be paid at an Additional Closing (as defined
below), the "Additional Closing Purchase Price").
3. Terms of Public Offering. The Company has been advised by you
that the Underwriters propose to make an offering of the ADS
Offered Securities as soon after the Registration Statement, the
ADS Registration Statement, and this Agreement have become
effective as in your judgment is advisable and to offer the ADS
Offered Securities upon the terms set forth in the Prospectus. The
Underwriters propose to make a public offering of the ADS Offered
Securities in the United States. The Representative may from time
to time thereafter change the public offering price and other
selling terms. Not later than 12:00 p.m., New York, New York time,
on the Business Day prior to Closing Date, the Company shall
deliver or cause to be delivered copies of the Prospectus in such
quantities and at such places as the Representative shall
reasonably request. For purposes herein, "Business Day" means any
day except any Saturday, any Sunday, any day which is a federal
legal holiday in the United States or any day on which banking
institutions in the State of New York are authorized or required by
law or other governmental action to close.
4. Delivery of the ADS Offered Securities and Payment Therefor.
On the Closing Date (as hereinafter defined), each Underwriter
shall deliver or cause to be delivered to the Company, via wire
transfer, immediately available funds equal to such Underwriter's
Closing Purchase Price and the Company shall cause the Depositary
to deliver to, or as directed by, such Underwriter its respective
Firm Securities and the Company shall deliver the other items
required pursuant to Section 9 that are deliverable at the closing
(the "Closing"). The Closing shall occur at the offices of Ellenoff
Grossman & Schole LLP ("Representative's Counsel"), 1345 Avenue
of the Americas, New York, New York 10105, at 10:00 a.m., New York,
New York time, on November 23, 2016, or such other place, time and
date as the Representative shall designate by written notice to the
Company (the time and date of such Closing is called the "Closing
Date"). The place of Closing and the Closing Date may be varied by
agreement between the Representative and the Company. The Company
hereby acknowledges that circumstances under which the
Representative may provide notice to postpone the Closing Date as
originally scheduled include any determination by the Company or
the Representative to recirculate to the public copies of an
amended or supplemented Prospectus or a delay as contemplated by
the second sentence of Section 10 hereof.
The Over-Allotment Option may be exercised by the Representative
as to all (at any time) or any part (from time to time) of the
Additional Securities at any time within 30 days after the date of
this Agreement. The Over-Allotment Option granted hereby may be
exercised by the giving of oral notice to the Company from the
Representative, which must be confirmed in writing by overnight
mail or facsimile or e-mail setting forth (i) the aggregate number
of Additional ADSs and/or Additional ADS Warrants as to which the
Representative is exercising the option and (ii) the date and time
for delivery of and payment for the Additional Securities (each, an
"Additional Closing" and the date of each Additional Closing, an
"Additional Closing Date") (which may be the same as the Closing
Date, but shall in no event be earlier than the Closing Date nor
later than three Business Days after the delivery of such notice).
Each Additional Closing shall occur at the offices of
Representative's Counsel at 10:00 a.m., New York, New York time, at
such place, time and date as the Representative shall designate by
written notice to the Company. The place of each Additional Closing
and each Additional Closing Date may be varied by agreement between
you and the Company. An Underwriter will not be under any
obligation to purchase any Additional Securities prior to the
exercise of the Over-Allotment Option by the Representative. Upon
exercise of the Over-Allotment Option, the Company will become
obligated to convey to the Underwriters, and, subject to the terms
and conditions set forth herein, the Underwriters will become
obligated to purchase, the number of Additional ADSs and/or
Additional ADS Warrants specified in such notice. The
Representative may cancel the Over-Allotment Option at any time
prior to the expiration of the Over-Allotment Option by written
notice to the Company. On or prior to any Additional Closing Date,
the Company shall deposit with the Depositary the number of ADS
Ordinary Shares underlying the Additional Securities to be
purchased by the Underwriters, and on the Additional Closing Date,
the Company shall cause the Depositary to deliver the Additional
Securities to the accounts of the several Underwriters, or as
directed by the several Underwriters, against receipt by the
Company from the Underwriters or payment therefor as provided in
this Agreement.
ADRs evidencing the Firm ADSs, the Additional ADSs and the
Underlying ADSs to be purchased hereunder shall be registered in
such names and in such denominations as you shall request prior to
1:00 p.m., New York, New York time, not later than the Business Day
preceding the Closing Date or an Additional Closing Date, as the
case may be. Delivery of the ADS Offered Securities shall be made
through the facilities of The Depository Trust Company ("DTC"). The
ADRs evidencing the Firm ADSs, the Additional ADSs and the
Underlying ADSs to be purchased hereunder shall be delivered to you
by the Company on the Closing Date or the Additional Closing Date,
as the case may be, against payment of the purchase price therefor
by wire transfer of immediately available funds to an account or
accounts specified in writing, on the Closing Date, or an
Additional Closing Date, as the case may be. Payment for the ADS
Offered Securities sold by the Company hereunder shall be delivered
by each respective Underwriter to the Company, except as otherwise
agreed to by the Company and the Representative.
It is understood that the Representative has been authorized,
for its own account and the accounts of the several Underwriters,
to accept delivery of and receipt for, and make payment of the
Closing Purchase Price for the Firm Securities that the
Underwriters have agreed to purchase and the Additional Closing
Purchase Price for the Additional Securities that the Underwriters
have agreed to purchase. H.C. Wainwright & Co., LLC,
individually and not as representative of the Underwriters, may,
but shall not be obligated to, make payment for any ADS Offered
Securities to be purchased by any Underwriter whose funds shall not
have been received by the Representative by the Closing Date or the
Additional Closing Date, as the case may be, for the account of
such Underwriter, but any such payment shall not relieve such
Underwriter from any of its obligations under this Agreement.
5. Covenants and Agreements. The Company covenants and agrees
with the Underwriters as follows:
(a) The Company will use its best efforts to cause the
Registration Statement, the ADS Registration Statement and any
amendments thereto to become effective, if it has not already
become effective, and to cause the Registration Statement to remain
effective until the later of (a) the date that is nine (9) months
following the date of this Agreement and (b) the date on which the
Warrants are no longer outstanding, and the Company will advise you
promptly and, if requested by you, will confirm such advice in
writing (i) when the Registration Statement and the ADS
Registration Statement have become effective and the time and date
of any filing of any post-effective Registration Statement or any
amendment or supplement to any Preliminary Prospectus or the
Prospectus and the time and date that any post-effective amendment
to the Registration Statement becomes effective, (ii) if Rule 430A
under the Act is employed, when the Prospectus has been timely
filed pursuant to Rule 424(b) under the Act, (iii) of the receipt
of any comments of the Commission, or any request by the Commission
for amendments or supplements to the Registration Statement, any
Preliminary Prospectus or the Prospectus or for additional
information, (iv) of the issuance by the Commission of any stop
order suspending the effectiveness of the Registration Statement or
the ADS Registration Statement or of the suspension of
qualification of the Offered Securities for offering or sale in any
jurisdiction or the initiation of any proceeding for such purposes
and (v) within the period of time referred to in Section 5(i)
hereof, of any adverse change in the Company's or any subsidiary's
condition (financial or other), business, prospects, properties,
net worth or results of operations, or of any event that comes to
the attention of the Company that makes any statement made in the
Registration Statement, the ADS Registration Statement or the
Prospectus (as then amended or supplemented) untrue in any material
respect as of the date made or that requires the making of any
additions thereto or changes therein in order to make the
statements therein (in the case of the Prospectus, in light of the
circumstances under which they were made) not misleading in any
material respect, or of the necessity to amend or supplement the
Prospectus (as then amended or supplemented) to comply with the Act
or any other law. If at any time the Commission shall issue any
stop order suspending the effectiveness of the Registration
Statement or the ADS Registration Statement, the Company will make
every reasonable effort to obtain the withdrawal or lifting of such
order at the earliest possible time. The Company will provide the
Underwriters with copies of the form of Prospectus, in such number
as the Underwriters may reasonably request. The Company shall file
with the Commission such Prospectus in accordance with Rule 424(b)
under the Act, and in form and substance satisfactory to the
Representative, before the close of business on the first Business
Day immediately following the date hereof.
(b) The Company will furnish to you, without charge, two signed
copies of the Registration Statement and the ADS Registration
Statement as originally filed with the Commission and of each
amendment thereto, including financial statements and all exhibits
thereto, and will also furnish to you, without charge, such number
of conformed copies of the Registration Statement and the ADS
Registration Statement as originally filed and of each amendment
thereto as you may reasonably request.
(c) The Company will promptly file (or cause to be filed, if
applicable) with the Commission any amendment or supplement to the
Registration Statement, the ADS Registration Statement or the
Prospectus that may, in the judgment of the Company or the
Representative, be required by the Act or requested by the
Commission.
(d) The Company will furnish a copy of any amendment or
supplement to the Registration Statement, the ADS Registration
Statement or to the Prospectus or any Issuer Free Writing
Prospectus to you and counsel for Representative and obtain your
consent prior to filing any of those with the Commission.
(e) The Company will not make any offer relating to the Offered
Securities that would constitute an Issuer Free Writing Prospectus
without your prior written consent.
(f) The Company will retain in accordance with the Act all
Issuer Free Writing Prospectuses not required to be filed pursuant
to the Act; and if at any time after the date hereof any events
shall have occurred as a result of which any Issuer Free Writing
Prospectus, as then amended or supplemented, would conflict with
the information in the Registration Statement, the ADS Registration
Statement, the most recent Preliminary Prospectus or the
Prospectus, or would include an untrue statement of a material fact
or omit to state any material fact necessary in order to make the
statements therein, in the light of the circumstances under which
they were made, not misleading, or, if for any other reason it
shall be necessary to amend or supplement any Issuer Free Writing
Prospectus, to notify you and, upon your request, to file such
document and to prepare and furnish without charge to each
Underwriter as many copies as they may from time to time reasonably
request of an amended or supplemented Issuer Free Writing
Prospectus that will correct such conflict, statement or omission
or effect such compliance.
(g) If at any time following the distribution of any oral or
written communication with potential investors undertaken in
reliance on Section 5(d) of the Act ("Testing-the-Waters
Communication") that is a written communication within the meaning
of Rule 405 under the Act ("Written Testing-the-Waters
Communications"), there occurred or occurs an event or development
as a result of which such Written Testing-the-Waters Communication
included or would include an untrue statement of a material fact or
omitted or would omit to state a material fact necessary in order
to make the statements therein, in the light of the circumstances
under which they were made existing at that subsequent time, not
misleading, the Company will promptly notify the Representative and
will promptly amend or supplement, at its own expense, such Written
Testing-the-Waters Communication to eliminate or correct such
untrue statement or omission. The Company will promptly notify the
Representative of (A) any distribution by the Company of Written
Testing-the-Waters Communications and (B) any request by the
Commission for information concerning the Written
Testing-the-Waters Communications.
(h) Prior to the execution and delivery of this Agreement, the
Company has delivered or will deliver to you, without charge, in
such quantities as you have requested or may hereafter reasonably
request, copies of each form of the Preliminary Prospectus. The
Company consents to the use, in accordance with the provisions of
the Act and with the securities or Blue Sky laws of the
jurisdictions in which the ADS Offered Securities are offered by
the several Underwriters and by dealers, prior to the date of the
Prospectus, of each Preliminary Prospectus so furnished by the
Company.
(i) As soon after the execution and delivery of this Agreement
as is practicable and thereafter from time to time for such period
as in the reasonable opinion of counsel for the Representative a
prospectus is required by the Act to be delivered in connection
with sales by any Underwriter or a dealer (the "Prospectus Delivery
Period"), and for so long a period as you may request for the
distribution of the ADS Offered Securities, the Company will
deliver to each Underwriter and each dealer, without charge, as
many copies of the Prospectus and the Time of Sale Information (and
of any amendment or supplement thereto) as each Underwriter and
each dealer may reasonably request. The Company consents to the use
of the Prospectus and the Time of Sale Information (and of any
amendment or supplement thereto) in accordance with the provisions
of the Act and with the securities or Blue Sky laws of the
jurisdictions in which the ADS Offered Securities are offered by
the several Underwriters and by all dealers to whom ADS Offered
Securities may be sold, both in connection with the offering and
sale of the ADS Offered Securities and for such period of time
thereafter as the Prospectus is required by the Act to be delivered
in connection with sales by any Underwriter or dealer. If at any
time prior to the later of (i) the completion of the distribution
of the ADS Offered Securities pursuant to the Offering, (ii) the
expiration of prospectus delivery requirements with respect to the
ADS Offered Securities under Section 4(a)(3) of the Act and Rule
174 under the Act thereunder or (iii) the date on which the
Warrants are no longer outstanding, any event shall occur that in
the judgment of the Company or in the opinion of counsel for the
Representative is required to be set forth in the Prospectus (as
then amended or supplemented) or should be set forth therein in
order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, or if it
is necessary to supplement or amend the Prospectus to comply with
the Act or any other law, the Company will forthwith prepare and,
subject to Section 5(a) hereof, file with the Commission and use
its best efforts to cause to become effective as promptly as
possible an appropriate supplement or amendment thereto, and will
furnish to each Underwriter who has previously requested
Prospectuses, without charge, a reasonable number of copies
thereof.
(j) If required in connection with the Offering, the Company
will cooperate with you and counsel for the Representative in
connection with the registration or qualification of the ADS
Offered Securities for offering and sale by the several
Underwriters and by dealers under the securities or Blue Sky laws
of such jurisdictions as you may reasonably designate and will file
such consents to service of process or other documents as may be
reasonably necessary in order to effect and maintain such
registration or qualification for so long as required to complete
the distribution of the ADS Offered Securities; provided that in no
event shall the Company be obligated to qualify to do business in
any jurisdiction where it is not now so qualified or to take any
action that would subject it to general service of process in
suits, other than those arising out of the offering or sale of the
ADS Offered Securities, as contemplated by this Agreement and the
Prospectus, in any jurisdiction where it is not now so subject. In
the event that the qualification of the ADS Offered Securities in
any jurisdiction is suspended, the Company shall so advise you
promptly in writing. If required in connection with the Offering,
the Company will use its best efforts to qualify or register the
ADS Offered Securities for sale in non-issuer transactions under
(or obtain exemptions from the application of) the Blue Sky laws of
each state where necessary to permit market-making transactions and
secondary trading and will comply with such Blue Sky laws and will
use its best efforts to continue such qualifications, registrations
and exemptions in effect for a period of two years after the date
hereof.
(k) The Company will make generally available to its security
holders, as soon as practicable after the Effective Date, but not
later than the first day of the fifteenth full calendar month
following the date of this Agreement, a consolidated earnings
statement (in form complying with the provisions of Rule 158 under
the Act), which need not be audited, covering a period of at least
12 months commencing after the Effective Date and satisfying the
provisions of Section 11(a) of the Act.
(l) If this Agreement shall be terminated by the Underwriters
(except pursuant to a termination under Section 11 hereof) because
of any inability, failure or refusal on the part of the Company to
perform in all material respects any agreement herein or to comply
in all material respects with any of the terms or provisions hereof
or to fulfill in all material respects any of the conditions of
this Agreement, the Company agrees to reimburse you and the other
Underwriters for all reasonable and documented out-of-pocket
expenses (including travel expenses and reasonable fees and
expenses of counsel for the Representative, but excluding wages and
salaries paid by you) reasonably incurred by you in connection
herewith.
(m) The Company will apply the net proceeds from the sale of the
Offered Securities to be sold by it hereunder and in the European
Placement in accordance in all material respects with the
statements under the caption "Use of Proceeds" in the
Prospectus.
(n) For a period commencing on the date hereof and ending on the
180th day after the date of the Prospectus (the "Lock-Up Period"),
the Company will not, directly or indirectly, (1) offer for sale,
issue, sell, pledge or otherwise dispose of (or enter into any
transaction or device that is designed to, or could be expected to,
result in the disposition by any person at any time in the future
of) any Ordinary Shares, ADSs, options, warrants or other
securities of the Company (the "Company Securities") or any
securities convertible into or exercisable or exchangeable for, or
any rights to purchase or otherwise acquire, any Company Securities
(other than upon the exercise of equity incentives granted pursuant
to the Company's equity incentive plans existing on the date
hereof) (collectively, the "Lock-Up Securities"), or sell or grant
options, rights or warrants with respect to any Lock-Up Securities
or securities convertible into or exchangeable for Lock-Up
Securities (other than the grant of equity incentives pursuant to
the Company's equity incentive plans existing on the date hereof),
(2) enter into any swap or other derivatives transaction that
transfers to another, in whole or in part, any of the economic
benefits or risks of ownership of such Lock-Up Securities, whether
any such transaction described in clause (1) or (2) above is to be
settled by delivery of Lock-Up Securities or other securities, in
cash or otherwise, (3) file or cause to be filed a registration
statement in the United States or any foreign jurisdiction,
including any amendments, with respect to the registration of any
Lock-Up Securities or securities convertible, exercisable or
exchangeable into Lock-Up Securities or any other securities of the
Company or (4) publicly disclose the intention to do any of the
foregoing in clauses (1), (2) or (3), in each case without the
prior written consent of the Representative on behalf of the
Underwriters. The prohibition in the foregoing sentence shall not
apply to (A) the ADS Offered Securities to be sold hereunder, (B)
any Ordinary Shares issued by the Company upon the exercise of an
option or warrant or the conversion of a security outstanding on
the date hereof and described in the Registration Statement, Time
of Sale Information and Prospectus (including, without limitation,
the issuance by the Company of any Ordinary Shares upon the
conversion of the Company's convertible promissory notes issued to
each of Amphion Innovations plc and Amphion Innovations US, Inc.
(the "Notes"), either on the maturity date of such Notes or in
connection with the Company's election to prepay the Notes prior to
the maturity date), provided that such option, warrant, convertible
securities or Notes have not been amended since the date of this
Agreement to increase the number of securities or to decrease the
exercise price, exchange price or conversion price of such
securities, (C) any Ordinary Shares issued or options to purchase
or subscribe for Ordinary Shares granted pursuant to existing
employee benefit or equity incentive plans of the Company described
in the Registration Statement, Time of Sale Information and
Prospectus, (D) the filing by the Company of any registration
statement on Form S-8 or any successor form thereto with respect to
the registration of securities to be offered under any employee
benefit or equity incentive plans of the Company described in the
Registration Statement, Time of Sale Information and Prospectus,
(E) the entry into an agreement providing for the issuance by the
Company of Ordinary Shares or any security convertible into or
exercisable for Ordinary Shares pursuant to an employee benefit
plan or equity incentive plan that was assumed by the Company in
connection with the acquisition by the Company or any of its
subsidiaries of the securities, business, property or other assets
of another person or entity such acquisition, and the issuance of
any such securities pursuant to such agreement, or (F) the entry
into any agreement providing for the issuance of Ordinary Shares or
any security convertible into or exercisable for Ordinary Shares in
connection with joint ventures, commercial relationships or other
strategic transactions, and the issuance of any such securities
pursuant to any such agreement; provided that, in the case of
clauses (E) and (F), the aggregate number of Ordinary Shares that
the Company may sell or issue or agree to sell or issue shall not
exceed 5% of the total number of
Ordinary Shares issued and outstanding as of immediately prior
to the Closing Date; and provided further that, in the case of
clauses (B) through (E), the Company shall cause each recipient of
such securities to execute and deliver, on or prior to the issuance
of such securities, a lock-up agreement, substantially in the form
of Exhibit A hereto, to the extent and for the duration that such
terms remain in effect at the time of transfer, and the Company
shall authorize its transfer agent to decline to make any transfer
of such securities in violation of such lock-up agreements. On or
prior to the date hereof, the Company shall cause each officer,
director and shareholder of the Company and any other person or
entity set forth on Schedule IV hereto to furnish to the
Representative an executed lock-up agreement, substantially in the
form of Exhibit A hereto (the "Lock-Up Agreements").
(o) Prior to the Closing Date or each Additional Closing Date,
as the case may be, the Company will furnish to you, as promptly as
possible, copies of any unaudited interim consolidated financial
statements of the Company and its subsidiaries for any period
subsequent to the periods covered by the financial statements
appearing in the Prospectus.
(p) The Company will comply with all provisions of any
undertakings contained in the Registration Statement and the ADS
Registration Statement.
(q) The Company will not at any time, directly or indirectly,
take any action designed, or which might reasonably be expected to
cause or result in, or which will constitute, stabilization or
manipulation of the price of the ADSs or the Ordinary Shares to
facilitate the sale or resale of any of the ADS Offered
Securities.
(r) The Company will timely file with the Nasdaq Stock Market,
Inc. ("NASDAQ") all documents and notices required by the NASDAQ of
companies that have or will issue securities that are traded on the
NASDAQ.
(s) The Company will on or prior to the Closing Date obtain all
approvals necessary for the issuance of the ADS Offered Securities,
including all shareholder approvals required under the Company's
Articles of Association and/or the English Companies Act of 2006
(the "Companies Act") and/or the listings requirements (the "AIM
Listings Requirements") of the AIM Market of the London Stock
Exchange (the "AIM"), and will timely file with the AIM all
documents and notices required by the AIM of companies that have
securities that are traded on the AIM. On or prior to the Closing
Date, the Company will make application in accordance with the AIM
Listings Requirements for the admission of the ADS Ordinary Shares
underlying the Firm ADSs to trading on the AIM. On the date of
exercise of any Warrants, the Company will obtain approval under
AIM Listing Requirements for the admission of the ADS Ordinary
Shares underlying the Underlying ADSs underlying such exercised
Warrants.
(t) To the extent that any approval is required from the United
Kingdom Financial Conduct Authority ("FCA") for the performance by
the Company of its obligations under this Agreement (including,
without limitation, to pay any amounts owing to the Underwriters
pursuant to Section 8 below), the Company hereby undertakes to take
all steps necessary in order to obtain such approval, as and when
required by the Underwriters.
(u) The Company will promptly notify the Representative if the
Company ceases to be an "emerging growth company," as defined in
Section 2(a) of the Act (an "Emerging Growth Company") at any time
prior to the later of (A) the time when a prospectus relating to
the offering or sale of the ADS Offered Securities is not required
by the Act to be delivered (whether physically or through
compliance with Rule 172 under the Act or any similar rule) and (B)
completion of the Lock-Up Period.
(v) On or prior to the Closing Date, the Company will deposit
the ADS Ordinary Shares underlying the Firm Securities with the
Depositary in accordance with the provisions of the Deposit
Agreement in all material respects and otherwise comply with the
Deposit Agreement so that the Firm Securities will be issued by the
Depositary against receipt of such ADS Ordinary Shares and
delivered to the Underwriters on the Closing Date.
(w) From the date hereof until the later of (i) three years
following the date of this Agreement and (ii) the date on which no
ADS Warrants remain outstanding, the Company will use its best
efforts to maintain the registration of the ADSs and the ADS
Warrants under the Exchange Act. From the date hereof until the
earlier of (i) three years following the date of this Agreement and
(ii) the date on which no ADS Warrants remain outstanding, the
Company will not deregister the ADSs or the ADS Warrants under the
Exchange Act without the prior written consent of the
Representative.
(x) From the date hereof until the later of (i) three years
following the date of this Agreement and (ii) the date on which no
ADS Warrants remain outstanding, the Company shall continue to
retain a nationally recognized independent certified public
accounting firm. The Underwriters acknowledge that
PricewaterhouseCoopers (as defined below) is acceptable to the
Underwriters. In addition, from the date hereof until the earlier
of (i) three years following the date of this Agreement and (ii)
the date on which no ADS Warrants remain outstanding, the Company
shall retain the Depositary as depositary and warrant agent in the
United States or a depositary and warrant agent in the United
States reasonably acceptable to the Representative.
(y) From the date hereof until the later of (i) three years
following the date of this Agreement and (ii) the date on which no
ADS Warrants remain outstanding, the Company will maintain a system
of internal accounting controls sufficient to provide reasonable
assurances that: (i) transactions are executed in accordance with
management's general or specific authorization; (ii) transactions
are recorded as necessary in order to permit preparation of
financial statements in accordance with IFRS and to maintain
accountability for assets; (iii) access to assets is permitted only
in accordance with management's general or specific authorization;
and (iv) the recorded accountability for assets is compared with
existing assets at reasonable intervals and appropriate action is
taken with respect to any differences.
(z) At the request of the Representative, at the time requested
by the Representative, the Company shall issue a press release
disclosing the material terms of the Offering. The Company and the
Representative shall consult with each other in issuing any other
press releases with respect to the Offering, and neither the
Company nor any Underwriter shall issue any such press release nor
otherwise make any such public statement without the prior consent
of the Company, with respect to any press release of such
Underwriter, or without the prior consent of such Underwriter, with
respect to any press release of the Company, which consent shall
not unreasonably be withheld or delayed, except if such disclosure
is required by law, in which case the disclosing party shall
promptly provide the other party with prior notice of such public
statement or communication. The Company will not issue press
releases or engage in any other publicity, without the
Representative's prior written consent, for the period ending at
5:00 p.m. (New York City time) on the first Business Day following
the 30th day following the date of this Agreement, other than
normal and customary releases issued in the ordinary course of the
Company's business.
(aa) If all or any portion of a Warrant is exercised at a time
when there is an effective registration statement to cover the
issuance of the Underlying ADSs, or if the Warrant is exercised via
cashless exercise at a time when such Underlying ADSs would be
eligible for resale under Rule 144 under the Act by a non-affiliate
of the Company, the Underlying ADSs issued pursuant to any such
exercise shall be issued free of all restrictive legends and, with
respect to the Underlying ADSs, shall be delivered through the
facilities of DTC. If at any time following the date hereof the
Registration Statement (or any subsequent registration statement
registering the sale or resale of the Underlying ADSs) is not
effective or is not otherwise available for the sale of the
Underlying ADSs, the Company shall immediately notify the holders
of the Warrants in writing that such registration statement is not
then effective and thereafter shall promptly notify such holders
when the registration statement is effective again and available
for the sale of the Underlying ADSs (it being understood and agreed
that the foregoing shall not limit the ability of the Company to
issue, or any holder thereof to sell, any of the Underlying ADSs in
compliance with applicable federal and state securities laws).
6. Representations and Warranties of the Company. The Company
hereby represents and warrants to each Underwriter on the date
hereof, and shall be deemed to represent and warrant to each
Underwriter as of the Time of Sale and on the Closing Date and each
Additional Closing Date, as the case may be, that:
(a) At the time of the initial filing of the Registration
Statement and the ADS Registration Statement, at the times that the
Registration Statement and the ADS Registration Statement are
declared or become effective by the Commission, on the date hereof,
and at the earliest time thereafter that the Company or another
offering participant made a bona fide offer (within the meaning of
Rule 164(h)(2) of the Act) of the ADS Offered Securities, the
Company was not and will not be on the Closing Date or each
Additional Closing Date, as the case may be, an "ineligible issuer"
(as defined in Rule 405 under the Act).
(b) At the times the Registration Statement and the ADS
Registration Statement are declared or become effective and on the
date hereof, the Registration Statement and the ADS Registration
Statement conformed, and any amendment to the Registration
Statement and the ADS Registration Statement filed after the date
hereof will conform in all material respects when filed, to the
requirements of the Act and the rules and regulations of the
Commission thereunder. No stop order suspending the effectiveness
of the Registration Statement or the ADS Registration Statement has
been issued by the Commission and no proceedings for that purpose
is pending or, to the knowledge of the Company, is threatened or
contemplated by the Commission. The most recent Preliminary
Prospectus conformed, and the Prospectus will conform, in all
material respects when filed to the requirements of the Act and the
rules and regulations of the Commission thereunder with the
Commission pursuant to Rule 424(b) of the Act.
(c) The Registration Statement and the ADS Registration
Statement do not contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading; provided
that no representation or warranty is made as to any information
contained in or omitted from the Registration Statement and the ADS
Registration Statement in reliance upon and in strict conformity
with written information furnished to the Company through the
Representative by or on behalf of any Underwriter specifically for
inclusion therein.
(d) The Prospectus will not contain an untrue statement of a
material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in the
light of the circumstances under which they were made, not
misleading; provided that no representation or warranty is made as
to any information contained in or omitted from the Prospectus in
reliance upon and in strict conformity with written information
furnished to the Company through the Representative by or on behalf
of any Underwriter specifically for inclusion therein.
(e) The Time of Sale Information does not contain an untrue
statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were
made, not misleading; provided that no representation or warranty
is made as to any information contained in or omitted from the Time
of Sale Information in reliance upon and in strict conformity with
written information furnished to the Company through the
Representative by or on behalf of any Underwriter specifically for
inclusion therein.
(f) Each Issuer Free Writing Prospectus (including, without
limitation, any road show that is a free writing prospectus under
Rule 433 under the Act), when considered together with the Time of
Sale Information, did not contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided
that no representation or warranty is made as to any information
contained in or omitted from the Time of Sale Information in
reliance upon and in strict conformity with written information
furnished to the Company through the Representative by or on behalf
of any Underwriter specifically for inclusion therein.
(g) Except as disclosed in the Prospectus, each Issuer Free
Writing Prospectus conformed or will conform in all material
respects to the requirements of the Act on the date of first use,
and the Company has complied with all prospectus delivery and any
filing requirements applicable to such Issuer Free Writing
Prospectus pursuant to the Act. The Company has not made any offer
relating to the Offered Securities that would constitute an Issuer
Free Writing Prospectus without the prior written consent of the
Representative. The Company has retained in accordance with the Act
all Issuer Free Writing Prospectuses that were not required to be
filed pursuant to the Act. The Company has taken all actions
necessary so that any "road show" (as defined in Rule 433 under the
Act) in connection with the offering of the Offered Securities will
not be required to be filed pursuant to the Act.
(h) From the time of initial confidential submission of the
Registration Statement to the Commission (or, if earlier, the first
date on which the Company engaged directly or through any Person
authorized to act on its behalf in any Testing-the-Waters
Communication) through the date hereof, the Company has been and is
an Emerging Growth Company.
(i) The Company (i) has not engaged in any Testing-the-Waters Communication other than Testing-the-Waters Communications with the consent of the Representative with entities that are qualified institutional buyers within the meaning of Rule 144A under the Act or institutions that are accredited investors within the meaning of Rule 501 under the Act and (ii) has not authorized anyone other than the Representative to engage in Testing-the-Waters Communications. The Company reconfirms that the Representative has been authorized to act on its behalf in undertaking Testing-the-Waters Communications. The Company has not distributed or approved for distribution any Written Testing-the-Waters Communications other than those listed on Schedule V hereto.
(j) Each Written Testing-the-Waters Communication did not, as of
the Time of Sale, when taken together with the most recent
Preliminary Prospectus, as of the Time of Sale together with a road
show that is a Free Writing Prospectus but is not required to be
filed under Rule 433 under the Act, contain an untrue statement of
a material fact or omit to state a material fact necessary to make
the statements therein, in the light of the circumstances under
which they were made, not misleading; provided that no
representation or warranty is made as to any information contained
in or omitted from such Written Testing-the-Waters Communication
listed on Schedule V hereto in reliance upon and in strict
conformity with written information furnished to the Company
through the Representative by or on behalf of any Underwriter
specifically for inclusion therein; and the Company has filed
publicly on EDGAR at least 15 calendar days prior to any "road
show" (as defined in Rule 433 under the Act), any confidentially
submitted registration statement and registration statement
amendments relating to the offer and sale of the Offered
Securities. Each Written Testing-the-Waters Communications did not,
as of the Time of Sale, and at all times through the completion of
the public offer and sale of the Offered Securities will not,
include any information that conflicted, conflicts or will conflict
with the information contained in the Registration Statement, the
Time of Sale Information or the Prospectus.
(k) The issued and outstanding share capital of the Company is
set forth in the Prospectus as of the date set forth therein. The
Ordinary Shares and all other outstanding share capital of the
Company have been, and as of the Closing Date and each Additional
Closing Date, as the case may be, will be, duly authorized and
validly issued, fully paid and free of any preemptive or similar
rights other than pursuant to applicable law; the Company is not a
party to or bound by any outstanding options, warrants or similar
rights to subscribe for, or contractual obligations to issue, sell,
transfer or acquire, any of its share capital or any securities
convertible into or exchangeable for any of such share capital,
other than as disclosed in the Registration Statement, the Time of
Sale Information and the Prospectus; the Offered ADSs to be issued
and sold to the Underwriters by the Company hereunder have been
duly authorized and, when issued and delivered to the Underwriters
against full payment therefor in accordance with the terms hereof
will be validly issued, fully paid, non-assessable and free of any
preemptive or similar rights; the Warrants to be issued and sold to
the Underwriters by the Company hereunder have been duly authorized
and, when issued and delivered to the Underwriters against full
payment therefor in accordance with the terms hereof will be
validly issued, fully paid and free of any preemptive or similar
rights; the Underlying ADSs have been duly authorized and, when
issued and delivered to the holders of the Warrants upon exercise
of the Warrants in accordance with their terms, will be validly
issued, fully paid, non-assessable and free of any preemptive or
similar rights; the share capital of the Company conforms to the
description thereof in the Registration Statement, the Time of Sale
Information and the Prospectus (or any amendment or supplement
thereto); and the delivery of ADRs evidencing the Offered ADSs and
the Underlying ADSs against payment therefor pursuant to the terms
of this Agreement will pass valid title to the Offered ADSs and the
Underlying ADSs, free and clear of any claim, encumbrance or defect
in title, to the several Underwriters purchasing such Offered ADSs
and Warrants in good faith and without notice of any lien, claim or
encumbrance. The ADS Ordinary Shares, when the Underlying ADSs are
issued and delivered against payment thereof and the terms of the
Warrants, may be freely deposited by the Company with the
Depositary against issuance of the Underlying ADSs being sold by
the Company. As of the date hereof, the Company has reserved and
the Company shall continue to reserve and keep available at all
times, free of preemptive rights, a sufficient number of Ordinary
Shares for the purpose of enabling the Company to issue the ADS
Ordinary Shares.
(l) The ADRs evidencing the Offered ADSs and the Underlying ADSs
are in valid and sufficient form. Upon execution and delivery by
the Depositary of the ADS Securities against deposit of the ADS
Ordinary Shares in respect thereof in accordance with the
provisions of the Deposit Agreement and upon payment by the
Underwriters for the ADS Offered Securities evidenced thereby in
accordance with the provisions of this Agreement, the ADS Offered
Securities will be duly and validly issued, and the persons in
whose names the ADS Offered Securities are registered will be
entitled to the rights specified therein and in the Deposit
Agreement. The Offered Securities conform in all material respects
to the description thereof contained in the Registration Statement,
the Time of Sale Information and the Prospectus. There are no
limitations on the rights of holders of Ordinary Shares, Offered
Securities or ADRs evidencing the Offered ADSs and the Underlying
ADSs to hold or vote or transfer their respective securities
(except as described in the Registration Statement).
(m) Each of the Company and its subsidiaries is duly organized
and validly existing as a corporation, limited liability company or
other organization in good standing under the laws of the
jurisdiction of its incorporation or organization with full
corporate or organizational power and authority to own, lease and
operate its properties and to conduct its business as presently
conducted and as described in the Registration Statement, the Time
of Sale Information and the Prospectus and is duly registered and
qualified to conduct its business and is in good standing in each
jurisdiction or place where the nature of its properties or the
conduct of its business requires such registration or
qualification, except where the failure to so register or qualify
has not had or will not have a material adverse effect on the
condition (financial or other), business, properties, net worth,
results of operations or prospects of the Company and its
subsidiaries, taken as a whole (a "Material Adverse Effect").
(n) The issued shares of each of the Company's subsidiaries have
been duly authorized and validly issued, are fully paid and are
wholly owned by the Company free and clear of any security
interests, liens, encumbrances, equities or claims. The Company
does not have any subsidiaries and does not own a material interest
in or control, directly or indirectly, any other corporation,
partnership, joint venture, association, trust or other business
organization, other than Motif BioSciences, Inc., a Delaware
corporation. As used in this Agreement, "subsidiaries" shall mean
direct and indirect subsidiaries of the Company.
(o) There are no legal or governmental proceedings pending or,
to the knowledge of the Company, threatened, against the Company or
its subsidiaries or to which the Company or its subsidiaries or any
of their properties are subject, that are required to be described
in the Registration Statement, the Time of Sale Information, or the
Prospectus but are not described as required. There is no action,
suit, inquiry, proceeding or investigation by or before any court
or governmental or other regulatory or administrative agency or
commission (including the AIM) pending or, to the best knowledge of
the Company, threatened, against or involving the Company or its
subsidiaries, which might individually or in the aggregate prevent
or adversely affect the transactions contemplated by this Agreement
or result in a Material Adverse Effect, nor to the Company's
knowledge, is there any basis for any such action, suit, inquiry,
proceeding or investigation. There are no material agreements,
statutes, regulations, contracts, indentures, leases or other
instruments that are required to be described in the Registration
Statement, the Time of Sale Information or the Prospectus or to be
filed as an exhibit to the Registration Statement that are not
described or filed in the Registration Statement, the ADS
Registration Statement, the Time of Sale Information and the
Prospectus as required by the Act. All such agreements, contracts,
indentures, leases and instruments to which the Company or any of
its subsidiaries is a party have been duly authorized, executed and
delivered by the Company or the applicable subsidiary, constitute
valid and binding agreements of the Company or the applicable
subsidiary and are enforceable against the Company or the
applicable subsidiary in accordance with the terms thereof, except
as enforceability thereof may be limited by (i) the application of
bankruptcy, reorganization, insolvency and other laws affecting
creditors' rights generally and (ii) equitable principles being
applied at the discretion of a court before which any proceeding
may be brought. Neither the Company nor the applicable subsidiary
has received notice or been made aware that any other party is in
breach of or default to the Company under any of such agreements,
contracts, indentures, leases or instruments, except where such
breach or default would not be reasonably expected to result in a
Material Adverse Effect.
(p) Neither the Company nor any of its subsidiaries is (i) in
violation of (A) its articles of association or bylaws, or other
organizational documents, (B) any federal, state or foreign law,
ordinance, administrative or governmental rule or regulation
applicable to the Company or any of its subsidiaries, the violation
of which would have a Material Adverse Effect or (C) any decree of
any federal, state or foreign court or governmental agency or body
having jurisdiction over the Company or any of its subsidiaries; or
(ii) in default in any material respect in the performance of any
obligation, agreement or condition contained in (A) any bond,
debenture, note or any other evidence of indebtedness or (B) any
agreement, indenture, lease or other instrument (each of (A) and
(B), an "Existing Instrument") to which the Company or any of its
subsidiaries is a party or by which any of their properties may be
bound, which default would have a Material Adverse Effect; and
there does not exist any state of facts that constitutes an event
of default on the part of the Company or any of its subsidiaries as
defined in such documents or that, with notice or lapse of time or
both, would constitute such an event of default, except where such
event of default would not be reasonably expected to result in a
Material Adverse Effect.
(q) The Company's execution and delivery of this Agreement and
the Warrants and the performance by the Company of its obligations
under this Agreement and the Warrants have been duly and validly
authorized by the Company and have been duly executed and delivered
by the Company, and this Agreement and the Warrants constitutes
valid and legally binding agreements of the Company, enforceable
against the Company in accordance with their respective terms,
except to the extent enforceability may be limited by (i) the
application of bankruptcy, reorganization, insolvency and other
laws affecting creditors' rights generally and (ii) equitable
principles being applied at the discretion of a court before which
any proceeding may be brought, except as rights to indemnity and
contribution hereunder may be limited by federal or state
securities laws.
(r) The Company's execution and delivery of the Deposit
Agreement, the Warrant Agent Agreement and the performance by the
Company of its obligations under the Deposit Agreement and the
Warrant Agent Agreement have been duly and validly authorized by
the Company (including, to the extend required, by its
shareholders) and has been duly executed and delivered by the
Company, and the Deposit Agreement and the Warrant Agent Agreement
constitutes valid and legally binding agreements of the Company,
enforceable against the Company in accordance with their respective
terms, except to the extent enforceability may be limited by (i)
the application of bankruptcy, reorganization, insolvency and other
laws affecting creditors' rights generally and (ii) equitable
principles being applied at the discretion of a court before which
any proceeding may be brought, except as rights to indemnity and
contribution hereunder may be limited by federal or state
securities laws.
(s) The Deposit Agreement and the Warrant Agent Agreement
conform in all material respects to the descriptions thereof
contained in the Registration Statement, the ADS Registration
Statement, the Time of Sale Information and the Prospectus.
(t) None of the issuance and sale of the ADS Ordinary Shares by
the Company; the deposit of the ADS Ordinary Shares with the
Depositary against issuance of the ADS Offered Securities; the
execution, delivery or performance of this Agreement, the Warrants,
the Deposit Agreement and the Warrant Agent Agreement
(collectively, the "Transaction Documents") by the Company nor the
consummation by the Company of the transactions contemplated hereby
or thereby (i) requires any consent, approval, authorization or
other order of or registration or filing with, any court,
regulatory body, administrative agency or other governmental body,
agency or official except such as will be obtained prior to the
Closing Date, (ii) conflicts with or will conflict with or
constitutes or will constitute a breach of, or a default under, the
Company's Articles of Association or any agreement, indenture,
lease or other instrument to which the Company or any of its
subsidiaries is a party or by which any of its properties may be
bound, (iii) violates any statute, law, regulation, ruling, filing,
judgment, injunction, order or decree applicable to the Company or
any of its subsidiaries or any of their properties, or (iv) results
in a breach of, or default under, or results in the creation or
imposition of any lien, charge or encumbrance upon any property or
assets of the Company or any of its subsidiaries pursuant to, or
requires the consent of any other party to, any Existing
Instrument, except for such conflicts, breaches, defaults, liens,
violations,
charges or encumbrances that will not, individually or in the
aggregate, result in a Material Adverse Effect.
(u) Except as described in the Registration Statement, the Time
of Sale Information and the Prospectus, neither the Company nor any
of its subsidiaries has outstanding and at the Closing Date and the
Additional Closing Date, as the case may be, will have outstanding
any options to purchase, or any warrants to subscribe for, or any
securities or obligations convertible into, or any contracts or
commitments to issue or sell, any Ordinary Shares, ADSs or any
warrants or other convertible securities or obligations. No holder
of securities of the Company has rights to the registration of any
securities of the Company as a result of or in connection with the
filing of the Registration Statement or the consummation of the
transactions contemplated hereby that have not been satisfied or
heretofore waived in writing.
(v) PricewaterhouseCoopers LLP ("PricewaterhouseCoopers"), the
independent registered public accounting firm who have audited the
financial statements (including the related notes thereto) filed as
part of the Registration Statement and the Prospectus, are
independent public accountants as required by the Act.
(w) Except as disclosed in the Time of Sale Information, since
the end of the period covered by the latest audited financial
statements included in the Time of Sale Information, (i) neither
the Company nor any of its subsidiaries has incurred any material
liabilities or obligations, indirect, direct or contingent, or
entered into any transaction that is not in the ordinary course of
business, (ii) neither the Company nor any of its subsidiaries has
sustained any material loss or interference with its business or
properties from fire, flood, windstorm, accident or other calamity,
whether or not covered by insurance, (iii) neither the Company nor
any of its subsidiaries has paid or declared any dividends or other
distributions with respect to its share capital (other than to the
Company or one of its subsidiaries) and the Company is not in
default under the terms of any class of share capital of the
Company or any outstanding debt obligations, (iv) there has not
been any material change in the authorized or outstanding share
capital of the Company or any material change in the indebtedness
of the Company (other than in the ordinary course of business) and
(v) there has not been any material adverse change, or any
development involving or that may reasonably be expected to result
in a Material Adverse Effect.
(x) All offers and sales of the Company's shares and other debt
or other securities prior to the date hereof were made in
compliance with or were the subject of an available exemption from
the Act and all other applicable state and federal laws or
regulations or any actions under the Act or any state or federal
laws or regulations in respect of any such offers or sales are
effectively barred by effective waivers or statutes of
limitation.
(y) The Company has filed with the Commission (i) a Form 8-A
(File Number 001-37847) providing for the registration under the
Exchange Act of the ADSs and (ii) a Form 8-A/A (File Number
001-37847) providing for the registration under the Exchange Act of
the ADS Warrants. The Offered ADSs and the Underlying ADSs have
been approved for listing on the NASDAQ under the symbol "MTFB" and
the ADS Warrants have been approved for listing on the NASDAQ under
the symbol "MTFBW," each subject to official notice of issuance. On
or prior to the Closing Date and any Additional Closing Date as
applicable, application shall have been made for the ADS Ordinary
Shares underlying the applicable Offered ADSs for admission to
trading on AIM.
(z) Neither the Company nor any of the Company's subsidiaries,
director or officers has taken or will take, directly or
indirectly, any action that constituted, or any action designed to,
or that might reasonably be expected to cause or result in or
constitute, under the Act or otherwise, stabilization or
manipulation of the price of any security of the Company to
facilitate the sale or resale of the Ordinary Shares or the ADSs or
for any other purpose.
(aa) The Company and each of its subsidiaries have filed all tax
returns required to be filed (other than returns as to which the
failure to file, individually or in the aggregate, would not have a
Material Adverse Effect), which returns are complete and correct in
all material respects, and neither the Company nor any subsidiary
is in default in the payment of any taxes that were due payable
pursuant to said returns or any assessments with respect thereto
except as may be contested or legally postponed in good faith by
appropriate proceedings. All material deficiencies asserted in
writing as a result of any federal, state, local or foreign tax
audits (other than those that have been contested in good faith)
have been paid or finally settled and no issue has been raised in
any such audit that, by application of the same or similar
principles, reasonably could be expected to result in a proposed
material deficiency for any other period not so audited. There are
no outstanding agreements or waivers extending the statutory period
of limitation applicable to any federal, state, local or foreign
tax return for any period. On the Closing Date, all stock transfer
and other taxes that are required to be paid in connection with the
issue of the ADS Ordinary Shares to be issued by the Company to the
Depositary and the ADS Offered Securities to the Underwriter, to
the extent payable on or prior to the Closing Date, will have been
fully paid by or on behalf of the Company and all laws imposing
such taxes will have been complied with.
(bb) Except as set forth in the Registration Statement, the Time
of Sale Information and the Prospectus, there are no transactions
with "affiliates" (as defined in Rule 405 under the Act) or any
officer, director or security holder of the Company (whether or not
an affiliate) that are required by the Act to be disclosed.
Additionally, no relationship, direct or indirect, exists between
the Company or any of its subsidiaries on the one hand, and the
directors, officers, shareholders, customers or suppliers of the
Company or any subsidiary on the other hand that is required by the
Act to be disclosed in the Registration Statement, the Time of Sale
Information and the Prospectus that is not so disclosed.
(cc) Neither the Company nor any of its subsidiaries is and,
after giving effect to the offering and sale of the Offered
Securities and the application of the proceeds thereof received by
the Company as described in the Registration Statement, the Time of
Sale Information and the Prospectus, neither the Company nor any of
its subsidiaries will be required to register as an "investment
company" within the meaning of the U.S. Investment Company Act of
1940, as amended, and the rules and regulations of the Commission
thereunder.
(dd) All dividends and other distributions declared and payable
on the Ordinary Shares may under the current laws and regulations
of England and Wales be paid to the Depositary, and, where they are
to be paid from England and Wales, are freely transferrable out of
England and Wales; all such dividends and other distributions will
not be subject to withholding or other taxes under the laws and
regulations of England and Wales and are otherwise free and clear
of any other tax, withholding or deduction in England and Wales and
without the necessity of obtaining any governmental authorization
in England and Wales.
(ee) No transaction, stamp, capital or other issuance,
registration, transaction, transfer or withholding taxes or duties
are payable in England or Wales by or on behalf of the Underwriters
to any taxing authority in England or Wales in connection with (A)
the issuance and allotment of Ordinary Shares by the Company, the
issuance of ADS Offered Securities (other than ADS Ordinary Shares)
by the Depositary in connection with such issuance and allotment by
the Company or the sale and delivery of such ADS Offered Securities
(other than ADS Ordinary Shares) to or for the account of the
Underwriters, (B) the purchase from the Company of the ADS Offered
Securities or the initial sale and delivery of the ADS Offered
Securities to the purchasers thereof by the Underwriters (provided
that no instrument of transfer is executed in the United Kingdom
and that nothing is done in relation to any property situated in
the United Kingdom) or (C) the deposit (by way of issue and
allotment) by the Company of the ADS Ordinary Shares with the
Depositary, upon the execution and delivery of this Agreement or
the Deposit Agreement.
(ff) The choice of the laws of the State of New York as the
governing law of the Transaction Documents is a valid choice of law
under the laws of England and Wales and, to the knowledge of the
Company, will be honored by courts in England and Wales, subject to
the restrictions described under the caption "Enforcement of Civil
Liabilities" in the Registration Statement, the Time of Sale
Information and the Prospectus, and except as may otherwise be
limited by general principles of equity. The Company has the power
to submit, and pursuant to Section 14 of this Agreement, Section
7.6 of the Deposit Agreement and Section 8.12 of the Warrant Agent
Agreement has legally, validly, effectively and irrevocably
submitted, to the personal jurisdiction of each New York State
court and the Southern District of New York (each, a "New York
Court") with respect to the Transaction Documents and has validly
and irrevocably waived any objection to the laying of venue of any
suit, action or proceeding brought in any such court; and the
Company has the power to designate, appoint and empower, and
pursuant to Section 14 of this Agreement, Section 7.6 of the
Deposit Agreement and Section 8.12 of the Warrant Agent Agreement
has legally, validly, effectively and irrevocably designated,
appointed and empowered an
authorized agent for service of process in any action arising
out of or relating to the Transaction Documents, the Time of Sale
Information, the Registration Statement, the ADS Registration
Statement or the offering of the Offered Securities in any New York
Court, and service of process in any manner permitted by applicable
laws effected on such authorized agent will be effective to confer
valid personal jurisdiction over the Company as provided herein or
in the Deposit Agreement.
(gg) None of the Company, any of its subsidiaries or any of
their respective properties, assets or revenues has any right of
immunity, under the laws of their respective jurisdiction, England
and Wales or the State of New York, from any legal action, suit or
proceeding; the giving of any relief in any such legal action, suit
or proceeding; set-off or counterclaim; the jurisdiction of
English, Welsh, New York or United States federal court; service of
process; attachment upon or prior to judgment; or attachment in aid
of execution of judgment, or execution of a judgment, or other
legal process or proceeding for the giving of any relief or for the
enforcement of a judgment, in any such court, with respect to its
obligations, liabilities or any other matter under or arising out
of or in connection with the Transaction Documents; and, to the
extent that the Company, any of its subsidiaries or any of their
respective properties, assets or revenues may have or may hereafter
become entitled to any such right of immunity in any such court in
which proceedings may at any time be commenced, each of the Company
and its subsidiaries waives or will waive such right to the extent
permitted by law and has consented to such relief and enforcement
as provided in Section 14 of this Agreement, Section 7.6 of the
Deposit Agreement and Section 8.12 of the Warrant Agent
Agreement.
(hh) Any final judgment for a fixed sum of money rendered by a
New York Court having jurisdiction under its own domestic laws in
respect of any suit, action or proceeding against the Company based
upon the Transaction Documents would, to the knowledge of the
Company, be recognized and enforced by English and Welsh courts
without re-examining the merits of the case under the common law
doctrine of obligation; provided that (i) adequate service of
process has been effected and the defendant has had a reasonable
opportunity to be heard, (ii) such judgments or the enforcement
thereof are not contrary to the law, public policy, security or
sovereignty of England and Wales, (iii) such judgments were not
obtained by fraudulent means and do not conflict with any other
valid judgment in the same matter between the same parties and (iv)
an action between the same parties in the same matter is not
pending in any English or Welsh court at the time the lawsuit is
instituted in the foreign court. It is not necessary that the
Transaction Documents, the Registration Statement, the Time of Sale
Information, the Prospectus or any other document be filed or
recorded with any court or other authority in the England and
Wales.
(ii) The Company and its subsidiaries have (i) complied with
their respective published privacy policies and internal privacy
policies and guidelines, except where non-compliance would not
reasonably be expected to have a Material Adverse Effect, (ii)
implemented or are in the process of implementing procedures to
comply with all applicable laws in the European Union, England and
Wales, and the United States (the "Significant Jurisdictions")
relating to data privacy, data protection and data security,
including with respect to the collection, storage, transmission,
transfer (including cross-border transfers), disclosure and use of
personally identifiable information (including personally
identifiable information of employees, contractors, and third
parties who have provided information to the Company or its
subsidiaries), and (iii) implemented and maintained a comprehensive
security plan which implements and monitors effective and
commercially reasonable administrative, technical and physical
safeguards to ensure that personally identifiable information is
protected against loss, damage, and unauthorized access, use,
modification, or other misuse. There has been no loss, damage, or
unauthorized access, use, modification, or breach of security of
personally identifiable information maintained by or on behalf of
by the Company or any of its subsidiaries, except where such loss,
damage, access, use, modification or breach would not reasonably be
expected to have a Material Adverse Effect. No person (including
any governmental entity) has made any claim or commenced any action
with respect to loss, damage, or unauthorized access, use,
modification, or breach of security of personally identifiable
information maintained by or on behalf of the Company or any of its
subsidiaries and to the knowledge of the Company no such claim or
action has been threatened that would be reasonably expected to
have a Material Adverse Effect. The Company and its subsidiaries
have filed any required registrations with applicable data
protection authorities in the Significant Jurisdictions.
(jj) Each of the Company and its subsidiaries has good and valid
title to all property (real and personal) described in the
Registration Statement, the Time of Sale Information and the
Prospectus as being owned by it, free and clear of all liens,
claims, security interests or other encumbrances except such as are
not materially burdensome and do not have or will not result in a
Material Adverse Effect to the use of the property or the conduct
of the business of the Company. All property (real and personal)
held under lease by the Company and its subsidiaries is held by it
under valid, subsisting and enforceable leases with only such
exceptions as in the aggregate are not materially burdensome and do
not have or result in a Material Adverse Effect to the use of the
property or the conduct of the business of the Company.
(kk) Each of the Company and its subsidiaries has all permits,
licenses, franchises, approvals, consents and authorizations of
governmental or regulatory authorities (hereinafter "permit" or
"permits") as are necessary to own its properties and to conduct
its business in the manner described in the Registration Statement,
the Time of Sale Information and the Prospectus, except where the
failure to have obtained any such permit has not had and will not
have a Material Adverse Effect; each of the Company and its
subsidiaries has operated and is operating its business in material
compliance with and not in material violation of all of its
obligations with respect to each such material permit and no event
has occurred that allows, or after notice or lapse of time would
allow, revocation or termination of any such material permit or
result in any other material impairment of the rights of any such
material permit.
(ll) The consolidated financial statements of the Company,
together with the related schedules and notes thereto, set forth in
the Registration Statement, the Time of Sale Information and the
Prospectus present fairly in all material respects (i) the
financial condition of the Company and its consolidated
subsidiaries on the basis stated as of the dates indicated and (ii)
the consolidated results of operations, shareholders' equity and
changes in cash flows and the Company's consolidated subsidiaries
for the periods therein specified; and such financial statements
and related schedules and notes thereto have been prepared in
accordance with International Financial Reporting Standards
("IFRS"), as issued by the International Accounting Standards Board
(the "IASB"), consistently applied throughout the periods involved.
There are no other financial statements (historical or pro forma)
that are required to be included or incorporated by reference in
the Registration Statement, the Time of Sale Information and the
Prospectus.
(mm) The Company and its subsidiaries maintain a system of
internal accounting controls that the Company believes are
sufficient to provide reasonable assurances that transactions are
properly authorized and recorded and detailed records are kept
which accurately and fairly reflect financial activities, so as to
permit the preparation of the Company's consolidated financial
statements in conformity with IFRS and includes those policies and
procedures that (i) pertain to the maintenance of records that in
reasonable detail accurately and fairly reflect the transactions
and dispositions of the assets of the Company; (ii) provide
reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with
generally accepted accounting principles, and that expenditures of
the Company are being made only in accordance with authorizations
of management and directors of the Company; and (iii) provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of the Company's
assets that could have a material effect on the financial
statements.
(nn) The Company has established and maintains "disclosure
controls and procedures" (as such term is defined in Rules
13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934
(the "Exchange Act")); such disclosure controls and procedures are
designed to ensure that material information relating to the
Company, including its consolidated subsidiaries, is made known to
the Company's Chief Executive Officer and its Chief Financial
Officer by others within those entities, and such disclosure
controls and procedures are effective to perform the functions for
which they were established; the Company's independent auditors and
the Audit Committee of the Board of Directors of the Company have
been advised of (i) all significant deficiencies and material
weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect
the Company's ability to record, process, summarize, and report
financial data and (ii) any fraud, whether or not material, that
involves management or other employees who have a significant role
in the Company's internal control over financial reporting;
(oo) The Company and, to the knowledge of the Company, the
Company's directors or officers, in their capacities as such, are
each in compliance in all material respects with Section 402 of the
Sarbanes-Oxley Act and the rules and regulations promulgated
thereunder;
(pp) The Company is a "foreign private issuer" within the meaning of Rule 405 of the Act.
(qq) The Company has not, prior to the date hereof, made any
offer or sale of securities which could be "integrated" for
purposes of the Act with the offer and sale of the ADS Offered
Securities pursuant to the Registration Statement, the ADS
Registration Statement and the Prospectus; and except as disclosed
in the Registration Statement, the Time of Sale Information and the
Prospectus, the Company has not sold or issued any security during
the 180-day period preceding the date of the Prospectus;
(rr) Neither the Company nor any of its subsidiaries, directors,
officers or employees nor, to the knowledge of the Company, any
agent or affiliate of the Company or any of its subsidiaries is
aware of or has taken any action, directly or indirectly, that
would result in a violation by such persons of the Foreign Corrupt
Practices Act of 1977, as amended, and the rules and regulations
thereunder (the "Foreign Corrupt Practices Act") or the United
Kingdom Bribery Act (the "Bribery Act"), including, without
limitation, making use of the mails or any means or instrumentality
of interstate commerce corruptly in furtherance of an offer,
payment, promise to pay or authorization of the payment of any
money, or other property, gift, promise to give, or authorization
of the giving of anything of value to any "foreign official" (as
such term is defined in the Foreign Corrupt Practices Act and the
Bribery Act) or any foreign political party or official thereof or
any candidate for foreign political office, in contravention of the
Foreign Corrupt Practices Act or the Bribery Act; and the Company,
its subsidiaries and, to the knowledge of the Company, its
affiliates have conducted their businesses in compliance in all
respects with the Foreign Corrupt Practices Act and the Bribery Act
and have instituted and maintain policies and procedures designed
to ensure, and which are reasonably expected to continue to ensure,
continued compliance in all material respects therewith;
(ss) Neither the Company nor any of its subsidiaries, directors,
officers or employees nor, to the knowledge of the Company, and
agent or affiliate of the Company or any of its subsidiaries is
currently subject to any U.S. sanctions administered or enforced by
the Office of Foreign Assets Control of the U.S. Department of the
Treasury ("OFAC"), the United Nations Security Council, the
European Union, Her Majesty's Treasury, or other relevant sanctions
(collectively, "Sanctions") or located, organized, resident or
conducting business in a country or territory that is the subject
of Sanctions; and the Company will not directly or indirectly use
the proceeds of the offering, or lend, contribute or otherwise make
available such proceeds to any subsidiary, joint venture partner or
other person or entity, for the purpose of financing the activities
of any person currently subject to any U.S. sanctions administered
by OFAC;
(tt) The operations of the Company and its subsidiaries are and
have been conducted at all times in compliance in all material
respects with any applicable financial recordkeeping and reporting
requirements of the Currency and Foreign Transactions Reporting Act
of 1970, as amended, the "United and Strengthening America by
Providing Appropriate Tools Required to Intercept and Obstruct
Terrorism Act of 2001" (the "PATRIOT Act") or the money laundering
statutes of all jurisdictions, the rules and regulations thereunder
and any related or similar rules, regulations or guidelines,
issued, administered or enforced by any governmental agency;
(uu) No labor problem or dispute with the employees of the
Company or any of its subsidiaries exists, or, to the Company's
knowledge, is threatened or imminent, which would reasonably be
expected to result in a Material Adverse Effect. The Company is not
aware that any key employee or significant group of employees of
the Company or any of its subsidiaries plans to terminate
employment with the Company or any of its subsidiaries.
(vv) The Company and its subsidiaries (i) are in compliance with
any and all applicable federal, state, local and foreign laws and
regulations relating to the protection of human health and safety,
the environment or hazardous or toxic substances or wastes,
pollutants or contaminants ("Environmental Laws"), (ii) have
received all permits, licenses or other approvals required of them
under applicable Environmental Laws to conduct their respective
businesses and (iii) are in compliance with all terms and
conditions of any such permit, license or approval, except where
such noncompliance with Environmental Laws, failure to receive
required permits, licenses or other approvals or failure to comply
with the terms and conditions of such permits, licenses or other
approvals would not, individually or in the aggregate, have a
Material Adverse Effect. Neither the Company nor any of its
subsidiaries has been named as a "potentially responsible party"
under the Comprehensive Environmental Response Compensation and
Liability Act of 1980, as amended. Neither the Company nor any of
its subsidiaries owns, leases or occupies any property that appears
on any list of hazardous sites compiled by any state, local or
foreign governmental agency where such appearance would have a
Material Adverse Effect. There are no costs or liabilities
associated with Environmental Laws (including, without limitation,
any capital or operating expenditures required for clean-up,
closure of properties or compliance with Environmental Laws or any
permit, license or approval, any related constraints on operating
activities and any potential liabilities to third parties) which
would, individually or in the aggregate, result in a Material
Adverse Effect.
(ww) The Company and its subsidiaries own, or have obtained
valid and enforceable licenses for, or other rights to use, the
inventions, patent applications, patents, trademarks, trade names,
service names, copyrights, trade secrets and other proprietary
information described in the Registration Statement, the Time of
Sale Information and the Prospectus, as being owned by or licensed
to them or which are necessary for the conduct of their respective
businesses as currently conducted or as proposed to be conducted,
except where the failure to own, license or have such rights would
not, individually or in the aggregate, have a Material Adverse
Effect (collectively, "Intellectual Property"); (i) to the
Company's knowledge, the business of the Company as currently
conducted does not infringe or misappropriate any Intellectual
Property of any third party where such infringement would result in
a Material Adverse Effect; (ii) to the Company's knowledge, there
is no infringement by third parties of any Intellectual Property;
(iii) there is no pending or, to the Company's knowledge,
threatened action, suit, proceeding or claim by others challenging
the validity or enforceability of any Intellectual Property; (iv)
there is no pending or, to the Company's knowledge, threatened
action, suit, proceeding or claim by others that the Company or any
of its subsidiaries infringes or otherwise violates (or would, upon
the commercialization of any product or service described in the
Registration Statement, the Time of Sale Information and the
Prospectus that is under development, infringe or violate) any
patent, trademark, trade name, service name, copyright, trade
secret or other proprietary rights of others; and (v) the Company
and its subsidiaries have complied in all material respects with
the terms of each agreement pursuant to which material Intellectual
Property has been licensed to the Company or any of its
subsidiaries, and all such agreements are in full force and
effect.
(xx) All patents and patent applications owned by or exclusively
licensed to the Company have been duly filed and maintained, the
parties prosecuting any such patent applications have complied with
their duty of candor and disclosure to the United States Patent and
Trademark Office ("USPTO"), or the relevant foreign patent
authority, and the Company is not aware of any facts required to be
disclosed to the USPTO or the relevant foreign patent authority
that were not disclosed in the course of prosecuting patent
applications which would preclude the grant of a patent in
connection with such patent or would reasonably be expected to form
the basis of a finding of invalidity with respect to any patents
that have issued with respect to such applications.
(yy) The Company (A) is and at all times has been in compliance
with all statutes, rules or regulations of the United States Food
and Drug Administration (the "FDA"), the United States Department
of Health and Human Services ("HHS"), the United States Centers for
Medicare & Medicaid Services ("CMS"), the European Medicines
Agency ("EMEA") or any other state, federal or foreign agencies or
bodies engaged in the regulation of ownership, testing,
development, manufacture, packaging, processing, use, distribution,
marketing, labeling, promotion, sale, offer for sale, storage,
import, export or disposal of any product under development,
manufactured or distributed by the Company ("Product Laws"), except
where the failure so to comply would not, singly or in the
aggregate, result in a Material Adverse Effect; (B) has not
received any FDA Form 483, notice of adverse finding, warning
letter, untitled letter or other correspondence or notice from the
FDA or any governmental authority alleging or asserting material
noncompliance with any Product Laws or any governmental licenses
amendments thereto required by any such Product Laws, and to the
knowledge of the Company, neither the FDA nor any other
governmental entity is considering such action; and (C) has not
received notice of any claim, action, suit, proceeding, hearing,
enforcement, investigation, arbitration or other action from the
FDA or any governmental authority or third party alleging that any
product operation or activity is in material violation of any
Product Laws and has no knowledge that the FDA or any governmental
authority or third party is considering any such claim, litigation,
arbitration, action, suit, hearing, enforcement, audit,
investigation or proceeding.
(zz) The studies, tests and preclinical and clinical trials
conducted by or on behalf of, or sponsored by, the Company, or in
which the Company has participated, that are described in the
Registration Statement, the Time of Sale Information or the
Prospectus, or the results of which are referred to in the
Registration Statement, the Time of Sale Information or the
Prospectus, were and, if still pending, are being conducted in all
material respects in accordance with protocols, procedures and
controls designed and approved for such studies and with standard
medical and scientific research procedures; the descriptions of the
results of such studies, tests and trials contained in the
Registration Statement, the Time of Sale Information or the
Prospectus are accurate and complete in all material respects.
(aaa) The Company has procured executed Lock-Up Agreements,
substantially in the form of Exhibit A attached hereto, from each
of the individuals and entities listed on Schedule IV hereto.
(bbb) There are no affiliations or associations between (i) any
member of the Financial Institution Regulatory Authority ("FINRA")
and (ii) the Company or any of the Company's officers, directors,
5% or greater security holders or any beneficial owner of the
Company's unregistered equity securities that were acquired at any
time on or after the 180th day immediately preceding the date the
Registration Statement was initially filed with the Commission.
(ccc) The Company and its subsidiaries are covered by insurance
that is adequate to protect the Company and its subsidiaries
against such losses and risks and that is in such amounts as are
prudent and customary in the businesses in which the Company and
its subsidiaries are engaged.
(ddd) The Company has not established, maintained or contributed
to any "employee benefit plan," as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended
("ERISA"), that is subject to Title IV of ERISA or Section 412 or
430 of the Code or Section 302 or 303 of ERISA.
(eee) There are no contracts or other documents that are
required to be described in the Registration Statement, the ADS
Registration Statement, the Time of Sale Information or the
Prospectus or to be filed as exhibits to the Registration Statement
that are not described or filed as required.
(fff) No holder of Ordinary Shares, ADSs or Warrants after the
consummation of the transactions contemplated by the Transaction
Documents is or will be subject to any personal liability in
respect of any liability of the Company by virtue only of its
holding of any such Ordinary Shares, ADSs or Warrants.
7. Expenses. Whether or not the transactions contemplated hereby
are consummated or this Agreement becomes effective or is
terminated, the Company agrees to pay or cause to be paid the
following expenses incidental to the performance of the obligations
of the Company: (i) the fees, disbursements and expenses of the
Company's counsel and accountants in connection with the
registration of the Offered Securities under the Act and all other
expenses in connection with the preparation, printing and filing of
the Registration Statement, the ADS Registration Statement and the
Prospectus and amendments and supplements thereto and the mailing
and delivering of copies thereof and of any Preliminary Prospectus
to the Underwriters and dealers; (ii) the printing and delivery
(including postage, air freight charges and charges for counting
and packaging) of such copies of the Registration Statement, the
ADS Registration Statement, the Prospectus, each Preliminary
Prospectus, the Time of Sale Information, any Written
Testing-the-Waters Communication and all amendments or supplements
to any of them as may be reasonably requested for use in connection
with the offering and sale of the Offered Securities; (iii)
consistent with the provisions of Section 5(j), all reasonable
expenses in connection with the qualification of the ADS Offered
Securities for offering and sale under state securities laws or
Blue Sky laws, including reasonable attorneys' fees and
out-of-pocket expenses of the counsel for the Underwriters in
connection therewith; (iv) the filing fees incidental to securing
any required review by FINRA of the fairness of the terms of the
sale of the ADS Offered Securities; (v) the fees and expenses
associated with listing the ADSs and Warrants on the NASDAQ and the
ADS Ordinary Shares on the AIM; (vi) the cost of preparing share
certificates or any ADRs evidencing the ADS Ordinary Shares; (vii)
the costs and charges of any transfer agent, registrar, warrant
agent or depositary; (viii) the cost of the tax stamps, if any, in
connection with the issuance and delivery of the ADS Offered
Securities (other than the ADS Ordinary Shares) to the respective
Underwriters; (ix) all other fees, costs and expenses referred to
in the section titled "Expenses Relating to this Offering" in the
Registration Statement, the Time of Sale Information and the
Prospectus; (x) the transportation, lodging, graphics and other
expenses incidental to the Company's preparation for and
participation in the "roadshow" or any Testing-the-Waters
Communications for the offering contemplated hereby; and (xi) up to
$10,000 with respect to the fees and expenses of Representative's
clearing firm. All expenses incurred by the Company in connection
with any "road show" presentation to potential investors shall be
paid by the Company (provided that each of the Company and the
Underwriters shall pay their respective hotel and other expenses
incurred in connection with any "road show" presentation). In
addition, the Company shall reimburse the Representative for its
out-of-pocket expenses related to the Offering in an amount up to
$100,000, $25,000 of which has been paid prior to the date hereof
(and which shall be reimbursed to the extent not incurred pursuant
to FINRA Rule 5110(f)(2)(D)), which shall be paid by deduction from
the proceeds of the Offering contemplated herein. In addition, in
the event that the proposed offering is terminated for the reasons
set forth in Section 5(l) hereof, the Company agrees to reimburse
the Underwriters as provided in Section 5(l).
8. Indemnification and Contribution. (a) Subject to the
limitations in the paragraph below, the Company agrees to indemnify
and hold harmless each Underwriter, and each dealer selected by
each Underwriter that participates in the Offering (each, a
"Selected Dealer"), and each of their respective directors,
officers, employees, agents and affiliates of such Underwriter or
any Selected Dealer, and each person, if any, who controls any
Underwriter or any Selected Dealer within the meaning of Section 15
of the Act or Section 20 of the Exchange Act (a "Controlling
Person") from and against any and all losses, claims, damages,
liabilities and expenses (including, without limitation, any and
all legal or other expenses reasonably incurred in investigating,
preparing or defending against any litigation, commenced or
threatened, or any claim whatsoever, whether arising out of any
action between such Underwriter and the Company or between such
Underwriter and any third party or otherwise) (collectively,
"Damages") to which they or any of them may become subject under
the Act, the Exchange Act or any other statute or at common law or
otherwise or under the laws of foreign countries, arising out of or
based upon any untrue statement or alleged untrue statement of a
material fact contained in (i) any Preliminary Prospectus, the
Registration Statement, the ADS Registration Statement, the Time of
Sale Information, any Issuer Free Writing Prospectus, any Written
Testing-the-Waters Communication or the Prospectus or in any
amendment or supplement thereto, (ii) any materials or information
provided to investors by, or with the approval of, the Company in
connection with the marketing of the offering of the Offered
Securities, including any "road show" or investor presentations
made to investors by the Company (whether in person or
electronically), or (iii) any application or other document or
written communication (collectively, "application") executed by the
Company or based upon written information furnished by the Company
in any jurisdiction in order to qualify the Offered Securities
under
the securities laws thereof or filed with the Commission, any
state securities commission or agency, trading market or any
securities exchange, or any omission or alleged omission to state
therein a material fact required to be stated therein or necessary
to make the statements therein (in the case of the Prospectus, in
light of the circumstances under which they were made) not
misleading, except if such Damages arise out of or are based upon
an untrue statement or omission or alleged untrue statement or
omission that has been made therein or omitted therefrom in
reliance upon and in strict conformity with the information
furnished in writing to the Company by or on behalf of any
Underwriter expressly for use in any Preliminary Prospectus, the
Registration Statement, the ADS Registration Statement, the Time of
Sale Information, any Issuer Free Writing Prospectus, any Written
Testing-the-Waters Communication or the Prospectus or in any
amendment or supplement thereto or in any application. This
indemnification shall be in addition to any liability that the
Company may otherwise have.
(b) If any action or claim shall be brought against any
Underwriter, a Selected Dealer or any Controlling Person in respect
of which indemnity may be sought against the Company, such
Underwriter, Selected Dealer or Controlling Person shall promptly
notify in writing the Company of the institution of such action or
claim and the Company shall assume the defense thereof, including
the employment of counsel reasonably acceptable to such
Underwriter, Selected Dealer or Controlling Person and the payment
of all actual fees of and expenses incurred by such counsel. Such
Underwriter, Selected Dealer or Controlling Person shall have the
right to employ separate counsel in any such action and participate
in the defense thereof, but the fees and expenses of such counsel
shall be at the expense of such Underwriter, Selected Dealer or
Controlling Person, unless (i) the Company has agreed in writing to
pay such fees and expenses of such counsel in connection with the
defense of such action or claim, (ii) the Company has failed to
assume the defense and employ counsel reasonably acceptable to such
Underwriter, Selected Dealer or Controlling Person in connection
with the defense of such action or claim, or (iii) the named
parties to any such action or claim (including any impleaded
parties) include both such Underwriter, Selected Dealer or
Controlling Person and the Company, and such Underwriter, Selected
Dealer or Controlling Person shall have reasonably concluded, based
on advice of its outside counsel, that one or more legal defenses
may be available to the Underwriter, Selected Dealer or Controlling
Person which are different from or additional to those defenses
available to the Company, or that representation of such
Underwriter, Selected Dealer or Controlling Person and the Company
by the same counsel would be inappropriate under applicable
standards of professional conduct (whether or not such
representation by the same counsel has been proposed) due to actual
or potential differing interests between them (in which case the
Company shall not have the right to assume the defense of such
action on behalf of such Underwriter, Selected Dealer or
Controlling Person (but the Company shall not be liable for the
fees and expenses of more than one counsel for the Underwriters,
Selected Dealers or Controlling Persons in addition to local
counsel if needed)). The Company shall not be liable for any
settlement of any such action effected without its written consent,
but if settled with such written consent, or if there be a final
judgment for the plaintiff in any such action, the Company agrees
to indemnify and hold harmless any Underwriter, Selected Dealer or
Controlling Person from and against any loss, claim, damage,
liability or expense by reason of such settlement or judgment, but
in the case of a judgment only to the extent stated in the
paragraph (a) of this Section 8.
(c) Each Underwriter agrees, severally and not jointly, to
indemnify and hold harmless the Company, its directors, officers,
employees and agents and any person who controls the Company within
the meaning of Section 15 of the Act or Section 20 of the Exchange
Act, to the same extent as the foregoing several indemnity from the
Company to each Underwriter, but only with respect to untrue
statements or omissions, or alleged untrue statements or omissions
in the Registration Statement, the ADS Registration Statement, the
Prospectus, the Time of Sale Information, any Issuer Free Writing
Prospectus, any Written Testing-the-Waters Communication or any
Preliminary Prospectus, or any amendment or supplement thereto or
in any application, in reliance upon, and in strict conformity
with, written information furnished to the Company with respect to
such Underwriter expressly for use in such Registration Statement,
the ADS Registration Statement, the Prospectus, the Time of Sale
Information, any Issuer Free Writing Prospectus, any Written
Testing-the-Waters Communication or any Preliminary Prospectus, or
any amendment or supplement thereto or application. If any action
or claim shall be brought or asserted against the Company, any of
its directors, any of its officers or any such controlling person
based on the Registration Statement, the ADS Registration
Statement, the Prospectus, the Time of Sale Information or any
Preliminary Prospectus, or any amendment or supplement thereto, or
any application, and in respect of which indemnity may be sought
against any Underwriter pursuant to this paragraph (c), such
Underwriter shall have the rights and duties given to the Company
by the immediately preceding paragraph (except that if the Company
shall have assumed the defense thereof such Underwriter shall not
be required to do so, but may employ separate counsel therein and
participate in the defense thereof, but the fees and expenses of
such separate counsel shall be at such Underwriter's expense), and
the Company, its directors, any such officers and any such
controlling persons, shall have the rights and duties given to the
Underwriters by the immediately preceding paragraph.
Notwithstanding the provisions of this paragraph (c), no
Underwriter shall be required to indemnify the Company for any
amount in excess of the underwriting discounts and commissions
applicable to the ADS Offered Securities purchased by such
Underwriter. The Underwriters' obligations in this paragraph (c) to
indemnify the Company are several in proportion to the respective
numbers of Firm Securities set forth opposite their names in
Schedule I hereto (or such numbers of Firm Securities increased as
set forth in Section 10 hereof) and not joint.
(d) Neither the Company nor any Underwriter will, without the
prior written consent of each person entitled to indemnification
hereunder, settle or compromise or consent to the entry of any
judgment in any proceeding or threatened claim, action, suit or
proceeding in respect of which the indemnification may be sought
under this Section 8 (whether or not the party that is entitled to
indemnification hereunder is a party to such claim, action, suit or
proceeding), unless such settlement, compromise or consent includes
an unconditional release of persons entitled to indemnification
hereunder from all liability arising out of such claim, action,
suit or proceeding and does not include a statement as to, or an
admission of, fault, culpability or a failure to act by or on
behalf of a person entitled to indemnification.
(e) If the indemnification provided for in this Section 8 is
unavailable or insufficient for any reason whatsoever to an
indemnified party in respect of any Damages referred to herein,
then the Company and each Underwriter, severally and not jointly,
in lieu of indemnifying such person entitled to indemnification
under this Section 8, shall contribute to the amount paid or
payable by such person entitled to indemnification under this
Section 8 as a result of such Damages in such proportion that is
equal to the proportion represented by the percentage that the
underwriting discount which appears on the cover page of the
Prospectus bears to the initial offering price thereon and the
Company shall be responsible for the balance, provided that no
person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation.
The Underwriters' obligations to contribute pursuant to this
Section 8 are several in proportion to the respective numbers of
Firm Securities set forth opposite their names in Schedule I hereto
(or such numbers of Firm Securities increased as set forth in
Section 10 hereof) and not joint. Within fifteen days after receipt
by any party to this Agreement (or its representative) of notice of
the commencement of any action, suit or proceeding, such party
will, if a claim for contribution in respect thereof is to be made
against another party ("contributing party"), notify the
contributing party of the commencement thereof, but the failure to
so notify the contributing party will not relieve it from any
liability which it may have to any other party other than for
contribution hereunder. In case any such action, suit or proceeding
is brought against any party, and such party notifies a
contributing party or its representative of the commencement
thereof within the aforesaid fifteen days, the contributing party
will be entitled to participate therein with the notifying party
and any other contributing party similarly notified. Any such
contributing party shall not be liable to any party seeking
contribution on account of any settlement of any claim, action or
proceeding affected by such party seeking contribution without the
written consent of such contributing party. The contribution
provisions contained in this Section 8 are intended to supersede,
to the extent permitted by law, any right to contribution under the
Securities Act, the Exchange Act or otherwise available.
(f) Any Damages for which an indemnified party is entitled to
indemnification or contribution under this Section 8 shall be paid
by the indemnifying party to the indemnified party as Damages are
incurred after receipt of reasonably itemized invoices therefor.
The indemnity, contribution and reimbursement agreements contained
in this Section 8 and the representations and warranties of the
Company set forth in this Agreement shall remain operative and in
full force and effect, regardless of (i) acceptance of any ADS
Offered Securities and payment therefor hereunder and (ii) any
termination of this Agreement. A successor to any Underwriter,
Selected Dealer or Controlling Person, or to the Company, its
directors or officers or any person controlling the Company, shall
be entitled to the benefits of the indemnity, contribution and
reimbursement agreements contained in this Section 8.
9. Conditions of Underwriters' Obligations. The several
obligations of the Underwriters to purchase the ADS Offered
Securities hereunder are subject to the satisfaction of the
following conditions on the Closing Date and each Additional
Closing Date:
(a) The Registration Statement and the ADS Registration
Statement shall have become effective and all filings required by
Rules 424(b), 430A and 462 under the Act shall have been timely
made.
(b) You shall be reasonably satisfied that since the respective
dates as of which information is given in the Registration
Statement, the ADS Registration Statement, the Time of Sale
Information and the Prospectus, (i) there shall not have been any
material change in the share capital of the Company or any material
change in the indebtedness (other than in the ordinary course of
business) of the Company, (ii) except as set forth or contemplated
by the Registration Statement, the Time of Sale Information or the
Prospectus, no material oral or written agreement or other
transaction shall have been entered into by the Company that is not
in the ordinary course of business or that could reasonably be
expected to result in a material reduction in the future earnings
of the Company, (iii) no loss or damage (whether or not insured) to
the property of the Company shall have been sustained that had or
could reasonably be expected to have a Material Adverse Effect,
(iv) no legal or governmental action, suit or proceeding affecting
the Company or any of its properties that is material to the
Company or that affects or could reasonably be expected to affect
the transactions contemplated by this Agreement shall have been
instituted or threatened, which if adversely determined would have
a Material Adverse Effect and (v) there shall not have been any
material adverse change in the condition (financial or otherwise),
business, management, results of operations or prospects of the
Company and its subsidiaries taken as a whole that makes it
impractical or inadvisable in your judgment to proceed with the
public offering or purchase of the ADS Offered Securities as
contemplated hereby.
(c) On the date hereof, you shall have received a cold comfort
letter, addressed to the Underwriters and in form and substance
reasonably satisfactory in all respects to you from
PricewaterhouseCoopers, dated as of the date of this Agreement and
you shall have received a bring-down cold comfort letter dated as
of the Closing Date and each Additional Closing Date, if any.
(d) You shall have received on the Closing Date (and each
Additional Closing Date, if any) an opinion of Reed Smith LLP, U.S.
counsel to the Company, including without limitation a negative
assurance letter, addressed to the Underwriters, in form and
substance reasonably satisfactory to counsel for the
Representative.
(e) You shall have received on the Closing Date (and each
Additional Closing Date, if any) the opinion of Reed Smith LLP,
English counsel to the Company, including without limitation a
negative assurance letter, addressed to the Underwriters, in form
and substance reasonably satisfactory to counsel for the
Representative.
In rendering the opinions as provided for in Sections 9(d) and
(e), counsel may rely, to the extent they deem such reliance
proper, as to matters of fact upon certificates of officers of the
Company and of government officials.
(f) You shall have received on the Closing Date (and each
Additional Closing Date, if any), an opinion of Ellenoff Grossman
& Schole LLP with respect to the issuance and sale of the ADS
Offered Securities, the Registration Statement and other related
matters as you may reasonably request.
(g) You shall have received on the Closing Date and each
Additional Closing Date, if any, an opinion of Emmett, Marvin &
Martin, LLP, as counsel for the Depositary, in form and substance
reasonably satisfactory to counsel for the Representative.
(h) The Company and the Depositary shall have executed and
delivered the Deposit Agreement and the Deposit Agreement shall be
in full force and effect and the Company and the Depositary shall
have taken all action necessary to permit the issue and deposit of
the Company's ADS Ordinary Shares, as applicable, and the issuance
of the ADS Offered Securities in accordance with the Deposit
Agreement, including, in the case of the Company, having obtained
the approval of its shareholders for (i) the issuance of the ADS
Offered Securities on the Closing Date and (ii) in accordance with
the AIM Listings Requirements (solely with respect to the ADS
Ordinary Shares underlying the Offered ADSs).
(i) The Depositary shall have furnished or caused to be
furnished to the Representative on the Closing Date or the
Additional Closing Date, as the case may be, certificates
satisfactory to the Representative evidencing the deposit with it
of the ADS Ordinary Shares being so deposited against issuance of
the ADS Offered Securities to be delivered by the Company on the
Closing Date or the Additional Closing Date, as the case may be,
and the execution, countersignature (if applicable), issuance and
delivery of such ADS Offered Securities pursuant to the Deposit
Agreement and such other matters related thereto as the
Representative may reasonably request.
(j) On the Closing Date, the Company and the Depositary shall
have executed and delivered the Warrant Agent Agreement and the
Warrant Agent Agreement shall be in full force and effect;
(k) On the Closing Date and on each Additional Closing Date, the
duly executed and delivered Officer's Certificate, in form and
substance reasonably satisfactory to counsel for the
Representative, signed by the chief executive officer and the chief
financial officer of the Company (or such other officers as are
acceptable to you) to the effect that the statements set forth in
Sections 9(b), 9(n) and 9(o) hereof are true and correct as of such
date;
(l) On the Closing Date and on each Additional Closing Date, the
duly executed and delivered Secretary's Certificate, in form and
substance reasonably satisfactory to counsel for the
Representative;
(m) the European Placement has been consummated and the European
Placement Securities have been contracted to be issued to the
purchasers thereof on or about the Closing Date and evidence of the
foregoing has been delivered to the Representative and is
satisfactory to the Representative in its sole discretion;
(n) (i) No stop order suspending the effectiveness of the
Registration Statement or the ADS Registration Statement shall have
been issued by the Commission and no proceedings for that purpose
shall be pending or, to the knowledge of the Company, shall be
threatened or contemplated by the Commission; (ii) no order
suspending the effectiveness of the Registration Statement, the ADS
Registration Statement or the qualification or registration of the
ADS Offered Securities under the securities or Blue Sky laws of any
jurisdiction shall be in effect and no proceeding for such purpose
shall be pending or, to the knowledge of the Company, threatened or
contemplated by the authorities of any jurisdiction; (iii) any
request for additional information on the part of the staff of the
Commission or any such authorities shall have been complied with;
(iv) after the date hereof, no amendment or supplement to the
Registration Statement, the ADS Registration Statement or the
Prospectus shall have been filed unless a copy thereof was first
submitted to you and you did not object thereto in good faith; and
(v) all of the representations and warranties of the Company
contained in this Agreement shall be true and correct in all
material respects (except for such representations and warranties
qualified by materiality, which representations and warranties
shall be true and correct in all respects) on and as of the date
hereof and on and as of the Closing Date or the Additional Closing
Date, as the case may be, as if made on and as of the Closing Date
or the Additional Closing Date, as the case may be.
(o) The Company shall not have failed in any material respect at
or prior to the Closing Date or the Additional Closing Date, as the
case may be, to have performed or complied with any of its
agreements herein contained and required to be performed or
complied with by them hereunder at or prior to the Closing Date or
the Additional Closing Date, as the case may be.
(p) The Company has furnished or caused to have been furnished
to you such further certificates and documents as you shall have
reasonably requested.
(q) At or prior to the date hereof, you shall have received
executed Lock-Up Agreements from each of the parties set forth on
Schedule IV.
(r) At or prior to the Effective Date, you shall have received a
letter from the Corporate Financing Department of FINRA confirming
that such Department has determined to raise no objections with
respect to the fairness or reasonableness of the underwriting terms
and arrangements of the offering contemplated hereby.
(s) On or prior to the Closing Date, you will be satisfied that
application has been made for admission of the ADS Ordinary Shares
underlying the Firm ADSs to trading on the AIM, no order suspending
the offering of such ADS Ordinary Shares shall have been issued and
no proceeding for any such purpose shall have been instituted or
threatened by the AIM. On or prior to each Additional Closing Date,
if any, you shall be satisfied that the ADS Ordinary Shares
underlying the Additional ADSs have been approved for admission to
trading on the AIM.
(t) The Offered ADSs, Underlying ADSs and ADS Warrants have been
approved for listing on NASDAQ and the Company has delivered
evidence of such approval for listing to the Representative that is
reasonably satisfactory to the Representative;
(u) All relevant approvals required for the performance of this
Agreement and the transactions contemplated by this Agreement from
the FCA shall have been duly obtained and be in full force and
effect.
All such opinions, certificates, letters and other documents
will be in compliance with the provisions hereof only if they are
reasonably satisfactory in form and substance to you and your
counsel.
The several obligations of the Underwriters to purchase
Additional Securities hereunder are subject to the satisfaction on
and as of each Additional Closing Date of the conditions set forth
in this Section 9, except that, if an Additional Closing Date is
other than the Closing Date, the certificates, opinions and letters
referred to in this Section 9 shall be dated as of such Additional
Closing Date and the opinions called for by paragraphs (d), (e),
and (f) shall be revised to reflect the sale of Additional
Securities.
If any of the conditions hereinabove provided for in this
Section 9 shall not have been satisfied when and as required by
this Agreement, this Agreement may be terminated by you by
notifying the Company of such termination in writing or by telegram
at or prior to such Closing Date, but you shall be entitled to
waive any of such conditions.
10. Defaulting Underwriters. If any one or more of the
Underwriters shall fail or refuse to purchase Firm Securities or
Additional Securities, as the case may be, that it or they have
agreed to purchase hereunder, and the aggregate number of Firm
Securities or Additional Securities, as the case may be, that such
defaulting Underwriter or Underwriters agreed but failed or refused
to purchase is not more than one-tenth of the aggregate number of
the Firm Securities or Additional Securities, as the case may be,
each non-defaulting Underwriter shall be obligated, severally, in
the proportion in which the number of Firm Securities set forth
opposite its name in Schedule I hereto bears to the aggregate
number of Firm Securities set forth opposite the names of all
non-defaulting Underwriters or in such other proportion as you may
specify in the Agreement among Underwriters, to purchase the Firm
Securities that such defaulting Underwriter or Underwriters agreed,
but failed or refused to purchase. If any Underwriter or
Underwriters shall fail or refuse to purchase Firm Securities and
the aggregate number of Firm Securities with respect to which such
default occurs is more than one-tenth of the aggregate number of
Firm Securities and arrangements satisfactory to you and the
Company for the purchase of such Firm Securities are not made
within five Business Days after such default, this Agreement will
terminate without liability on the part of any non-defaulting
Underwriter or the Company. In any such case that does not result
in termination of this Agreement, either you or the Company shall
have the right to postpone the Closing Date, but in no event for
longer than seven days, in order that the required changes, if any,
in the Registration Statement, the ADS Registration Statement and
the Prospectus or any other documents or arrangements may be
effected. Any action taken under this paragraph shall not relieve
any defaulting Underwriter from liability in respect of any such
default of any such Underwriter under this Agreement.
11. Termination of Agreement. This Agreement shall be subject to
termination in your absolute discretion, without liability on the
part of any Underwriter to the Company by notice to the Company, if
prior to the Closing Date, or an Additional Closing Date (if
different from the Closing Date and then only as to the Additional
Securities), as the case may be, in your sole judgment, (i) trading
in the Company's Ordinary Shares or ADSs shall have been suspended
by the Commission or NASDAQ, or the AIM, as the case may be, (ii)
trading in securities generally on the New York Stock Exchange
("NYSE"), the NYSE MKT, NASDAQ, or the AIM shall have been
suspended or materially limited, or minimum or maximum prices shall
have been generally established on such exchange, or additional
material governmental restrictions, not in force on the date of
this Agreement, shall have been imposed upon trading in securities
generally by any such exchange or by order of the Commission or any
court or other governmental authority, (iii) a general moratorium
on commercial banking activities shall have been declared by either
federal or New York State authorities or (iv) there shall have
occurred any outbreak or escalation of hostilities or other
international or domestic calamity, crisis or change in political,
financial or economic conditions or other material event the effect
of which on the financial markets of the United States and/or
United Kingdom, in your judgment, is material and adverse and such
as to make it impracticable or inadvisable to market the ADS
Offered Securities or to enforce contracts for the sale of the ADS
Offered Securities. Notice of such cancellation shall be promptly
given to the Company and its counsel by telegraph, telecopy, e-mail
or telephone and shall be subsequently confirmed by letter.
12. Information Furnished by the Underwriters. The Company
acknowledges that the first paragraph under the caption
"Underwriting-Commissions and Discounts" and the second and third
paragraphs under the caption "Underwriting-Price Stabilization,
Short Positions And Penalty Bids" in any Preliminary Prospectus or
the Prospectus, constitute the only information furnished by or on
behalf of the Underwriters through you or on your behalf as such
information is referred to in Sections 6(c), 6(d), 6(e), and 8
hereof.
13. Miscellaneous. Except as otherwise provided in Sections 5
and 11 hereof, notice given pursuant to any of the provisions of
this Agreement shall be in writing and shall be delivered
(i) to the Company:
Motif Bio plc
One Tudor Street
London, EC4Y 0AH
United Kingdom
Attention: Graham Lumsden
E-mail: graham.lumsden@motifbio.com
with a copy to:
Reed Smith LLP
599 Lexington Avenue, 22nd Floor
New York, New York 10022
Attention: Aron Izower
Facsimile: (212) 521-5450
E-mail: aizower@reedsmith.com
(ii) to the Representative:
H.C. Wainwright & Co., LLC
430 Park Avenue, 4th Floor
New York, New York 10022
Attention: Aileen Gibbons
E-mail: agibbons@hcwco.com
with a copy to:
Ellenoff Grossman & Schole LLP
1345 Avenue of the Americas
New York, New York 10105
Attention: Joseph Smith
Facsimile: (212) 401-4741
E-mail: jsmith@egsllp.com
This Agreement has been and is made solely for the benefit of
the several Underwriters and the Company. No provision of this
Agreement may be waived, modified, supplemented or amended except
in a written instrument signed, in the case of an amendment, by the
Company and the Representative. No waiver of any default with
respect to any provision, condition or requirement of this
Agreement shall be deemed to be a continuing waiver in the future
or a waiver of any subsequent default or a waiver of any other
provision, condition or requirement hereof, nor shall any delay or
omission of any party to exercise any right hereunder in any manner
impair the exercise of any such right.
14. Applicable Law; Counterparts; Consent to Jurisdiction;
Entire Agreement. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York without
reference to choice of law principles thereunder.
This Agreement may be signed in various counterparts, which
together shall constitute one and the same instrument. This
Agreement shall be effective when, but only when, at least one
counterpart hereof shall have been executed on behalf of each party
hereto.
The Company and the Underwriters each hereby irrevocably waive
any right they may have to a trial by jury in respect to any claim
based upon or arising out of this Agreement or the transactions
contemplated hereby.
Any legal suit, action or proceeding arising out of or based
upon this Agreement or the transactions contemplated hereby
("Related Proceedings") shall be instituted in (i) the federal
courts of the United States of America located in the City and
County of New York, Borough of Manhattan or (ii) the courts of the
State of New York located in the City and County of New York,
Borough of Manhattan (collectively, the "Specified Courts"), and
each party irrevocably submits to the exclusive jurisdiction
(except for proceedings instituted in regard to the enforcement of
a judgment of any such court (a "Related Judgment"), as to which
such jurisdiction is non-exclusive) of such courts in any such
suit, action or proceeding. Service of any process, summons, notice
or document by mail to such party's address set forth above shall
be effective service of process for any suit, action or other
proceeding brought in any such court. The parties irrevocably and
unconditionally waive any objection to the laying of venue of any
suit, action or other proceeding in the Specified Courts and
irrevocably and unconditionally waive and agree
not to plead or claim in any such court that any such suit,
action or other proceeding brought in any such court has been
brought in an inconvenient forum.
The Transaction Documents, together with the exhibits and
schedules thereto, and the Prospectus contain the entire
understanding of the parties with respect to the subject matter
hereof and thereof and supersede all prior agreements and
understandings, oral or written, with respect to such matters,
which the parties acknowledge have been merged into such documents,
exhibits and schedules. Notwithstanding anything herein to the
contrary, the Engagement Agreement, dated October 10, 2016 and
amended and restated on November 2, 2016, between the Company and
the Representative (the "Engagement Agreement") shall continue to
be effective and the terms therein shall continue to survive and be
enforceable by the Representative in accordance with its terms,
including, without limitation, Sections A.1, A.3 and A.4 therein,
provided that, in the event of a conflict between the terms of the
Engagement Agreement and this Agreement, the terms of this
Agreement shall prevail.
15. No Fiduciary Duty. Notwithstanding any pre-existing
relationship, advisory or otherwise, between the parties or any
oral representations or assurances previously or subsequently made
by any of the Underwriters, the Company acknowledges and agrees
that (i) nothing herein shall create a fiduciary or agency
relationship between the Company, on the one hand, and the
Underwriters, on the other hand; (ii) the Underwriters have been
retained solely to act as underwriters and are not acting as
advisors, expert or otherwise, to either the Company in connection
with this offering, the sale of the ADS Offered Securities or any
other services the Underwriters may be deemed to be providing
hereunder, including, without limitation, with respect to the
public offering price of the ADS Offered Securities; (iii) the
relationship between the Company, on the one hand, and the
Underwriters, on the other hand, is entirely and solely commercial,
and the price of the ADS Offered Securities was established by the
Company and the Underwriters based on discussions and arms' length
negotiations and the Company understands and accepts the terms,
risks and conditions of the transactions contemplated by this
Agreement; (iv) any duties and obligations that the Underwriters
may have to the Company shall be limited to those duties and
obligations specifically stated herein; and (v) notwithstanding
anything in this Agreement to the contrary, the Company
acknowledges that the Underwriters may have financial interests in
the success of the offering contemplated hereby that are not
limited to the difference between the price to the public and the
purchase price paid to the Company for the ADS Offered Securities
and such interests may differ from the interests of the Company,
and the Underwriters have no obligation to disclose, or account to
the Company for any benefit they may derive from such additional
financial interests. The Company hereby waives and releases, to the
fullest extent permitted by the applicable law, any claims it may
have against the Underwriters with respect to any breach or alleged
breach of fiduciary duty in connection with the transactions
contemplated by this Agreement or any matters leading up to such
transactions.
16. Research Analyst Independence. The Company acknowledges that
(a) the Underwriters' research analysts and research departments
are required to be independent from their respective investment
banking divisions and are subject to certain regulations and
internal policies and (b) the Underwriters' research analysts may
hold views and make statements or investment recommendations and/or
publish research reports with respect to the Company, the value of
the ADS Offered Securities and/or the offering that differ from the
views of their respective investment banking divisions. The Company
hereby waives and releases, to the fullest extent permitted by law,
any claims that it may have against the Underwriters with respect
to any conflict of interest that may arise from the fact that the
views expressed by the Underwriters' independent research analysts
and research departments may be different from or inconsistent with
the views or advice communicated to the Company by any
Underwriter's investment banking division. The Company acknowledges
that each of the Underwriters is a full service securities firm and
as such, from time to time, is subject to applicable securities
laws, may effect transactions for its own account or the account of
its customers and may hold long or short positions in debt or
equity securities of the companies that are the subject of the
transactions contemplated by this Agreement.
[remainder of page intentionally blank]
17. Please confirm that the foregoing correctly sets forth the
agreement among the Company and the several Underwriters.
Very truly yours,
MOTIF BIO PLC
/s/ Graham G. Lumsden
------------------------------------------------------
Name: Graham G. Lumsden
Title: Chief Executive Officer and Executive Director
CONFIRMED as of the date first above
mentioned, as the Representative
of the several Underwriters named in
Schedule I hereto.
H.C. WAINWRIGHT & CO., LLC
By: /s/ Mark W. Viklund
-------------------------------
Name: Mark W. Viklund
Title: Chief Executive Officer
[Signature Page to the Underwriting Agreement]
SCHEDULE I
Number of Firm ADS
Name Number of Firm ADSs Warrants Closing Purchase Price
-------------------------------------------- ------------------- ------------------ ----------------------
2,438,491 1,219,246 $6.4914 as to
H.C. Wainwright & Co.,
LLC.................... 1,347,691
combinations
$6.6659 as to
1,090,800
combinations
to be sold to
Invesco
$16,019,565
Total:
(1) includes 1,090,800 Firm ADSs and 545,400 Firm ADS Warrants
sold to Invesco Asset Management Limited
SCHEDULE II
Issuer Free Writing Prospectuses
1. The Free Writing Prospectus of the Company filed with the
Commission on October 13, 2016.
2. The Free Writing Prospectus of the Company filed with the
Commission on October 31, 2016.
3. The Free Writing Prospectus of the Company filed with the
Commission on November 17, 2016.
SCHEDULE III
Pricing Information
Number of Firm ADSs: 2,438,491
Number of Firm ADS Warrants: 1,219,246
Number of Additional ADSs: 292,618
Number of Additional ADS Warrants: 146,309
Combined Public Offering Price per ADS/ADS Warrant: $ 6.98
Allocated as follows:
-- Per ADS Public Offering Price: $6.97
-- Per ADS Warrant Public Offering Price: $0.01
Underwriting Discount per ADS/ADS Warrant Combination:
$0.4886
Underwriting Discount per ADS/ADS Warrant Combination sold to
Invesco Asset Management Limited: $0.3141
SCHEDULE IV
Persons Subject to Lock-up
Graham Lumsden
Pete Meyers
Robert Bertoldi
David Huang
Richard Morgan
Charlotta Ginman-Horell
Jonathan Gold
Zaki Hosny
Mary Lake Polan
Bruce Williams
Amphion Innovations plc
Amphion Innovations US Inc.
Yorkville Advisors
SCHEDULE V
Written Testing the Water Communications
EXHIBIT A
Lock-up Agreement
, 2016
Rodman & Renshaw, a unit of H.C. Wainwright & Co.,
LLC
As representative of the several Underwriters
named in Schedule I to the Underwriting Agreement
c/o H.C. Wainwright & Co., LLC
430 Park Avenue
New York, New York 10022
Re: Motif Bio plc (the "Company") - Restriction on Share Sales
Dear Sirs and Madams:
This letter is delivered to you pursuant to the Underwriting
Agreement (the "Underwriting Agreement") to be entered into by the
Company, as issuer, and Rodman & Renshaw, a unit of H.C.
Wainwright & Co., LLC, as representative (the "Representative")
of certain underwriters (the "Underwriters") to be named therein.
Upon the terms and subject to the conditions of the Underwriting
Agreement, the Underwriters intend to effect a public offering of
American Depositary Shares ("ADSs"), each of which represents 20
Ordinary Shares, of one penny each in capital, of the Company (the
"Ordinary Shares"), and warrants ("Warrants") to purchase ADSs, as
described in and contemplated by the registration statement of the
Company on Form F-1, File No. 333-212491 (the "Registration
Statement"), as subsequently amended (the "Offering").
The undersigned recognizes that it is in the best financial
interests of the undersigned, as an officer or director, or an
owner of shares, options, warrants or other securities of the
Company (the "Company Securities"), that the Company complete the
proposed Offering.
The undersigned further recognizes that the Company Securities
held by the undersigned are, or may be, subject to certain
restrictions on transferability, including those imposed by United
States federal securities laws. Notwithstanding these restrictions,
the undersigned has agreed to enter into this letter agreement to
further assure the Underwriters that the Company Securities of the
undersigned, now held or hereafter acquired, will not enter the
public market at a time that might impair the underwriting
effort.
Therefore, as an inducement to the Underwriters to execute the
Underwriting Agreement, the undersigned hereby acknowledges and
agrees that the undersigned will not (i) offer, sell, contract to
sell, pledge, grant any option to purchase or otherwise dispose of
(collectively, a "Disposition") any Company Securities, or any
securities convertible into or exercisable or exchangeable for, or
any rights to purchase or otherwise acquire, any Company Securities
held by the undersigned or acquired by the undersigned after the
date hereof, or that may be deemed to be beneficially owned by the
undersigned (collectively, the "Lock-Up Shares"), pursuant to the
Rules and Regulations promulgated under the Act, as amended, and
the Exchange Act, as amended, for a period commencing on the date
hereof and ending 180 days after the date of the Company's
Prospectus first filed pursuant to Rule 424(b) under the Act,
inclusive (the "Lock-Up Period"), without the prior written consent
of Rodman & Renshaw, a unit of H.C. Wainwright & Co., LLC
or (ii) exercise or seek to exercise or effectuate in any manner
any rights of any nature that the undersigned has or may have
hereafter to require the Company to register under the Act the
undersigned's sale, transfer or other disposition of any of the
Lock-Up Shares or other securities of the Company held by the
undersigned, or to otherwise participate as a selling
securityholder in any manner in any registration effected by the
Company under the Act, including under the Registration Statement,
during the Lock-Up Period. The foregoing restrictions are expressly
agreed to preclude the undersigned from engaging in any hedging,
collar (whether or not for any consideration) or other transaction
that is designed to or reasonably expected to lead or result in a
Disposition of Lock-Up Shares during the Lock-Up Period, even if
such Lock-Up Shares would be disposed of by someone other than such
holder. Such prohibited hedging or other transactions would include
any short sale or any purchase, sale or grant of any right
(including any put or call option or reversal or cancellation
thereof) with respect to any Lock-Up Shares or with respect to any
security (other than a broad-based market basket or index) that
includes, relates to or derives any significant part of its value
from Lock-Up Shares.
Notwithstanding the restriction, the undersigned may transfer
any or all Lock-up Shares (i) as a bona fide gift or gifts,
provided that the donee or donees thereof have executed and
delivered to the Representative a written agreement providing their
agreement to be bound by the restrictions set forth herein, (ii) to
any trust, partnership, limited liability company or other legal
entity commonly used for estate planning purposes which is
established for the direct or indirect benefit of the undersigned
or the immediate family of the undersigned, provided that the
trustee, general partner, manager or other administrator, as the
case may be, has executed and delivered to the Representative a
written agreement providing their agreement of such entity to be
bound by the restrictions set forth herein, and provided further
that any such transfer shall not involve a disposition for value,
or (iii) with the prior written consent
of the Representative on behalf of the Underwriters. For
purposes of this letter agreement, "immediate family" shall mean
any relationship by blood, marriage or adoption, not more remote
than first cousin. In addition, notwithstanding the foregoing, (i)
if the undersigned is a corporation, partnership, limited liability
company or other business entity, such business entity may (a)
transfer Company Securities to another corporation, partnership or
other business entity that controls, is controlled by or is under
common control with the undersigned or (b) distribute Company
Securities to current or former members, partners, shareholders,
subsidiaries or affiliates (as defined in Rule 405 promulgated
under the Act) of the undersigned or to any investment fund or
other entity that controls or manages the undersigned (including,
for the avoidance of doubt, a fund managed by the same manager or
managing member or general partner or management company or by an
entity controlling, controlled by, or under common control with
such manager or managing member or general partner or management
company as the undersigned or who shares a common investment
advisor with the undersigned; and (ii) if the undersigned is a
trust, such trust may transfer Company Securities to a trustee or
beneficiary of the trust; provided, however, that in any such case,
it shall be a condition to the transfer that the transferee has
executed and delivered to the Representative a written agreement
stating that the transferee is receiving and holding such Company
Securities subject to the provisions of this Agreement and there
shall be no further transfer of such Company Securities except in
accordance with this Agreement, and provided further that any such
transfer shall not involve a disposition for value.
Furthermore, the undersigned may: (i) exercise options or
warrants of the Company to purchase ordinary shares granted
pursuant to the Company's share option plans, or that are otherwise
referred to or described in the Prospectus, whether for cash or by
"cashless" exercise; (ii) transfer ordinary shares by operation of
law such as pursuant to a qualified domestic order or in connection
with a divorce settlement, provided that the undersigned shall use
its reasonable best efforts to cause the transferee to sign and
deliver a lock-up agreement substantially in the form of this
lock-up agreement for the balance of the Lock Up Period; and (iii)
sell, transfer or dispose of ordinary shares purchased by the
undersigned on the open market following the Offering if and only
if no filing or report by any party under the Exchange Act, or
other public announcement, shall be required or shall be
voluntarily made in connection with such sale, transfer or
disposition.
In addition, the foregoing restrictions shall not apply to (i)
the deposit of Ordinary Shares with the Depositary, in exchange for
the issuance of ADSs, or the cancellation of ADSs in exchange for
the issuance of Ordinary Shares, provided that such ADSs or
Ordinary Shares issued pursuant to this clause (i) shall remain
subject to the terms of this lock-up agreement or (ii) the
establishment of any contract, instruction or plan (a "Plan") that
satisfies all of the requirements of Rule 10b5-1(c)(1)(i)(B) under
the Exchange Act; provided that no sales of Company Securities
shall be made pursuant to such a Plan prior to the expiration of
the Lock-Up Period, and such a Plan may only be established if no
public announcement of the establishment or existence thereof and
no filing with the Commission or other regulatory authority in
respect thereof or transactions thereunder or contemplated thereby,
by the undersigned, the Company or any other person, shall be
required, and no such announcement or filing is made voluntarily,
by the undersigned, the Company or any other person, prior to the
expiration of the Lock-Up Period.
Nothing in this lock-up agreement shall prevent the undersigned
from offering, announcing the intention to sell, selling,
transferring, contracting to sell, selling any option or contract
to purchase, purchase any option or contract to sell, granting any
option, right or warrant to purchase or otherwise transfer or
dispose of, directly or indirectly, any of the undersigned's
Company Securities:
(a) in connection with either:
(i) the acceptance of a general offer for the ordinary share
capital of the Company (or any part of it) made in accordance with
the United Kingdom City Code on Takeovers and Mergers; or
(ii) the provision of an irrevocable undertaking to accept an
offer referred to in paragraph (i) above;
(b) pursuant to any compromise or arrangement under Part 26 of
the United Kingdom Companies Act 2006 providing for the acquisition
by any person (or group of persons acting in concert) of 50% or
more of the Ordinary Shares in issue and which compromise or
arrangement is agreed by the requisite majority of the members of
the Company and sanctioned by the court;
(c) pursuant to any sale, transfer or arrangement under section
110 of the United Kingdom Insolvency Act 1986 in relation to the
Company;
(d) pursuant to an intervening court order; or
(e) a transfer to the shareholders' personal representative
following the death of such shareholder.
It is understood that, if the Underwriting Agreement (other than
the provisions thereof that survive termination) shall terminate or
be terminated prior to payment for and delivery of the ADSs, you
will release the undersigned from the obligations under this letter
agreement.
In furtherance of the foregoing, the Company, its transfer agent
and registrar and the Depositary are hereby authorized to decline
to make any transfer of Lock-Up Shares if such transfer would
constitute a violation or breach of this letter. This letter shall
be binding on the undersigned and the respective successors, heirs,
personal representatives and assigns of the undersigned.
Capitalized terms used but not defined herein have the respective
meanings assigned to such terms in the Underwriting Agreement.
Very truly yours,
Signature of Securityholder
Print Name
Exhibit 4.17
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement") is effective as of
January 16, 2017 (the "Effective Date"), and is entered into by and
between Motif BioSciences Inc. (the "Company"), and Robert Dickey
IV ("Employee") (collectively with the Company, the "Parties"; each
of the Parties referred to individually as a "Party").
WHEREAS, the Company desires to employ Employee in accordance
with the terms and conditions set forth below; and
WHEREAS, Employee desires to be employed by the Company in
accordance with the terms and conditions set forth below;
NOW, THEREFORE, in consideration of the promises and mutual
covenants and agreements set forth in this Agreement, the Parties
hereby agree as follows:
1. EMPLOYMENT.
a. Title. The Company hereby agrees to employ Employee, and
Employee hereby accepts such employment, as Chief Financial Officer
of the Company.
b. At Will Relationship. Employee's employment with the Company
shall commence as of the Effective Date. Employee's employment
shall be considered "at will" in nature and, accordingly, either
the Company or Employee may terminate this Agreement and Employee's
employment at any time and for any reason, with or without cause or
prior notice. Nothing in this Agreement, including but not limited
to Section 3 hereof, shall be construed as, or shall interfere
with, abridge, limit, modify, or amend the "at will" nature of
Employee's employment with Company.
c. Duties and Responsibilities. During Employee's employment
with the Company, Employee shall at all times: (i) comply with the
terms and conditions set forth in this Agreement; (ii) perform and
carry out such responsibilities, duties, and authorities as the
Company may direct, designate, request of, or assign to Employee
from time to time, which shall include, but not necessarily be
limited to, such responsibilities, duties, and authorities that are
typically performed by and assigned to employees in similar
positions within similar companies; (iii) perform the duties and
carry out the responsibilities assigned to him by the Company to
the best of his ability, in a trustworthy, business-like, and
efficient manner for the purpose of advancing the business and
interests of the Company; (iv) devote sufficient time, attention,
effort, and skill to his position with and the business of the
Company; (v) comply with and abide by the Company's policies,
practices, and procedures (as may be amended or otherwise modified
from time to time by the Company); and (vi) comply with all laws,
rules, regulations, and licensing requirements of, or that may be
applicable to, his employment with the Company. In the event that
any term(s) of this Agreement conflicts with a term(s) of any
employee handbook, policy, practice, or procedure adopted or
maintained, at any time, by the Company, the term(s) of this
Agreement shall control and supersede such conflicting term(s).
In particular but without prejudice to the foregoing, during
Employee's employment with the Company, Employee shall carry on
duties on behalf of the Company and any affiliate company
including, (i) if so required by the Company, acting as an officer
of the Company, (ii) complying with the articles of association as
amended from time to time of the Company, (iii) abiding by any
statutory, fiduciary, or common law duties which may apply to his
position, (iv) not doing anything that could result in any legal or
regulatory restriction which would cause him to be unable to
perform his duties, (v) doing such things within his control as are
necessary to ensure compliance by himself and the Company or any
relevant affiliate with the United States Securities and Exchange
Commission Rules and Regulations, the Alternative Investment Market
Rules of the London Stock Exchange and any regulatory code to the
extent it is considered relevant by the Company, (vi) complying
with all requirements, recommendations, or regulations as amended
from time to time of the Financial Industry Regulatory Authority in
the United States and the Financial Conduct Authority in the United
Kingdom and all regulatory authorities relevant to the Company or
any affiliate company, (vii) complying with any code of practice
issued by the Company as amended from time to time relating to
dealing in securities of the Company or any affiliate company, and
(viii) complying with the requirements under both legislation and
regulation in respect of the disclosure of inside information.
Notwithstanding anything to the contrary in this Agreement,
Employee shall be permitted to serve on the board of directors of
any other entity or organization to the extent that doing so does
not (i) involve an entity with which the Company has a material
vendor relationship or is deemed to be a competitor, (ii)
interfere, or create a conflict of interest, with Employee's duties
and obligations to the Company, or (iii) otherwise violate any
provision of this Agreement, subject to Employee obtaining prior
written approval from the Company's Board of Directors.
d. No Conflicts. Employee represents and warrants that he is not
bound by or subject to any written or oral agreement, pact,
covenant, or understanding with any previous or concurrent
employer, or any other party, that would limit, abridge, restrict,
or interfere with, in any way, his ability to perform his duties
and obligations hereunder. Employee further represents and warrants
that the performance of his duties and obligations hereunder shall
not violate any written or oral agreement, pact, covenant, or
understanding by and between him and any previous or concurrent
employer, or any other party. Employee further represents and
warrants that he will not use any trade secret, or confidential or
proprietary information, of any of his previous or concurrent
employers, or that was obtained, learned, or procured during any
period of employment prior to or concurrent with his employment
with the Company, in connection with his employment with the
Company or in the performance of his duties and obligations
hereunder.
e. Travel. Employee acknowledges and agrees that substantial
time may be spent, as part of his employment with the Company, in
such locations as may be requested by the Chief Executive Officer
of the Company, or his/her designee, from time-to-time, for which
Employee may be required to travel.
2. COMPENSATION AND BENEFITS. Subject to the terms and
conditions of Sections 1 and 3 of this Agreement, and Employee's
continued employment with the Company, and in consideration for the
services to be provided hereunder by Employee, the Company hereby
agrees to pay or otherwise provide Employee with the following
compensation and benefits during his employment with the
Company:
a. Annual Salary. The Company shall pay Employee a base salary
equal to $320,000.00 per year (as it may be adjusted from time to
time, the "Annual Salary"), less applicable taxes, withholdings,
and deductions, and any other deductions that may be authorized by
Employee, from time to time, in accordance with applicable federal,
state, and/or local law. The Annual Salary shall be payable in
monthly installments or otherwise in accordance with the Company's
standard payroll practices and procedures, as in effect from time
to time. Employee acknowledges and understands that his position of
employment with the Company is considered "exempt," as that term is
defined under the Fair Labor Standards Act and applicable state or
local law. As an exempt employee, Employee is not eligible to
receive overtime pay.
Notwithstanding the foregoing, the Annual Salary may be reviewed
by the Company from time to time and may be subject to upward or
downward adjustment, in the Company's sole discretion, based upon a
review and consideration of various factors, including but not
limited to Employee's performance and/or the Company's overall
financial performance. Employee acknowledges and agrees that the
Company's upward or downward adjustment of the Annual Salary, at
any time, for any reason, and to any extent, shall not constitute
Good Reason (as that term is defined below).
b. Equity. Subject to the approval by the Board of Directors of
Motif Bio Plc (the parent company of the Company), and the terms
and conditions set forth in the Motif Bio Plc Share Option Plan and
option agreement, Employee will receive a stock option award to
purchase shares of Motif Bio Plc's common stock. The number of
shares of Motif Bio Plc common stock to be granted to Employee will
be 1,500,000 shares. The per share exercise price for the shares of
common stock underlying the stock option shall be equal to the fair
market value of Motif Bio Plc's common stock on the date of grant.
The stock option shall vest and become exercisable in increments
over the four (4)-year period following the Effective Date as
follows: (i) one-fourth (25%) of the stock option will vest and
become exercisable on the one (1)-year anniversary of the Effective
Date and (ii) the remaining three-fourths (75%) of the stock option
will vest and become exercisable in equal installments on a monthly
basis over the thirty-six (36)- month period following the one
(1)-year anniversary of the Effective Date. The stock option is
contingent upon Employee's employment with the Company.
c. Bonus Eligibility. In addition to the Annual Salary,
following the end of each fiscal year of the Company or at such
other times as the Company may in its sole discretion deem
appropriate, Employee shall be eligible to receive a discretionary
bonus payment. The timing and amount, if any, of any such bonus
shall be determined in the sole discretion of the Board of
Directors of the Company. In order to earn and receive any such
bonus, Employee must be employed by the Company, without having
received from or tendered to the Company notice of an anticipated
termination (for any reason), at the time that such bonus is to be
paid to Employee. Payment of a bonus for any year will not give
rise to an entitlement or expectation of a bonus for any other
year. Such bonus, if any, will be paid in accordance with the
Company's bonus payment practices in effect from time-to-time for
similarly-situated employees of the Company, including tax
withholdings.
For the bonus period for the fiscal year ending December 31,
2017, Employee shall be eligible to receive a discretionary bonus,
if any, of up to 35 % of the Annual Salary in effect as of December
31, 2017 prorated for the number of days from the Effective Date of
the Employment Agreement to December 31, 2017.
d. Benefit Plans. Employee shall be provided with medical
insurance by the Company, pursuant to any such plan(s) made
generally available to similarly-situated employees of the Company,
and shall be entitled to participate in any and all group health,
disability insurance, life insurance, incentive, savings,
retirement, and other benefit plans which are made generally
available to similarly-situated employees of the Company.
Notwithstanding the foregoing, the Company reserves the right, in
its sole discretion, to at any time amend, modify, or terminate any
such plans referenced in the prior sentence, subject to the terms
and conditions of such plans and applicable federal, state, or
local law.
e. Vacation and Sick Leave. Employee shall be entitled to twenty
(20) combined days of vacation and sick leave per calendar year, in
accordance with the Company's respective vacation and sick leave
policies, as in effect from time to time, plus such holidays as may
be designated by the Company in accordance with its holiday policy
as in in effect from time to time.
f. Expenses. Employee shall be entitled to reimbursement for all
reasonable expenses that he incurs in connection with the
performance of his duties and obligations hereunder, including but
not necessarily limited to those expenses incurred in connection
with Section 1(e) of this Agreement. Upon presentment by Employee
of appropriate and sufficient documentation, as determined in the
Company's sole direction, the Company shall reimburse Employee for
all such expenses in accordance with the Company's expense
reimbursement policy, as in effect from time to time.
3. EFFECT OF TERMINATION.
a. Definitions. For purposes of this Agreement:
i. the term "Cause" shall mean: (a) any act or omission of
Employee that, in connection with his employment with the Company,
amounts to or constitutes a breach of a fiduciary duty, gross
negligence, willful misconduct, or material misconduct, or that
amounts to or constitutes fraud, embezzlement, or misappropriation;
(b) Employee's breach of any term(s) of this Agreement; (c)
Employee's violation of any policy(ies) established, adopted, or
maintained by the Company; (d) any act or omission of Employee
that, in the Company's sole discretion, is demonstrably and
materially injurious to the Company; (e) any act or omission of
Employee that causes the Company to suffer or endure public
disgrace, disrepute, or economic harm; or (f) Employee's
misappropriation of corporate assets or corporate opportunities;
and
ii. the term "Good Reason" shall mean the occurrence of either
of the following events without the consent of Employee: (a) a
material breach of this Agreement by the Company; (b) a material
reduction in Employee's responsibility, authority, or duties
relative to Employee's responsibility, authority or duties in
effect immediately prior to such reduction, except for any change
in title or reporting relationship (such title or reporting change
shall not constitute Good Reason); or (c) the Company's permanent
relocation of Employee's principal place of employment to a
location that is more than fifty (50) miles from New York, New York
(for purposes of this Section 3(a)(ii)(c), however, "Good Reason"
shall not include or arise from ordinary travel, for any length of
time, as may be required or requested of Employee by the Company,
from time to time, during the course of Employee's employment
hereunder, in accordance with Section 1(e) of this Agreement or
otherwise); provided, however, that "Good Reason" shall not be
deemed to exist for purposes of this Agreement unless Employee has
first provided written notice of such reason to the Company no
later than thirty (30) days after the event or occurrence
constituting Good Reason first arises, with such notice affording
the Company thirty (30) days, from the date of the Company's
receipt of such notice, to cure the deficiency, and further
provided that the Company has failed to cure such deficiency within
the time frame prescribed in such written notice.
b. Termination by the Company without Cause within Two Years of
the Effective Date. If Employee's employment with the Company is
terminated by the Company without Cause prior to or upon the second
anniversary of the Effective Date, Employee shall receive upon such
termination only:
i. any vacation accrued but unused as of the date of Employee's
termination, subject to the Company's policies regarding vacation
pay (the "Vacation Pay");
ii. any Annual Salary and Bonus earned but unpaid as of the date
of Employee's termination (together with the Vacation Pay, the
"Statutory Amounts"); and
iii. subject to Employee meeting the terms and conditions of
Section 3(g) below, an amount equal to three (3) months of the
then-current Annual Salary, as of the date of Employee's
termination, which shall be paid in three (3) substantially equal
monthly installments commencing with the first regular payroll of
the Company following the effective date of the Release (as that
term is defined below), and if at all, in any event no later than
seventy (70) days after the date of Employee's termination.
c. Termination by the Company without Cause Following the Second
Anniversary of the Effective Date. If Employee's employment with
the Company is terminated by the Company without Cause following
the second anniversary of the Effective Date, Employee shall
receive upon such termination only:
i. the Statutory Amounts; and
ii. subject to Employee meeting the terms and conditions of
Section 3(g) below, an amount equal to three (3) months of the
then-current Annual Salary, as of the date of Employee's
termination, plus one (1) additional month of the then-current
Annual Salary for each full year of Employee's employment with the
Company, up to a maximum of nine (9) additional months above the
three-month initial entitlement, which shall be paid in twelve (12)
substantially equal monthly installments commencing with the first
regular payroll of the Company following the effective date of the
Release (as that term is defined below), and if at all, in any
event no later than seventy (70) days after the date of Employee's
termination.
d. Termination by Employee with Good Reason within Two Years of
the Effective Date. If Employee's employment with the Company is
terminated by Employee with Good Reason prior to or upon the second
anniversary of the Effective Date, subject to the notice and cure
period provided in Section 3(a)(ii), Employee shall receive upon
such termination only:
i. the Statutory Amounts; and
ii. subject to Employee meeting the terms and conditions of
Section 3(g) below, an amount equal to three (3) months of the
then-current Annual Salary, as of the date of Employee's
termination, which shall be paid, in the Company's sole discretion,
either in a lump sum or in three (3) substantially equal monthly
installments commencing with the first regular payroll of the
Company following the effective date of the Release (as that term
is defined below), and if at all, in any event no later than
seventy (70) days after the date of Employee's termination.
e. Termination by Employee with Good Reason Following the Second
Anniversary of the Effective Date. If Employee's employment with
the Company is terminated by Employee with Good Reason following
the second anniversary of the Effective Date, subject to the notice
and cure period provided in Section 3(a)(ii), Employee shall
receive upon such termination only:
i. the Statutory Amounts; and
ii. subject to Employee meeting the terms and conditions of
Section 3(g) below, an amount equal to three (3) months of the
then-current Annual Salary, as of the date of Employee's
termination, plus one (1) additional month of the then-current
Annual Salary for each full year of Employee's employment with the
Company, up to a maximum of nine (9) additional months above the
three-month initial entitlement, which shall be paid, in the
Company's sole discretion, either in a lump sum or in twelve (12)
substantially equal monthly installments commencing with the first
regular payroll of the Company following the effective date of the
Release (as that term is defined below), and if at all, in any
event no later than seventy (70) days after the date of Employee's
termination.
f. Termination with Cause and All Other Terminations. Subject to
Section 2(b) above, if Employee's employment with the Company is
terminated for any reason other than as specified in Sections
3(b)-(e) at any time during Employee's employment with the Company,
Employee shall receive upon such termination only the Statutory
Amounts.
g. Release of Claims against the Company. Notwithstanding the
foregoing, no payment shall be made or benefit provided to Employee
pursuant to this Section 3 of the Agreement, other than the
Statutory Amounts, unless Employee signs and, if applicable, does
not revoke a general release of all claims against the Company, and
any related, affiliated, or associated persons and/or entities as
the Company may designate or determine in its sole discretion, in
such form as the Company may reasonably require (the "Release").
The Release must be signed by Employee and returned to the Company
within the period designated by the Company, which shall not extend
later than fifty (50) days after the date of Employee's
termination. Any payment to be made or benefit provided pursuant to
this Section 3 of the Agreement shall be tendered in accordance
with the schedule to be set forth in the Release.
4. RESTRICTIVE COVENANTS. The Parties agree that the Company is
engaged in a highly competitive industry and would suffer
irreparable harm and incur substantial damage if Employee were to
enter into competition with the Company. Therefore, in order for
the Company to protect its legitimate business interests, Employee
covenants and agrees as follows:
a. Except as set forth in Section 1(c) of this Agreement,
Employee shall not, at any time during his employment with the
Company, either directly or indirectly, accept employment with or
render services to, whether as an employee, independent contractor,
consultant, or otherwise, any person or entity other than the
Company without the prior written consent of the Company, which
consent shall not be unreasonably withheld by the Company but may
nevertheless be determined in the sole discretion of the
Company;
b. Employee shall not, for a period of six (6) months after his
employment with the Company ceases, anywhere in the States of New
York or New Jersey, either directly or indirectly: (i) accept
employment with or render services to any person or entity that is
a business competitor of the Company, or has at any time during
Employee's employment with the Company engaged or attempted to
engage in business competition with the Company, in a position,
capacity, or function that is similar, in title or substance,
whether in whole or in part, to any position, capacity, or function
that Employee held with or in which Employee served the Company; or
(ii) invest in any person or entity that is a business competitor
of the Company, or has at any time during Employee's employment
with the Company engaged or attempted to engage in business
competition with the Company, except that Employee may own up to
one percent (1%) of any outstanding class of securities of any
company registered under Section 12 of the Securities Exchange Act
of 1934, as amended;
c. Employee shall not, at any time during his employment with
the Company and for a period of twelve (12) months thereafter, for
any reason, on his own behalf or on behalf of any other person or
entity: (i) solicit, invite, induce, cause, or encourage to alter
or terminate his, her, or its business relationship with the
Company any client, customer, supplier, vendor, licensee, licensor,
or other person or entity that, at any time during Employee's
employment with the Company, had a business relationship with the
Company, or any person or entity whose business the Company was
soliciting or attempting to solicit at the time of Employee's
termination, (a) with whom Employee had contact, or for whom
Employee performed services, to any extent, during his employment
with the Company, and (b) with whom Employee did not have a
business relationship prior to his employment with the Company;
(ii) solicit, entice, attempt to solicit or entice, or accept
business from any such client, customer, supplier, vendor,
licensee, licensor, person, or entity; or (iii) interfere or
attempt to interfere with any aspect of the business relationship
between the Company and any such client, customer, supplier,
vendor, licensee, licensor, person, or entity; and
d. Employee shall not, at any time during his employment with
the Company and for a period of twelve (12) months thereafter,
either directly or indirectly, on his own behalf or on behalf of
any other person or entity: (i) solicit, invite, induce, cause, or
encourage any director, officer, employee, agent, representative,
consultant, or contractor of the Company to alter or terminate his,
her, or its employment, relationship, or affiliation with the
Company; (ii) interfere or attempt to interfere with any aspect of
the relationship between the Company and any such director,
officer, employee, agent, representative, consultant, or
contractor; or (iii) engage, hire, or employ, or cause to be
engaged, hired, or employed, in any capacity whatsoever, any such
director, officer, employee, agent, representative, consultant, or
contractor.
Employee represents, warrants, agrees, and understands that: (i)
the covenants and agreements set forth in this Section 4 of the
Agreement are reasonable in their geographic scope, temporal
duration, and content; (ii) the Company's agreement to employ
Employee, and a portion of the compensation to be paid to Employee
hereunder, are in consideration for such covenants and Employee's
continued compliance therewith; (iii) Employee shall not raise any
issue of, nor contest or dispute, the reasonableness of the
geographic scope, temporal duration, or content of such covenants
and agreements in any proceeding to enforce such covenants and
agreements; (iv) the enforcement of any remedy under this Agreement
will not prevent Employee from earning a livelihood, because
Employee's past work history and abilities are such that Employee
can reasonably expect to find work in other areas and lines of
business; (v) the covenants and agreements set forth in this
Section 4 of the Agreement are essential for the Company's
reasonable protection, are designed to protect the Company's
legitimate business interests, and are necessary and implemented
for legitimate business reasons; and (vi) in entering into this
Agreement, the Company has relied upon Employee's representation
that he will comply in full with the covenants and agreements set
forth in this Section 4 of the Agreement.
5. CONFIDENTIALITY.
a. Confidential Information. Employee acknowledges that during
his employment with the Company, and by the nature of Employee's
duties and obligations hereunder, Employee will come into close
contact with confidential information of the Company and its
subsidiaries, affiliates, and/or other related entities, as
applicable, including but not limited to: trade secrets, know-how,
Inventions (as that term is defined below), business plans,
finances, pricing, sales and marketing information, products,
research, algorithms, market intelligence, services, technologies,
concepts, methods, sources, methods of doing business, patterns,
processes, compounds, formulae, programs, devices, tools,
compilations of information, development, manufacturing,
purchasing, engineering, computer programs (whether in source code
or object code), theories, techniques, procedures, strategies,
systems, designs, works of art, the identity of and any information
concerning affiliates or customers, or potential customers,
information received from others that the Company is obligated to
treat as confidential or proprietary, and any other technical,
operating, financial, and other business information that has
commercial value, whether relating to the Company, its business,
potential business, operations, or finances, or the business of any
of the Company's affiliates, subsidiaries, related entities,
clients, customers, suppliers, vendors, licensees, or licensors,
that Employee may develop or of which Employee may acquire
knowledge during his employment with the Company, or from his
colleagues while working for the Company, whether prior to, during,
or subsequent to his execution of this Agreement, and all other
business affairs, methods, and information not readily available to
the public (collectively, "Confidential Information"). Confidential
Information does not include: (i) Employee's general skills and
experience; (ii) information that was lawfully in Employee's
possession prior to his employment with the Company (other than
through breach by a third party of any confidentiality obligation
to the Company); (iii) information that is or becomes publicly
available without any direct or indirect act or omission on
Employee's part; (iv) information that is required to be disclosed
pursuant to any applicable law, regulation, judicial or
administrative
order or decree, or request by other regulatory organization
having authority pursuant to the law; provided, however, that
Employee shall first have given reasonable notice to the Company
prior to making such disclosure; or (v) information that is
generally known within the industries or trades in which the
Company transacts business.
Employee acknowledges and agrees that each and every part of the
Company's Confidential Information: (a) has been developed by the
Company at significant effort and expense; (b) is sufficiently
secret to derive economic value from not being generally known to
other parties; (c) is proprietary to and a trade secret of the
Company and, as such, is a valuable, special, and unique asset of
the Company; and (d) constitutes a protectable business interest of
the Company. Employee further acknowledges and agrees that any
unauthorized use or disclosure of any Confidential Information by
Employee will cause irreparable harm and loss to the Company.
Employee acknowledges and agrees that the Company owns the
Confidential Information. Employee agrees not to dispute, contest,
or deny any such ownership rights either during or after Employee's
employment with the Company.
In recognition of the foregoing, Employee covenants and agrees
as follows:
i. Employee will use Confidential Information only in the
performance of his duties and obligations hereunder for the
Company. Employee will not use Confidential Information, directly
or indirectly, at any time during or after his employment with the
Company, for his personal benefit, for the benefit of any other
person or entity, or in any manner adverse to the interests of the
Company. Further, Employee will keep secret all Confidential
Information and will not make use of, divulge, or otherwise
disclose Confidential Information, directly or indirectly, to
anyone outside of the Company, except with the Company's prior
written consent;
ii. Employee will take all necessary and reasonable steps to
protect Confidential Information from being disclosed to anyone
within the Company who does not have a need to know the information
and to anyone outside of the Company, except with the Company's
prior written consent;
iii. Employee shall not at any time remove, copy, download, or
transmit any information from the Company during the term of this
Agreement, except for the benefit of the Company and in accordance
with this Agreement and the Company's policies; and
iv. Promptly upon Employee's termination, and in any event no
later than five (5) business days after Employee's employment with
the Company ceases, Employee shall return to the Company any and
all Confidential Information in his possession, custody, or
control, including but not limited to all memoranda, notes,
records, plans, reports, forecast, marketing information, financial
records and information, employee or contractor records and files,
client lists, training materials, trade secrets, and all other
documents (and all copies thereof), whether in electronic or hard
copy form, which Employee obtained while employed by the Company or
otherwise serving or acting on behalf of the Company, or which
Employee may then possess or have under Employee's control.
b. Duration of Covenant. Employee acknowledges and agrees that
his obligations under this Section 5 of the Agreement shall remain
in effect forever. Notwithstanding the foregoing, nothing in this
Agreement shall be construed as, or shall interfere with, abridge,
limit, restrain, or restrict Employee's (or his attorney's) right,
without prior authorization from or notification to the Company:
(i) to engage in any activity or conduct protected by Section 7 or
any other provision of the National Labor Relations Act; (ii) to
communicate with any federal, state, or local government agency
charged with the enforcement and/or investigation of claims of
discrimination, harassment, retaliation, improper wage payments, or
any other unlawful employment practices under federal, state, or
local law, or to file a charge, claim, or complaint with, or
participate in or cooperate with any investigation or proceeding
conducted by, any such agency; (iii) to report possible violations
of federal, state, or local law or regulation to any government
agency or entity, including but not limited, to the extent
applicable, to the U.S. Department of Labor, the Department of
Justice, the Securities and Exchange Commission (the "SEC"), the
Congress, and/or any agency Inspector General, or make other
disclosures that are protected under the whistleblower provisions
of federal, state, or local law or regulation; or (iv) to
communicate directly with, respond to any inquiry from, or provide
testimony before, to the extent applicable, the SEC, the Financial
Industry Regulatory Authority, any other self-regulatory
organization, or any other federal, state, or local regulatory
authority, regarding this Agreement or its underlying facts or
circumstances.
c. Retention of All Other Rights. Employee's obligations under
this Section 5 of the Agreement are in addition to, and not in
place or lieu of, any other statutory or common law obligations
that Employee may have with regard to the maintenance,
preservation, protection, use, and/or disclosure of Confidential
Information, and the Company specifically reserves all rights it
may have against Employee should Employee violate any such
statutory or common law obligations.
6. INJUNCTIVE RELIEF. Employee agrees that it would be difficult
to measure any damages caused to the Company which might result
from any breach by Employee of the covenants and agreements set
forth in Sections 4 and 5 of this Agreement, and that in any event
money damages would be an inadequate remedy for any such breach.
Accordingly, and notwithstanding any other provision of this
Agreement, Employee agrees that if Employee breaches, or the
Company reasonably believes that Employee is likely to breach,
Sections 4 or 5 of this Agreement, the Company shall be entitled,
in addition to all other remedies that it may have, to an
injunction or other appropriate equitable relief to restrain any
such breach. Any award or relief to the Company may, in the
discretion of the court, include the Company's costs and expenses
of enforcement (including reasonable attorneys' fees, court costs,
and expenses). Nothing contained in this Section 6 of the Agreement
or in any other provision of the Agreement shall restrict or limit
in any manner the Company's right to seek and obtain any form of
relief, legal or equitable, and shall not waive the Company's right
to any other relief related to any dispute arising out of this
Agreement or related to Employee's employment with the Company.
7. WORKS FOR HIRE. As it is used in this Section 7 of the
Agreement, the term "Inventions" means all discoveries, designs,
creations, developments, improvements, methods, techniques,
practices, methodologies, data models, databases, scripts,
know-how, processes, algorithms, application program interfaces,
software programs, software source documents and training manuals,
codes and formulae, works of authorship, ideas, inventions, and
contributions of any kind, whether or not they are patentable or
registrable under federal or state copyright laws or similar
statutes or protectable under common-law principles, and regardless
of their form or state of development, that are made or conceived
by Employee, alone or with others, or while Employee was serving as
a consultant to the Company. Notwithstanding anything else in this
Agreement, this Section 7 shall not apply to an Invention for which
no software program, application program interface, equipment,
supplies, resources, facilities, data, products, information,
materials, or trade secret information of the Company was used, and
which was developed entirely on Employee's own time, unless the
Invention: (i) relates to the Company's business or potential
business; or (ii) results from tasks assigned to Employee by the
Company or from work performed by Employee for the Company.
All Inventions are exclusively the property of the Company.
Employee will promptly disclose in writing, in full detail to
persons authorized by the Company, all Inventions which Employee
makes during his employment with the Company and for a period of
one (1) year immediately following the end of Employee's employment
with the Company, which relate either to Employee's work assignment
at the Company, or to the Company's trade secrets or confidential
or proprietary information, for the purpose of determining the
Company's rights in each such Invention. Employee will not file any
patent application relating to any such Invention without the prior
written consent of the Company's Chief Executive Officer or his/her
designee. If Employee does not prove that Employee made the
Invention entirely after leaving the Company's employment, the
Invention is presumed to have been made during the period of time
Employee was employed by the Company.
All Inventions will belong solely to the Company from
conception. The Company shall be the sole owner of all issued
patents, pending patent applications, copyrights, domain names,
trade secrets, trademarks, service marks, and all other
intellectual property or other rights (collectively, the
"Proprietary Rights") in connection with all Inventions in the
United States and/or in any other country. Employee further
acknowledges and agrees that such Inventions and other works of
authorship are "works made for hire" as defined in the U.S.
Copyright Law, 17 U.S.C. -- 101 et seq. (as amended), prepared by
Employee within the scope of his employment with the Company, for
purposes of the Company's rights under copyright laws. To the
extent that title to any Invention or any materials comprising or
including any Invention, including all Proprietary Rights embodied
therein, does not, by operation of law, vest in the Company, or is
not considered "works made for hire," Employee hereby irrevocably
assigns to the Company all of his rights, title and interest to
that Invention, including all Proprietary Rights embodied therein,
free of all encumbrances and restrictions. At any time during or
after Employee's employment with the Company that the Company
requests, Employee will take any action, including signing whatever
written documents of assignment the Company deems reasonably
necessary, to formally evidence Employee's irrevocable assignment
to the Company of any Invention and all related Proprietary Rights,
and, upon the Company's request, he shall deliver to the Company
any documents which the Company deems necessary to effect the
transfer or prosecution of rights for all Inventions and
Proprietary Rights in the United States and/or in any other
country. At all times during and after Employee's employment with
the Company, Employee will assist the Company in obtaining,
maintaining and renewing patent, copyright, trademark and other
appropriate protection for any Invention, in the United States and
in any other country, at the Company's expense. In the event that
the Company is unable, after reasonable effort, to secure
Employee's signature on any document or documents needed to apply
for or prosecute any patent, copyright, domain name, trademark, or
other right or protection relating to an Invention, for any other
reason whatsoever, Employee hereby irrevocably designates and
appoints the Company and its duly authorized officers and agents as
his agent and attorney-in-fact, to act for and on Employee's behalf
to execute and file any such application or applications, and to do
all other lawfully permitted acts to further the prosecution and
issuance of patents, copyrights, domain names, trademarks, or
similar protections thereon with the same legal force and effect as
if executed by Employee. Employee hereby waives all rights of
publicity, moral rights or droit morale, and agrees not to enforce
or permit others to enforce such rights against the Company or its
successors in interest.
On Schedule A, which is an integral part of this Agreement,
Employee has completely identified (without disclosing any trade
secret, proprietary or other confidential information) every
Invention he made before his employment with the Company in which
Employee has an ownership interest and which is not the subject
matter of an issued patent or a printed publication at the time
Employee signs this Agreement. If Employee becomes aware of any
projected or actual use of any such Invention by the Company,
Employee will promptly notify the Company in writing of said use.
Except as to the Inventions listed on Schedule A or those which are
the subject matter of an issued patent or a printed publication at
the time Employee signs this Agreement, Employee will not assert
any rights against the Company with respect to any Invention made
before his employment with the Company.
8. NOTICES. Any notice or other communication required or
permitted to be given hereunder shall be in writing and shall be
deemed to have been given (i) when delivered personally or by hand
(with written confirmation of receipt); (ii) if sent by a
nationally-recognized overnight courier, on the date received by
the addressee (with written confirmation of receipt); or (iii) on
the date sent by electronic mail or facsimile (with confirmation of
transmission), to the recipient(s) and address(es) specified below
(or to such other recipient and/or address as either Party may,
from time to time, designate in writing in accordance with the
terms and conditions of this Agreement):
If to Employee:
Robert Dickey IV
320 West Mermaid Lane
Philadelphia, PA 19118
robdickey4@gmail.com
If to the Company:
Graham G. Lumsden
Motif BioSciences Inc.
125 Park Avenue, Suite 2622
New York, NY 10017
graham.lumsden@motifbio.com
9. LEGAL REPRESENTATION. Employee acknowledges that he was
advised to consult with, and has had ample opportunity to receive
the advice of, independent legal counsel before executing this
Agreement - and the Company hereby advises Employee to do so - and
that Employee has fully exercised that opportunity to the extent he
desired. Employee acknowledges that he had ample opportunity to
consider this Agreement and to receive an explanation from such
legal counsel of the legal nature, effect, ramifications, and
consequences of this Agreement. Employee warrants that he has
carefully read this Agreement, that he understands completely its
contents, that he understands the significance, nature, effect, and
consequences of signing it, and that he has agreed to and signed
this Agreement knowingly and voluntarily of his own free will, act,
and deed, and for full and sufficient consideration.
10. ENTIRE AGREEMENT; AMMENT. This Agreement, together with all
exhibits and schedules annexed hereto and any agreements and/or
awards that have been or shall be made pursuant to Section 2(b) of
this Agreement, constitutes the entire agreement between the
Parties relating to the subject matter hereof, and supersedes and
cancels all prior agreements and understandings, whether oral or
written, with respect to the same. In entering into and performing
under this Agreement, neither the Company nor Employee has relied
upon any promises, representations, or statements except as
expressly set forth herein or in any agreements and/or awards that
have been or shall be made pursuant to Section 2(b) of this
Agreement. No modification, alteration, amendment, revision of, or
supplement to this Agreement shall be valid or effective unless the
same is memorialized in a writing signed by both by Employee and a
duly-authorized representative or agent of the Company. Neither
e-mail correspondence, text messages, nor any other electronic
communications constitutes a writing for purposes of this Section
10 of the Agreement.
11. GOVERNING LAW. This Agreement shall in all respects be
interpreted, enforced, and governed by and in accordance with the
internal substantive laws (and not the laws of choice of laws) of
the State of New York.
12. ASSIGNMENT. This Agreement shall not be assignable by
Employee, but shall be binding upon Employee and upon his heirs,
administrators, representatives, executors, and successors. This
Agreement shall be freely assignable by the Company without
restriction and shall be deemed automatically assigned by the
Company with Employee's consent in the event of any sale, merger,
share exchange, consolidation, or other business reorganization.
This Agreement shall inure to the benefit of the Company and its
successors and assigns.
13. SEVERABILITY. If one or more of the provisions of this
Agreement is deemed void by law, then the remaining provisions
shall continue with full force and effect and, if legally
permitted, such offending provision or provisions shall be replaced
with an enforceable provision or enforceable provisions that as
nearly as possible effects the Parties' intent. Without limiting
the generality of the foregoing, the Parties hereby expressly state
their intent that, to the extent any provision of this Agreement is
deemed unenforceable due to the scope, whether geographic,
temporal, or otherwise, being deemed excessive, unreasonable,
and/or overbroad, the court, person, or entity rendering such
opinion regarding the scope shall modify such provision(s), or
shall direct or permit the Parties to modify such provision(s), to
the minimum extent necessary to cause such provision(s) to be
enforceable.
14. SURVIVAL. Upon the termination or expiration of this
Agreement, Sections 2(b), 4 through 8, and 10 through 17, shall
survive such termination or expiration, and shall continue, with
full force and effect, in accordance with their respective terms
and conditions.
15. WAIVER. The failure of either Party to insist, in any one or
more instances, upon the performance of any of the terms,
covenants, or conditions of this Agreement or to exercise any right
hereunder, shall not be construed as a waiver or relinquishment of
the future performance of any rights, and the obligations of the
Party with respect to such future performance shall continue with
full force and effect. No waiver of any such right will have effect
unless given in a writing signed by the Party against whom the
waiver is to be enforced.
16. COMPLIANCE WITH SECTION 409A OF THE INTERNAL REVENUE CODE OF
1986, AS AMED ("SECTION 409A").
a. Notwithstanding anything herein to the contrary, to the
maximum extent permitted by applicable law, amounts payable to
Employee pursuant to Sections 3(b)(iii), 3(c)(ii), 3(d)(ii), or
3(e)(ii) of this Agreement shall be made in reliance upon Treas.
Reg. Section 1.409A-1(b)(9) (Separation Pay Plans) or Treas. Reg.
Section 1.409A-1(b)(4) (Short-Term Deferrals), as applicable. For
this purpose, each payment (including each monthly installment)
shall be considered a separate and distinct payment, and each
payment made in reliance on Treas. Reg. Section 1.409A-1(b)(9)
shall only be payable if the Employee's termination of employment
constitutes a "separation from service" within the meaning of
Treas. Reg. Section 1.409A-1(h).
b. Notwithstanding anything contained in this Agreement to the
contrary, no amount payable on account of Employee's termination of
employment which constitutes a "deferral of compensation" ("Section
409A Deferred Compensation") within the meaning of the Treasury
Regulations issued pursuant to Section 409A of the Code (the
"Section 409A Regulations") shall be paid unless and until Employee
has incurred a "separation from service", and if the 70-day payment
period set forth under Sections 3(b)(iii), 3(c)(ii), 3(d)(ii), or
3(e)(ii) of this Agreement commences in one taxable year and ends
in another, then payment under such section shall not be made until
the second taxable year. For purposes of this Agreement,
"separation from service" shall have the meaning of such term as
defined by the Section 409A Regulations, and each payment shall be
considered a separate and distinct payment. Furthermore, if
Employee is a "specified employee" within the meaning of the
Section 409A Regulations as of the date of Employee's separation
from service, no amount that constitutes Section 409A Deferred
Compensation which is payable on account of Employee's separation
from service shall be paid to Employee before the date (the
"Delayed Payment Date") which is first business day of the seventh
(7th) month after the date of Employee's separation from service
or, if earlier, the date of Employee's death following such
separation from service. All such amounts that would, but for this
Section, become payable prior to the Delayed Payment Date will be
accumulated and paid on the Delayed Payment Date.
c. To the extent that all or any portion of the Company's
payment of benefits or reimbursements or in-kind benefits provided
to Employee (the "Company-Provided Benefits") would constitute
Section 409A Deferred Compensation, then, for the duration of the
applicable period during which the Company is required to provide
such benefits: (a) the amount of Company-Provided Benefits
furnished in any taxable year of Employee shall not affect the
amount of Company-Provided Benefits furnished in any other taxable
year of Employee; (b) any right of Employee to Company-Provided
Benefits shall not be subject to liquidation or exchange for
another benefit; and (c) any reimbursement for Company-Provided
Benefits to which Employee is entitled shall be paid no later than
the last day of Employee's taxable year following the taxable year
in which Employee's expense for such Company-Provided Benefits was
incurred.
d. The Company intends that income provided to Employee pursuant
to this Agreement will not be subject to taxation under Section
409A of the Code. The provisions of this Agreement shall be
interpreted and construed in favor of satisfying any applicable
requirements of Section 409A and the Section 409A Regulations.
However, the Company does not guarantee any particular tax effect
for income provided to Employee pursuant to this Agreement. In any
event, except for the Company's responsibility to withhold
applicable income and employment taxes from compensation paid or
provided to Employee, the Company shall not be responsible for the
payment of any applicable taxes incurred by Employee on
compensation paid or provided to Employee pursuant to this
Agreement.
17. TAXES. The Parties acknowledge and agree that the Company
may withhold from any amounts payable under this Agreement such
federal, state, local, and foreign taxes and withholdings as may be
required to be withheld pursuant to any applicable law, rule, or
regulation.
18. SECTION HEADINGS. The section headings used in this
Agreement are included solely for convenience, and shall not
affect, or be used in connection with, the interpretation of this
Agreement.
19. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original copy
of this Agreement and all of which, when taken together, will be
deemed to constitute one and the same agreement.
IN WITNESS WHEREOF, the Parties have executed this Agreement as
of the day and year first above written.
EMPLOYEE: MOTIF BIOSCIENCES INC.
/s/ Robert Dickey IV By: /s/ Graham G. Lumsden
-------------------- -----------------------
Robert Dickey IV Graham G. Lumsden
Chief Executive Officer
SCHEDULE A
INVENTIONS EMPLOYEE MADE PRIOR TO THE COMMENCEMENT OF HIS
EMPLOYMENT WITH THE COMPANY, IN WHICH HE HAS AN OWNERSHIP INTEREST,
WHICH ARE NOT THE SUBJECT MATTER OF ISSUED PATENTS OR PRINTED
PUBLICATIONS:
(If there are none, please enter the word "NONE")
NOTE: Please describe each such Invention without disclosing
trade secrets, proprietary or confidential information.
NONE
[Attach additional sheets if more space is needed.]
Exhibit 4.18
CONSULTING AGREEMENT
Effective Date: January 16, 2017
THIS CONSULTING AGREEMENT (this "Agreement") is entered into by
and between Motif Biosciences, Inc., a Delaware corporation (the
"Company"), and Pete A. Meyers, an individual ("Consultant"), as of
the date set forth above (the "Effective Date").
WHEREAS, the Consultant was previously the Chief Financial
Officer of the Company ("CFO"); and
WHERAS, the Company wishes to obtain the services of Consultant
for a three month period to facilitate the transition of the
Consultant's prior duties as the CFO of the Company to the
Company's new CFO, and Consultant wishes to provide such services,
all subject to the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants
contained herein, the Company and Consultant hereby agree to be
legally bound as follows:
1. Services. During the Term, Consultant shall assist the new
CFO of the Company as requested by the Company (the "Services").
The Services will be performed in a professional manner and will be
performed remotely and/or at the offices of the Company as
reasonably requested by the Company
2. Compensation. In connection with the Services, the Company
shall pay Consultant as follows: (a) thirty thousand dollars
($30,000) for the first month of Services; (b) ten thousand dollars
($10,000) for the second month of Services; and (c) ten thousand
dollars ($10,000) for the third and final month of Services. Such
amounts shall be paid at the end of each month. The Company shall
reimburse Consultant for all reasonable expenses incurred by
Consultant in connection with the performance of the Services,
including travel expenses. Additionally, the Company agrees to
amend Consultant's existing stock option grant of April 21, 2016
(the "Grant") to (1) provide that 740,394 of the stock options
granted will vest on May 1, 2017, provided that the Consultant
performed the Services as provided herein, (2) Consultant will be
able to exercise such vested options under the Grant at any time
until December 31, 2018 and (3) in the event that Consultant makes
any disparaging remarks regarding the Company or is in breach of
Section 7 of the Confidential Separation and Release Agreement
entered into by the Company and Consultant dated January 13, 2017,
any right to exercise any vested options under the Grant shall
immediately terminate. All shares you receive upon exercise of
vested options under the Grant shall be subject to reasonable
lock-up periods as reasonably determined by the Company.
3. Term. The term of this Agreement shall begin on the Effective
Date and shall continue for three (3) months thereafter (the
"Term").
4. Confidentiality.
4.1 Company Confidential Information. Consultant shall hold in
strict confidence, and not to use, except for the benefit of the
Company, and not to disclose to any person or entity without
written authorization of the Company, any Confidential Information
(as defined below) of the Company. "Confidential Information" means
any proprietary or confidential information, technical data, trade
secrets or know-how, including, but not limited to, research,
product plans, products, services, customer lists and customers,
markets, software, developments, inventions, processes, formulas,
technology, designs, drawings, engineering, marketing, distribution
and sales methods and systems, sales and profit figures, finances
and other business information disclosed to Consultant by or on
behalf of the Company, either directly or indirectly, whether in
writing, orally or by drawings or inspection of documents or other
tangible property; provided, that Confidential Information shall
not include any of the foregoing items to the extent they have
become publicly known and made generally available through no
wrongful act of Consultant.
4.2 Third Party Information Held by Consultant. Consultant shall
not improperly use or disclose to the Company or any of its
directors, officers, employees or agents, any Confidential
Information of any current or former client or other person or
entity with whom Consultant has an agreement or duty to keep such
information confidential, and that Consultant shall not bring onto
the premises of the Company any such information in any medium
unless consented to in writing by such client, person or
entity.
4.3 Third Party Information Held by the Company. Consultant
recognizes that the Company has received, and in the future may
receive, from third parties Confidential Information subject to a
duty on the Company's part to maintain the confidentiality of such
information and to use it only for certain limited purposes.
Consultant shall hold all such information in strict confidence and
not disclose it to any person or entity or use it except as
necessary in carrying out Services, consistent with the Company's
agreement with such third party. For purposes of this Agreement,
such third party information shall be deemed part of the
Confidential Information of the Company.
4.4 Required Disclosure of Confidential Information. If
Consultant is required by law or court or governmental order to
disclose Confidential Information, Consultant shall give the
Company prompt written notice of such requirement such that the
Company shall have the opportunity to apply for a protective order,
injunction or for confidential treatment of such Confidential
Information.
5. Miscellaneous.
5.1 Assignment; No Third Party Beneficiaries. Neither party may
assign this Agreement without the prior written consent of the
other party. All of the terms and provisions of this Agreement
shall be binding upon and inure to the benefit of and be
enforceable by the respective heirs, executors, administrators,
legal representatives, successors and permitted assigns of the
parties. Nothing in this Agreement, express or implied, is intended
to confer on any person or entity other than the parties hereto or
their respective successors and permitted assigns, any benefits,
rights or remedies.
5.2 Governing Law, Jurisdiction and Attorney Fees. This
Agreement shall be governed by and interpreted in accordance with
laws of the State of Delaware without giving effect to any conflict
of laws provisions. Consultant agrees that any dispute or
controversy arising out of or relating to any interpretation,
construction, performance or breach of this Agreement may be
brought in the United States District Court in Delaware, or if such
court does not accept jurisdiction or will not accept jurisdiction,
in any court of general jurisdiction in the State of Delaware.
5.3 Entire Agreement, Amendment and Waiver. This Agreement
(including the schedules hereto) is the sole agreement between
Consultant and the Company with respect to the Services and it
supersedes all prior agreements and understandings with respect
thereto, whether oral or written. No amendment, supplement or other
modification to any provision of this Agreement shall be binding
unless in writing and signed by both Consultant and the Company. No
waiver of any rights under this Agreement shall be effective unless
in writing signed by the party to be charged. A waiver of a breach
or violation of any provision of this Agreement will not constitute
or be construed as a waiver of any subsequent breach or violation
of that provision or as a waiver of any breach or violation of any
other provision of this Agreement.
5.4 Severability. If any provision of this Agreement or
application thereof to anyone or under any circumstances is
adjudicated to be invalid or unenforceable in any jurisdiction,
such invalidity or unenforceability shall not affect any other
provision or application of this Agreement which can be given
effect without the invalid or unenforceable provision or
application and shall not invalidate or render unenforceable such
provision or application in any other jurisdiction.
5.5 Headings. The headings in this Agreement are intended solely
for convenience or reference and shall be given no effect in the
construction or interpretation of this Agreement.
5.6 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original as
against any party whose signature appears thereon, but all of which
together shall constitute but one and the same instrument.
IN WITNESS WHEREOF, the undersigned, intending to be legally
bound, have duly executed this Agreement as of the Effective
Date.
MOTIF BIOSCIENCES, INC. CONSULTANT
/s/ Graham G. Lumsden /s/ Pete A Meyers
----------------------- -----------------
Authorized Signature Pete A Meyers
Name: Graham G. Lumsden
Title: CEO
Exhibit 4.19
CONFIDENTIAL SEPARATION AGREEMENT AND RELEASE
THIS CONFIDENTIAL SEPARATION AGREEMENT AND RELEASE (the
"Agreement") is made and entered into by and between Pete A. Meyers
("Meyers") and Motif BioSciences Inc., (the "Company")
(collectively, the "Parties")
WHEREAS, Meyers was employed by the Company pursuant to an
Employment Agreement, dated May 1, 2016 (the "Employment
Agreement");
WHEREAS, the Parties wish memorialize the terms and conditions
of the termination of Meyers' employment by the Company;
NOW THEREFORE, in consideration of the covenants, promises, and
other good and valuable consideration set forth herein, it is
agreed by and between the Parties as follows:
1. Separation of Employment. Meyers agrees that his employment
with the Company will terminate effective as of January 13, 2017
(the "Separation Date"). Meyers agrees that from and after the
Separation Date, he will no longer be, nor hold himself out as, an
employee, officer, representative or agent of the Company. Meyers
agrees that, on or before the Separation Date, he will resign from
all Board, officer or other positions with the Company and will
take all necessary actions to effect such resignation, including
signing the necessary resignation letters and other documents.
Meyers shall be paid his current annual salary through the
Separation Date, less applicable withholdings and authorized
deductions. Meyers shall be entitled to reimbursement for
reasonable business expenses incurred on or before the Separation
Date, provided Meyers submits appropriate supporting receipts and
documentation to Graham Lumsden, CEO within ten (10) business days
after the Separation Date; reimbursements will be made at such time
and in such manner as provided for by the Company's normal policies
and practices governing such payments.
2. Severance Benefits. Subject to Meyers' execution and
non-revocation of this Agreement, and in consideration of the
releases and covenants given by Meyers in this Agreement, the
Company shall pay Meyers an amount equal to one hundred fifty
thousand dollars ($150,000), less applicable withholdings and
authorized deductions (the "Severance Benefits"). For purposes of
clarity, the payment provided in this Section 2(a) shall satisfy
the Company's obligations pursuant to Section 3(b) of the
Employment Agreement.
3. Acknowledgments. Meyers acknowledges and agrees that:
a. The Severance Benefits are in lieu of and in full
satisfaction of any amounts that might otherwise be payable under
any contract, plan, policy or practice, past or present, of the
Company, and any of its affiliates, including but not limited to
the Employment Agreement (other than the Consulting Agreement
entered into by the parties as of January 16, 2017 (the "Consulting
Agreement")).
b. The Severance Benefits provide valid and sufficient
consideration for Meyers' undertakings pursuant to this Agreement,
are in addition to what Meyers would otherwise be entitled, and
would not be made but for Meyers' execution of this Agreement.
c. Except as set forth in Section 2 above and other than as
provided under the Consulting Agreement and the Stock Option Grant
dated April 21, 2016 (as to be amended pursuant to the Consulting
Agreement), Meyers is not entitled to and will not at any time seek
or receive any further consideration from the Company, including
any compensation, bonus, incentive compensation, equity securities
or benefits of any kind.
d. After the Separation Date, Meyers will not be entitled to
participate in, or continue to participate in, any benefit programs
offered by the Company to its employees. Any accrued or vested
amounts or benefits due to Meyers will be treated in accordance
with the Company's benefit plans, programs, or policies, as
applicable. Meyers will receive, under separate cover, information
concerning his right to continue health insurance benefits (at his
own expense after the Separation Date in accordance with the
Consolidated Omnibus Budget Reconciliation Act of 1985, as amended
("COBRA").
4. Release and Waiver of Claims.
a. As a material inducement to the Company to enter into this
Agreement, Meyers, for himself and his heirs, successors, and
assigns, hereby forever releases and discharges, to the fullest
extent permitted by law, the Company, its owners, investors,
parents, subsidiaries, affiliated corporations, related entities,
divisions, predecessors, successors and assigns, and its and their
respective directors, officers, partners, principals, shareholders,
attorneys, agents, representatives, employees, insurers, trustees,
heirs, executors, and administrators, past and present
(collectively, the "Released Parties") from any and all claims,
demands, actions, and causes of action of any kind whatsoever, past
or present, known and unknown, whether in law or in equity, which
Meyers ever had, now has, or may have against the Released Parties
arising at any time up to and including the date of his execution
of this Agreement, including but not limited to:
(i) all claims directly or indirectly relating to or arising out
of Meyers' employment with the Company and the termination of
same
(ii) all claims under any federal, state or local statute or
ordinance, including without limitation all claims under Title VII
of the Civil Rights Act of 1964, the Civil Rights Act of 1991,
Section 1981 of Title 42 of the United States Code, the Age
Discrimination in Employment Act ("ADEA"), the Older Workers
Benefit Protection Act ("OWBPA"), the Americans with Disabilities
Act, the Employee Retirement Income Security Act of 1974, the
Family and Medical Leave Act of 1993, the Fair Labor Standards Act,
the Equal Pay Act, the Genetic Information Nondiscrimination Act,
the Sarbanes-Oxley Act of 2002, the New York State Human Rights
Law, the New York City Human Rights Law, the New York Labor Code,
each as amended, and any other federal, state, or local law, rule,
or regulation pertaining to employment;
(iii) all claims under any express or implied contract or claims
under any common law theory, including claims for unjust
enrichment, negligence, defamation, failure to hire, wrongful
discharge, intentional and unintentional torts, breach of the
covenant of good faith and fair dealing, fraud, retaliation,
harassment or discrimination; and
(iv) all claims for compensation or damages of any type
whatsoever, including but not limited to, back pay, front pay,
wages, economic loss, compensatory damages, emotional distress,
pain and suffering, liquidated and punitive damages, attorneys'
fees, expenses and costs.
b. Notwithstanding the generality of the foregoing, nothing here
constitutes a release or waiver by Meyers of: (i) any claim or
right based on any facts or set of facts that may arise after the
execution of this Agreement; (ii) any claim that may not be waived
under law, including claims for unemployment or workers
compensation benefits; (iii) the right to provide information to,
file a charge with, or participate in an investigation by a
governmental agency; and (iv) any claim or right Meyers may have
under this Agreement. Provided, however, that Meyers acknowledges
and agrees that, if he pursues, or someone pursues on his behalf, a
claim that is not waived as set forth in this Section 4(b), Meyers
hereby waives and disclaims any right to individual recovery for
such claim, including money damages or other relief, except that
this limitation on monetary recovery will not apply to claims for
unemployment or workers compensation benefits or to administrative
proceedings before the U.S. Securities and Exchange Commission.
Moreover, nothing in this Agreement limits or waives Meyers' right,
pursuant to the OWBPA, to seek a judicial determination of the
validity of this Agreement's waiver of claims under the ADEA.
5. Covenant Not to Sue. Meyers represents that he has not, prior
to signing this Agreement, filed any suit, proceeding, complaint,
charge, grievance, arbitration, or claim against the Company or any
of the Released Parties in any forum. Meyers further represents
that he has not assigned or transferred, or purported to assign or
transfer, to any person or entity any claim or other matter
released in this Agreement. Meyers further agrees that, to the
fullest extent permitted by law, he will not institute nor consent
to allow any other person or entity to institute on his behalf
against the Company or any of the Released Parties any claim,
lawsuit, or proceeding with any forum in any way relating to or
arising out of any claim or other matter released in this
Agreement. In the event any action or claim is brought in violation
of this section, Meyers understands that the General Release and
Waiver set forth in Section 4 will completely bar any recovery or
relief obtained on his behalf, whether monetary or otherwise, by
any person or entity with respect to any of the claims that he has
released in this Agreement.
6. Return of Property. Within five (5) business days following
the Separation Date, Meyers shall return to the Company all Company
Property, whether tangible or intangible, whether created by Meyers
or not, that is in his custody, possession or control. "Company
Property" includes, but is not limited to, any and all originals,
copies, excerpts and synopses of any files, notes, documents,
records, computer disks, printouts, video recordings, audio
recordings, correspondence on Company letterhead, communications
(including without limitation correspondence, e-mails and text
messages) and other methods of storing information which pertain
to, relate to, constitute, contain or reference the Company's
business or Confidential Information.
7. Non-Disparagement. Meyers agrees that he will not take any
actions, make any statements, or knowingly cause others to take any
actions or make any statements that disparage, derogate, or defame
the Company or any other Released Party. Nothing in this Agreement
shall prevent Meyers from providing information to or participating
in a proceeding before a court, administrative agency, or other
governmental body, or as otherwise required by law.
8. No Disclosure. Meyers agrees to keep the existence and terms
of this Agreement confidential, except that Meyers may tell his
immediate family, attorneys, and accountants, if any, of the
Agreement as needed, but only if any individual he tells about this
Agreement agrees to maintain the confidentiality of this Agreement.
This Section shall not prohibit disclosure (a) as may be necessary
for the prosecution of claims relating to the performance or
enforcement of this Agreement or (b) as may be ordered by any
regulatory agency or court or as required by other lawful
process.
9. Continuing Obligations. Meyers agrees to comply with the
sections of his Employment Agreement titled "Restrictive
Covenants," "Confidentiality," and "Works For Hire" by their terms,
as if set forth expressly herein, and acknowledges that his
obligations set forth in such sections survive the termination of
his employment with the Company.
10. Non-Admission of Liability. This Agreement is entered into
voluntarily by the Parties in order to bring a mutually agreeable
resolution to the termination of Meyers' employment with the
Company. This Agreement is not, and shall not in any way be
construed as, an admission by the Company of any fault, liability,
or wrongdoing of any kind. The Company specifically disclaims on
the part of the Company, its respective directors, officers,
executives, employees, representatives and agents, any liability to
or wrongful acts against Meyers or any other person.
11. Choice of Law; Venue. This Agreement shall be interpreted,
governed by, and construed in accordance with the laws of the State
of New York, without giving effect to its conflict of law
principles. Any claims arising out of or relating to this
Agreement, the execution of this Agreement, or the waiver of claims
in this Agreement shall be brought exclusively in the state courts
of New York or, if the jurisdictional prerequisites are met, in the
United States District Court for the Southern District of New York;
the Parties agree and consent to the jurisdiction of and venue in
those courts.
12. Injunctive Relief. Meyers acknowledges and agrees that any
breach of his covenants and other obligations set forth in Sections
5 through 9, inclusive, will cause irreparable harm to the Company
that is incapable of calculation and for which monetary damages
will be grossly inadequate. Meyers therefore acknowledges and
agrees that in the event of a breach or threatened breach of
Sections 5 through 9, inclusive, the Company shall be entitled to
immediate injunctive or other preliminary or equitable relief, as
appropriate and without the requirement to post any bond, in
addition to all other remedies available at law and equity. The
Company shall be entitled to recover all reasonable attorneys' fees
and costs incurred with respect to any action brought to enforce
its rights under this Paragraph 12.
13. Severability. It is the desire and intent of the Parties
that the provisions of this Agreement shall be enforced to the
fullest extent permissible under the laws and public policies
applied in each jurisdiction in which enforcement is sought. In the
event that any one or more of the provisions of this Agreement
shall be held to be invalid, illegal, or unenforceable, the
validity, legality and enforceability of the remaining provisions
shall not in any way be affected or impaired thereby. Provided,
however, that if either of both of the General Release and Waiver
in Section 4 or the Covenant Not to Sue in Section 5 are held to be
invalid, illegal, or unenforceable, then Meyers acknowledges and
agrees that (a) he will be required to enter into a new agreement
containing an enforceable release of all legally waivable claims
against the Released Parties and a promise to not file any legal
proceeding against any of the Released Parties based on such
released claims and (b) the Severance Benefits will constitute
sufficient consideration for his entering into such new
agreement.
14. Entire Agreement; Amendment. This Agreement sets forth the
entire agreement and understanding between the Parties and fully
supersedes and replaces any and all prior agreements or
understandings (whether oral or written) between the Parties
pertaining to the subject matter hereof; provided however, that
nothing in this Agreement shall impair Meyer's obligations under
the Employment Agreement that survive termination of his
employment, as set forth in Section 9 above. The Parties
acknowledge and agree that in signing this Agreement, they have not
relied upon any representation, promise or inducement that is not
expressly set forth in this Agreement. This Agreement may be
amended or modified only with the written consent of the Company.
No oral waiver, amendment or modification will be effective under
any circumstances whatsoever.
15. Acknowledgments, Consideration and Revocation Period.
a. Meyers acknowledges and represents that he has carefully read
this Agreement, knows its contents, and understands its terms. By
signing this Agreement, Meyers acknowledges that he does so same
freely and voluntarily, without any compulsion, duress or undue
influence from anyone.
b. Meyers acknowledges that he has been advised in writing (by
this Agreement) that he has the right to consult with an attorney
of his choosing concerning the legal significance of this Agreement
prior to signing it.
c. Meyers acknowledges that (i) by entering into this Agreement,
he is releasing and waiving valuable rights and claims, including
specifically, but not limited, any rights and claims that may exist
under the ADEA; (ii) the waiver and release of claims set forth in
Section 4 and the promise not to sue set forth in Section 5 do not
apply to any rights or claims that may arise under the ADEA after
the date of execution of this release, nor do they apply to his
right to challenge the validity of this Agreement's waiver and
release of claims under the ADEA.
d. Meyers shall have a period of 21 days from the date on which
a copy of this Agreement has been delivered to him to consider
whether to sign it and return a signed copy to the Company to
Graham Lumsden, CEO in person, by mail, or by email at
graham.lumsden@motifbio.com. Any modifications, material or
otherwise, made to this Agreement do not restart or affect in any
manner the original twenty-one (21) day consideration period.
Meyers acknowledges that if he signs and returns this Agreement
before the expiration of the 21-day period, he will have done so
knowingly and voluntarily and will have waived the remainder of the
21-day period.
e. If Meyers signs the Agreement, he then has a period of 7 days
following the date of signing (the "Revocation Period") to revoke
his acceptance of the Agreement. Any revocation must be in writing
and received by Graham Lumsden, CEO in person, by mail, or by email
at graham.lumsden@motifbio.com on or prior to the end of seventh
day in order to be effective. A letter of revocation that is not
received by the seventh day after Meyers has signed the Agreement
will be invalid and will not revoke this Agreement. If no
revocation occurs, this Agreement shall become effective on the
eighth day after it is signed by Meyers (the "Effective Date").
16. Counterparts. This Agreement may be executed in any number
of counterparts, which together shall be effective as if they were
a single document. Signatures on the Agreement transmitted by email
or facsimile copy shall have the same force and effect as original
signatures.
WHEREFORE, the Parties to this Agreement, intending to be
legally bound, have caused this Agreement to be executed as of the
date(s) set forth below.
Pete Meyers Motif BioSciences lnc.
/s/ Pete Meyers By: /s/ Graham G. Lumsden
----------------------- ---------------------------
Graham G. Lumsden
CEO
Date: 1/5/17 Date: January 5, 2017
---------------- -------------------------
Exhibit 4.20
INDEPENT CONTRACTOR AGREEMENT
This Independent Contractor Agreement (the "Agreement") is
entered into on this 7th day of April, 2017, between Motif
BioSciences Inc. ("Motif"), and Jonathan E. Gold ("Consultant"),
each a "Party" and, collectively, the "Parties."
RECITALS
WHEREAS, Consultant currently serves as a Non-Executive Director
for Motif Bio plc ("Motif Bio") and receives certain remuneration
for such service; and
WHEREAS, effective upon the Effective Date (as defined below),
Motif wishes to engage Consultant to provide certain consulting
services to Motif; and
WHEREAS, Consultant and Motif desire to enter into a binding
agreement outlining the terms and conditions of their independent
contractor relationship;
NOW, THEREFORE, in consideration of the mutual terms, covenants,
and promises set forth below, the Parties hereto covenant and agree
as follows:
1. Engagement. Motif hereby engages Consultant pursuant to the
terms and conditions set forth herein, and Consultant hereby
accepts such engagement.
2. Term; Termination.
a) The term of this Agreement and Consultant's engagement by
Motif shall commence on January 1, 2017 (the "Effective Date") and
shall continue for a period of twelve (12) months thereafter (the
"Initial Term") unless terminated earlier as set forth herein.
Following the Initial Term, this Agreement shall automatically
renew on a monthly basis (each such monthly term, a "Renewal Term,"
and, together with the Initial Term, collectively, the "Term")
unless either Party provides written notice of its or his election
not to renew this Agreement at least thirty (30) days prior to the
end of the Initial Term or then applicable Renewal Term. In the
event that either Party provides the required 30-days' notice of
non-renewal, this Agreement and Consultant's engagement by Motif
will be terminated effective upon the expiration of the Initial
Term or then-current Renewal Term.
b) Notwithstanding the foregoing section, (i) either Party may
terminate the Initial Term, and this Agreement and their
relationship, by providing the other Party with ninety (90) days'
written notice of such termination, (ii) Motif may terminate the
Initial Term or any Renewal Term, and this Agreement and its
relationship with Consultant, immediately upon Consultant's breach
of Section 7 (Qualifications), Section 9 (Indemnification), Section
10 (Inventions) or Section 11 (Confidential Information) or a
material breach of any other provision of this Agreement, and (iii)
Consultant may terminate the Initial Term or any Renewal Term, and
this Agreement and its relationship with Motif, immediately upon
Motif's material breach of any provision of this Agreement.
c) Upon any non-renewal or termination of this Agreement and the
Parties' relationship, Consultant shall be entitled only to: (i)
the portion of Consultant's fee (as set forth in Section 4(a) of
this Agreement) that was earned before the effective date of the
non-renewal or termination; and (ii) reimbursement of pre-approved
expenses incurred by Consultant before the effective date of the
non-renewal or termination that are reimbursable pursuant to
Section 4(b) of this Agreement.
3. Scope of Duties; Acknowledgements and Representations.
a) Consultant agrees, and shall use his best efforts, to provide
the consulting services and the deliverables set forth in "Exhibit
A" hereto, and such other services and deliverables as may be
requested or required, from time to time, by Motif (the
"Services").
b) Consultant hereby agrees to devote his reasonable time,
abilities, skills, and energy to the performance of the Services.
Consultant represents and warrants that he has the right and is
free to perform the Services without violating any other agreement
to which he is a party. Consultant further represents and warrants
that he will not use any trade secret, or confidential or
proprietary information, that was obtained, learned, or procured
during any period of employment or engagement prior to or
concurrent with Consultant's engagement by Motif (whether prior to
or following the Effective Date of this Agreement), in connection
with his engagement by Motif or in the performance of the
Services.
d) Consultant acknowledges and agrees that, during and after the
Term, he shall not: (a) enter into any oral or written contract,
agreement, or arrangement on behalf of or in the name of Motif,
sign any checks on behalf of or authorize any payments by Motif, or
otherwise bind Motif, without the express prior written consent of
an officer of Motif; (b) engage in any conduct, or cause Motif to
engage in any conduct, that would result in Motif's breach or
violation of any agreement, law, ordinance, or regulation; or (c)
describe or represent himself, or hold himself out, as an employee
of Motif or any entity owned or controlled, in whole or in part by
Motif, or any entity affiliated with Motif.
4. Compensation, Expenses, and Taxes.
a) Compensation. In consideration for the performance of the
Services and fulfillment of all of Consultant's obligations to
Motif under this Agreement, and as full compensation therefor,
Motif shall pay Consultant a monthly fixed fee of $16,167.00 during
the Term. Consultant shall submit monthly statements to Motif
summarizing the Services performed by Consultant for the
immediately preceding month, no later than fourteen (14) days
following the end of the applicable month being invoiced. Motif
shall pay any such invoices within thirty (30) days of receipt.
Consultant acknowledges and agrees that as long as this Agreement
is in place and notwithstanding any other agreement between Motif
and/or Motif Bio and him, no compensation will be paid to him by
Motif and/or Motif Bio, including but not limited with regards to
his service as a Non-Executive Director of Motif Bio.
b) Expenses. Motif shall reimburse Consultant for all
pre-approved (in writing) business expenses, including travel
expenses, incurred by Consultant in performance of the Services
upon prompt presentment of appropriate and sufficient documentation
supporting the need for such expenses. If Motif objects to any
expense reimbursement request submitted, Motif shall so advise
Consultant within ten (10) business days after receipt thereof;
otherwise, payment shall be made within thirty (30) business days
following Motif's receipt of such request. Except as set forth in
Section 4(a) and this Section 4(b) of the Agreement, Consultant
shall be solely responsible, and shall not be reimbursed by Motif,
for all other costs, fees, and/or expenses incurred by Consultant
in rendering the Services.
c) Form W-9. Consultant shall provide Motif with a signed and
completed IRS Form W-9 upon execution of this Agreement. Payment
will be made to the entity named on the IRS Form W-9. Consultant
hereby agrees to notify Motif immediately upon any change of
taxpayer information found on the IRS Form W-9.
d) Taxes. Motif shall not withhold any taxes from any payment it
makes to Consultant, nor make any contributions to any federal,
state, or local agency with respect to such payments on behalf of
Consultant, but shall report the payments made to Consultant
hereunder on an IRS Form 1099. Consultant and Motif acknowledge
that Motif intends to deduct the fees it pays to Consultant for the
Services as an ordinary and necessary business expense for income
tax purposes. Consultant agrees and represents that, except as
otherwise required in writing by the Internal Revenue Service: (i)
Consultant will treat the such fees as ordinary income for income
tax purposes; (ii) Consultant shall be responsible for withholding,
if applicable, and paying, when due, all taxes, including estimated
taxes, incurred, imposed, or assessed as a result of Consultant's
receipt of such fees from Motif, including but not limited to
income taxes and self-employment taxes of Consultant ("Consultant's
Taxes"); and (iii) if Consultant reports the receipt of such fees
other than as ordinary income and/or fails to withhold, if
applicable, or pay Consultant's Taxes, Consultant will indemnify
and hold harmless Motif from any and all taxes, penalties,
interest, costs, and expenses actually incurred, including
reasonable attorneys' fees and accounting fees, or assessed against
Motif as a result thereof.
5. Independent Contractor Status. The Parties acknowledge and
agree that Consultant enters into this Agreement as, and shall at
all times act as, be considered, and remain, an independent
contractor of Motif. The Parties further acknowledge and agree that
this Agreement shall not, at any time, be construed as creating any
association, partnership, joint venture, employment, or agency
relationship between Consultant, on the one hand, and Motif. As an
independent contractor, Consultant shall:
a) Not be subject to Motif's direct supervision or control with
respect to the performance of the Services (except that he may,
from time to time, receive generalized instructions from Motif
pertaining to the goals to be attained and/or results to be
achieved by Consultant);
b) Comply, at Consultant's own expense, with all provisions of
applicable federal, state, and local law relating to terms and
conditions required to be fulfilled by independent contractors,
including but not limited to all applicable tax and insurance laws
and regulations;
c) Have complete and sole discretion to determine the method,
means, sequence, manner, and schedule pursuant to which the
Services shall be and are performed;
d) Not receive performance reviews or vocational training, nor
shall Consultant be required to work at Motif's facilities or be
subject to the standard disciplinary practices and procedures to
which Motif's employees are subject;
e) Be responsible for maintaining and furnishing, at his own
expense, a place of work, and any tools, supplies, apparel,
equipment, and appropriate communications facilities required for
Consultant to render the Services
f) Except as set forth in this Agreement, not, at any time, be
eligible to participate in any of Motif's employee benefit plans,
fringe benefit programs, group insurance arrangements, or other
similar plans, programs, or arrangements maintained by Motif for
the benefit of its employees, and Consultant shall never claim that
he is or was eligible for, or entitled to, any benefits under any
such plan, program, or arrangement;
g) Not seek, and shall have no right to receive, unemployment
compensation benefits based upon the termination of this Agreement
or his engagement by Motif hereunder;
h) Not receive any statutory benefit that Motif makes available
to its employees, including but not limited to workers'
compensation, Social Security, or unemployment compensation
coverage; and
i) Be solely responsible, to the extent required by applicable
law or regulation, for securing disability, unemployment
compensation, and/or other insurance, and for obtaining workers'
compensation insurance and training for themselves and others, as
necessary.
Consultant agree to never assert or claim that he is or was an
employee of Motif at any time during or after the Term, and, given
that he is an independent contractor and not an employee of Motif,
to never assert any claim seeking wages, employee benefits,
unemployment compensation benefits, or workers' compensation
benefits based upon his consulting relationship with Motif and/or
the termination thereof. Consultant also knowingly and voluntarily
waives any claim against Motif for any benefits provided to Motif's
current or former employees during any period, prior to or
following the commencement of the Term, in which Consultant is
determined to be a common law employee or any designation other
than an independent contractor.
6. Performing Work For Others. The Parties acknowledge and agree
that Consultant's services to Motif shall not be exclusive. The
Parties further acknowledge and agree that, during his engagement
by Motif, Consultant may perform work on behalf of, and provide
services to, persons and entities other than Motif, and may market
and advertise his services to such persons and entities, so long as
Consultant: (a) does not violate any of his obligations under this
Agreement; (b) devotes sufficient time to the performance of the
Services as is necessary for Consultant to effectively and
efficiently perform all such services and fulfill all of
Consultant's obligations to Motif under this Agreement; and (c)
does not accept or become engaged in projects that create a
conflict of interest with Motif.
7. Qualifications. Consultant represents and warrants to Motif
that Consultant has the qualifications and skills necessary to
perform the Services in a competent, professional manner,
consistent with applicable industry standards, without the advice,
control, or direction of Motif, and is in all respects able to
fulfill the requirements of this Agreement. Consultant's failure or
inability to skillfully perform the Services shall constitute a
material breach of this Agreement. In the event that Consultant,
with Motif's prior written consent, hires any other person,
employee, sub-contractor, agent, or consultant to assist Consultant
with performing the Services, Consultant represents and warrants
that such person or entity shall have the qualifications and skills
necessary to perform the Services in a competent, professional
manner, consistent with applicable industry standards, without the
advice, control, or direction of Motif, and is in all respects able
to fulfill the requirements of this Agreement. Any such person's
failure or inability to skillfully perform the Services shall
constitute a material breach of this Agreement.
8. Hire of Others.
a) Consultant may, with prior written consent of Motif, hire
persons to assist Consultant in performing the Services. Any and
all such persons hired by Consultant to assist in performing the
Services shall be considered and classified as employees of
Consultant, and, in any event, no person, employee, sub-contractor,
agent, or consultant hired by Consultant shall be considered an
employee of Motif, unless specifically indicated otherwise in an
agreement signed by all parties. The Parties acknowledge and agree
that Motif will not have the authority to hire, fire, supervise,
control, or manage any of Consultant's employees. Upon request,
Consultant shall immediately provide Motif with proof of
disability, workers' compensation, and general liability insurance,
to the extent required by law, covering such employees.
b) In the event that Consultant, with Motif's prior written
consent, hires any other person, employee, sub-contractor, agent,
or consultant to assist Consultant with performing the Services,
Consultant will obtain such person's or entity's written
acknowledgement to be bound by the terms of this Agreement,
including without limitation the terms contained in Section 7
(Qualifications), Section 10 (Inventions) and Section 11
(Confidential Information).
9. Indemnification.
a) Consultant agrees to, and hereby does, indemnify, defend,
protect, and hold harmless Motif and its principals, agents, and
affiliated companies of and from any and all claims, actions,
causes of action, demands, losses, costs, expenses, obligations,
liabilities, damages, recoveries, and deficiencies, including
interest, penalties, attorneys' fees, and costs ("Claims"),
asserted against Motif or its affiliates, or that Motif or its
affiliates may suffer or incur, as a result of, predicated upon,
concerning, or arising out of: (a) Consultant's failure to comply
with any representation, covenant, or obligation under, or any
provision of, this Agreement; (b) Consultant's failure, or
allegations that he failed, to pay his employees in accordance with
applicable federal, state, and/or local law; (c) any claims for
wages, benefits, or compensation asserted against Motif by
Consultant or any employee, sub-contractor, or agent hired or
engaged by Consultant (d) any injury, disability, or death of
Consultant, or of any of Consultant's employees, sub-contractors,
or agents, caused other than by a willful or grossly negligent act
or omission committed by Motif, or any employee or agent thereof;
or (e) in accordance with Section 4(d) of this Agreement,
Consultant reporting his receipt of the fees paid by Motif for the
Services other than as ordinary income and/or failing to pay
Consultant's Taxes.
b) Motif agrees to, and hereby does, indemnify, defend, protect,
and hold harmless Consultant from any and all Claims arising out of
his performance of the Services hereunder, except to the extent
such Claims are made pursuant to Section 9(a) of this Agreement.
Notwithstanding the foregoing, Motif shall not be obligated to make
any payment to Consultant under this Section 9(b) that is finally
determined by a court or final arbiter of competent jurisdiction to
be unlawful.
10. Inventions. Consultant agrees that all inventions, patents,
ideas, products, and proceeds resulting from Consultant's
performance of the Services, and all rights therein, are and shall
forever remain Motif's exclusive property, and Consultant, with
full title guarantee, hereby grants and assigns to Motif the entire
copyright (including by way of present assignment all future
copyright) and all other rights of whatsoever nature to which
Consultant is now or may in the future become entitled to in and to
the products of his Services hereunder to Motif.
Consultant also agrees that any copyrightable works prepared by
Consultant within the scope of Consultant's performance of the
Services are "works for hire" under the Copyright Act and that
Motif will be considered the author and owner of such copyrightable
works.
Consultant further agrees that Motif shall have the right to use
such results and products during or after the Term in any manner or
media whether or not now known. Consultant hereby waives all rights
or interest in any invention, idea, products, proceed, or result
arising from Consultant's performance of the Services hereunder in
order to enable Motif to fully exploit the products of his services
in any and all media, in perpetuity.
11. Confidential Information. Consultant understands that,
during the course of his engagement by Motif, he may be exposed to
trade secrets, and/or confidential and proprietary information, of
or about Motif and its operations, including but not limited to
information about its plans, finances, projects, research, records,
marketing, current and prospective members, sponsors, donors,
beneficiaries, partners, agents, consultants, representatives,
clients, current and prospective suppliers, contracts, services,
systems, processes, methods, know-how, data, consumers, employees,
and/or fellow contractors (collectively, the "Confidential
Information"). Throughout the Term, Consultant agrees to follow all
company policies and practices designed to protect the Confidential
Information. In addition, throughout the Term and at all times
thereafter: (i) Consultant will hold all Confidential Information
in the strictest confidence and take all reasonable precautions to
prevent its disclosure to any unauthorized person; and (ii) other
than as specifically required by law, Consultant will not use,
disclose, communicate, or make available to anyone else, any of the
Confidential Information. Consultant understands that if he
violates this promise of confidentiality, Motif may take whatever
action it deems appropriate to enforce its rights.
Upon termination or expiration of this Agreement, or whenever
requested by Motif, Consultant will immediately deliver to Motif
all property in his possession, or under his care and control,
belonging to Motif, including but not necessarily limited to
Confidential Information. The provisions of this Section 11 of the
Agreement shall survive the expiration of the Term.
12. Miscellaneous.
a) Assignment. Consultant shall not assign any rights, or
delegate or sub-contract any obligations, under this Agreement
without Motif's prior written consent. Any assignment or
delegation, or attempted assignment or delegation, in violation of
the foregoing shall be deemed null and void, and shall constitute a
material breach of this Agreement. Motif may freely assign its
rights and delegate its obligations under this Agreement, at any
time, without Consultant's prior consent. Subject to the foregoing,
this Agreement shall inure to the benefit of, be binding upon, and
be enforceable against each of the Parties hereto and their
respective successors and assigns.
b) Severability. If any provision of this Agreement is held by a
court of competent jurisdiction to be invalid, void, or
unenforceable, the remaining provisions will continue in full force
and effect without being impaired or invalidated in any way.
c) Entire Agreement. This Agreement, together with Exhibit A
annexed hereto, constitutes the full, complete, and exclusive
agreement between Consultant and Motif with respect to the subject
matter discussed herein, and supersedes and cancels any and all
other agreements, understandings, representations, negotiations, or
discussions, either oral or in writing, or express or implied,
between and among Consultant and Motif and/or its employees,
agents, or representatives, on the other. In entering into and
performing under this Agreement, no Party has relied upon any
promises or statements except as set forth herein.
d) Modification. This Agreement may be modified, amended,
superseded, or canceled, and the terms, covenants, representations,
warranties, or conditions hereof may be waived, only by a writing
signed by the Party or Parties to be bound by any such
modification, amendment, cancellation, or waiver, that references
and annexes a copy of this Agreement. Neither e-mail
correspondence, text messages, nor any other electronic
communications shall constitute a sufficient writing for purposes
of this clause.
e) Construction. No part of this Agreement shall be strictly
construed against any Party. The headings in this Agreement shall
not affect its meaning.
f) Knowing and Voluntary Agreement. Consultant has carefully
read all parts of this Agreement and fully understands their
meaning. Consultant understands that this Agreement is legally
binding, and affirms that he is entering into it voluntarily.
g) Notice. Unless otherwise provided herein, all notices and
other communications under this Agreement shall be in writing and
shall be deemed given (a) when delivered by hand, (b) when received
by the addressee if sent by a nationally recognized overnight
courier (receipt requested), or (c) on the date sent by electronic
mail of a PDF document (with confirmation of transmission), to the
Parties at the following addresses (or to such other address as a
Party may have specified by notice given to the other Party
pursuant to this provision):
If to Consultant:
Jonathan E. Gold
380 Lexington Avenue, Suite 2020
New York, NY 10168
E-mail: jgold@jegcapital.com
If to Motif:
Motif BioSciences Inc.
Attn: Graham G. Lumsden
125 Park Avenue, Suite 2622
New York, NY 10017
E-mail: graham.lumsden@motifbio.com
h) Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of New
York, without giving effect to any choice of law provision or rule.
Each Party irrevocably submits to the exclusive jurisdiction and
venue of the federal and state courts located in New York County,
New York, in any legal suit, action, or proceeding arising out of
or based upon this Agreement, the Services, or Consultant's
engagement by Motif.
i) Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original copy
of this Agreement and all of which, when taken together, will be
deemed to constitute one and the same agreement.
IN WITNESS WHEREOF, the Parties hereto have caused this
Agreement to be executed as of the date first set forth above.
CONSULTANT
Name: Jonathan E. Gold
Signature: /s/ Jonathan E. Gold
-----------------------
Dated: April 7, 2017
-------------------------
MOTIF BIOSCIENCES, INC.
By: Graham G. Lumsden
Signature: /s/ Graham G. Lumsden
-----------------------
Title: Chief Executive Officer
Dated: April 7, 2017
-------------------------
EXHIBIT A
Description of the Consulting Services
During the Term, Consultant shall provide to Motif the following
services and deliverables:
Strategic financial expert advice and guidance, including but
not limited to advice concerning:
-- Capital Markets (equity and debt) insight, analysis and recommendations;
-- Investment Bank assessment and partnering, syndicate building, terms;
-- Capital raising strategy, including capital markets, M&A,
strategic partnerships;
-- Negotiation of terms for proposed financial transactions; and
-- Such other advice and guidance as may reasonably be requested
by Motif from time to time.
Reports, submitted upon request, detailing:
-- Any new potential business opportunities for Motif identified
or pursued during the current month;
-- Any new potential partnering opportunities for Motif
identified or pursued during the current month;
-- Any updates regarding potential business opportunities or
partnering opportunities previously identified;
-- The status of any negotiations of proposed financial transactions;
-- A list of any closed financial transactions; and
-- Such other items as may be reasonably requested by Motif from time to time.
Exhibit 12.1
Certification by the Principal Executive Officer pursuant to
Securities Exchange Act Rules 13a-14(a) and 15d-14(a)
as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002
I, Graham Lumsden, certify that:
1. I have reviewed this annual report on Form 20-F of Motif Bio
plc (the "Company") for the fiscal year ended December 31,
2016;
2. Based on my knowledge, this annual report does not contain
any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading
with respect to the period covered by this annual report;
3. Based on my knowledge, the financial statements, and other
financial information included in this annual report, fairly
present in all material respects the financial condition, results
of operations and cash flows of the Company as of, and for, the
periods presented in this annual report;
4. The Company's other certifying officer and I are responsible
for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and
internal control over financial reporting (as defined in Exchange
Act Rules 13a-15(f) and 15d-15(f)) for the Company and have:
(a) Designed such disclosure controls and procedures, or caused
such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
Company, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period
in which this annual report is being prepared;
(b) Designed such internal control over financial reporting, or
caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance
regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in
accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the Company's disclosure
controls and procedures and presented in this annual report our
conclusions about the effectiveness of the disclosure controls and
procedures, as of the end of the period covered by this annual
report based on such evaluation; and
(d) Disclosed in this annual report any change in the Company's
internal control over financial reporting that occurred during the
period covered by the annual report that has materially affected,
or is reasonably likely to materially affect, the Company's
internal control over financial reporting; and
5. The Company's other certifying officer and I have disclosed,
based on our most recent evaluation of internal control over
financial reporting, to the Company's auditors and the audit
committee of the Company's board of directors (or persons
performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the
design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the Company's
ability to record, process, summarize and report financial
information; and
(b) Any fraud, whether or not material, that involves management
or other employees who have a significant role in the Company's
internal control over financial reporting.
Date: May 1, 2017
/s/ Graham Lumsden
--------------------
Name: Graham Lumsden
Title: Chief Executive Officer
(Principal Executive Officer)
Exhibit 12.2
Certification by the Principal Financial Officer pursuant to
Securities Exchange Act Rules 13a-14(a) and 15d-14(a)
as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002
I, Robert Dickey IV, certify that:
1. I have reviewed this annual report on Form 20-F of Motif Bio
plc (the "Company") for the fiscal year ended December 31,
2016;
2. Based on my knowledge, this annual report does not contain
any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading
with respect to the period covered by this annual report;
3. Based on my knowledge, the financial statements, and other
financial information included in this annual report, fairly
present in all material respects the financial condition, results
of operations and cash flows of the Company as of, and for, the
periods presented in this annual report;
4. The Company's other certifying officer and I are responsible
for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and
internal control over financial reporting (as defined in Exchange
Act Rules 13a-15(f) and 15d-15(f)) for the Company and have:
(a) Designed such disclosure controls and procedures, or caused
such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
Company, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period
in which this annual report is being prepared;
(b) Designed such internal control over financial reporting, or
caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance
regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in
accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the Company's disclosure
controls and procedures and presented in this annual report our
conclusions about the effectiveness of the disclosure controls and
procedures, as of the end of the period covered by this annual
report based on such evaluation; and
(d) Disclosed in this annual report any change in the Company's
internal control over financial reporting that occurred during the
period covered by the annual report that has materially affected,
or is reasonably likely to materially affect, the Company's
internal control over financial reporting; and
5. The Company's other certifying officer and I have disclosed,
based on our most recent evaluation of internal control over
financial reporting, to the Company's auditors and the audit
committee of the Company's board of directors (or persons
performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the
design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the Company's
ability to record, process, summarize and report financial
information; and
(b) Any fraud, whether or not material, that involves management
or other employees who have a significant role in the Company's
internal control over financial reporting.
Date: May 1, 2017
/s/ Robert Dickey IV
-------------------------------------
Name: Robert Dickey IV
Title: Chief Financial Officer
(Principal Financial Officer)
Exhibit 13.1
Certification by the Principal Executive Officer pursuant to
18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the annual report of Motif Bio plc (the
"Company") on Form 20-F for the fiscal year ended December 31, 2016
as filed with the Securities and Exchange Commission on the date
hereof, I, Graham Lumsden, Chief Executive Officer of the Company,
certify, pursuant to 18 U.S.C. -- 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, that to my
knowledge:
(1) The annual report fully complies with the requirements of
Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as
amended; and
(2) The information contained in the annual report fairly
presents, in all material respects, the financial condition and
results of operations of the Company.
Date: May 1, 2017
/s/ Graham Lumsden
-------------------------------------
Name: Graham Lumsden
Title: Chief Executive Officer
(Principal Executive Officer)
Exhibit 13.2
Certification by the Principal Financial Officer pursuant to
18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the annual report of Motif Bio plc (the
"Company") on Form 20-F for the fiscal year ended December 31, 2016
as filed with the Securities and Exchange Commission on the date
hereof, I, Robert Dickey IV, Chief Financial Officer of the
Company, certify, pursuant to 18 U.S.C. -- 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to
my knowledge:
(1) The annual report fully complies with the requirements of
Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as
amended; and
(2) The information contained in the annual report fairly
presents, in all material respects, the financial condition and
results of operations of the Company.
Date: May 1, 2017
/s/ Robert Dickey IV
-------------------------------------
Name: Robert Dickey IV
Title: Chief Financial Officer
(Principal Financial Officer)
Exhibit 15.1
Crowe Clark Whitehill LLP
Chartered Accountants
Member of Crowe Horwath International
St Bride's House
10 Salisbury Square
London EC4Y 8EH, UK
28 April 2017 Tel +44 (0)20 7842 7100
Fax +44 (0)20 7583 1720
DX: 0014 London Chancery Lane
www.croweclarkwhitehill.co.uk
Securities and Exchange Commission
100 F Street, N.E.
Washington, DC 20549
USA
Our Ref: SMB
Ladies and Gentlemen:
Motif Bio plc
We have read Item 16F, Change in Registrant's Certifying
Accountant, included in the Annual Report on Form 20-F to be filed
with the Securities and Exchange Commission on May 1, 2017 and are
in agreement with the statements contained therein concerning our
firm.
Yours faithfully
/s/ Crowe Clark Whitehill LLP
Crowe Clark Whitehill LLP
Crowe Clark Whitehill LLP is a limited liability Partnership
registered in England and Wales with registered number OC307043.
The registered office is at St Bride's House, 10 Salisbury Square,
London EC4A 8EH. Registered by the Institute of Chartered
Accountants in England and Wales to carry out company audit work in
the UK. Authorised and regulated by the Financial Conduct
Authority. Crowe Clark Whitehill LLP is an independent member of
Crowe Horwath International, with offices and associated firms
throughout the UK and Worldwide. A list of members' names is
available at the above address.
Exhibit 15.2
1 May 2017
Securities and Exchange Commission
100 F Street, N.E.
Washington, DC 20549
Commissioners:
We have read the statements made by Motif Bio Plc (copy
attached), which we understand will be filed with the Securities
and Exchange Commission, pursuant to Item 16F of Form 20-F, as part
of the Form 20-F of Motif Bio Plc dated 1 May 2017. We agree with
the statements concerning our Firm in such Form 20-F.
Very truly yours,
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP, The Capitol, 431 Union Street,
Aberdeen, AB11 6DA
T: +44 (0) 1224 210 100, F: +44 (0) 1224 253 318,
www.pwc.co.uk
PricewaterhouseCoopers LLP is a limited liability partnership
registered in England with registered number OC303525. The
registered office of
PricewaterhouseCoopers LLP is 1 Embankment Place, London WC2N
6RH. PricewaterhouseCoopers LLP is authorised and regulated by the
Financial Conduct Authority for designated investment business.
Exhibit 15.3
CONSENT OF BAL PHARMA CONSULTING, LLC
BAL Pharma Consulting, LLC hereby consents to all references to
the market research survey we were commissioned to prepare on
behalf of Motif Bio plc entitled "Assessment of Iclaprim Commercial
Opportunity in the Gram Positive Antibiotic Hospital Market" and to
the results of such survey included in this Annual Report on Form
20-F of Motif Bio plc for the year ending December 31, 2016, and to
all references to BAL Pharma Consulting, LLC as having prepared
such survey.
/s/ Lynda Berne
--------------------------
Lynda Berne
Principal
BAL Pharma Consulting, LLC
April 24, 2017
Exhibit 15.4
CONSENT OF JMI LABORATORIES
JMI LABORATORIES hereby consents to all references to the market
research survey we were commissioned to prepare on behalf of Motif
Bio plc entitled "Assessment of Iclaprim Commercial Opportunity in
the Gram Positive Antibiotic Hospital Market" and to the results of
such survey included in this Annual Report on Form 20-F of Motif
Bio plc for the year ending December 31, 2016, and to all
references to JMI LABORATORIES as having prepared such survey.
/s/ Andrew Fuhrmeister
----------------------
Andrew Fuhrmeister
CEO
JMI Laboratories
April 24, 2017
This information is provided by RNS
The company news service from the London Stock Exchange
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