TIDMMTFB
RNS Number : 3504K
Motif Bio PLC
10 April 2018
Motif Bio plc
("Motif Bio" or the "Company")
Motif Bio Reports Fiscal Year 2017 Results
Motif Bio plc (AIM/NASDAQ: MTFB), a clinical-stage
biopharmaceutical company specialising in developing novel
antibiotics, today announced financial results for the year ended
December 31, 2017.
Dr. Graham Lumsden, Chief Executive Officer, said: "Motif Bio
made tremendous progress in 2017, accomplishing several critical
milestones, including announcing positive topline results from two
Phase 3 clinical trials with iclaprim in acute bacterial skin and
skin structure infections and publishing and presenting important
clinical and other data about iclaprim. These activities have laid
the foundation for success in 2018, when we plan to complete
regulatory submissions for iclaprim in both the U.S. and Europe,
continue pre-commercialisation activities to increase awareness of
iclaprim in the medical community and amongst hospital formulary
committees and finalise our commercialisation strategy for the U.S.
We look forward to reporting our achievements in the months ahead
as we get closer to bringing iclaprim to the market."
Corporate and Development Highlights
-- Positive topline results announced with iclaprim in the
REVIVE-2 Phase 3 study in the treatment of patients with acute
bacterial skin and skin structure infections (ABSSSI).
-- Detailed results from the REVIVE-1 Phase 3 study in ABSSSI
published in the peer-reviewed medical journal, Clinical Infectious
Diseases.
-- New preclinical data with iclaprim presented at ID Week 2017. Data from an in vivo study in methicillin-resistant Staphylococcus aureus (MRSA) lung infections showed improved survival rates with iclaprim treatment compared to vancomycin, in addition to a significantly greater reduction in bacterial colony forming units (CFUs). In an in vitro study, data showed that iclaprim, at concentrations below those that inhibit bacterial growth, suppresses toxin production.
-- Cystic Fibrosis Foundation award received to fund important
in vitro testing that will help to advance the development of
iclaprim for the treatment of lung infections in patients with
cystic fibrosis. This is the first award that the Company has
received from the Cystic Fibrosis Foundation.
-- Dr. Craig T. Albanese, Chief Operating Officer of the Morgan
Stanley Children's Hospital, appointed as a non-executive director
on May 5, 2017.
Full Year 2017 Financial Results Highlights
-- Motif Bio reported a net loss of $44.8 million, or $(0.19)
per share (basic and diluted), for 2017 compared to a net loss of
$40.3 million, or $(0.35) per share (basic and diluted), for the
same period in 2016.
-- Research and development (R&D) costs for 2017 were $29.5
million compared to $34.8 million for 2016. R&D costs in 2017
decreased compared to the previous year mainly due to lower
clinical research organization (CRO) costs as a result of the
completion of the two iclaprim Phase 3 clinical trials in ABSSSI.
This was partially offset by increases in chemistry, manufacturing
and controls (CMC) costs; employee benefits, including share-based
compensation; and other R&D expenses.
-- General and administrative expenses for 2017 were $8.5
million compared to $4.9 million for 2016. The increase was
primarily due to the costs associated with being a public company
in both the United Kingdom and the U.S.; increases in employee
benefits, including non-cash share-based compensation, due to an
increase in the number of employees; and increases in the costs of
outside professional and advisory services.
-- Raised $23.7 million of net proceeds through an equity
fundraising placed with new and existing investors in the UK,
Europe and the U.S.
-- Debt financing of $20 million successfully completed; $15 million has been drawn down.
-- Gross cash and cash equivalents were $22.7 million as of December 31, 2017.
-- As of December 31, 2017, the Company had 263.5 million ordinary shares outstanding.
Post Period End Highlights
-- Initiated a rolling submission of a New Drug Application
(NDA) to the U.S. Food & Drug Administration (FDA) for iclaprim
in ABSSSI in March 2018; submission expected to be completed in the
second quarter of 2018.
Motif Bio will file later today its U.S. Annual Report on Form
20-F for the year ended December 31, 2017 with the U.S. Securities
and Exchange Commission (SEC). The Form 20-F will be available to
download, either from the Investors section of the Company website
www.motifbio.com or the SEC website at www.sec.gov. An electronic
version of the UK Annual Report and Accounts will be made available
on Motif Bio's website under "AIM Investors" in due course and
announced when available.
For further information please contact:
Motif Bio plc info@motifbio.com
Graham Lumsden (Chief
Executive 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
David Hignell/John Howes/Rob
Rees
Walbrook PR Ltd. (UK FINANCIAL
PR & IR) +44 (0) 20 7933 8780
Paul McManus/Helen Cresswell/
Lianne Cawthorne
MC Services AG (EUROPEAN
IR) +49 (0)89 210 2280
Raimund Gabriel raimund.gabriel@mc-services.eu
The Trout Group (US IR) + 1 (646) 378-2936
Meggie Purcell mpurcell@troutgroup.com
Russo Partners (US PR) +1 (858) 717-2310 or
+1 (212) 845 4272
David Schull david.schull@russopartnersllc.com
Travis Kruse, Ph.D. travis.kruse@russopartnersllc.com
Notes to Editors
About Motif Bio
Motif Bio plc (AIM/NASDAQ: MTFB) 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, including MRSA. The Company's lead
product candidate, iclaprim, is being developed for high-risk MRSA
patient populations. The first proposed indication, and near-term
commercial opportunity, is for the treatment of ABSSSI, one of the
most common bacterial infections, with 3.6 million patients
hospitalised annually in the U.S. The Company believes that
iclaprim may be suitable for first-line empiric therapy in ABSSSI
patients, especially those with renal impairment, with or without
diabetes. Unlike many standard of care antibiotics, iclaprim is
only minimally cleared via the kidneys (<2% of the administered
dose was recovered unchanged in the urine). No nephrotoxicity was
observed with iclaprim in the REVIVE Phase 3 trials and dosage
adjustment has not been required in patients with renal
impairment.
Iclaprim has an underutilised mechanism of action compared to
other antibiotics. Clinical and microbiology data indicate iclaprim
has a targeted Gram-positive spectrum of activity, low propensity
for resistance development, fixed dose administration and
favourable tolerability profile. Additionally, data support that
the inactive metabolites of iclaprim clear through the kidneys. The
Company also plans to develop iclaprim for hospital acquired
bacterial pneumonia (HABP), including ventilator associated
bacterial pneumonia (VABP), as there is a high unmet need for new
therapies in this indication. A Phase 2 trial was conducted to
study iclaprim in patients with HABP. Iclaprim has been studied in
an animal model of pulmonary MRSA infection which mimics the
pathophysiology observed in patients with cystic fibrosis. Iclaprim
has been granted orphan drug designation by the U.S. FDA for the
treatment of Staphylococcus aureus lung infections in patients with
cystic fibrosis.
Iclaprim has received Qualified Infectious Disease Product
(QIDP) designation from the FDA together with Fast Track status.
Upon acceptance by the FDA of a New Drug Application (NDA),
iclaprim will receive Priority Review status and, if approved as a
New Chemical Entity, will be eligible for 10 years of market
exclusivity in the U.S. from the date of first approval, under the
Generating Antibiotic Incentives Now Act (the GAIN Act). In Europe,
10 years of market exclusivity is anticipated.
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 commercialise 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, (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's Annual Report on Form 20-F to be
filed with the SEC on April 10, 2018, which will be available on
the SEC's web site, www.sec.gov. Motif Bio undertakes no obligation
to update or revise any forward-looking statements.
Chairman's Statement
Motif Bio plc and its wholly-owned subsidiary Motif Biosciences,
Inc. ("Motif" or the "Group") finalized the acquisition of iclaprim
about three years ago. In that period of time Motif has become a
publicly listed company, with a presence on NASDAQ as well as on
the London Stock Exchange. We have successfully completed two Phase
3 pivotal trials, bringing to over 1,400 the number of people given
iclaprim, and we are busily preparing to submit two applications
for marketing approval during 2018 - a New Drug Application ("NDA")
to the Food and Drug Administration ("FDA") in the US and a
Marketing Authorization Application ("MAA") to the European
Medicines Agency ("EMA") in Europe. We currently expect a decision
from the FDA during the first quarter of 2019, which, assuming it
is positive, should allow the drug to be launched quickly
thereafter. To become a revenue generating business in about four
years from when the company initiated the iclaprim program would be
a considerable accomplishment.
When we acquired the rights to iclaprim in 2015, our in-depth
review had convinced us that the drug had the potential to be an
efficacious antibiotic with a good safety profile and a number of
distinctive features that should give it a special place in the
anti-infective armamentarium. For example, iclaprim's safety
profile could make it a good candidate to address a growing unmet
medical need - patients hospitalized with acute bacterial skin and
skin structure infections ("ABSSSI") who have other health problems
and are at high risk of vancomycin-associated acute kidney injury
("VA-AKI"). It is estimated that around 10% of hospitalized
patients with ABSSSI treated with standard of care vancomycin
develop VA-AKI, and the proportion of hospitalized patients with
risk factors for VA-AKI is growing. We also plan to develop
iclaprim for hospital-acquired bacterial pneumonia ("HABP"),
including ventilator-associated bacterial pneumonia ("VABP"),
infections that are often caused by methicillin resistant
Staphylococcus aureus ("MRSA").
It was clear from the pre-clinical data that iclaprim may have
an important role to play in the treatment of respiratory
infections. That was borne out by the successful demonstration to
the FDA of its potential in the treatment of Staphylococcus aureus
lung infections in patients with cystic fibrosis, which are a
tragic cause of mortality in a majority of the victims of this
terrible condition. As a result, the FDA granted Motif Bio the
orphan drug designation we were seeking for this indication. While
we prudently chose to first proceed with two well-controlled
clinical trials in ABSSSI, which will be the basis of our NDA
submission to the FDA, we are aware of the acute medical need for
novel agents for lung infections in patients with cystic fibrosis,
hospital acquired pneumonia, and other infections of the lung,
where current treatment options are few and mortality is very high
and plan to develop iclaprim further for these indications.
The U.S. government, as well as government agencies in the UK
and other countries, have been taking increasingly important steps
to foster the development of novel anti-infective agents. Their
concern to do this has been driven by the inexorable march of
anti-microbial resistance, an unfortunate fact of life with these
critical and life-saving pharmaceutical agents. Many of today's
established medical procedures, ranging from cancer treatment to
surgeries of all kinds, would not be possible without the
availability of effective anti-infective drugs. The passage of the
GAIN (Generating Antibiotic Incentives Now) Act in 2012 in the US
made possible the program we have undertaken to bring iclaprim to
market. Because of the passage of time and patent expiry, that
otherwise would not have been possible without the QIDP (Qualified
Infectious Disease Product) designation we have been granted under
the Act. The passage of the 21(st) Century Cures Act in December
2016, which was designed to help accelerate medical product
development and bring new innovations and advances to patients who
need them faster and more efficiently, was an equally important
watershed moment in the regulatory climate for iclaprim. Many of
the provisions of this Act refer specifically to anti-infectives,
while some of the provisions that apply to all novel medicines
should broaden Motif Bio's ability to make iclaprim available to a
far larger patient population than would have been possible without
this legislation. In addition, we are encouraged by the actions of
the new FDA Commissioner, who has embraced the need to make
far-reaching changes to the way in which novel medical technology
is made available to patients without compromising the safety
concerns of all such innovations. Last year was a banner year with
46 new drug approvals by the FDA, a 21-year high point. We also saw
a welcome surge in approvals, submissions, and clinical trial
results for antibiotics. Motif Bio was the beneficiary of this
shift in priorities last summer when the FDA announced a commitment
to clear the backlog of orphan drug applications and granted
iclaprim orphan drug designation in a very timely manner.
Pharmaceutical products are necessarily and rightly developed and
marketed in a highly-regulated environment and the positive changes
in the regulatory machinery that rules our lives seem to be
continuing and bode well for the future.
The anticipated transition from a promise in the Spring of 2015
to a reality by the Spring of 2019 would not be possible without
incredible effort and dedication by the Motif Bio team and support
from our shareholders. Large clinical trials are very expensive and
in order to complete our two trials we were obliged to raise a
considerable amount of capital, in both London and New York. The
number of new drugs undergoing clinical trials has been growing
rapidly in recent years and has put pressure on the resources
available in clinical trial sites around the world. This has
increased the cost of all clinical trials and placed additional
constraints on the ability to recruit patients into the trials,
which in turn means that to be competitive, sponsors must pay the
higher prices if the trials are to be completed on time. Raising
the large amounts of capital needed to make all this possible has
been a constant preoccupation of the Board since we completed the
AIM IPO in 2015. Last year we were able to raise over US $25
million in an equity placing in June and in November we were able
to raise an additional US $20 million through a US debt facility,
US $5 million of which remains undrawn. We continue to devote a
considerable amount of time and effort in the US, in particular, to
the communication of iclaprim and the investment opportunity in
Motif. The US remains by far the broadest and most active pool of
investment capital devoted to health care and life sciences and we
remain committed to gaining broad support for the Company in the US
which our ADS listing on NASDAQ has made possible. As we continue
to pursue our continued clinical development, regulatory approval
and commercialization of iclaprim and fund our operations at
current cash expenditure levels, we will be required to raise
additional capital within the next year. Furthermore, we have
disclosed that certain control deficiencies in our financial
reporting processes constituted material weaknesses as of December
31, 2017 and 2016. Although we are a small public company, we have
implemented and are planning additional substantial changes in our
internal control over financial reporting, as we remediate these
material weaknesses during the ensuing periods.
I would like to close by expressing our appreciation for the
dedication and hard work of the Motif team and to my fellow Board
members, who continue to play an active role in supporting the
management team. I would like to say again how pleased we are to
have Dr. Craig Albanese join the Board. His insights into the US
hospital management systems and practices are a vital addition to
the Board's deliberations as we approach the commercial launch of
iclaprim.
Richard C.E. Morgan
Chairman
April 10, 2018
Chief Executive Officer's Statement
In 2017, Motif made tremendous progress, accomplishing several
critical milestones that laid the foundation for success in
2018.
Iclaprim - Exciting potential in treating serious hospital
infections not adequately addressed by current treatments
We announced positive topline results from our two Phase 3
clinical trials (REVIVE-1 and REVIVE-2) evaluating iclaprim versus
standard of care vancomycin in patients with acute bacterial skin
and skin structure infections (ABSSSI). In both trials, iclaprim
met the FDA pre-specified primary endpoint of non-inferiority of
early clinical response at the early time point. We believe that
these results satisfy the requirements for regulatory submissions
in 2018 seeking marketing approval for iclaprim in patients with
acute bacterial skin and skin structure infections (ABSSSI) in the
U.S. and Europe.
If approved, iclaprim may satisfy an important and growing unmet
medical need that is not being addressed by current standard of
care antibiotics - namely, patients hospitalized with serious
infections who have other health problems and are at high risk of
vancomycin-associated acute kidney injury (VA-AKI). Vancomycin is
one of the standard of care antibiotics used today in hospitals for
patients with ABSSSI, but it has known kidney toxicity risk. It is
estimated that around 10% of hospitalized patients with ABSSSI
treated with vancomycin develop VA-AKI. Risk factors for VA-AKI
include obesity, diabetes, age 65+, moderate to severe kidney
impairment or a prior history of VA-AKI. The proportion of
hospitalized patients with these risk factors is growing. No kidney
toxicity was seen with iclaprim in the REVIVE Phase 3 clinical
trials.
Subject to future funding, Motif is planning to develop iclaprim
for two additional indications. Hospital acquired bacterial
pneumonia (HABP), which includes ventilator-associated bacterial
pneumonia (VABP), is diagnosed in approximately 1.4 million
patients annually in the U.S. Approximately 40% of patients are
infected with Gram-positive bacteria, such as methicillin-resistant
Staphylococcus aureus (MRSA), the type of bacteria that iclaprim is
effective against. Despite existing antibiotic therapies, the
all-cause mortality rate associated with HABP/VABP is up to 47%.
Additionally, VABP prolongs hospitalization by approximately eleven
days and is associated with excess cost of approximately $40,000
per patient. Promising data were seen in an earlier Phase 2 trial
that showed that iclaprim improved clinical cure and reduced
mortality in patients with HABP/VABP caused by Gram-positive
bacteria. The results were published in a peer-reviewed medical
journal in 2017.
In 2017, iclaprim was granted orphan drug designation by the FDA
for the treatment of Staphylococcus aureus lung infections in
patients with cystic fibrosis (CF). Some 80% or more of patients
with CF die as a result of respiratory infections caused by a
variety of bacteria; so, there is an urgent need to treat these
infections quickly and effectively. In vivo data evaluating the
therapeutic potential of iclaprim in MRSA lung infections published
in 2017 showed that iclaprim treatment resulted in a significantly
greater reduction in bacterial colony forming units (CFUs) compared
to vancomycin. In January 2018, we announced that Motif had
received an award from the Cystic Fibrosis Foundation, a leader in
the search for a cure for CF, to fund important in vitro testing
that will help to advance the development of iclaprim for this
indication.
Increasing awareness of iclaprim amongst the infectious disease
community
While getting a new medicine approved is the first and most
important step towards making it available to patients, the
long-term success of a product is dependent on key activities that
begin well in advance of regulatory approval. In order for doctors
to prescribe a new intravenous antibiotic, the antibiotic must
first be approved and available on hospital formularies. Secondly,
physicians must be aware of the new antibiotic, and they must
understand how it can help their patients - and which patients -
better than existing treatment options. During 2017, Motif was hard
at work to increase awareness of iclaprim in the infectious disease
community. For example, data on iclaprim were presented at IDWeek
2017 in October and ECCMID 2017 in April. IDWeek is an important
U.S. scientific conference for infectious disease doctors, and
ECCMID is one of the most important European conferences for this
community. Additionally, data from the REVIVE-1 trial were
published in a major medical journal in December. Motif also held
several advisory boards during the year to garner insight from key
scientific leaders. We expanded our clinical advisory board to
include three leaders in the infectious diseases field - Thomas
Lodise, PharmD, PhD; Thomas Holland, MD, MSc-GH and William
O'Riordan, MD. With their extensive knowledge and research on
infectious diseases, particularly ABSSSI, and on the cost of
treating patients with a suboptimal antibiotic, these specialists
have given us invaluable insight into where iclaprim might best fit
in the treatment paradigm. For instance, Dr. Lodise's research
indicates that VA-AKI among hospitalized ABSSSI patients may result
in additional hospital costs of about $17,000 per patient due to
longer length of stay in hospital, the need for kidney specialist
consultations and acute dialysis. In an environment where
healthcare costs are spiraling, iclaprim may have the potential to
help hospitals avoid such additional costs in the treatment of
high-risk patients.
Our work to build awareness of iclaprim among the infectious
disease community continues in 2018. Hospital pharmacists, key
members of antibiotic formulary decision-making in hospitals, are
an important audience. We have already had various data on iclaprim
published, resulting in several publications in peer-reviewed
journals, and were pleased to announce that the REVIVE-2 Phase 3
results, as well as other iclaprim data, will be presented at
ECCMID in April 2018. We are planning to expand our conference
presence this year to include the American Society of Hospital
Pharmacists (ASHP) and American Society of Microbiology (ASM).
Increasing awareness of Motif in the investment community
Other critical work we conducted during 2017 was to raise
awareness of Motif in the investment community. While we are known
in the UK and Europe, we need to increase awareness of Motif and
iclaprim in the U.S. investment community. The team held over 70
meetings with investors and research analysts on both sides of the
Atlantic in 2017.
In addition to participating in various investor conferences, in
2017 we hosted our first investor and analyst event. Held in New
York in September, the event was well attended and featured talks
from five scientific leaders who discussed iclaprim and the unmet
needs in treating hospital infections, including issues with
current treatments and potential impact on costs. Our investor
outreach work is continuing in 2018, and already in the first
quarter of the year we have held a number of meetings with
investors and participated in several investor events.
2018 - a transformative year
We expect 2018 to be another transformative year for the
Company. Our team has been working around the clock to get the NDA
submitted to the FDA as expeditiously as possible. We then will
turn our efforts to the Marketing Authorization Application (MAA)
for Europe and whilst a significant portion of this has been
progressed in parallel with the NDA, we expect to be in a position
to submit a MAA in the second half of 2018.
The team is working closely with the Board of Directors to
ensure that we have sufficient resources to carry out our plans. In
2017, we completed a successful equity financing, raising over $25
million through a placement in the UK and secured $20 million
through a debt financing. As is always the case for
development-stage biotech companies, we continuously assess our
financing needs and access to capital, which is why we filed a
shelf registration in the U.S. early in 2018. This gives us
flexibility to take advantage of funding opportunities as and when
they arise.
In addition, we are also evaluating the various options we have
for commercializing iclaprim in the U.S. These options include
partnering with a revenue-generating company or a late
development-stage company in the hospital space, where there could
be synergies and efficiencies by combining forces and utilizing a
specialized sales force more effectively. We could also use a
commercial outsourcing company or could build our own commercial
organization. These are all viable options, each with its own set
of pros and cons. The Company is in discussion with several
potential partners and views partnering as its preferred strategy.
Whilst we have not committed to a single path, we continue our
pre-commercialization efforts to raise awareness of iclaprim in the
infectious disease/hospital communities. We continue to speak with
potential partners for other territories, with a focus on Europe
and Japan.
In conclusion, I would like to thank you, our shareholders, for
your continued support. I would also like to thank the dedicated
individuals on our Motif team for their tireless efforts. And I
would like to thank the doctors, patients and their loved ones for
their willingness to participate in our clinical trials. At the end
of the day, they are the focus and the reason we are in this
business. We are excited about the year ahead and about the
potential for iclaprim to truly make a difference in people's
lives.
Dr. Graham Lumsden
Chief Executive Officer
April 10, 2018
Strategic Report
Strategy and Business Model
The Group's business strategy is to develop novel antibiotics
that are designed to be effective against serious and
life-threatening infections in hospitalized patients caused by
multi-drug resistant bacteria. The Group's lead product candidate,
iclaprim, is being developed for the treatment of the most common
and serious bacterial infections such as ABSSSI and HABP, including
those caused by resistant strains such as MRSA. Positive results
from two pivotal Phase 3 clinical trials in ABSSSI were announced
in 2017 and are serving as the basis for the New Drug Application
(NDA) to the U.S. Food & Drug Administration (FDA), which has
been submitted on a rolling basis and is expected to be completed
in the second quarter of 2018. Assuming the NDA is accepted for
filing by the FDA, Motif expects the FDA to make a decision on the
application in the first quarter of 2019. A Phase 3 clinical trial
to determine the efficacy of iclaprim in HABP is planned to start
in 2018, subject to receipt of appropriate funding. Additionally,
iclaprim is in preclinical testing for the treatment of
Staphylococcus aureus lung infections in patients with cystic
fibrosis and was granted orphan
drug designation by the FDA for this indication in 2017.
The Group is evaluating commercialization options for its
product candidate iclaprim in the US and plans to partner with
other companies for commercialization in other countries. The Group
expects to generate revenues from sales of its product candidates
once they are approved. In addition, the Group expects to be able
to enter into commercialization agreements in one or more
territories, which could result in cash payments from partners in
the form of upfront payments, progress-based milestone payments
and/or royalties on sales. Until the Group is able to successfully
commercialize its pharmaceutical products, it expects to continue
to generate losses until revenues from these sources exceed
operating costs. The Board expects to be able to raise sufficient
capital to support the Group's commercialization strategy.
The Group's goal is to help physicians to treat hospitalized
patients with serious and life-threatening infections by building a
leading, fully integrated biopharmaceutical company dedicated to
the development and commercialization of novel antibiotics,
designed to be effective against multi-drug resistant bacteria as
detailed in the preceding paragraphs.
Business Review
The Group's results for the year are set out in the consolidated
statement of comprehensive loss.
General and administrative expenses increased by $3.6 million,
to $8.5 million, in the year ended December 31, 2017, compared to
$4.9 million in the year ended December 31, 2016. This increase was
primarily attributable to an increase in employee compensation and
benefits of $0.7 million and non-cash stock-based compensation
expense of $0.6 million. Legal, professional and advisory fees
increased due to the: (i) increasing costs associated with being a
public company in the United Kingdom and in the United States; (ii)
costs associated with 2017 financing activities; and (iii)
increased costs of outside professional services, including
commercial evaluation and strategy services, investor relations and
other consulting services.
Research and development (R&D) expenses decreased by $5.3
million, to $29.5 million, in the year ended December 31, 2017,
compared to $34.8 million in the year ended December 31, 2016. This
decrease was primarily attributable to the completion of the Phase
3 clinical trial program in 2017 for iclaprim in ABSSSI. R&D
expenses for the year ended December 31, 2017 included $22.1
million for contract research organization direct and indirect
expenses, which represented a decrease of $8.3 million for similar
costs incurred in 2016. The decrease was partially offset by a $2.3
million increase in costs relating to other clinical operating
activities, chemistry, manufacturing and control (CMC) requirements
and other non-clinical development activities.
Net cash provided by financing activities amounted to $38.5
million for the year ended December 31, 2017. This resulted from
$23.7 million of net proceeds from the June 2017 equity issuance of
66,666,667 new ordinary shares at GBP0.30 per share and $14.4
million of net proceeds from a term loan borrowing under the
November 2017 Hercules Loan Agreement.
At December 31, 2017 and 2016, the Group had cash and cash
equivalents of approximately $22.7 million and $21.8 million,
respectively. The Company does not expect to generate significant
revenue from product sales unless and until the Group obtains
regulatory approval for and successfully commercializes iclaprim or
future product candidates. The Company anticipates that it will
continue to generate losses for the foreseeable future as the
Company continues the development of and seeks regulatory approvals
for its product candidates and begins to commercialize any approved
products.
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, the net proceeds of a Hercules Loan
Agreement entered into in November 2017 and, prior to the AIM IPO
in 2015, the issuance of convertible promissory notes to related
parties.
Selected peer companies developing antibiotics, including
Achaogen, Melinta, Nabriva, and Paratek, are regularly followed and
studied as benchmarks for clinical development timelines, product
pricing, capital requirements, financial metrics, and market
positioning. Qualitative and quantitative market research is used
to identify and assess market opportunities for novel
antibiotics.
Going Concern
As of December 31, 2017, the Group had $22.7 million in cash.
Net cash used in operating activities was $37.4 million for the
year ended December 31, 2017. Net loss for the year ended December
31, 2017 was $44.8 million. The Group has incurred ongoing losses
and negative cash flows as a result of costs mainly related to the
clinical development of iclaprim and expect to incur losses for the
next several years as revenue from expected iclaprim sales and/or
licensing agreements are not expected to fully cover the cost of
additional research and development of iclaprim as well as
commercialization costs. The directors are unable to predict the
extent of any future losses or when the Group and Company will
become profitable, if at all.
The Group will be required to raise additional capital within
the next year to continue the development and commercialization of
iclaprim and to continue to fund operations at the current cash
expenditure levels. The directors 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.
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 is
existing and future 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; and/or (iii) relinquish or otherwise dispose of
rights on unfavorable terms to technologies, existing and future
product candidates or products that the Group would otherwise seek
to develop or commercialize itself.
These financial statements have been prepared under the
assumption that the Group and Company will continue as a going
concern. Due to the Group and Company's recurring and expected
continuing losses from operations, the directors have concluded
there is material uncertainty which may cast significant doubt
about the Group and Company's ability to continue as a going
concern for at least one year from 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.
Principal Risks and Uncertainties
The principal risks faced by the Group, and the actions taken to
mitigate them, are shown in the table below:
Risk Description Principal mitigation
------------------------- ----------------------------- ---------------------------
Financial The successful The Group has
development of successfully engaged
the Group's assets with investors
requires financial to generate significant
investment which cash resources
can come from which, providing
revenues, commercial it can raise sufficient
partners, or investors. additional development
Failure to generate capital, are considered
additional funding sufficient to
from these sources fund current plans
may compromise for the clinical
the Group's ability development of
to execute its the Group's lead
business plans antibiotic, iclaprim.
or to continue See Going Concern
in business. discussion above.
------------------------- ----------------------------- ---------------------------
Intellectual property In common with The Group actively
(IP) other companies manages its IP,
engaged in pharmaceutical engaging with
development, the specialists to
Group faces the apply for and
risk that IP rights defend IP rights
necessary to exploit in appropriate
its research and territories. As
development efforts the Group currently
may not be adequately has no iclaprim
secured or defended. patents, it will
The Group's IP depend on the
may also become already granted
obsolete, preventing QIDP (Qualified
commercial exploitation. Infectious Disease
Product) designation
under the GAIN
(Generating Antibiotic
Incentives Now)
Act to provide
10 years' market
exclusivity within
the US. Outside
the US, the Group
will depend on
similar provisions
from regulatory
agencies in different
territories and
on the commercialization
partners it is
able to attract.
------------------------- ----------------------------- ---------------------------
Research and development The Group may The Lead product
not generate further candidate, iclaprim,
attractive drug has successfully
candidates and completed a comprehensive
candidates already preclinical and
in development clinical development
may fail preclinical program and the
testing or clinical safety and efficacy
trials because profile is well
of lack of efficacy, understood. Two
unacceptable side positive Phase
effects, or insurmountable 3 trials in ABSSSI
challenges in have been completed;
conducting studies the results of
adequate to support which will be
regulatory approvals. included in the
Practical issues, Group's regulatory
such as the inability applications for
to devise acceptable marketing approval
formulations for in the United
products or the States and Europe.
inability to manufacture
products at acceptable
cost, may also
lead to failure
of candidates
in development.
------------------------- ----------------------------- ---------------------------
Regulatory Drug development The Group's drug
is a highly regulated development team
activity governed includes specialists
by different regulatory in regulatory
authorities in affairs who consult
different jurisdictions. with other experts
It can be difficult to ensure that
to predict the internal control
exact requirements processes and
of different regulatory clinical trial
bodies. Decisions designs meet current
by regulators regulatory requirements.
may lead to delays The Group also
in development engages directly
and approval of with regulatory
drugs or lack authorities when
of marketing authorizations appropriate.
in some or all
territories.
------------------------- ----------------------------- ---------------------------
Commercial and The Group may The Group consults
economic be unable to effectively with commercial,
commercialize clinical, and
or license its scientific experts
products to partners to assess the
or may not be payer and prescriber
able to execute environment and
licensing deals the potential
that provide significant impact of competing
revenues. Development products or changes
of alternative in the economic
technologies or landscape pertaining
products may undermine to hospital infections.
the Group's capacity The Group actively
to generate revenue monitors the performance
from commercialization of key competitors
of its assets. in terms of pricing,
If the Group's market share,
drugs are commercialized, and prescribing
they may not generate behavior.
significant revenues
if their use and
sale are restricted
by regulators
or by failure
of healthcare
payers to provide
adequate reimbursement
of drug costs.
------------------------- ----------------------------- ---------------------------
Operational The Group may The Group's recruitment
not be able to processes are
recruit and retain tailored to identify
appropriately and attract the
qualified staff. best candidates
Facilities and for specific roles.
other resources The Group aims
may become unavailable. to provide competitive
rewards and incentives
to staff and directors
and informally
benchmarks the
level of benefits
it provides against
similar companies.
------------------------- ----------------------------- ---------------------------
The electorate On March 29, 2017, Brexit has already
in the United the U.K. government and could continue
Kingdom voted delivered to the to adversely affect
in favor of leaving European Council European and/or
the EU (referred notice of its worldwide economic
to as "Brexit"). intention to leave and market conditions
the EU by March and could continue
29, 2019. to contribute
to instability
Brexit could impair in the global
the Group's ability financial markets.
to transact business The long-term
in EU countries. effects of Brexit
In addition, Brexit will depend in
could lead to part on any agreements
legal uncertainty the United Kingdom
and potentially makes to retain
divergent national access to EU markets
laws and regulations following the
as the United United Kingdom's
Kingdom determines withdrawal from
which EU laws the EU.
to replicate or
replace. The Group has
and will continue
Any of these effects to monitor the
of Brexit, and implications of
others we cannot Brexit leveraging
anticipate, could experienced financial
adversely affect and legal advisors.
the Group's business,
business opportunities,
results of operations,
financial condition
and cash flows
------------------------- ----------------------------- ---------------------------
Information technology The Group's third-party The Group routinely
("IT") and cyber hosted computer monitors the risks
security systems, or those associated with
of our research information technology
partners or other and cyber security
contractors, consultants and will continue
or future collaborators, to monitor its
may fail or suffer third-party IT
security breaches, provider and current
which could result and future collaborators
in a disruption implemented security
of our drug product measures.
development programs
and planned commercial
activities.
------------------------- ----------------------------- ---------------------------
Key Performance Indicators
The Directors do not consider traditional financial measures,
such as EBIT, to be key performance indicators at this stage of the
business. However, the Directors closely monitor the Company's cash
position. The principal focus of the Group is preparations related
to the submission of the NDA to the US FDA and the MAA to the
European Medicines Agency (EMA) and related regulatory follow up,
as well as activities related to pre-commercialization and
partnering.
Substantial shareholdings
As of March 1, 2018, the Group was aware that the following
shareholders each had holdings of 3% or more of the issued share
capital of the Group.
As of March 1, 2018 Holding %
---------------------------------- ----------- ------
Invesco Asset Management Limited 65,465,260 24.79
Amphion Innovations plc 37,150,645 14.07
Bank of America Merrill Lynch
(1) 18,674,188 7.07
Sand Grove Capital (2) 13,257,448 5.02
Aviva Investors plc 11,209,053 4.24
---------------------------------- ----------- ------
(1) This information is based on information contained in a TR-1
Notification sent to us on January 12, 2018 by Bank of America
Corporation disclosing an indirect voting interest in our ordinary
shares. The principal address of Bank of America Merrill Lynch is 2
King Edward Street, London, EC1A 1HQ, United Kingdom.
(2) This information is based on information contained in a TR-1
Notification sent to us on October 5, 2017 by Sand Grove Capital
Management LLP disclosing a cash-settlement equity contract for
difference. The principal address of Sand Grove Capital Management
LLP is 35 Dover Street, 4th Floor, London W1S 4NQ.
Environmental and Social Matters
The Directors do not consider the disclosure of environmental
and social matters to be necessary to the understanding of the
business or its annual performance.
Greenhouse Gas Emissions
It is not practical for the Group to obtain information on its
emissions as information is not available.
Our People
At December 31, 2017, the Company's Board was made up of nine
directors (7 men and 2 women). The senior management (namely, the
Chief Executive Officer, Chief Financial Officer and Chief Medical
Officer) consisted of all men. At the end of the year, there were 5
additional employees of the Company (3 men and 2 women).
Approved by the Board and signed on its behalf by:
Jonathan E. Gold
Chief Financial Officer
April 10, 2018
Motif Bio plc
Consolidated statement
of comprehensive loss
For the year ended
December
31, 2017
Year Year Year
ended ended ended
December December December
31, 2017 31, 2016 31, 2015
Note US $ US $ US $
----- ------------------------------- -------------------------------- ---------------------------------
Continuing
operations
General and
administrative
expenses 4 (8,541,396) (4,912,150) (3,577,180)
Research and
development
expenses 4 (29,475,293) (34,794,815) (4,680,940)
Gains on
settlement
of contract
disputes 4 - 83,320 5,027
Operating loss (38,016,689) (39,623,645) (8,253,093)
Interest income 4 133,612 69,754 15,028
Interest expense 4 (275,449) (383,259) (268,216)
Net foreign
exchange
losses (238,289) (250,926) (9,644)
Loss from
revaluation
of derivative
liabilities 14 (6,391,551) (135,939) -
Loss before
income
taxes (44,788,366) (40,324,015) (8,515,925)
Income tax 7 (22,000) (287) (774)
Net loss for the
year (44,810,366) (40,324,302) (8,516,699)
------------------------------- -------------------------------- ---------------------------------
Total
comprehensive
loss for the
year (44,810,366) (40,324,302) (8,516,699)
=============================== ================================ =================================
Net loss per
share 8
Basic and
diluted
per share * $(0.19) $(0.35) $(0.14)
=============================== ================================ =================================
Weighted average
number of
ordinary
shares, basic
and
diluted 231,530,091 116,558,191 61,225,922
=============================== ================================ =================================
* In accordance with IAS 33 "Earnings per share", shares
are not diluted where the entity has reported a loss
for the year.
The notes are an integral part of these consolidated financial
statements.
Motif Bio plc
Consolidated statements of financial
position
As at December 31, 2017
December 31, 2017 December 31, 2016
Note US $ US $
----- ---------------------------- -------------------------------------
ASSETS
Non-current assets
Intangible assets 9 6,195,748 6,195,748
Other non-current assets 23,075 -
---------------------------- -------------------------------------
Total non-current assets 6,218,823 6,195,748
---------------------------- -------------------------------------
Current assets
Prepaid expenses and other
receivables 10 317,584 401,064
Cash 22,651,475 21,829,632
Total current assets 22,969,059 22,230,696
---------------------------- -------------------------------------
Total assets 29,187,882 28,426,444
============================ =====================================
LIABILITIES
Non-current liabilities
Term loan, net of deferred financing
costs 13 14,057,147 -
Other non-current liabilities 13 22,758 -
Total non-current liabilities 14,079,905 -
---------------------------- -------------------------------------
Current liabilities
Trade and other payables 12 10,889,554 12,319,117
Payable on completion of clinical
trial 9 500,000 500,000
Derivative liabilities 14 12,626,299 5,798,058
Total current liabilities 24,015,853 18,617,175
---------------------------- -------------------------------------
Total liabilities 38,095,758 18,617,175
============================ =====================================
Net (liabilities) / assets (8,907,876) 9,809,269
============================ =====================================
EQUITY
Share capital 17 3,589,201 2,728,199
Share premium 17 80,872,838 57,348,694
Group reorganization reserve 17 9,938,362 9,938,362
Accumulated deficit (103,308,277) (60,205,986)
Total (deficit) / equity (8,907,876) 9,809,269
============================ =====================================
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 9, 2018. They were signed on
its behalf by:
Director
Richard C.E. Morgan
Motif Bio plc
Company statement of financial
position
At December 31, 2017 and
2016
December December
31, 2017 31, 2016
Note US $ US $
----- ------------ ---------------------------
ASSETS
Non-current assets
Investment 19 40,519,390 38,951,647
Total non-current assets 40,519,390 38,951,647
------------ ---------------------------
Current assets
Prepaid expenses and other
receivables 10 249,152 349,368
Cash 629,257 21,817,489
Receivable from Motif
Bio Inc. 47,733,088 3,294,823
Total current assets 48,611,497 25,461,680
------------ ---------------------------
Total assets 89,130,887 64,413,327
============ ===========================
LIABILITIES
Trade and other payables 12 159,975 96,916
Derivative liabilities 14 12,626,299 5,798,058
Total current liabilities 12,786,274 5,894,974
------------ ---------------------------
Total liabilities 12,786,274 5,894,974
============ ===========================
Net assets 76,344,613 58,518,353
============ ===========================
EQUITY
Share capital 17 3,589,201 2,728,199
Share premium 17 80,872,838 57,348,694
Reorganization reserve (544,378) (544,378)
-------------------------------- ----- ------------ ---------------------------
Loss for the period (8,266,961) (2,221,872)
Issue of share capital 25,416,301 19,599,378
Cost of issuance (1,734,562) (3,370,155)
Exercise of share options
and warrants 703,401 117,313
Share-based payments 1,708,075 255,830
Conversion of promissory
note - 3,550,786
-------------------------------- ----- ------------ ---------------------------
Accumulated deficit (7,573,048) (1,014,162)
Total equity 76,344,613 58,518,353
============ ===========================
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 9, 2018. They were signed on its behalf by:
Director
Richard C.E. Morgan
Motif Bio plc
Consolidated
statements
of changes in equity
For the year
ended
December 31,
2017
Group
Share Share reorganization Accumulated
capital premium reserve deficit Total
Note US $ US $ US $ US $ US $
----- ------------------- --------------------------- -------------------------- -------------------------- -------------------
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 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 - - - 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 17 177,786 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
Loss for the
year - - - (44,810,366) (44,810,366)
------------------- --------------------------- -------------------------- -------------------------- -------------------
Total
comprehensive
loss for the
year - - - (44,810,366) (44,810,366)
Issue of share
capital 17 846,667 24,569,634 - - 25,416,301
Cost of
issuance - (1,734,562) - - (1,734,562)
Exercise of
share
options and
warrants 17 14,335 689,072 - - 703,407
Share-based
payments 16 - - - 1,708,075 1,708,075
------------------- --------------------------- -------------------------- -------------------------- -------------------
Balance at
December
31, 2017 3,589,201 80,872,838 9,938,362 (103,308,277) (8,907,876)
=================== =========================== ========================== ========================== ===================
The notes are an integral part of these consolidated financial
statements.
Motif Bio plc
Company statement of
changes in equity
For the year
ended
December 31,
2017
Share Share Reorganization Accumulated
capital premium reserve earnings Total
Note US $ US $ US $ US $ US $
----- ------------------- --------------------- --------------------------- ---------------------- ------------------
Balance at
November
20, 2014 - - - - -
Loss for the
year - - - (1,757,475) (1,757,475)
------------------- --------------------- --------------------------- ---------------------- ------------------
Total
comprehensive
loss for the
year - - - (1,757,475) (1,757,475)
Group
reorganization 544,378 - (544,378) - -
Issue of share
capital 17 1,095,377 41,334,240 - - 42,429,617
Cost of
issuance - (2,898,693) - - (2,898,693)
Exercise of
share
options and
warrants 5,536 98,733 - - 104,269
Issue of
warrants
issued to
acquire
assets - - - 2,340,373 2,340,373
Share-based
payments 16 - - - 368,982 368,982
------------------- --------------------- --------------------------- ---------------------- ------------------
Balance at
December
31, 2015 1,645,291 38,534,280 (544,378) 951,880 40,587,073
Loss for the
year - - - (2,221,872) (2,221,872)
------------------- --------------------- --------------------------- ---------------------- ------------------
Total
comprehensive
loss for the
year - - - (2,221,872) (2,221,872)
Issue of share
capital 17 897,812 18,701,566 - - 19,599,378
Cost of
issuance - (3,370,155) - - (3,370,155)
Conversion of
promissory
notes 17 177,786 3,373,000 - - 3,550,786
Exercise of
share
options and
warrants 17 7,310 110,003 - - 117,313
Share-based
payments 16 - - - 255,830 255,830
------------------- --------------------- --------------------------- ----------------------
Balance at
December
31, 2016 2,728,199 57,348,694 (544,378) (1,014,162) 58,518,353
Loss for the
year - - - (8,266,961) (8,266,961)
------------------- --------------------- --------------------------- ---------------------- ------------------
Total
comprehensive
loss for the
year - - - (8,266,961) (8,266,961)
Issue of share
capital 17 846,667 24,569,634 - - 25,416,301
Cost of
issuance - (1,734,562) - - (1,734,562)
Exercise of
share
options and
warrants 17 14,335 689,072 - - 703,407
Share-based
payments 16 - - - 1,708,075 1,708,075
------------------- --------------------- --------------------------- ---------------------- ------------------
Balance at
December
31, 2017 3,589,201 80,872,838 (544,378) (7,573,048) 76,344,613
=================== ===================== =========================== ====================== ==================
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, 2017
Year ended Year ended Year ended
December December December
31, 2017 31, 2016 31, 2015
Note US $ US $ US $
----- --------------------------------- ---------------------------------- -----------------------------------
Operating
activities
Operating loss
for the
year (38,016,689) (39,623,645) (8,253,093)
Adjustments to reconcile
net loss to net cash
used
in activities:
Share-based
payments 16 1,708,075 513,541 325,908
Warrant issued
for services
performed 14 109,431 - -
Gain on
settlement of
contract
disputes 4 - (83,320) (5,027)
Interest
receivable 4 133,612 69,754 15,028
Taxation
payable - (287) (774)
Changes in
operating
assets and
liabilities:
Prepaid expenses
and accounts
receivable 60,405 (233,407) (155,578)
Accounts
payable and
other
accrued
liabilities (1,429,563) 11,415,353 75,852
--------------------------------- ---------------------------------- -----------------------------------
Net cash used in
operating
activities (37,434,729) (27,942,011) (7,997,684)
--------------------------------- ---------------------------------- -----------------------------------
Financing
activities
Proceeds from
issuance
of promissory
notes - - 704,210
Proceeds from
issuance
of term loan 13 15,000,000 - -
Costs of issuance
of term
loan 13 (575,970) - -
Proceeds from
issue of
share capital 17 25,416,301 24,995,980 38,660,106
Costs of issuance
of share
capital 17 (1,734,562) (3,370,155) (2,559,477)
Proceeds from
exercise
of warrants and
options 17 419,004 117,313 62,739
Interest paid 4 (70,833) (314,916) (268,216)
--------------------------------- ---------------------------------- -----------------------------------
Net cash provided
by financing
activities 38,453,940 21,428,222 36,599,362
--------------------------------- ---------------------------------- -----------------------------------
Net change in
cash 1,019,211 (6,513,789) 28,601,678
Cash, beginning
of the
year 21,829,632 28,594,347 3,281
Effect of foreign
exchange
rate changes (197,368) (250,926) (10,612)
--------------------------------- ---------------------------------- -----------------------------------
Cash, end of the
year 22,651,475 21,829,632 28,594,347
================================= ================================== ===================================
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 -
Fair value of
warrants
issued in
conjunction
with issuance
of term
loan 419,573 - -
The notes are an integral part of these consolidated financial
statements.
Motif Bio plc
Company statement of cash
flows
For the year ended December
31, 2017
Year ended Year ended
December December
31, 2017 31, 2016
Note US $ US $
-------------------------------- --------------------------------
Operating activities
Operating loss for the year (1,827,148) (1,903,861)
Adjustments to reconcile
net loss to net cash used
in activities:
Share-based payments 140,331 255,830
Interest receivable 4 133,609 69,718
Warrants issued for services
performed 109,431 -
Changes in operating assets
and liabilities:
Prepaid expenses and other
receivables 100,216 (2,883,360)
Accounts payable and other
accrued liabilities 62,659 39,428
-------------------------------- --------------------------------
Net cash used in operating
activities (1,280,902) (4,422,246)
-------------------------------- --------------------------------
Investing activities
Capital contributions to
subsidiary, after acquisition - (23,472,036)
Due from Motif Bio Inc. (43,810,709) (322,758)
Net cash used in investing
activities (43,810,709) (23,794,794)
-------------------------------- --------------------------------
Financing activities
Proceeds from issue of share
capital 17 25,416,301 24,995,980
Costs of issuance of share
capital 17 (1,734,562) (3,370,155)
Proceeds from exercise of
warrants and options 17 419,004 117,313
-------------------------------- --------------------------------
Net cash provided by financing
activities 24,100,743 21,743,138
-------------------------------- --------------------------------
Net change in cash (20,990,868) (6,473,902)
Cash, beginning of the period 21,817,489 28,543,181
Effect of foreign exchange
rate changes (197,364) (251,790)
-------------------------------- --------------------------------
Cash, end of the year 629,257 21,817,489
================================ ================================
The notes are an integral part of these consolidated financial
statements.
Notes to the consolidated financial statements of Motif Bio
plc
For the year ended December 31, 2017
1. General information
Motif Bio plc is a clinical stage biopharmaceutical company
which specializes in developing and commercializing 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: 201 Temple
Chambers, 3-7 Temple Avenue, London EC4Y 0DT, 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 251 Little Falls Drive,
Wilmington, Delaware, 19808. 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 9, 2018.
Going concern
As of December 31, 2017, the Group had $22.7 million in cash.
Net cash used in operating activities was $37.4 million for the
year ended December 31, 2017. Net loss for the year ended December
31, 2017 was $44.8 million. The Company had US $0.6 million in cash
as of December 31, 2017. The Group and Company expect to incur
losses for the next several years as it expands its research,
development and clinical trials of iclaprim and prepare for
commercialization upon regulatory approval of iclaprim. The Group
and Company are unable to predict the extent of any future losses
or when the Group and Company will become profitable, if at
all.
The Group and Company will be required to raise additional
capital within the next year to continue the development and
commercialization of current product candidate and to continue to
fund operations at the current cash expenditure levels. The Group
and Company cannot be certain that additional funding will be
available on acceptable terms, or at all. To the extent that the
Group and Company raise 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 and Company's ability to conduct business.
If the Group and Company are 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 and Company would otherwise seek to develop or
commercialize itself on unfavorable terms.
These financial statements have been prepared under the
assumption that the Group and Company will continue as a going
concern. Due to the Group's and Company's recurring and expected
continuing losses from operations, as well as significant amounts
of outstanding payables and accrued expenses, the Group and Company
have concluded there is a material uncertainty which may cast
significant doubt in the Group's and Company'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.
Significant events
On November 15, 2017, the Group entered into a credit agreement
(the "Hercules Loan Agreement") with Hercules Capital, Inc.
("Hercules"). Pursuant to the credit agreement, Hercules agreed to
loan the Group $20.0 million in two tranches. The first tranche of
$15.0 million was drawn down at closing, with the remaining $5.0
million available upon the achievement of certain milestones
anticipated in 2018, or at Hercules' discretion. The terms include
an initial interest-only period of 15 months, extendable to 21
months on the achievement of certain milestones; a 30-month capital
and interest repayment period thereafter; an interest rate of 10%
tied to the U.S. prime rate and customary security over all assets
of the Group, except for intellectual property where there is a
negative pledge. Under the Hercules Loan Agreement, the Group
issued Hercules warrants to purchase up to 73,452 of its American
Depositary Shares (ADSs) at an exercise price of $9.53 per ADS,
representing 3.5% warrant coverage of the total loan facility.
Hercules also has the right, in its discretion, to participate in
any subsequent financing, such as an equity offering, in an amount
up to $1 million.
On June 23, 2017, the Group placed 66,666,667 new ordinary
shares at 30 pence per share and received $23,681,739 of net
proceeds.
On November 18, 2016, the Group announced the pricing of the
underwritten U.S. 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 offering in
the form of 2,438,491 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 offering price of the
ADSs and ADS Warrants in the U.S. offering was $6.98 per ADS and
ADS Warrant combination, and the 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 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 the 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
totaled US $3,550,786 and 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.
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 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 accounting policies have been applied consistently
across the Group.
The financial statements have been prepared in accordance with
International Financial Reporting Standards ("IFRS") as adopted by
the European Union and with the Companies Act 2006 applicable to
companies reporting under IFRS. 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 as modified for financial instruments
(including derivative instruments) at fair value through the income
statement. 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 Company has taken advantage of the exemption in Section 408
of the Companies Act 2006 to not present its own Statement of
Comprehensive Loss. The loss for the Company for the year was US
$8.3 million (2016: US $2.2 million loss).
a. New and amended standards effective from January 1, 2017
Amendments to IAS 7, Disclosure Initiative, was adopted with an
effective date of January 1, 2017. 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. The Group
believes that the disclosure contained herein adequately satisfy
this requirement. The only balance sheet liability for which cash
flows are classified as financing activities is the term loan with
Hercules Capital, Inc. The cash inflow in the year in respect of
the term loan was $14.4 million, net of issuance costs and non-cash
movement of $0.4 million for the issuance of warrants. The net
movement and resulting closing balance is further detailed in Note
13.
There are no other new standards and amendments that have been
applied from January 1, 2017, which have had an impact on the
Group's or Company'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 or Company.
The new standards potentially relevant to the Group or Company
are discussed below.
IFRS 2, Share-based Payments (as amended) - Effective date -
January 1, 2018. The Group currently plans to apply IRFS 2
initially on January 1, 2018. IFRS 2 related to the classification
and measurement of share-based payment transactions. The amendments
are intended to eliminate diversity in practice regarding (i)
accounting for cash-settled share-based payment transactions that
include a performance condition, (ii) share-based payments in which
the manner of settlement is contingent on future events, (iii)
share-based payments settled net of tax withholdings, and (iv)
modification of share-based payment transactions from cash-settled
to equity-settled. Based on the initial assessment, this standard
is not expected to have a material impact on the Group.
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. Although the Group and Company are
currently evaluating the potential implications of this standard,
the Group and Company do not believe the adoption of this standard
will have a material impact at this time, based on the current
stage of the assessment.
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.
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-to support its strategy for 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.
The Company's preclinical studies and 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. The Company monitors patient
enrollment levels and related activities to the extent possible
through internal reviews, correspondence and status meetings and
review of contractual terms. Estimates are dependent on the
timeliness and accuracy of data provided by the CROs and other
vendors. In this event, the Company 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 in the second half of each
fiscal year 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 Group'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 Group 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 Group or the counterparty.
j. Share-based payment transactions
The fair value of options and warrants granted to employees,
Directors, and consultants is 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.
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 Group 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 Group 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 Group 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.
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 (Judgement and
Estimate)
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, the assessment of which includes
quantitative and qualitative factors, including projected future
cash flow estimate. The projected future cash flows are also used
to support the carrying value of the investment and intercompany
receivable balances recognised on the Company's Statement of
Financial Position.
Research and development expenditures (Judgement)
Research and development 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 (Estimate)
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, 2017, 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 become 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 to date using cash raised
through the issuance of debt and equity. The Directors acknowledge
that uncertainty remains over the ability of the Group to have the
resources to fully support advancing iclaprim through regulatory
approval and commercialization in the United States and Europe.
Subject to the availability of funding, the Group also plans to
commence additional phase 3 clinical trials of iclaprim in patients
with hospital-acquired bacterial pneumonia, including those with
ventilator-associated bacterial pneumonia. To fund the additional
clinical trial and the commercialization of iclaprim, the Group
will need additional funding through public markets, private
financing, and/or partnering opportunities.
The Group is heavily dependent on the public markets both in the
United States and United Kingdom. A downturn in the public markets,
especially in biotech, may make it difficult for the Group to
obtain sufficient funds on acceptable terms. A delay obtaining
additional funding could lead to a decrease in the Group's
prospects for the commercialization of iclaprim.
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 Total
At December 31, 2017 US $ US $ US $ US $ US $
---------------------------------------- ---------- ----------- ----------- ------------ -----------
Trade and other
payables................................
......... 10,889,554 - - - 10, 889,554
Payable on completion of clinical
trial................. 500,000 - - - 500,000
Derivative
liabilities.............................
..................... - - 12,626,299 - 12,626,299
Term Loan and other non-current (Note
13).......... - 4,699,701 10,730,299 - 15,430,000
---------- ----------- ----------- ------------ -----------
11,389,554 4,699,701 23,356,598 - 39,445,853
---------- ----------- ----------- ------------ -----------
Between 1 Between 2
< 1 year and 2 years and 5 years Over 5 years Total
At December 31, 2016 US $ US $ US $ US $ US $
----------------------------------------- ---------- ----------- ----------- ------------ ----------
Trade and other
payables.................................
........ 12,319,117 - - - 12,319,117
Payable on completion of clinical
trial................. 500,000 - - - 500,000
Derivative
liabilities..............................
.................... - - 5,798,058 - 5,798,058
---------- ----------- ----------- ------------ ----------
12,819,117 - 5,798,058 - 18,617,175
---------- ----------- ----------- ------------ ----------
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 pounds 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 31, 2017 December 31, 2016
US $ US $
----------------- -----------------
Sterling - Cash.................................................... 461,857 17,795
At December 31, 2017, a change in foreign currency exchange
rates is not expected to have a significant impact on the profit or
losses of the Group.
Interest rate risk
The Group's exposure to interest rate risk is limited to
interest earned on the cash and cash equivalent balance of $22.7
million and its financing exposures on the Hercules loan, which has
an initial interest rate of 10% tied to the U.S. prime rate. A
change in interest rates is not expected to have a 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, 2017, 2016 and 2015.
a. Other income
Year ended Dec Year ended Dec Year ended Dec
31, 2017 31, 2016 31, 2015
US $ US $ US $
-------------- -------------- --------------
Gains on settlement of contract
disputes................................................... - 83,320 5,027
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 year ended December 31,
2015 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 Dec Year ended Dec Year ended Dec
31, 2017 31, 2016 31, 2015
US $ US $ US $
----------------- -------------- --------------
General and administrative expenses
Employee benefits expenses, including share-based
payments............ 2,778,854 1,445,110 1,146,566
Directors'
fees......................................................
............................................ 728,798 423,051 380,969
Legal and professional
fees......................................................
.................... 2,762,334 2,073,317 1,444,507
Investor and public relations advisory fees
............................................ 1,283,012 647,919 292,949
Other
expenses..................................................
.............................................. 988,398 322,753 312,189
----------------- -------------- --------------
8,541,396 4,912,150 3,577,180
----------------- -------------- --------------
Research and development costs
Employee benefits expenses, including share-based
payments............ 1,468,719 677,412 -
Contract research organization
expenses................................................. 22,066,179 30,445,967 3,055,421
Chemistry and manufacturing development and other
non-clinical
development...............................................
................................................. 2,933,475 2,145,641 949,466
Other research and development
costs.....................................................
. 3,006,920 1,525,795 676,053
----------------- -------------- --------------
29,475,293 34,794,815 4,680,940
----------------- -------------- --------------
2017 2016 2015
----------------- -------------- --------------
Auditors' Remuneration US $ US $ US $
----------------- -------------- --------------
Fees paid/payable to the company's auditors and its
associates for the audit of the parent
company and consolidated financial statements 60,630 40,000 73,730
----------------- -------------- --------------
- Audit of the Group's overseas filings 257,500 210,000
----------------- -------------- --------------
- Audit related assurance services 208,040 20,092 -
----------------- -------------- --------------
Advisory services in relation to F-1/A1 filings - 601,431 -
----------------- -------------- --------------
526,170 871,523 73,730
----------------- -------------- --------------
c. Finance income and costs
Year ended Dec Year ended Dec Year ended Dec
31, 2017 31, 2016 31, 2015
US $ US $ US $
-------------- -------------- --------------
Finance income
Interest from financial
assets....................................................
.................. 133,612 69,754 15,028
-------------- -------------- --------------
133,612 69,754 15,028
-------------- -------------- --------------
Finance costs
Interest
expense...................................................
........................................... (200,000) (383,259) (268,216)
Accretion of end of term
payment...................................................
............. (22,758) - -
Amortisation of deferred financing
costs.................................................. (52,691) - -
-------------- -------------- --------------
(275,449) (383,259) (268,216)
-------------- -------------- --------------
Net finance
costs.....................................................
........................................ (141,837) (313,505) (253,188)
-------------- -------------- --------------
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 ended Year ended Year ended
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
------------- ------------- -------------
Executive
Directors.......................................................
.................................. 1 2 2
------------- ------------- -------------
Key management
personnel.......................................................
................... 7 4 2
------------- ------------- -------------
Total 8 6 4
------------- ------------- -------------
The aggregate payroll costs of Executive Directors and key
management personnel were as follows:
Year ended Year ended Year ended
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
US $ US $ US $
------------- ------------- -------------
Short-term benefits:
Wages and
salaries........................................................
................................ 2,287,458 1,527,776 935,081
Social security and other employer
costs.................................................. 252,040 67,410 60,604
Share-based payments(1)
................................................................
................. 1,120,374 119,845 150,881
------------- ------------- -------------
3,659,872 1,715,031 1,146,566
------------- ------------- -------------
(1) The total share-based payments do not reflect the
out-of-period adjustment recorded in 2017 (Note 16).
6. Directors' remuneration
Salaries Social 2017 2016 2015
and fees Bonuses Security Total Total Total
US $ US $ US $ US $ (2) US $ US $
--------- ------- -------- --------- --------- ---------
Executive
Graham Lumsden(1)(2) ............. 425,000 127,500 15,499 567,999 488,510 557,180
Non-executive.........................
Robert Bertoldi(2) ................... 125,000 - 9,563 134,563 137,783 135,126
Richard Morgan.................... 113,500 - - 113,500 177,725 217,072
Charlotta Ginman(3) .............. 67,279 - - 67,279 57,475 32,042
Jonathan Gold....................... 194,004 - - 194,004 114,094 25,881
Zaki
Hosny.............................. 63,000 - - 63,000 57,475 28,756
Mary Lake Polan................... 60,000 - - 60,000 54,094 25,881
John Stakes(4)
.......................... - - - - 30,869 28,756
Bruce Williams..................... 64,000 - - 64,000 54,094 25,881
Craig T. Albanese 38,333 - - 38,333 - -
--------- ------- -------- --------- --------- ---------
Total.................................
....... 1,150,116 127,500 25,062 1,302,678 1,172,119 1,076,575
--------- ------- -------- --------- --------- ---------
(1) On February 2, 2018, Dr. Lumsden was awarded a cash bonus of
$127,500 for services provided in 2017. A portion, or $42,500, of
the cash bonus is contingent on meeting certain operational
milestones in 2018.
(2) Total remuneration for Dr. Lumsden and Mr. Bertoldi exclude
employer 401k pension contributions of $7,950 and $6,075,
respectively, during 2017.
(3) Ms. Ginman's remuneration for 2017 was GBP52,195 or US
$67,279 based on an average exchange rate of 1.289 for the
period.
(4) Mr. Stakes resigned from the Board of Directors effective
July 1, 2016.
The Directors' remuneration included in the table above
represents the amount paid and/or awarded to each director during
the years ending December 31, 2017 and 2016. The highest paid
director's aggregate emolument was $567,999 for the year ending
December 31, 2017. No director exercised share options during the
year ending December 31, 2017.
Directors of the Company have been awarded rights to subscribe
for shares in the Group as set out below.
Exercise
1 January 31 December price Grant Expiry
2017 Granted 2017 US $ date date
--------- --------- ----------- ---------- ------------ ------------
Richard
Morgan....................
.......... 73,215 - 73,215 $ 0.70 Jan 1, 2010 Jan 1, 2020
6,179 - 6,179 $ 0.70 Jan 1, 2011 Jan 1, 2021
502,950 - 502,950 $ 0.14 Dec 4, 2014 Dec 4, 2024
--------- --------- -----------
582,344 - 582,344
--------- --------- -----------
Craig T.
Albanese.................. - 100,000 100,000 $ 0.44 May 4, 2017 May 4, 2027
--------- --------- -----------
- 100,000 100,000
--------- --------- -----------
Robert
Bertoldi..................
.............. 53,887 - 53,887 $ 0.70 Jan 1, 2010 Jan 1, 2020
251,475 - 251,475 $ 0.14 Dec 4, 2014 Dec 4, 2024
--------- --------- -----------
305,362 - 305,362
--------- --------- -----------
Charlotta
Ginman....................
....... 251,475 - 251,475 $ 0.14 Dec 4, 2014 Dec 4, 2024
--------- --------- -----------
251,475 - 251,475
--------- --------- -----------
Jonathan
Gold......................
............ 73,502 - 73,502 $ 0.70 Jan 1, 2010 Jan 1, 2020
5,964 - 5,964 $ 0.70 Jan 1, 2011 Jan 1, 2021
251,475 - 251,475 $ 0.14 Dec 4, 2014 Dec 4, 2024
--------- --------- -----------
330,941 - 330,941
--------- --------- -----------
Zaki
Hosny.....................
................... 53,888 - 53,888 $ 0.70 Jun 18, 2009 Jun 18, 2019
14,370 - 14,370 $ 0.70 Jan 1, 2010 Jan 1, 2020
2,587 - 2,587 $ 0.70 Jan 1, 2011 Jan 1, 2021
107,774 - 107,774 $ 0.14 Jan 30, 2013 Jan 30, 2023
251,475 - 251,475 $ 0.14 Dec 4, 2014 Dec 4, 2024
--------- --------- -----------
430,094 - 430,094
--------- --------- -----------
Graham
Lumsden...................
......... 574,800 - 574,800 $ 0.14 May 25, 2013 May 25, 2023
2,874,000 - 2,874,000 $ 0.14 Dec 4, 2014 Dec 4, 2024
- 1,000,000 1,000,000 $ 0.33 Feb 7, 2017 Feb 7, 2027
- 700,000 700,000 $ 0.33 Feb 7, 2017 Feb 7, 2027
--------- --------- -----------
3,448,800 1,700,000 5,148,800
--------- --------- -----------
Mary Lake
Polan.....................
......... 67,036 - 67,036 $ 0.70 Jan 1, 2010 Jan 1, 2020
5,461 - 5,461 $ 0.70 Jan 1, 2011 Jan 1, 2021
251,474 - 251,474 $ 0.14 Dec 4, 2014 Dec 4, 2024
--------- --------- -----------
323,971 - 323,971
--------- --------- -----------
Bruce
Williams..................
.............. 67,252 - 67,252 $ 0.70 Jan 1, 2010 Jan 1, 2020
28,740 - 28,740 $ 0.70 Jan 16, 2010 Jan 16, 2020
71,850 - 71,850 $ 0.70 Nov 15, 2010 Jan 16, 2020
2,802 - 2,802 $ 0.70 Jan 1, 2011 Jan 1, 2021
251,474 - 251,474 $ 0.14 Dec 4, 2014 Dec 4, 2024
--------- --------- -----------
422,118 - 422,118
--------- --------- -----------
7. Income tax expense
Recognized in the income statement:
Year ended Year ended Year ended
Dec 31, Dec 31, Dec 31,
2017 2016 2015
Current tax expense US $ US $ US $
----------------------------------------------------------------- ---------- ---------- ----------
U.K. corporation
taxes............................................................
....................... - - -
Overseas
taxes................................................................
................................ 22,000 287 774
---------- ---------- ----------
22,000 287 774
---------- ---------- ----------
The main rate of U.K. corporation tax was reduced from 21% to
19% from April 1, 2015 and has been reflected in these consolidated
financial statements.
The tax expense recognized for the years ended December 31,
2017, 2016 and 2015 is higher than the standard rate of corporation
tax in the U.K. of 19%. The differences are reconciled below:
2017 2016 2015
Reconciliation of effective tax rate: US $ US $ US $
------------------------------------------------------------------- ------------- ----------- ----------
Loss on ordinary activities before
taxation.............................................. (44,788,366) (40,324,015) (8,515,925)
------------- ----------- ----------
U.K. Corporation tax 19%
...................................................................
.......... (1,570,723) (449,929) (355,889)
Overseas tax at higher
rate...............................................................
............ (7,669,495) (12,954,729) (2,297,873)
Effects of:
Unrecognized
losses.............................................................
.......................... (9, 240,218) (13,404,371) (2,652,988)
Other adjustments-overseas
taxes.............................................................. 22,000 287 774
------------- ----------- ----------
Total tax
charge.............................................................
.................................. 22,000 287 774
------------- ----------- ----------
There is an unrecognized cumulative deferred tax asset of US
$1,783,102, relating to deferred tax on losses generated of US
$10,488,833 the U.K. during the years ended December 31, 2017 and
2016.
8. Loss per share
Basic loss per share is calculated by dividing the loss
attributable to equity holders of the Group by the weighted average
number of shares in issue during the year. In accordance with IAS
33, where the Group has reported a loss for the year, the shares
are anti-dilutive.
Year ended Year ended Year ended
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
US $ US $ US $
------------- ------------- -------------
Loss after
taxation.....................................................
.................................... (44,810,366) (40,324,302) (8,516,699)
Basic and diluted weighted average shares in
issue............................. 231,530,091 116,558,191 61,225,922
Basic and diluted loss per
share........................................................
.......... (0.19) (0.35) (0.14)
------------- ------------- -------------
The following potentially dilutive securities outstanding at
December 31, 2017, 2016 and 2015 have been excluded from the
computation of diluted weighted average shares outstanding, as they
would be antidilutive.
2017 2016 2015
---------- ---------- ----------
Convertible promissory
notes....................................................... - - 14,510,770
Warrants.................................................................
.......................... 49,399,947 5,726,364 6,925,962
Share
options..................................................................
.................. 17,065,534 6,810,357 7,182,674
---------- ---------- ----------
66,465,481 12,536,721 28,619,406
---------- ---------- ----------
9. Intangible assets (Group)
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
---------
As of December 31, 2016
Cost..................................................................................................
..................................................... 6,195,748
Accumulated amortization and
impairment................................................................................. -
---------
Net book amount at December 31,
2016........................................................................................ 6,195,748
Additions.............................................................................................
................................................. -
Amortization
charge................................................................................................
.......................... -
---------
Net book amount at December 31,
2017..................................................................................... 6,195,748
---------
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 considered
the separable value of the active pharmaceutical ingredients and
determined it did not 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 management's
expectation that the liability will be settled in early 2018.
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, 2017 or 2016.
10. Prepaid expenses and other receivables
Group Company
------------------------ ---------------------------
12 months 12 months 12 months 12 months
ended ended ended ended
Amounts due within one Dec 31, Dec 31, Dec 31, Dec 31,
year 2017 2016 2017 2016
--------------------------------------------
US $ US $ US $ US $
-------------------------------------------- ---------- ------------ ---------- ---------------
Other receivables and
prepayments.............................. 317,584 401,064 249,152 349,368
317,584 401,064 249,152 349,368
-------------------------------------------- ---------- ------------ ---------- ---------------
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
Group Company
----------------------------- ------------------------
Dec 31, Dec 31, Dec 31, Dec 31,
2017 2016 2017 2016
US $ US $ US $ US $
------------------------------------------------------------- ----------- ---------------- -------- --------------
Cash at
bank.......................................................
.............. 22,651,475 21,829,632 629,257 21,817,489
22,651,475 21,829,632 629,257 21,817,489
------------------------------------------------------------- ----------- ---------------- -------- --------------
12. Trade and other payables
Group Company
------------------------ -----------------------------------------
12 months 12 months 12 months 12 months
ended ended Ended ended
Amounts due within one Dec 31, Dec 31, Dec 31,
year 2017 2016 Dec 31, 2017 2016
US $ US $ US $ US $
------------------------------------------------- ----------- ----------- ------------------- --------------------
Trade payables(1)
...............................................
. 6,464,038 734,405 - 68,940
Accrued expenses - Contract
research organization... 1,293,379 10,854,531 - -
Accrued expenses other
.................................... 3,007,893 727,947 35,331 27,976
Amounts due to
affiliates................................. - 78 - -
Other
payable........................................
........... 124,244 2,156 124,244 -
10,889,554 12,319,117 159,575 96,916
------------------------------------------------- ----------- ----------- ------------------- --------------------
(1) Trade payables include US $5,704,052 owed to the Group's
contract research organization.
The Directors estimate that the carrying value of trade and
other payables approximated their fair value. The amounts due to
the Group's contract research organization are due in 2018.
13. Interest bearing loans and borrowings (Group)
Dec 31, 2017 Dec 31, 2016
Non-current liabilities US $ US $
------------------------------- --------------- ------------
Term Loan 15,000,000 -
Deferred financing costs (942,853) -
--------------- ------------
Net non-current liabilities 14,057,147 -
--------------- ------------
On November 15, 2017, the Group entered into a credit agreement
(the "Hercules Loan Agreement") for up to US $20 million in debt
financing with Hercules Capital, Inc. ("Hercules"). Pursuant to the
credit agreement, Hercules agreed to loan the Group $20.0 million
in two tranches. The first tranche of US $15.0 million was drawn
down at closing, with the remaining $5.0 million available upon the
achievement of certain milestones anticipated in 2018, or at
Hercules's discretion.
These milestones include (i) (x) the FDA has accepted Borrower's
New Drug Application for marketing approval with respect to
Borrower's "iclaprim" product for the treatment of patients with
acute bacterial skin and skin structure infection ("ABSSSI"), and
(y) Borrower has enrolled its first patient in its Phase 3 clinical
study of Borrower's "iclaprim" product for the treatment of
hospital-acquired bacterial pneumonia ("HABP"), (ii) Borrower has
obtained market approval from the FDA with respect to Borrower's
"iclaprim" product for the treatment of patients with ABSSSI, or
(iii) at the discretion of Hercules.
The terms include an initial interest-only period of 15 months,
extendable to 21 months on the achievement of certain milestones; a
30-month capital and interest repayment period thereafter; an
interest rate of 10% tied to the US prime rate and customary
security over all assets of the Group, except for intellectual
property where there is a negative pledge. In addition, there is a
payment of $0.4 million due at the end of the term of the loan.
Under the credit agreement, the Group issued Hercules a warrant to
purchase up to 73,452 of its ADS (each representing 20 ordinary
shares) at an exercise price of US $9.53 per ADS, representing 3.5%
warrant coverage of the total loan facility. Hercules also has the
right, in its discretion, to participate in any subsequent
financing, such as an equity offering, in an amount up to $1
million. In connection with the Hercules Loan Agreement closing,
the Group incurred US $0.5 million in fees and issued warrants with
a fair value of approximately $0.4 million. Both items are
classified as a direct reduction from the Hercules Loan Agreement
balance and will be amortized over the life of the Loan using the
effective interest rate method. The Group is also subject to an end
of term charge equal to 2.15% of the total loan capacity. The end
of term charge is payable upon loan maturity or the date that the
Group prepays the outstanding loan balance. For the year ended
December 31, 2017, the Group recognized total interest expense of
US $275,449, comprised of interest expense of $200,000, accretion
expense related to the end of term payment of US $22,758 and
amortization expense related to the deferred financing costs of
$52,691. Under the Hercules Loan Agreement, the Group was required
to provide Hercules Capital, Inc. certain informational reports by
December 30, 2017. The Group did not provide such information in a
timely manner. The Group believes and represents that it has since
provided all required informational reports and is in compliance
with covenant requirements as of December 31, 2017 and as of the
date that these financial statements are issued, as we believe that
the untimely provision of information did not result in an Event of
Default under the terms of the loan agreement.
14. Warrants (Group and Company)
Warrant activity
The Group has issued warrants for services performed and in
conjunction with various equity financings. The Group's warrants
represent the right to purchase ordinary shares or ADS's and have
either a Pounds Sterling or US Dollar exercise price. The ADS
warrants are exercisable to purchase ADS's, which each represent 20
ordinary shares. Depending on the terms of the warrant agreements,
the ordinary share or ADS warrants are classified as either equity
or a liability. Liability classified warrants are remeasured each
reporting period, with changes in fair value recorded in the
statements of comprehensive loss. The following is a summary of the
Group's warrant activity during the year ended December 31,
2017:
Weighted Average
Number of Warrants Exercise Price
--------------------------- ------------------------
Ordinary shares ADS Ordinary shares ADS
--------------- --------- ----------------- -----
Outstanding as of January 1, 2017 23,729,865 1,219,246 GBP 0.278 $8.03
Expired (1) (416,645) - $ 0.56 -
Granted - 133,452 - $8.51
Exercised (640,353) (16,344) GBP 0.322 $8.03
--------------- --------- ------ --------- ----
Outstanding as of December 31, 2017 22,672,867 1,336,354 GBP 0.272 $8.08
=============== ========= ====== ========= ====
(1) The ordinary warrants that expired in December 2017 had an
exercise price denominated in US dollars. All other ordinary
warrants have Pounds Sterling exercise prices.
The Group's warrants outstanding and exercisable as of December
31, 2017 were as follows:
Type of Warrant Outstanding Number Outstanding and Exercisable Exercise Price Expiration Date
---------------------------- ---------------------------------- ---------------- -----------------
Ordinary shares (1) 1,367,089 GBP GBP 0.20 April 2, 2020
Ordinary shares (1) 1,082,384 GBP GBP 0.50 July 21, 2020
Ordinary shares (2) 10,791,361 GBP GBP 0.322 November 23, 2021
ADS (2) 1,202,902 US $ 8.03 November 23, 2021
Ordinary shares (1) 9,432,033 GBP GBP 0.20 April 2, 2025
ADS (2) 60,000 US $ 7.26 July 31, 2022
ADS (2) 73,452 US $ 9.53 November 14, 2022
(1) Warrants totalling 11,881,506 of ordinary shares are equity
classified.
(2) Warrants totalling 10,791,361 of ordinary shares and
1,336,354 of ADS are liability classified.
Liability classified warrants
ADS warrants
On November 23, 2016, the Group closed an initial U.S. offering
of 2,438,491 ADSs and 1,219,246 ADS warrants 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
Level 1 and 2 measurements.
On August 1, 2017, the Group issued to a third party a warrant
to purchase up to 60,000 ADSs at an exercise price of $7.26 per
ADS. The warrant vests 5,000 ADS at issuance, with the remaining
55,000 ADS vesting upon satisfaction of various performance
conditions related to the Group's stock price and trading volumes.
Once vested, the warrant may be exercised on a cashless basis, and
expires on July 31, 2022. Exercising on a cashless basis 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 $109,431
using the Black-Scholes model.
At issuance, the following assumptions were used in the
Black-Scholes model.
August 1, 2017
--------------
Share price (US
$).............................................................................................. 7.26
Exercise price (US
$)......................................................................................... 7.26
Expected
volatility.......................................................................................
..... 70%
Number of periods to
exercise....................................................................... 5.0
Risk-free
rate.............................................................................................
......... 1.80%
Expected
dividends........................................................................................
... -
On November 14, 2017, in conjunction with the Hercules Loan
Agreement, the Group issued Hercules a warrant to purchase up to
73,452 ADS's at an exercise price of $9.53 per ADS, representing
3.5% warrant coverage of the total loan facility. The warrant may
be exercised on a cashless basis, and is immediately exercisable
through November 14, 2022. Exercising on a cashless basis 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 $419,573
using the Black-Scholes model.
At issuance, the following assumptions were used in the
Black-Scholes model.
November 14, 2017
-----------------
Share price (US
$)............................................................................................
.. 9.53
Exercise price (US
$)......................................................................................... 9.53
Expected
volatility....................................................................................
........ 72%
Number of periods to
exercise....................................................................... 5.0
Risk-free
rate..........................................................................................
............ 2.06%
Expected
dividends.....................................................................................
...... -
At December 31, 2017 and 2016, the liability classified ADS
warrants had a fair value of US $8,927,252 and $3,967,189 using the
following weighted-average assumptions in the Black-Scholes
model:
December 31, December 31,
2017 2016
-------------------------- --------------------------
Share price (US
$)...................................................
........................................... 10.81 6.19
Exercise price (US
$)...................................................
...................................... 7.91 8.03
Expected
volatility...........................................
................................................. 74% 70%
Number of periods to
exercise.............................................
.......................... 3.82 4.92
Risk-free
rate.................................................
..................................................... 1.93% 1.91%
Expected
dividends............................................
............................................... - -
Ordinary warrants
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 GBP0.28 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, 2017 and 2016, the liability classified ordinary
warrants had a fair value of US $3,699,047 and $1,830,869 using the
Black-Scholes model and the following assumptions:
December 31, December 31,
2017 2016
------------ ------------
Share price
(GBP)............................................................................
.................. 0.41 0.25
Exercise price
(GBP)............................................................................
.............. 0.322 0.322
Expected
volatility.......................................................................
..................... 76% 70%
Number of periods to
exercise....................................................................... 3.90 4.92
Risk-free
rate.............................................................................
......................... 2.09% 1.91%
Expected
dividends........................................................................
................... - -
The following is a summary of the Group's liability classified
warrant activity, including both ADS and Ordinary warrants, during
the years ended December 31, 2017 and 2016:
Fair value
Liability classified warrants US $
-------------------------------------------------------------------------------------------------- ------------
January 1,
2016............................................................................................. -
Issued during the
year................................................................................. $ 5,662,119
Loss from revaluation of derivative liabilities....................................... 135,939
------------
Balance at December 31, 2016................................................................... 5,798,058
Issued during the
year................................................................................. 529,004
Exercised during the
year............................................................................ (284,402)
Impact of foreign exchange......................................................................... 192,088
Loss from revaluation of derivative liabilities....................................... 6,391,551
------------
Balance at December 31, 2017................................................................... $ 12,626,299
------------
15. Contingent liabilities
On February 28, 2018, the Group's Board of Directors awarded Dr.
Lumsden a cash bonus of $127,500 for his performance and
contributions during 2017. A portion, or $42,500, of the cash bonus
is contingent upon achieving certain operational milestones in
2018. Dr. Lumsden received a separate supplemental bonus of $50,000
that is also contingent upon operational milestones in the first
half of 2018. Dr. Huang was awarded a cash bonus of $142,000 for
his performance and contributions in 2017. A portion, or $42,000,
of the cash bonus is contingent upon achieving certain operational
milestones in 2018.
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 1, 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. The share price used for the
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.
Motif Bio plc adopted a Share Option Plan (the "New Plan") on
April 1, 2015. The 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 at 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 Group 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.
Weighted
average
exercise
Number of price
share
options US $
---------- --------
Outstanding at January 1,
2016.................................................................................... 13,427,495 0.33
Granted during the
year.....................................................................................
............ 3,261,577 0.58
Forfeited during the
year.....................................................................................
........... - -
Exercised during the year
.........................................................................................
..... (263,690) 0.14
Expired during the
year.....................................................................................
............. (862,200) 0.70
----------
Outstanding at December 31,
2016............................................................................. 15,563,182 0.37
Granted during the
year.....................................................................................
............ 5,800,000 0.33
Forfeited during the
year.....................................................................................
........... (4,153,948) 0.53
Exercised during the year
.........................................................................................
..... (143,700) 0.14
Expired during the
year.....................................................................................
............. - -
----------
Outstanding at December 31,
2017............................................................................. 17,065,534 0.32
----------
Exercisable at December 31,
2017............................................................................... 11,334,173 0.29
----------
The range of exercise prices of the options at December 31, 2017
was US $0.14 - $0.91. The weighted average contractual term of
options outstanding at December 31, 2017 and 2016 was 7.0 years and
7.3 years, respectively. The weighted average remaining contractual
term of options exercisable at December 31, 2017 was 6.1 years.
The fair value of options granted have been valued using the
Black-Scholes option pricing model. The weighted-average fair value
of options granted during the year ended December 31, 2017 was
$0.26. 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 weighted-average assumptions for option grants were as
follows:
Year ended Dec
31, 2017
--------------
Share price (US
$)...............................................................................................
...................... 0.34
Exercise price (US
$)...............................................................................................
................. 0.34
Expected
volatility.......................................................................................
............................. 70.86%
Term.............................................................................................
............................................... 10 years
Risk-free
rate.............................................................................................
................................ 2.11%
Expected
dividends........................................................................................
.......................... -
The total expense recognized for the years arising from
stock-based payments are as follows:
Year ended Year ended Year ended
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
US $ US $ US $
------------- ------------- -------------
General and administrative
expense...................................................... 1,143,496 513,541 325,908
Research and development
expense........................................................ 564,579 - -
------------- ------------- -------------
Total share-based payment
expense....................................................... 1,708,075 513,541 325,908
------------- ------------- -------------
During the preparation of the interim financial statements for
the six months ended June 30, 2017, the Group identified and
corrected a prior period error whereby stock-based compensation
expense was understated primarily due to recognizing expense only
when an award vested, not over the required service period using a
graded vesting approach as required under IFRS 2. The Group
assessed the materiality of the out-of-period adjustments on all
impacted periods and determined that they were not material to any
of the periods and that a restatement of previously issued
financial statements was not required. The Group concluded that the
cumulative adjustment to correct the error should be recorded in
the year ended December 31, 2017.
The expense in fiscal years 2016 and 2015 and 2014 was
understated by $802,282, $291,696 and $31,799, respectively. The
out-of-period correction increased General and Administrative
expense by $762,836 and Research and Development expense by
$362,941 for the year ended December 31, 2017. None of these
adjustments had an impact on the cash resources of the Group.
17. Share capital (Company)
Allotted, called up and fully paid: Number US $
----------------------------------------------------------------------------------------------------------- ----------- ---------
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
----------- ---------
Issued:
Ordinary shares of 1p
each................................................................................................
. 143,700 1,748
Ordinary shares of 1p
each................................................................................................
. 326,880 4,262
Ordinary shares of 1p
each................................................................................................
. 66,666,667 846,667
Ordinary shares of 1p
each................................................................................................
. 250,000 3,185
Ordinary shares of 1p
each................................................................................................
. 390,353 5,140
----------- ---------
In issue at December 31,
2017...................................................................................................... 263,519,128 3,589,201
----------- ---------
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 ADSs upon
the closing of an initial U.S. 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.
In January 2017, 143,700 ordinary shares were issued upon the
exercise of options.
In May 2017, 326,880 ordinary shares were issued upon the
exercise of warrants.
In June 2017, Motif Bio plc issued 66,666,667 ordinary shares at
a price of 30 pence per share. The Company raised $24,569,634 in
gross proceeds and incurred $1,734,562 of issuance costs in
connection with this offering. These issuance costs, which include
placement fees, are recorded as a reduction in equity.
In July 2017, 250,000 ordinary shares were issued upon the
exercise of warrants.
In November 2017, a total of 390,353 ordinary shares were issued
upon the exercise of warrants.
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.
18. Financial assets and financial liabilities
The Group and Company hold the following financial
instruments:
Group Company
----------------- -----------------
Financial assets Financial assets
at amortized cost at amortized cost
Financial assets US $ US $
------------------------------------------------------------------------- ----------------- -----------------
2017
Prepaid expenses and other
receivables......................................................... 317,584 249,152
Due from
affiliates...............................................................
..................................... - 47,733,088
Cash and cash
equivalents..............................................................
.................. 22,651,475 629,257
----------------- -----------------
22,969,059 48,611,497
----------------- -----------------
2016
Prepaid expenses and other
receivables......................................................... 401,064 349,368
Due from
affiliates...............................................................
..................................... - 3,294,823
Cash and cash
equivalents..............................................................
.................. 21,829,632 21,817,489
----------------- -----------------
22,230,696 25,461,680
----------------- -----------------
Group Company
--------------------- ---------------------
Financial liabilities Financial liabilities
at amortized cost at amortized cost
Financial liabilities US $ US $
----------------------------------------------------------------- --------------------- ---------------------
2017
Trade and other
payables.........................................................
.......................... 10,889,554 159,575
Payable on completion of clinical
trial........................................................... 500,000 -
Derivative
liabilities......................................................
...................................... 12,626,299 12,626,299
--------------------- ---------------------
24,015,853 12,786,274
--------------------- ---------------------
2016
Trade and other
payables.........................................................
.......................... 12,319,117 96,916
Payable on completion of clinical
trial........................................................... 500,000 -
Derivative
liabilities......................................................
...................................... 5,798,058 5,798,058
--------------------- ---------------------
18,617,175 5,894,974
--------------------- ---------------------
18. Financial assets and financial liabilities, continued
Fair value disclosures
The Group's cash, prepaid expenses and other current assets and
trade and other payables 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 liabilities are measured at fair
value using Level 1 or 2 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 December 31, 2016 to
December 31, 2017. The Group determined that the book value of the
Hercules Loan Agreement (Note 13) approximates its fair value as of
December 31, 2107 due the proximity of the transaction date with
December 31, 2017 and the interest being tied to the U.S. Prime
Rate. There were no transfers between fair value levels during the
years ended December 31, 2017 or 2016.
There were no non-recurring fair value measurements for the
years ended December 31, 2017 or 2016.
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. Subsidiaries
Method used
Country of Percentage Percentage to account for
Company name incorporation shareholding voting power investment
------------------------------------- -------------- ------------ ------------ --------------
Motif BioSciences Inc............... Delaware, USA 100% 100% Consolidation
The principal activity of Motif BioSciences, Inc. is proprietary
drug discovery research and development. Motif BioSciences Inc. was
incorporated in the US State of Delaware on December 2, 2003 and
has its registered office at 251 Little Falls Drive, Wilmington,
Delaware, 19808.
The Company's increase in its investment in Motif BioSciences,
Inc. of $1,567,743 related to the Company's share options that were
granted to BioSciences, Inc. employees during the fiscal 2017
year.
20. Related party transactions
Transactions with Amphion Innovations plc and Amphion
Innovations US, Inc.
At December 31, 2017, Amphion Innovations plc and its wholly
owned subsidiary, Amphion Innovations US, Inc., or collectively,
the Amphion Group, owned 14.48% of the issued ordinary shares in
Motif Bio plc. In addition, the Amphion Group previously provided
funding for the activities of Motif BioSciences Inc. through the
issue of convertible interest bearing loan notes, which were
converted to shares in December 2016. Total interest expense
recorded for the year ended December 31, 2016 related to these
notes was $390,485. Richard Morgan and Robert Bertoldi were
Directors of both the Company and Amphion Innovations plc in the
period. Transactions between the Group and the Amphion Group are
disclosed below:
Advisory and Consultancy Agreement with Amphion Innovations US,
Inc.
On April 1, 2015, the Group entered into an Advisory and
Consultancy Agreement with Amphion Innovations US, Inc. The
consideration for the services is US$120,000 per annum. 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
$120,000 to Amphion Innovations US, Inc. during each year ending
December 31, 2017 and 2016 in accordance with the terms of the
agreement. As of the date of this annual report, the agreement
continues to be in force.
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 US $5,000 per month. On November 1, 2015, the
consideration was increased to US $180,000 per annum. On July 1,
2016, the consideration decreased to US $75,000 per annum. 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. In July 2017, the Group amended the consulting agreement
with Amphion Innovations plc to increase the annual consideration
to $125,000 to better reflect Robert Bertoldi's time commitment to
the Group with and effective date of 1 January 2017. The Group paid
Robert Bertoldi US $125,000 and US $127,500 during the years ended
December 31, 2017 and 2016 in accordance with the terms of the
agreement.
Consultancy Agreement with Amphion Innovations US, Inc.
On September 1, 2016, the Group entered into a Consultancy
Agreement with Amphion Innovations US, Inc., pursuant to which
Amphion Innovations US, Inc. will provide consultancy services in
relation to the Group's obligations as a NASDAQ listed company. The
consideration for the services was US $15,500 per month. The
agreement was for an initial period of 12 months, after which the
agreement will terminate automatically unless renewed by the
parties by mutual agreement. The agreement was not extended past
the initial term. The Group paid US $170,500 and US $19,633 during
the years ended December 31, 2017 and 2016 in accordance with the
terms of the agreement.
Consultancy Agreement with Jonathan Gold
On April 13, 2016, we entered into a consultancy agreement with
Jonathan Gold, a member of the Board of Directors. Under the terms
of this agreement, Mr. Gold received a fixed fee of US $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 Mr. Gold. Under the terms of this agreement, Mr.
Gold received a fixed fee of US $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. This agreement was suspended
as of December 31, 2017.
Intercompany Receivable (Company)
The Company had a net due from Motif BioSciences, Inc. of
$47,733,088 and $3,294,823 at December 31, 2017 and 2016,
respectively. The receivable is payable on demand and does not bear
interest.
21. Subsequent events
On January 19, 2018, the Group announced that it filed a
"universal" shelf registration statement on Form F-3 with the SEC,
which was declared effective by the SEC on January 31, 2018. The
filing of a shelf registration statement, a common practice by
NASDAQ-listed companies, is intended to provide the Group with more
timely and efficient access to the U.S. capital markets. The shelf
registration, which can remain effective for up to three years,
will enable the Company to offer, issue and sell, in one or more
offerings at any time (as long as the shelf registration statement
remains effective), up to an aggregate of $80 million of ordinary
shares, including ADSs, where each ADS represents 20 ordinary
shares), preference shares, warrants, subscription rights, debt
securities and a combination of such securities, separately or as
units. The Group currently has no specific plans to issue
securities under this shelf registration. The specifics of any
future offering, including the prices and terms of any securities
offered by the Group, would be determined at the time of any such
offering and would be described in detail in a prospectus
supplement filed in connection with such offering.
Effective February 2, 2018, Jonathan Gold assumed the executive
role of Chief Financial Officer upon the resignation of Robert
Dickey IV, the Group's former Chief Financial Officer.
On April 3, 2018, the Group announced the initiation of a
rolling submission of a New Drug Application (NDA) to the U.S. Food
& Drug Administration (FDA) for iclaprim. The Group commenced
the submission before the end of the first quarter of 2018 and is
expecting to complete the submission of the full NDA during the
second quarter of 2018. The Group also announced that it received
correspondence from the FDA that a small business waiver has been
granted for the NDA application fee which is typically due upon
submission of an NDA under the Prescription Drug User Fee Act
(PDUFA). As a result, the Group did not have to pay a $2.4 million
application fee for this NDA submission.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR FMGGDZLZGRZZ
(END) Dow Jones Newswires
April 10, 2018 02:01 ET (06:01 GMT)
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Da Lug 2023 a Lug 2024
