TIDMMTFB
RNS Number : 1268W
Motif Bio PLC
15 April 2019
Motif Bio plc
("Motif Bio" or the "Company")
Motif Bio Reports Fiscal Year 2018 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, 2018.
Dr. Graham Lumsden, Chief Executive Officer, said: "Motif Bio
had an incredibly productive year in 2018, including submitting a
New Drug Application to the U.S. FDA for iclaprim for the treatment
of patients with acute bacterial skin and skin structure
infections. Unfortunately, in February 2019 we unexpectedly
received a Complete Response Letter from FDA notifying Motif that
the NDA for iclaprim could not be approved as submitted. The Agency
has asked for additional data to assess the potential for liver
toxicity and we have a confirmed FDA meeting date of May 3, 2019 to
discuss the concerns noted in the Complete Response Letter. We
expect to be joined at the meeting by two external experts and
anticipate a collaborative discussion and hopefully an acceptable
path forward. We believe that iclaprim can be a valuable option for
patients and their providers who are in need of new antibiotic
treatment options."
Corporate and Development Highlights
-- New Drug Application (NDA) submitted to and accepted for priority review by U.S. Food & Drug Administration (FDA) for iclaprim for treatment of patients with acute bacterial skin and skin structure infections (ABSSSI).
-- Notice of Allowance from the United States Patent and
Trademark Office for two patent applications. The claims relate to
the use of iclaprim to treat patients with bacterial infections,
including but not limited to ABSSSI, hospital-acquired bacterial
pneumonia and Staphylococcus aureus lung infections in patients
with cystic fibrosis. The two method of use patents, which have now
issued, will expire in November 2037.
-- Results from the Phase III REVIVE-2 trial and pooled efficacy
and safety results from the REVIVE-1 and -2 Phase III trials in
ABSSSI published in peer-reviewed medical journals.
-- Data on iclaprim safety and efficacy and potential cost
avoidance data presented at major medical conferences.
-- Jonathan Gold appointed interim Chief Financial Officer in
February 2018; Stephanie Noviello, MD, MPH joins as Vice President,
Clinical Development in May 2018.
Full Year 2018 Financial Results Highlights
-- Motif Bio reported a net loss of $14.0 million or $(.05) per
share, basic and $(.07) per share, diluted for 2018, compared to
$44.8 million, or $(0.19) per share, basic and diluted for
2017.
-- Research and development expenses decreased to $11.0 million
for 2018, compared to $29.5 million for 2017. This decrease was
primarily attributable to a $22.1 million reduction in expense for
the iclaprim Phase III clinical trial program, which was completed
in 2017. This decrease was partially offset by a $3.6 million
increase in costs relating to regulatory and clinical operating
activities, chemistry manufacturing and control requirements and
other non-clinical development activities.
-- General and administrative expenses were $7.6 million for
2018, compared to $8.5 million in 2017. This decrease was primarily
attributable to a $0.4 million reduction in stock-based
compensation, which was higher in the 2017 period partially due to
a previously disclosed out-of-period correction and a $1.3 million
reduction in legal, investor relations and other professional fees.
This decrease was partially offset by a $0.7 million increase in
employee cash compensation.
-- Raised $12.7 million of net proceeds through the issuance of
ordinary shares London's AIM market.
-- Cash and cash equivalents of approximately $12.3 million as of December 31, 2018.
-- 296.7 million ordinary shares outstanding as of December 31, 2018.
Post Period End Highlights
-- Received Complete Response Letter (CRL) from FDA regarding
NDA for iclaprim; Motif's request to meet with the FDA to discuss
the points raised in the CRL was granted and a meeting is scheduled
for May 3, 2019.
-- Bruce Williams appointed interim Chairman following
resignation of Richard Morgan from Board of Directors.
-- Raised $3.3 million of net proceeds through the issuance of
ordinary shares London's AIM market.
-- 342.5 million ordinary shares outstanding as of April 11, 2019.
Motif Bio will file later today its U.S. Annual Report on Form
20-F for the year ended December 31, 2018 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.
Motif Bio expects to hold its next Annual General meeting at 1
PM BST on May 22, 2019 at the offices of DLA Piper UK LLP at 160
Aldersgate Street London EC1A 4HT, United Kingdom.
Motif Bio plc info@motifbio.com
Graham Lumsden (Chief Executive Officer)
Peel Hunt LLP (NOMAD & JOINT BROKER) + 44 (0)20 7418 8900
Dr Christopher Golden
Oliver Jackson
SP ANGEL CORPORATE FINANCE LLP (JOINT
BROKER) +44 (0)20 3470 0470
David Hignell/ Vadim Alexandre /Rob
Rees
Walbrook PR Ltd. (UK FINANCIAL PR &
IR) +44 (0)20 7933 8780
Paul McManus/Helen Cresswell/Lianne motifbio@walbrookpr.com
Cawthorne
MC Services AG (EUROPEAN IR) +49 (0)89 210 2280
Raimund Gabriel raimund.gabriel@mc-services.eu
Russo Partners (U.S. PR) +1 (858) 717-2310 or +1 (212) 845
4272
David Schull david.schull@russopartnersllc.com
Note to Editors
Motif Bio plc (AIM/NASDAQ: MTFB) is a clinical-stage
biopharmaceutical company focused on developing novel antibiotics
designed to be effective against serious and life-threatening
infections caused by multi-drug resistant Gram-positive bacteria,
including MRSA. The Company's lead product candidate is iclaprim.
Motif Bio is seeking approval of iclaprim from the U.S. Food &
Drug Administration (FDA) for the treatment of acute bacterial skin
and skin structure infections (ABSSSI). More than 3.6 million
patients with ABSSSI are hospitalised annually in the U.S. It is
estimated that up to 26% of hospitalized ABSSSI patients have renal
impairment.
The Company also has 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 in
patients with HABP has been successfully completed and a Phase 3
trial is being planned. Additionally, iclaprim has been granted
orphan drug designation by the FDA for the treatment of
Staphylococcus aureus lung infections in patients with cystic
fibrosis and is in preclinical development for this indication.
Iclaprim has received Qualified Infectious Disease Product
(QIDP) designation from the FDA together with Fast Track status for
the ABSSSI indication. If approved for the ABSSSI indication as a
New Chemical Entity, iclaprim 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. Motif is
also building a patent estate to provide additional protection for
iclaprim and has two U.S. method of use patents issued that will
expire in 2037.
Forward-Looking Statements
This 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, (x) Motif Bio's ability to
raise additional capital to sustain its operations and pursue its
strategy and (xi) the factors discussed in the section entitled
"Risk Factors" in Motif Bio's Annual Report on Form 20-F filed with
the SEC on April 15, 2019, which is 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
2018 was a highly productive year for Motif Bio plc and its
wholly-owned subsidiary Motif Biosciences, Inc. (collectively,
Motif or the Group), most notably marked by the submission of a New
Drug Application to the U.S. Food & Drug Administration (FDA)
for iclaprim for the treatment of acute bacterial skin and skin
structure infections (ABSSSI) in June. While we had hoped at this
writing to be celebrating iclaprim's approval, as you know, this
was not the outcome. Motif is now focused on working with the FDA
to address the concerns raised in its Complete Response Letter
(CRL) to the Group with the goal of finding the best path to move
iclaprim towards approval.
Taking a look at the "big picture," there remains an urgent need
for new antibiotics that can overcome resistance. Focusing on this
issue, in January 2019, the UK announced a five-year plan laying
out three key ways in which the government plans to take action
against antimicrobial resistance: reducing the need for
antimicrobials by lowering the burden of infection in humans and
animals; optimizing antimicrobial use in humans and animals through
better stewardship; and investing in research and development of
new antibiotics, diagnostics, and vaccines. Antimicrobial
resistance is a critical healthcare issue that is recognized not
just in the UK but also in the U.S. and around the globe.
With its targeted Gram-positive spectrum of activity, iclaprim
has the potential to help address the problem. Such a "precision
medicine" approach is consistent with antibiotic stewardship
principles which, among other things, seek to reduce the
inappropriate use of broad-spectrum products to avoid the build-up
of resistance. Additionally, iclaprim has a mechanism of action
different from many commonly used classes of antibiotics and has
been shown to have potent bacteria-killing activity against
Gram-positive bugs associated with ABSSSI, including MRSA.
In addition to the problem of antibiotic resistance, some
patient population needs are just not adequately addressed by
currently available antibiotics. A good example of this and an area
where we think iclaprim may help is ABSSSI patients who have
impaired kidneys, obesity, diabetes or other risk factors for
developing acute kidney injury. Acute kidney injury is of great
concern because it not only increases hospital costs but also
significantly impacts patient health, including increasing the risk
of death. We believe iclaprim has the potential to address these
issues.
Financial situation
With a regulatory decision that was not what was hoped for or
expected, Motif has had to take a hard look at its financial
situation.
A few days after receiving the Complete Response Letter from the
FDA, Motif amended its loan agreement with Hercules Capital and
made early repayments in the amount of $7.5 million. The result was
that Motif had to use a significant amount of its available cash to
pay down its loan. On the positive side, the amendment includes a
three-month interest-only period on the remaining loan, which was
subsequently expanded to provide an additional month of
interest-only. In addition, Hercules has waived any prepayment
charges for the life of the loan. As a result of the prepayment,
future interest and amortization payments will be substantially
lower than before.
Additionally, in March 2019, Motif successfully raised $3.6
million in gross proceeds from an equity offering. Following
receipt of the net proceeds, the Group's cash resources are
expected to be sufficient to fund the business through June 2019,
allowing the Group to evaluate the formal minutes of its Type A
meeting on May 3, 2019. Minutes are generally provided within
30-days after the meeting. This gives the Group a bit more
flexibility as it prepares to meet with the FDA and discuss a plan
forward for iclaprim. The Group will require additional funds to
meet all obligations and, assuming a viable route to approval, to
resubmit an NDA and reach a new target decision date.
We have been very careful in managing our costs, even prior to
receiving the FDA decision, while carrying out the critical
activities to prepare for an expected iclaprim launch. Motif
continues to aggressively manage its resources, which has been
facilitated in part due to important additional internal controls
and processes put in place during 2018.
Closing remarks
I would like to close by expressing my appreciation for the
dedicated Motif team and to my fellow Board members, who continue
to play an active role in supporting management. I would also like
to warmly thank our former Chairman, Richard Morgan, for his
guidance, support and dedicated service to Motif over many years
since the Group's founding. And, lastly, I would like to thank you,
our shareholders, for your belief in and support of the Group,
especially during this challenging time.
All of us on the Board continue to believe in iclaprim's
potential to help patients, and the Motif management team has our
full support as it works tirelessly to find a path forward for the
Group and its antibiotic candidate.
Bruce Williams
Chairman
April 15, 2019
Chief Executive Officer's Statement
The year 2018 was an incredibly productive one for Motif as we
advanced toward our goal of bringing our antibiotic candidate,
iclaprim to the market. Unfortunately, in February 2019 we
unexpectedly received a Complete Response Letter from the FDA
notifying Motif that the New Drug Application (NDA) for iclaprim
could not be approved as submitted. The Agency has asked for
additional data to assess the potential for liver toxicity and we
have a confirmed FDA meeting date of May 3, 2019 to discuss the
concerns noted in the CRL. We expect to be joined at the meeting by
two of our external experts and anticipate a collaborative
discussion and hopefully will find an acceptable path forward. We
believe that iclaprim can be a valuable option for patients and
their providers who are in need of new antibiotic treatment
options.
Addressing an unmet need and helping hospitals save money
There are more than 3.6 million hospitalized ABSSSI patients
annually in the U.S. These patients often have co-morbidities,
including renal impairment, diabetes and obesity, that put them at
increased risk for vancomycin-associated acute kidney injury
(VA-AKI). It is estimated that up to 360,000 hospitalized ABSSSI
patients have moderate to severe renal impairment or other risk
factors for VA-AKI. Vancomycin is the most commonly used antibiotic
to treat ABSSSI, but it is not a good option for this at-risk
portion of the ABSSSI population because vancomycin use can lead to
acute kidney injury. For these patients, better treatment options
are needed to avoid progression to acute kidney injury. Indeed,
data published in 2018 showed that approximately 9% of patients
hospitalized with ABSSSI and treated with vancomycin developed
VA-AKI, leading to an increase in mortality risk from 5% to 19% and
an average longer length of stay in the hospital of five days. That
additional cost to treat VA-AKI is estimated at up to $17,000/per
patient, a considerable cost burden to healthcare systems.
We think that iclaprim may address this need. Unlike many
standard-of-care Gram-positive antibiotics, iclaprim is
administered as a fixed dose rather than a weight-based dose. No
dosage adjustment is required in renally impaired patients, and no
therapeutic drug monitoring is required. These attributes may help
reduce the resources required in hospitals since dosage adjustment
by health care professionals is avoided and overall hospital
treatment costs may be lower, especially in patients at increased
risk of developing acute kidney injury. This is a compelling story
to bring to hospitals.
Building the story through data
During 2018, Motif increased its presence at medical
conferences, and there were presentations of iclaprim data at
several key events in both the U.S. and Europe. Data are an
important way to reach the clinicians and hospitals that may one
day be customers and a critical part of raising awareness and
understanding of where iclaprim could fit in the treatment
paradigm.
The final results from the REVIVE-2 Phase 3 trial were presented
at the 28(th) European Congress of Clinical Microbiology and
Infectious Diseases (ECCMID 2018) in the spring, and the pooled
results from our two ABSSSI Phase 3 trials - REVIVE-1 and -2 - were
presented at the American Society of Microbiology (ASM) Microbe
2018 meeting. We also presented analyses of important patient
subgroups, such as patients with diabetes.
Data were also presented during 2018 on potential cost savings
opportunities for hospitals by using iclaprim to treat ABSSSI and
to avoid costs related to VA-AKI. Data related to the high cost of
treating VA-AKI were also presented.
Much of these data were also published in peer-reviewed medical
journals. We also took the opportunity at conferences to meet and
talk with key medical and scientific leaders.
All of these activities are effective and appropriate ways of
creating awareness and understanding of iclaprim amongst the
medical community prior to marketing approval. We will continue to
present data at key medical conferences during 2019.
Partnering
During 2018, a critical activity for us involved discussions
with potential commercialization partners for the U.S. market.
Ultimately, we want to make sure that we have not just a partner,
but the best partner in place to ensure we are able to fully
exploit iclaprim's market opportunity. We are keeping our potential
partners apprised of our ongoing interactions with the FDA.
Maximizing iclaprim's long-term potential
Securing approval in the U.S. for iclaprim remains Motif's top
priority, but that is part of a broader plan for iclaprim's
long-term success. Preparations for the European regulatory process
are underway and we expect to be able to announce later in 2019
more details on the timeline for our Marketing Authorization
Approval (MAA). The data required to submit our MAA are almost
identical to those submitted in our NDA and so minimal additional
resources are required to complete the pre-submission steps that
the team has been working on. Once submitted, a decision on
approval is generally provided within approximately 12 months.
In 2018, we were granted two new U.S. patents that do not expire
until November 2037. The patents relate to the use of iclaprim to
treat patients with bacterial infections, including but not limited
to ABSSSI, hospital-acquired bacterial pneumonia (HABP) and
Staphylococcus aureus lung infections in patients with cystic
fibrosis. We also have applied for similar patents in other key
territories.
While Motif's focus must continue to be on the U.S., we see
potential for iclaprim in other territories and have been gratified
to see interest from potential partners for key countries in Asia
and Europe. We remain in contact with these companies and are
keeping them updated on our interactions with the FDA.
We also believe that iclaprim could have potential in
indications beyond ABSSSI. This includes HABP, including ventilator
associated bacterial pneumonia (VABP), as there is a major unmet
need for new therapies in this indication, which has a high
mortality rate. A Phase 2 trial evaluating iclaprim in patients
with HABP has been successfully completed and a Phase 3 trial is
planned to start, subject to additional funding and likely with a
partner.
Additionally, iclaprim has been granted orphan drug designation
by the FDA for the treatment of Staphylococcus aureus lung
infections in patients with cystic fibrosis and is in preclinical
development for this indication. In early 2018, Motif received an
award from the Cystic Fibrosis Foundation to fund important in
vitro testing that may help to advance the development of iclaprim
in this indication. The Cystic Fibrosis Foundation is a leader in
the search for a cure for this disease. Patients with cystic
fibrosis, especially in the later stages of lung disease, are often
infected with multidrug resistant bacteria, severely limiting
treatment options.
Financials
We have completed two financings since our last Annual Report.
In the spring of 2018, we completed an equity financing of
approximately $13.4 million in gross proceeds. Additionally, in
March 2019, we completed a fundraising in the United Kingdom,
securing $3.6 million in gross proceeds.
Throughout the year, we carefully managed our expenses, and this
cost control has increased given the setback with iclaprim,
including placing certain activities related to supply and
pre-commercialization outreach on hold. We are focusing our
resources on the work needed to advance iclaprim towards a U.S.
approval, including interactions with the FDA and analytical work
needed to address the issues that the FDA raised in the Complete
Response Letter. The partial prepayment of our loan with Hercules
Capital is helping to reduce our cost base going forward because of
the resulting reduced monthly debt service. Our resources are
expected to be sufficient to fund the business through June 2019,
at which time we expect to have a clear path as to the steps
necessary for the approval of iclaprim in the United States. The
Group will require additional funds to meet all obligations and,
assuming a viable route to approval, to resubmit an NDA and reach a
new target decision date.
Conclusion
Let me wrap up by focusing on what I believe is Motif's greatest
asset - our people. We have a small but highly talented group that
has achieved much in a very short period of time, and I would like
to thank all of them for their continued hard work and dedication.
During 2018, we were pleased to welcome Dr. Stephanie Noviello as
our Vice President, Clinical Development. Stephanie is a highly
experienced clinical development executive, who has been invaluable
throughout the NDA submission and review process and as we continue
to work with the FDA to address their concerns.
I also would like to thank you, our shareholders, for your
continued support of Motif. It has been a challenging time for all
of us, and we very much appreciate your belief in the Company and
iclaprim. We look forward to keeping you updated on our plans and
progress.
Dr. Graham Lumsden
Chief Executive Officer
April 15, 2019
Strategic Report
Strategy and Business Model
Motif's business strategy is focused on the development of novel
antibiotics 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,
ABSSSI, 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 submitted to the U.S. Food & Drug
Administration in 2018. On February 14, 2019, the Group announced
the receipt of a Complete Response Letter from the FDA regarding
the NDA for iclaprim. The CRL stated that the FDA cannot approve
the NDA in its present form and indicates that additional data are
needed to further evaluate the risk for liver toxicity before the
NDA may be approved. The Group's request to meet with the FDA to
discuss the points raised in the CRL was granted and a meeting is
scheduled for May 3, 2019.
If iclaprim receives regulatory approval in the United States,
the Group expects to utilize a strategic partner for
commercialization. The Group does not expect to generate any
product revenues from its iclaprim product candidate until
marketing approval is received and a commercial partner is secured.
In addition, the Group expects to be able to enter into
commercialization agreements for other key markets, 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
iclaprim or any other potential 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 also believes that iclaprim can be further
developed to support additional indications, including
hospital-acquired bacterial pneumonia (HABP) and ventilator
associated bacterial pneumonia (VABP). Although the Group has
completed preparations for a global Phase 3 trial of iclaprim for
HABP, including VABP, the commencement of such trials is subject to
the availability of adequate funding. The Group cannot guarantee
that such funding will be available.
The Group's goal is to help physicians to treat hospitalized
patients with serious and life-threatening infections by developing
novel antibiotics, designed to be effective against multi-drug
resistant bacteria as detailed in the preceding paragraphs.
This link shows a table which provides an illustration of our
current product development pipeline related to iclaprim:
http://www.rns-pdf.londonstockexchange.com/rns/1268W_1-2019-4-14.pdf
Business Review
The Group's results for the year are set out in the consolidated
statement of comprehensive loss below.
General and administrative expenses decreased by $0.9 million,
to $7.6 million, in the year ended December 31, 2018 from $8.5
million in the year ended December 31, 2017. This decrease was
primarily attributable to a $0.4 million reduction in stock-based
compensation, which was higher in the 2017 period partially due to
a previously disclosed out-of-period correction, and a $1.2 million
reduction in legal, investor relations and other professional fees.
This decrease was partially offset by a $0.7 million increase in
employee cash compensation.
Research and development expenses decreased by $18.5 million to
$11.0 million in the year ended December 31, 2018 from $29.5
million in the year ended December 31, 2017. This decrease was
primarily attributable to a $22.1 million reduction in expense for
our Phase 3 clinical trial program for iclaprim, which was
completed in 2017. This decrease was partially offset by a $3.6
million increase in costs relating to regulatory and clinical
operating activities, chemistry manufacturing and control
requirements and other non-clinical development activities.
Net cash used in operating activities was $21.4 million for the
year ended December 31, 2018, which reflects an operating loss of
$18.6 million, primarily from regulatory and clinical operating
activities, including activities supporting our NDA submission for
iclaprim, and a $3.9 million reduction in current liabilities.
At December 31, 2018 and 2017, the Group had cash and cash
equivalents of approximately $12.3 million and $22.7 million,
respectively. Subsequent to December 31, 2018, the Group made early
repayments under its Hercules Loan Agreement of $7.5 million, as
further described in Note 13 to the financial statements. The Group
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 Group anticipates that it will continue to generate losses for
the foreseeable future as the Group continues the development of
and/or seeks regulatory approvals for iclaprim and any future
product candidates and begins to commercialize any approved
products.
Operations to date have been financed primarily by net proceeds
from the issuance of ordinary shares on AIM, the issuance of
American Depositary Shares on the NASDAQ Capital Market, 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
Allergan, Melinta, Merck & Co., Inc., 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 are used to identify and assess market
opportunities for novel antibiotics.
Going Concern
As of December 31, 2018, the Group had $12.3 million in cash, of
which $0.6 million was held by the parent organization Motif Bio
plc (or the Company). The Group also had $15 million drawn under
its loan facility with Hercules Capital Inc. (Hercules) as of
December 31, 2018. Net cash used in operating activities was $21.4
million for the year ended December 31, 2018. Net loss for the year
ended December 31, 2018 was $14.0 million. The Group expects to
incur losses for the next several years as it continues to advance
its product candidate iclaprim through regulatory approval in the
United States and Europe, while continuing to support ongoing
business operations and commercial preparatory activities. The
Group is unable to predict the extent of any future losses or when
the Group will become profitable, if at all.
In February 2019, the Group received a Complete Response Letter
from the U.S. Food & Drug Administration notifying Motif that
the New Drug Application for iclaprim could not be approved as
submitted. The FDA has asked for additional data to assess the
potential for liver toxicity and the Company has a confirmed a Type
A meeting with the FDA on May 3, 2019 to discuss the concerns noted
in the CRL.
After receiving the CRL from the FDA, Motif entered into
discussions, and amended its loan agreement with Hercules, making
early repayments amounting to $7.5 million and extended an interest
only payment period through to June 2019, as further described in
Note 13 to the financial statements. Furthermore, in March 2019,
Motif successfully raised $3.3 million in net proceeds from an
equity offering. Following the aforementioned early debt repayment
and receipt of the net proceeds from the equity raise, the Group's
cash resources are expected to be sufficient to fund the business
through June 2019. The Group continues to evaluate the options for
iclaprim and future funding through June 2019 and beyond when the
formal minutes of its Type A meeting with FDA are expected to be
published. Minutes are generally provided within 30 days of the
meeting. The Group will require additional funds to meet all
obligations and, assuming a viable route to approval, to resubmit
the NDA and reach a new target decision date. There can be no
certainty that the results from the Type A meeting will be
positive, or that additional funding will be available to the Group
and Company, and therefore the Group and Company may not be able to
satisfy all obligations that may exist at the end of June 2019.
To the extent that the Group and Company raise additional funds
by issuing equity securities, its existing 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 and achieve its objectives.
If the Group and Company are unable to raise additional capital
when required and/or on acceptable terms, the Group and Company may
have to (i) significantly delay, scale back or discontinue the
development and/or commercialisation 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 on unfavorable terms that the Group and
Company would otherwise seek to develop or commercialize
itself.
At the date when these financial statements were approved, the
Group's believes that the matters identified by the FDA as
communicated in its CRL are addressable and that routes to raise
funds are available. As a result, these financial statements have
been prepared under the assumption that the Group and Company will
continue as a going concern. However, due to the Group's and
Company's recurring and expected continuing operating losses, as
well as significant outstanding payables and accrued expenses, the
Directors have concluded there is a material uncertainty which may
cast significant doubt on the Group's and Company's ability to
continue as a going concern for at least one year from the date of
issuance of these financial statements. The financial statements do
not include any adjustments that might result from 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
Lack of funding The successful development The Group has successfully engaged
and regulatory approval with investors to generate significant
of the Group's assets cash resources to date. The
requires financial investment Group's Management Team expects
which can come from revenues, that continued access to capital
commercial partners, or markets, or other access to
investors. Failure to capital, will be required to
generate additional funding support the Group through regulatory
from these sources may approval and initial commercialization
compromise the Group's efforts in the United States
ability to execute its for its lead antibiotic candidate,
business plans or to continue iclaprim. See Going Concern
in business. discussion above.
----------------------------------- ----------------------------------------
Inadequate protection In common with other companies The Group actively manages its
of intellectual engaged in pharmaceutical IP, engaging with specialists
property (IP) development, the Group to apply for and defend IP rights
faces the risk that IP in appropriate territories.
rights necessary to exploit
its research and development A Notice of Allowance was received
efforts may not be adequately in 2018 from the United States
secured or defended. The Patent and Trademark Office
Group's IP may also become for United States Patent Application
obsolete, preventing commercial Nos. 15/586,021 and 15/586,815
exploitation. for the method of use of iclaprim
to treat patients with bacterial
infections. The two method of
use patents will expire in November
2037. In addition, the Group
previously received QIDP (Qualified
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.
----------------------------------- ----------------------------------------
Unsuccessful research The Group may not generate In 2018, the Group submitted
and development further attractive drug to the FDA an NDA for its product
efforts candidates and candidates candidate, iclaprim. The Complete
already in development Response Letter received in
may fail preclinical testing February of 2019 stated that
or clinical trials because the FDA cannot approve the NDA
of lack of efficacy, unacceptable in its present form and indicates
side effects, or insurmountable that additional data are needed
challenges in conducting to further evaluate the risk
studies adequate to support for liver toxicity before the
regulatory approvals. NDA may be approved. The Group's
Practical issues, such request to meet with the FDA
as the inability to devise to discuss the points raised
acceptable formulations in the CRL was granted and a
for products or the inability meeting is scheduled for May
to manufacture products 3, 2019.
at acceptable cost, may
also lead to failure of In addition, the Group is currently
candidates in development. evaluating opportunities to
expand its current product pipeline,
which is subject to the availability
of adequate funding.
----------------------------------- ----------------------------------------
Regulatory delays Drug development is a The Group's drug development
and setbacks highly regulated activity team includes specialists in
governed by different regulatory affairs who consult
regulatory authorities with other experts to ensure
in different jurisdictions. that internal control processes
It can be difficult to and clinical trial designs meet
predict the exact requirements current regulatory requirements.
of different regulatory The Group also engages directly
bodies. Decisions by regulators with regulatory authorities
may lead to delays in when appropriate.
development and approval
of drugs or lack of marketing
authorizations in some
or all territories.
----------------------------------- ----------------------------------------
Unsuccessful commercialization The Group may be unable The Group consults with commercial,
to effectively commercialize clinical, and scientific experts
or license its products to assess the payer and prescriber
to partners or may not environment and the potential
be able to execute licensing impact of competing products
deals that provide significant or changes in the economic landscape
revenues. Development pertaining to hospital infections.
of alternative technologies The Group actively monitors
or products may undermine the performance of key competitors
the Group's ability to in terms of pricing, market
generate revenue from share, and prescribing behavior.
commercialization of its
assets. If the Group's
drugs are commercialized,
they may not generate
significant revenues if
their use and sale are
restricted by regulators
or by failure of healthcare
payers to provide adequate
reimbursement of drug
costs.
----------------------------------- ----------------------------------------
Unsuccessful recruitment The Group may not be able The Group's recruitment processes
and retention to recruit and retain are tailored to identify and
of people appropriately qualified attract the best candidates
staff. Facilities and for specific roles. The Group
other resources may become aims to provide competitive
unavailable. rewards and incentives to staff
and directors and informally
benchmarks the level of benefits
it provides against similar
companies.
----------------------------------- ----------------------------------------
Risks associated On March 29, 2017, the Brexit has already and could
with Brexit U.K. government delivered continue to adversely affect
to the European Council European and/or worldwide economic
notice of its intention and market conditions and could
to leave the European continue to contribute to instability
Union (EU) by March 29, in the global financial markets.
2019, which was subsequently The long-term effects of Brexit
extended to October 31, will depend in part on any agreements
2019. the UK makes to retain access
to EU markets following the
Brexit could impair the UK's withdrawal from the EU.
Group's ability to transact
business in EU countries. The Group currently believes
In addition, Brexit could that the short-term impact will
lead to legal uncertainty not be material, due to the
and potentially divergent Group's limited operations in
national laws and regulations the UK. However, the Group is
as the United Kingdom uncertain as to the potential
determines which EU laws capital market implications
to replicate or replace. of Brexit. The Group has and
will continue to monitor any
Any of these effects of potential implications, if any,
Brexit, and others we of Brexit leveraging experienced
cannot anticipate, could financial and legal advisors.
adversely affect the Group's
business, business opportunities,
results of operations,
financial condition and
cash flows
----------------------------------- ----------------------------------------
Risk of disruption The Group's third-party The Group routinely monitors
to information hosted computer systems, the risks associated with information
technology (IT) or those of our research technology and cyber security
and cyber security partners or other contractors, and will continue to monitor
consultants or future its third-party IT provider
collaborators, may fail and current and future collaborators
or suffer security breaches, implemented security measures.
which could result in
a disruption of our drug
product 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 driving the iclaprim
product candidate through regulatory approval in the U.S.,
preparing and submitting a Marketing Authorization Application
(MAA) to the European Medicines Agency (EMA), as well as conducting
other activities that support commercialization and partnering.
Significant shareholdings
As of March 1, 2019, 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, 2019 Holding %
------------------------------------- ----------- -----
Invesco Asset Management Limited(1) 41,816,000 14.1
Sand Grove Capital(2) 33,264,087 11.2
Amphion Innovations plc(3) 25,254,611 8.5
------------------------------------- ----------- -----
(1) A TR-1 Notification was sent to us on April 1, 2019 by
Invesco Asset Management Limited indicating 12.2% ownership
position.
(2) This information as of March 1, 2019 is based on information
contained in a TR-1 Notification sent to us on May 23, 2018 by Sand
Grove Capital Management LLP. A TR-1 Notification was sent to us on
April 1, 2019 indicating a 10.2% ownership position.
(3) A press release was issued by Amphion on April 1, 2019 date
indicating a 5.5% ownership position.
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, 2018, the Company's Board was made up of eight
directors (6 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 4
additional employees of the Company (1 man and 3 women).
Approved by the Board and signed on its behalf by:
Jonathan E. Gold
Chief Financial Officer
April 15, 2019
Motif Bio plc
Consolidated statements of comprehensive loss
For the years ended December 31, 2018, 2017 and 2016
(in thousands, except share and per share data)
Year Year Year
ended ended ended
December 31, December 31, December 31,
2018 2017 2016
Note US $ US $ US $
---- ------------ ------------ ------------
Continuing operations
General and administrative
expenses................................... 4 (7,635) (8,542) (4,912)
Research and development
expenses.................................... 4 (10,988) (29,475) (34,795)
Gains on settlement of contract
disputes............................. 4 - - 83
------------ ------------ ------------
Operating
loss...........................................
.................................. (18,623) (38,017) (39,624)
Interest
income.........................................
.................................. 4 113 134 70
Interest
expense........................................
................................. 4 (2,160) (275) (383)
Net foreign exchange gains
(losses)....................................... 40 (238) (251)
Gain (loss) from revaluation of derivative
liabilities........ 14 6,654 (6,392) (136)
------------ ------------ ------------
Loss before income
taxes..........................................
............... (13,976) (44,788) (40,324)
Income tax
expense........................................
........................... 7 (9) (22) -
------------ ------------ ------------
Net loss for the
year...........................................
....................... (13,985) (44,810) (40,324)
------------ ------------ ------------
Total comprehensive loss for the
year................................... (13,985) (44,810) (40,324)
============ ============ ============
Net loss per
share..........................................
............................ 8
Basic..........................................
...............................................
.... (0.05) (0.19) (0.35)
Diluted........................................
...............................................
... (0.07) (0.19) (0.35)
============ ============ ============
Weighted average number of ordinary
shares....................
Basic..........................................
...............................................
.... 284,530,534 231,530,091 116,558,191
Diluted........................................
...............................................
... 287,131,688 231,530,091 116,558,191
============ ============ ============
The notes are an integral part of these consolidated financial
statements.
Motif Bio plc
Consolidated statements of financial position
As at December 31, 2018 and 2017
(in thousands) December 31, 2018 December 31, 2017
Note US $ US $
---- ----------------- -----------------
ASSETS
Non-current assets
Intangible
assets...........................................................
...................... 9 6,196 6,196
Other non-current
assets...........................................................
........ 18 23
----------------- -----------------
Total non-current
assets...........................................................
......... 6,214 6,219
----------------- -----------------
Current assets
Prepaid expenses and other
receivables........................................ 10 231 318
Cash and cash
equivalents......................................................
.......... 11 12,279 22,651
----------------- -----------------
Total current
assets...........................................................
................. 12,510 22,969
----------------- -----------------
Total
assets...........................................................
................................. 18,724 29,188
================= =================
LIABILITIES
Non-current liabilities
Term loan, net of current
portion..................................................... 13 10,131 14,057
Other non-current
liabilities......................................................
....... 13 196 23
----------------- -----------------
Total non-current
liabilities......................................................
........ 10,327 14,080
----------------- -----------------
Current liabilities
Trade payables and accrued
liabilities.......................................... 12 7,207 10,890
Term loan, current
portion..........................................................
...... 13 4,327 -
Payable on completion of clinical
trial.......................................... 9 - 500
Derivative
liabilities......................................................
..................... 14 5,789 12,626
----------------- -----------------
Total current
liabilities......................................................
................ 17,323 24,016
----------------- -----------------
Total
liabilities......................................................
................................. 27,650 38,096
================= =================
Net assets
(liabilities)....................................................
...................... (8,926) (8,908)
================= =================
EQUITY
Share
capital..........................................................
.............................. 16 4,032 3,589
Share
premium..........................................................
........................... 93,456 80,873
Group reorganization
reserve..........................................................
. 9,938 9,938
Accumulated
deficit..........................................................
.................. (116,352) (103,308)
----------------- -----------------
Total deficit
.................................................................
......................... (8,926) (8,908)
================= =================
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 15, 2019. They were signed on its behalf by:
Director
Bruce Williams
Motif Bio plc
Company statements of financial position
As at December 31, 2018 and 2017
(in thousands) December 31, 2018 December 31, 2017
Note US $ US $
---- ----------------- -------------------------
ASSETS
Non-current assets
Investment...............................................
.............................................. 18 80,306 40,519
----------------- -------------------------
Total non-current
assets...................................................
................. 80,306 40,519
----------------- -------------------------
Current assets
Prepaid expenses and other
receivables........................................ 10 154 249
Cash and cash
equivalents..............................................
.................. 560 629
Receivable from Motif Bio
Inc......................................................
..... 19 20,105 47,733
----------------- -------------------------
Total current
assets...................................................
......................... 20,819 48,611
----------------- -------------------------
Total
assets...................................................
......................................... 101,125 89,130
================= =========================
LIABILITIES
Trade payables and accrued
liabilities.......................................... 12 176 159
Derivative
liabilities..............................................
............................. 14 5,789 12,626
----------------- -------------------------
Total current
liabilities..............................................
........................ 5,965 12,785
----------------- -------------------------
Total
liabilities..............................................
......................................... 5,965 12,785
================= =========================
Net assets
(liabilities)............................................
.............................. 95,160 76,345
================= =========================
EQUITY
Share
capital..................................................
...................................... 16 4,032 3,589
Share
premium..................................................
................................... 93,456 80,873
Group reorganization
reserve..................................................
......... (544) (544)
---------------------------------------------------------- ---- ----------------- -------------------------
Gain (loss) for the
year.....................................................
.................. 4,848 (8,267)
Share-based
payments.................................................
...................... 941 1,708
---------------------------------------------------------- ---- ----------------- -------------------------
Accumulated
deficit..................................................
.......................... (1,784) (7,573)
----------------- -------------------------
Total Equity
.........................................................
................................. 95,160 76,345
================= =========================
The financial statements were approved by the Board of Directors
and authorized for issue on
April 15, 2019. They were signed on its behalf by:
Director
Bruce Williams
The notes are an integral part of these consolidated financial
statements.
Motif Bio plc
Consolidated statements of changes in equity
For the years ended December 31, 2018, 2017 and 2016
(in thousands)
Group
Share Share reorganization Accumulated
capital premium reserve deficit Total
Note US $ US $ US $ US $ US $
---- ------- ------- -------------- ----------- --------
Balance at December 31,
2015........................ 1,645 38,535 9,938 (20,395) 29,723
Loss for the
year..................................
............... - - - (40,324) (40,324)
------- ------- -------------- ----------- --------
Total comprehensive loss for the
year.......... - - - (40,324) (40,324)
Issue of share
capital...............................
........ 16 898 18,701 - - 19,599
Cost of
issuance..............................
................... 16 - (3,370) - - (3,370)
Conversion of promissory
notes..................... 16 178 3,373 - - 3,551
Exercise of share options and
warrants....... 16 7 110 - - 117
Share-based
payments..............................
........ 15 - - - 513 513
------- ------- -------------- ----------- --------
Balance at December 31,
2016........................ 2,728 57,349 9,938 (60,206) 9,809
======= ======= ============== =========== ========
Loss for the
year..................................
............... - - - (44,810) (44,810)
------- ------- -------------- ----------- --------
Total comprehensive loss for the
year.......... - - (44,810) (44,810)
Issue of share
capital...............................
........ 16 847 24,570 - - 25,417
Cost of
issuance..............................
................... 16 - (1,735) - - (1,735)
Exercise of share options and
warrants....... 16 14 689 - - 703
Share-based
payments..............................
........ 15 - - - 1,708 1,708
------- ------- -------------- ----------- --------
Balance at December 31,
2017........................ 3,589 80,873 9,938 (103,308) (8,908)
======= ======= ============== =========== ========
Loss for the
year..................................
............... - - - (13,985) (13,985)
------- ------- -------------- ----------- --------
Total comprehensive loss for the
year.......... - - (13,985) (13,985)
Issue of share
capital...............................
........ 16 433 12,989 - - 13,422
Cost of
issuance..............................
................... 16 - (749) - - (749)
Exercise of share options and
warrants....... 16 10 343 - - 353
Share-based
payments..............................
........ 15 - - - 941 941
------- ------- -------------- ----------- --------
Balance at December 31,
2018........................ 4,032 93,456 9,938 (116,352) (8,926)
======= ======= ============== =========== ========
The notes are an integral part of these consolidated financial
statements.
Motif Bio plc
Company statements of changes in equity
For the years ended December 31, 2018, 2017 and 2016
(in thousands)
Group
Share Share reorganization Accumulated
capital premium reserve deficit Total
Note US $ US $ US $ US $ US $
---- ------- ------- -------------- ----------- -------
Balance at December 31,
2015........................ 1,645 38,535 (544) 952 40,588
Loss for the
year...................................
.............. - - - (2,222) (2,222)
------- ------- -------------- ----------- -------
Total comprehensive loss for the
year.......... - - - (2,222) (2,222)
Issue of share
capital................................
....... 16 898 18,701 - - 19,599
Cost of
issuance...............................
.................. 16 - (3,370) - - (3,370)
Conversion of promissory
notes..................... 16 178 3,373 - - 3,551
Exercise of share options and
warrants....... 16 7 110 - - 117
Share-based
payments...............................
....... 15 - - - 256 256
------- ------- -------------- ----------- -------
Balance at December 31,
2016........................ 2,728 57,349 (544) (1,014) 58,519
======= ======= ============== =========== =======
Loss for the
year...................................
.............. - - - (8,267) (8,267)
------- ------- -------------- ----------- -------
Total comprehensive loss for the
year.......... - - (8,267) (8,267)
Issue of share
capital................................
....... 16 847 24,570 - - 25,417
Cost of
issuance...............................
.................. 16 - (1,735) - - (1,735)
Exercise of share options and
warrants....... 16 14 689 - - 703
Share-based
payments...............................
....... 15 - - - 1,708 1,708
------- ------- -------------- ----------- -------
Balance at December 31,
2017........................ 3,589 80,873 (544) (7,573) 76,345
======= ======= ============== =========== =======
Gain for the
year...................................
............. - - - 4,848 4,848
------- ------- -------------- ----------- -------
Total comprehensive loss for the
year.......... - - 4,848 4,848
Issue of share
capital................................
....... 16 433 12,989 - - 13,422
Cost of
issuance...............................
.................. 16 - (749) - - (749)
Exercise of share options and
warrants....... 16 10 343 - - 353
Share-based
payments...............................
....... 15 - - - 941 941
------- ------- -------------- ----------- -------
Balance at December 31,
2018........................ 4,032 93,456 (544) (1,784) 95,160
======= ======= ============== =========== =======
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, 2018, 2017 and 2016
(in thousands)
Year ended Year ended Year ended
December 31, December 31, December 31,
2018 2017 2016
Note US $ US $ US $
---- ------------ ------------ ------------
Operating activities
Operating loss for the
year.....................................
............................. (18,623) (38,017) (39,624)
Adjustments to reconcile net loss to net
cash used in activities:
Share-based
payments.................................
......................................... 15 941 1,708 513
Warrant issued for services
performed................................
............ 14 - 110 -
Gain on settlement of contract
disputes.................................
.......... 4 - - (83)
Interest
received.................................
.........................................
........... 4 97 134 70
Changes in operating assets and
liabilities:
Prepaid expenses and other
receivables...........................
........... 91 60 (233)
Trade payables and accrued
liabilities...........................
............. (3,952) (1,431) 11,415
------------ ------------ ------------
Net cash used in operating
activities...............................
.................. (21,446) (37,436) (27,942)
Financing
activities................................
..........................................
........
Proceeds from issuance of term
loan.....................................
........... 13 - 15,000 -
Costs of issuance of term
loan.....................................
....................... 13 - (576) -
Proceeds from issue of share
capital..................................
.............. 16 13,422 25,417 24,996
Costs of issuance of share
capital..................................
................... 16 (749) (1,734) (3,370)
Proceeds from exercise of warrants and
options............................ 16 145 419 117
Interest
paid.....................................
.........................................
.............. 4 (1,585) (71) (315)
------------ ------------ ------------
Net cash provided by financing
activities...............................
.......... 11,233 38,455 21,428
------------ ------------ ------------
Net change in
cash.....................................
.........................................
... (10,213) 1,019 (6,514)
Cash, beginning of the
year.....................................
............................. 22,651 21,830 28,595
Effect of foreign exchange rate
changes..................................
.......... (159) (198) (251)
------------ ------------ ------------
Cash, end of the
year.....................................
........................................ 12,279 22,651 21,830
============ ============ ============
Non-cash financing activity
Conversion of notes payable to ordinary
shares............................ - - 3,551
Fair value of warrants issued in
conjunction with issuance of share
capital.................................
........................................
.............. - - 5,662
Fair value of warrants issued in
conjunction with issuance of term
loan....................................
........................................
................. - 420 -
The notes are an integral part of these consolidated financial
statements.
Motif Bio plc
Company statements of cash flows
For the years ended December 31, 2018 and 2017
(in thousands)
Year ended Year ended
December 31, December 31,
2018 2017
Note US $ US $
---- ------------------------- ---------------------------
Operating activities
Operating loss for the
year...................................
............................... (1,746) (1,827)
Adjustments to reconcile net loss
to net cash used in activities:
Share-based
payments...............................
.......................................
.... 107 140
Warrant issued for services
performed..............................
.............. - 109
Interest
receivable.............................
.......................................
............. 4 3 134
Changes in operating assets and
liabilities:
Prepaid expenses and other
receivables.........................
............. 95 100
Trade payables and accrued
liabilities.........................
............... 138 63
------------------------- ---------------------------
Net cash used in operating
activities.............................
.................... (1,403) (1,281)
Investing
activities.........................
...................................
......................
Capital contributions to
subsidiary.............................
...................... (12,180)
Due from Motif Bio
Inc....................................
...................................... 858 (43,811)
------------------------- ---------------------------
Net cash used in investing
activities.............................
..................... (11,322) (43,811)
Financing
activities.........................
...................................
......................
Proceeds from issue of share
capital................................
................ 16 13,422 25,416
Costs of issuance of share
capital................................
..................... 16 (749) (1,734)
Proceeds from exercise of warrants and
options............................ 16 145 419
------------------------- ---------------------------
Net cash provided by financing
activities.............................
............ 12,818 24,101
------------------------- ---------------------------
Net change in
cash...................................
.......................................
....... 93 (20,991)
Cash, beginning of the
year...................................
............................... 629 21,817
Effect of foreign exchange rate
changes................................
............ (162) (197)
------------------------- ---------------------------
Cash, end of the
year...................................
.......................................
... 560 629
========================= ===========================
The notes are an integral part of these consolidated financial
statements.
1. General information
Motif Bio plc is a biopharmaceutical company focused on the
discovery, development and commercialisation of novel antibiotics
that are 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 5 Independence Way, Suite 300, Princeton, NJ, 08540,
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 15, 2019.
Going concern
As of December 31, 2018, the Group had $12.3 million in cash, of
which $0.6 million was held by the parent organization Motif Bio
plc (or the Company). The Group also had $15 million drawn under
its loan facility with Hercules Capital Inc. ('Hercules') as of
December 31, 2018. Net cash used in operating activities was $21.4
million for the year ended December 31, 2018. Net loss for the year
ended December 31, 2018 was $14.0 million. The Group expects to
incur losses for the next several years as it continues to advance
its product candidate iclaprim through regulatory approval in the
United States and Europe, while continuing to support ongoing
business operations and commercial preparatory activities. The
Group is unable to predict the extent of any future losses or when
the Group will become profitable, if at all.
In February 2019, the Group received a Complete Response Letter
from the U.S. Food & Drug Administration notifying Motif that
the New Drug Application for iclaprim could not be approved as
submitted. The FDA has asked for additional data to assess the
potential for liver toxicity and the Company has a confirmed a Type
A meeting with the FDA on May 3, 2019 to discuss the concerns noted
in the CRL.
After receiving the CRL from the FDA, Motif entered into
discussions, and amended its loan agreement with Hercules, making
early repayments amounting to $7.5 million and extended an interest
only payment period through to June 2019, as further described in
Note 13 to the financial statements. Furthermore, in March 2019,
Motif successfully raised $3.3 million in net proceeds from an
equity offering. Following the aforementioned early debt repayment
and receipt of the net proceeds from the equity raise, the Group's
cash resources are expected to be sufficient to fund the business
through June 2019. The Group continues to evaluate the options for
iclaprim and future funding through June 2019 and beyond when the
formal minutes of its Type A meeting with FDA are expected to be
published. Minutes are generally provided within 30 days of the
meeting. The Group will require additional funds to meet all
obligations and, assuming a viable route to approval, to resubmit
the NDA and reach a new target decision date. There can be no
certainty that the results from the Type A meeting will be
positive, or that additional funding will be available to the Group
and Company, and therefore the Group and Company may not be able to
satisfy all obligations that may exist at the end of June 2019.
To the extent that the Group and Company raise additional funds
by issuing equity securities, its existing 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 and achieve its objectives.
If the Group and Company are unable to raise additional capital
when required and/or on acceptable terms, the Group and Company may
have to (i) significantly delay, scale back or discontinue the
development and/or commercialisation 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 on unfavorable terms that the Group and
Company would otherwise seek to develop or commercialize
itself.
At the date when these financial statements were approved, the
Group's believes that the matters identified by the FDA as
communicated in its CRL are addressable and that routes to raise
funds are available. As a result, these financial statements have
been prepared under the assumption that the Group and Company will
continue as a going concern. However, due to the Group's and
Company's recurring and expected continuing operating losses, as
well as significant outstanding payables and accrued expenses, the
Directors have concluded there is a material uncertainty which may
cast significant doubt on the Group's and Company's ability to
continue as a going concern for at least one year from the date of
issuance of these financial statements. The financial statements do
not include any adjustments that might result from this
uncertainty.
Significant events
Subsequent to December 31, 2018, the Group announced on February
14, 2019 the receipt of a Complete Response Letter (CRL) from the
U.S. Food & Drug Administration (FDA) regarding the New Drug
Application (NDA) for iclaprim for the treatment of acute bacterial
skin and skin structure infections. The CRL states that the FDA
cannot approve the NDA in its present form and indicates that
additional data are needed to further evaluate the risk for liver
toxicity before the NDA may be approved. The Group is evaluating
and taking action on potential options to address the deficiencies.
The Group is scheduled to meet with the FDA on May 3, 2019.
On March 25, 2019, the Group placed 45,000,000 new ordinary
shares at GBP0.06 per share and received $3.3 million of net
proceeds.
On May 17, 2018, the Group placed 32,258,064 new ordinary shares
at GBP0.31 per share and received $12.7 million of net
proceeds.
On January 19, 2018, the Group 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 shelf registration,
which can remain effective for up to three years, will allow 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 has not issued any securities under this shelf
registration.
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 up to $20.0 million in two tranches. The first
tranche of $15.0 million was drawn down at closing. The milestones
for the second tranche of $5.0 million were not achieved and is no
longer available to the Group. The terms include an initial
interest-only period of 15 months; a 30-month capital and interest
repayment period thereafter; an initial interest rate of 10% tied
to a margin above 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 a warrant 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. Subsequent to December 31, 2018, the Group
announced that it amended the Hercules Loan Agreement, effective
February 17, 2019. Pursuant to the amendment, the Group made early
principal repayments of $7.0 million and an additional repayment of
$0.5 million on the earlier of 90 days (May 18, 2019), or receipt
of funds from an equity raise of $2 million or greater. The
additional repayment was remitted on April 1, 2019. The amendment
provides for a three-month interest-only period from March 2019 to
May 2019 on the remaining loan balance and waiver of any prepayment
charges for the remaining term of the loan. On March 22, 2019, the
Group entered into another amendment agreement that provided for
one additional month of an interest only period for the month of
June 2019. In addition, Hercules Capital, Inc. provided the Group a
letter stating that the receipt and aging of invoices relating to a
validation campaign of iclaprim mesylate from a third-party vendor
are excluded from the determination of compliance with
covenants
under the Hercules Loan Agreement, as amended.
On June 23, 2017, the Group placed 66,666,667 new ordinary
shares at GBP0.30 per share and received $23.7 million 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 $3.6 million 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
statement of comprehensive loss. A summary of the significant 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 profit for the Company for the year was US
$4.8 million (2017: US $8.3 million loss).
a. New and amended standards effective from January 1, 2018
IFRS 2, Share-based Payments (as amended) was adopted with an
effective date of 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. The impact of the adoption of this
guidance did not have a material impact on the Group's 2018
consolidated financial statements and any future impact would be
primarily dependent on future modifications to share-base payment
awards, if any.
IFRS 9, Financial Instruments (as revised in 2014) was adopted
with an effective date of 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. The adoption of this guidance did not have an impact
on the Group's 2018 consolidated financial statements and any
future impact would be primarily dependent on future financial
instrument transactions, if any. In particular, the Group has
evaluated the impact of the new accounting standard on the
intercompany receivable position within the Company's statement of
financial position and determined that there is no expected credit
loss to be recorded.
IFRS 15, Revenue from Contracts with Customers was adopted with
an effective date of January 1, 2018. IFRS 15 establishes a
comprehensive guideline for determining when to recognize revenue
and how much revenue to recognize. The Group currently has no
revenues. However, all applicable revenues generated by the Group
prospectively will be accounted for in accordance with IFRS 15, or,
where applicable, other relevant guidance.
On January 1, 2017, the Group adopted amendments to IAS 7,
Disclosure Initiative. 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 only
balance sheet liability for which cash flows are classifies as
financing activities is the term loan, as amended, with Hercules
Capital Inc. The net movement a period end balances are 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 financial statements.
New standards and interpretations not yet effective
Certain new accounting standards and interpretations have been
published that are not mandatory for the reporting periods covered
by these consolidated financial statements and have not been early
adopted by the Group.
The new standards potentially relevant to the Group are
discussed below.
IFRS 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. As of the issuance dated of this annual Report, the
adoption of IFRS 16 did not have a significant impact on the
Group's net results or net assets and any future impact would be
primarily dependent on future leasing transactions, if any.
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 commercialisation of pharmaceutical formulations. The Group
maintains a presence 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 the statement of comprehensive
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 comprehensive 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 Group'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 Group 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 Group 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 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 includes
intercompany asset and investment accounts as financial assets.
Transaction costs of financial assets carried at fair value
reported in profits and loss (FVPL) are expensed in profit or
loss.
The group's financial assets include the intercompany receivable
balance in the Company balance sheet.
b) Financial liabilities, initial recognition and
measurement
Financial liabilities are classified, at initial recognition, as
financial liabilities at fair value through profit or loss. 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. The Group includes intercompany liability accounts as
financial 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 amortized cost as the Group's assets are
held within a business model whose objective is to collect the
contractual cash flows and the contractual terms give rise to cash
flows that are solely payments of principal and interest.
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 and accrued liabilities
Trade payables and accrued liabilities are obligations to pay
for goods or services that have been acquired in the ordinary
course of business from or rendered by suppliers. All 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 and accrued liabilities are initially measured at
fair value, and, where applicable, 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 statement of comprehensive loss, as
the Group currently does not apply hedge accounting.
Impairment of financial assets
From 1 January 2018, the Group assesses on a forward-looking
basis the expected credit losses associated with its debt
instruments carried at amortized cost. The impairment methodology
applied depends on whether there has been a significant increase in
credit risk. An expected credit losses model replaces the incurred
loss impairment model used in IAS 39.
The accounting policy applied under IAS 39 in previous
accounting periods is described below.
The Group assessed at the end of each reporting period whether
there was 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.
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
statement of comprehensive loss 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 consolidated statement of
comprehensive loss except to the extent that it relates to items
recognized directly in equity, in which case it is recognized in
equity.
Current tax is the expected tax payable on the taxable income
for the period, using tax rates enacted or substantively enacted at
the balance sheet date and any adjustment to tax payable in respect
of previous years.
Deferred tax is provided on temporary differences between the
carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for taxation purposes. The following
temporary differences are not provided for: the initial recognition
of goodwill; the initial recognition of assets or liabilities that
affect neither accounting nor taxable profit other than in a
business combination; and differences relating to investments in
subsidiaries to the extent that they will probably not reverse in
the foreseeable future. The amount of deferred tax provided is
based on the expected manner of realization or settlement of the
carrying amount of assets and liabilities, using tax rates enacted
or substantively enacted at the balance sheet date.
A deferred tax asset is recognized only to the extent that it is
probable that future taxable profits will be available against
which the temporary difference can be utilized.
m. Earnings per share
The Company presents basic and diluted earnings per share (EPS)
data for its shares. Basic EPS is calculated by dividing the profit
or loss attributable to shares of the Company by the weighted
average number of shares outstanding during the period. Diluted EPS
is determined by adjusting the profit or loss attributable to
shareholders and the weighted average number of shares outstanding
for the effects of all dilutive potential shares, which comprise
share options and warrants granted to employees and non-employees.
Refer to Note 8 for calculation of EPS for all periods
presented.
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 that have a minimum S&P rating of A or A-3 for
short term deposits.
At December 31, 2018, 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 commercialisation in the United States and Europe. To
fund these activities and maintain business operations, the Group
will need additional funding which may come 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 for biotech companies, may make it difficult for the
Group to obtain sufficient funds on acceptable terms. A delay
obtaining additional funding could have a negative impact on the
Group's prospects for the commercialisation of iclaprim.
In the event that the Group does not have adequate capital to
maintain or develop its business and repay debt obligations,
additional capital may not be available to the Group on a timely
basis, on favorable terms, or at all, which could have a material
negative impact on the Group's business and results of
operations.
Contractual maturities of financial liabilities:
Between 1 Between 2
(in thousands) < 1 year and 2 years and 5 years Over 5 years Total
At December 31, 2018 US $ US $ US $ US $ US $
----------------------------------------------- -------- ----------- ----------- ------------ ------
Trade payables and accrued liabilities.......... 7,207 - - - 7,207
Derivative
liabilities....................................
....... - - 5,789 - 5,789
Term Loan and other non-current (Note 13)... 4,655 5,642 5,133 - 15,430
-------- ----------- ----------- ------------ ------
11,862 5,642 10,922 - 28,426
-------- ----------- ----------- ------------ ------
Between 1 Between 2
(in thousands) < 1 year and 2 years and 5 years Over 5 years Total
At December 31, 2017 US $ US $ US $ US $ US $
----------------------------------------------- -------- ----------- ----------- ------------ ------
Trade payables and accrued liabilities.......... 10,890 - - - 10,890
Payable on completion of clinical
trial.......... 500 - - - 500
Derivative
liabilities....................................
....... - - 12,626 - 12,626
Term Loan and other non-current (Note 13)... - 4,700 10,730 - 15,430
-------- ----------- ----------- ------------ ------
11,390 4,700 23,356 - 39,446
-------- ----------- ----------- ------------ ------
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, 2018 December 31, 2017
(in thousands) US $ US $
----------------- -----------------
Sterling - Cash................................................... 491 462
The exchange rate between British Pound and the United States
Dollar at December 31, 2018 and 2017 was 1.28 and 1.35,
respectively. At December 31, 2018, 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 $12.3
million and its financing exposures on the Hercules loan, which had
an initial interest rate of 10% tied to a margin above the U.S.
prime rate. The interest rate at December 31, 2018 was 11%. 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, 2018, 2017 and 2016.
a. Other income
Year ended Dec Year ended Dec Year ended Dec
31, 2018 31, 2017 31, 2016
(in thousands) US $ US $ US $
-------------- -------------- --------------
Gains on settlement of contract
disputes................................. - - 83
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. This amount was
written off in a settlement agreement.
b. Breakdown of expenses by nature
Year ended Dec Year ended Dec Year ended Dec
31, 2018 31, 2017 31, 2016
(in thousands) US $ US $ US $
-------------- -------------- --------------
General and administrative expenses
Employee benefits expenses, including share-based
payments.....................................................
................................ 3,062 2,779 1,445
Director, legal and professional
fees........................................ 2,405 3,491 2,496
Investor and public relations advisory fees
........................... 1,180 1,283 648
Other
expenses.....................................................
.......................... 988 989 323
-------------- -------------- --------------
7,635 8,542 4,912
-------------- -------------- --------------
Year ended Dec Year ended Dec Year ended Dec
31, 2018 31, 2017 31, 2016
(in thousands) US $ US $ US $
-------------- -------------- --------------
Research and development costs
Employee benefits expenses, including share-based
payments.....................................................
................................ 1,153 1,469 678
Contract research organization
expenses................................ __ 22,066 30,446
Chemistry and manufacturing development and other non-clinical
development
.............................................................
.. 3,444 2,933 2,146
Other research and development costs (1)
................................. 6,391 3,007 1,525
-------------- -------------- --------------
10,988 29,475 34,795
-------------- -------------- --------------
(1) Other research and development costs incurred during 2018
were primarily comprised of regulatory and related preparatory
activities for the iclaprim product candidate.
(in thousands) 2018 2017 2016
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.......................................... 70 61 40
* Audit of the Group's overseas
filings........................................ 254 257 210
* Audit related assurance
services.............................................
.. 113 208 20
Advisory services in relation to F-1/A1 filings.......................... - - 601
---- ---- ----
437 526 871
---- ---- ----
c. Finance income and costs
Year ended Dec Year ended Dec Year ended Dec
31, 2018 31, 2017 31, 2016
(in thousands) US $ US $ US $
-------------- -------------- --------------
Finance income
Interest from financial
assets..................................................... 113 134 70
-------------- -------------- --------------
113 134 70
-------------- -------------- --------------
Finance costs
Interest
expense......................................................
....................... (1,585) (200) (383)
Accretion of end of term
payment............................................... (174) (22) -
Amortization of deferred financing
costs................................. (401) (53) -
-------------- -------------- --------------
(2,160) (275) (383)
-------------- -------------- --------------
Net finance
costs........................................................
.................... (2,047) (141) (313)
-------------- -------------- --------------
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, 2018 Dec 31, 2017 Dec 31, 2016
------------- ------------- -------------
Executive
Directors.......................................................
............... 2 1 2
------------- ------------- -------------
Key management
personnel....................................................... 5 7 4
------------- ------------- -------------
Total(1) 7 8 6
------------- ------------- -------------
(1) The Company had no employees in 2018 and only one employee
in 2017 and 2016.
The aggregate payroll costs of Executive Directors and key
management personnel were as follows:
Year ended Year ended Year ended
Dec 31, 2018 Dec 31, 2017 Dec 31, 2016
(in thousands) US $ US $ US $
------------- ------------- -------------
Short-term benefits:
Wages and
salaries........................................................
............. 3,040 2,288 1,528
Social security and other employer
costs............................... 234 252 67
Share-based payments(1)
............................................................. 941 1,120 120
------------- ------------- -------------
4,215 3,660 1,715
------------- ------------- -------------
(1) The total share-based payments do not reflect the
out-of-period adjustment recorded in 2017 (Note 15).
6. Directors' remuneration
Salaries Social 2018 2017 2016
and fees Bonuses Security Total Total Total
US $ US $ US $ US $ (2) US $ US $
--------- ------- -------- --------- --------- ---------
Executive
Graham Lumsden(1)(7)
............................... 446,250 264,000 16,389 726,639 567,999 488,510
Jonathan Gold(2)(7)
.................................... 612,500 250,000 19,017 881,517 194,004 114,094
Non-executive...........................
................
Robert Bertoldi(3)(7)
................................... 125,000 - 9,563 134,563 134,563 137,783
Richard Morgan(4)
.................................... 113,500 - - 113,500 113,500 177,725
Charlotta Ginman(5)
................................. 69,680 - - 69,680 67,279 57,475
Zaki
Hosny...................................
............. 62,500 - - 62,500 63,000 57,475
Mary Lake
Polan...................................
... 60,000 - - 60,000 60,000 54,094
John Stakes(6)
........................................
.... - - - - - 30,869
Bruce Williams(4)
..................................... 64,000 - - 64,000 64,000 54,094
Craig T. Albanese 57,500 - - 57,500 38,333 -
--------- ------- -------- --------- --------- ---------
1,610,930 514,000 44,969 2,169,899 1,302,678 1,172,119
--------- ------- -------- --------- --------- ---------
(1) Dr. Lumsden's incentive bonus listed above includes the
receipt of $50,000 in 2018 for achieving the operational milestones
related to a supplemental bonus granted in the previous year.
(2) The compensation listed above is for Mr. Gold's services as
Chief Financial Officer and Executive Director. Mr. Gold assumed
the executive role of Chief Financial Officer on February 2,
2017.
(3) Effective July 16, 2018, Mr. Bertoldi resigned from the
Board of Directors. Mr. Bertoldi continued to provide consultancy
services under the terms of the consultancy agreement with Amphion
Innovation plc until December 31, 2018. The compensation listed
above represents consideration paid to Mr. Bertoldi during the
entire year.
(4) Effective March 18, 2019, Richard Morgan resigned from the
Board of Directors. In addition, Bruce Williams was appointed
interim Chairman.
(5) Ms. Ginman's compensation for 2018 was GBP52,195 or
US$69,680 based on an average exchange rate of 1.335 for the
period.
(6) Mr. Stakes resigned from the Board of Directors effective
July 1, 2016.
(7) The compensation for Dr. Lumsden, Mr. Gold and Mr. Bertoldi
exclude $8,100, $8,100 and $3,750 in employer provided 401k pension
during 2018.
Directors of the Company have been granted rights to subscribe
for shares in the Group as set out below.
Exercise
January 1, December 31, price Grant Expiry
2018 Granted 2018 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
- 1,000,000 1,000,000 $ 0.50 Feb 28, 2018 Feb 28, 2028
---------- --------- ------------
330,941 1,000,000 1,330,941
---------- --------- ------------
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
- 2,000,000 2,000,000 $ 0.50 Feb 28, 2018 Feb 28, 2028
- 1,000,000 1,000,000 $ 0.50 Feb 28, 2018 Feb 28, 2028
---------- --------- ------------
5,148,800 3,000,000 8,148,800
---------- --------- ------------
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 consolidated statement of comprehensive
loss:
Year ended Year ended Year ended
Dec 31, Dec 31, Dec 31,
(in thousands) 2018 2017 2016
Current tax expense US $ US $ US $
----------------------------------------------------------------- ---------- ---------- ----------
U.K. corporation
taxes............................................................
..................... - - -
Overseas
taxes................................................................
.............................. 9 22 -
---------- ---------- ----------
9 22 -
---------- ---------- ----------
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,
2018, 2017 and 2016 is lower than the standard rate of corporation
tax in the U.K. of 19%. The differences are reconciled below:
(in thousands) 2018 2017 2016
Reconciliation of effective tax rate: US $ US $ US $
---------------------------------------------------------------- ------------ -------- --------
Loss on ordinary activities before
taxation.......................................... (13,976) (44,788) (40,324)
-------- -------- --------
U.K. Corporation tax at
19%.................................................................
.... 921 (1,571) (450)
Overseas tax at higher
rate................................................................
...... (3,953) (7,669) (12,955)
Effects of:
Unrecognized
losses..............................................................
.................... (3,032) (9,240) (13,405)
Other adjustments-overseas
taxes......................................................... 9 22 -
-------- -------- --------
Total tax
charge..............................................................
............................. 9 22 -
-------- -------- --------
There is an unrecognized cumulative net deferred tax asset of
US$1.3 million. The net deferred tax asset relates to deferred tax
on $4.8 million of a gain generated in the United Kingdom during
the year ended December 31, 2018 offset by deferred tax on $12.2
million of cumulating historical losses. The Group has $115.4
million of cumulative net operating losses ("NOLs") generated in
the United States as of December 31, 2018. NOLs are subject to
review and possible adjustment by taxing authorities in the United
States and may become subject to an annual limitation, which could
limit the amount of tax attributes that can be utilized annually to
offset future taxable income or tax liabilities.
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. Diluted EPS is computed
by dividing net income (loss) by the weighted average of all
potentially diluted share of common stock that were outstanding
during the periods presented.
The treasury stock method is used in the calculation of diluted
EPS for potentially dilutive liability classified options and
warrants, which assumes that any proceeds received from the
exercise of in-the-money options and warrants, would be used to
purchase common shares at the average market prices for the
period.
Year ended Year ended
Year ended Dec 31, Dec 31,
Dec 31, 2018 2017 2016
(in thousands, except share and per share data) US $ US $ US $
-------------- ----------- -----------
Basic
Net
loss...........................................................
................................................. (13,985) (44,810) (40,324)
Basic weighted average shares in
issue.................................................... 284,530,534 231,530,091 116,558,191
-------------- ----------- -----------
Basic loss per
share..........................................................
............................ (0.05) (0.19) (0.35)
-------------- ----------- -----------
Diluted
Net
loss...........................................................
................................................. (13,985) (44,810) (40,324)
Effect of dilutive securities: liability-classified
warrants..................... (6,654) - -
-------------- ----------- -----------
Diluted net
loss...........................................................
................................... (20,639) (44,810) (40,324)
-------------- ----------- -----------
Weighted average shares in issue -
basic................................................ 284,530,534 231,530,091 116,558,191
Incremental dilutive shares from liability-classified warrants
(treasury stock
method)........................................................
................... 2,601,154 - -
-------------- ----------- -----------
Weighted average shares in issue - diluted
............................................ 287,131,688 231,530,091 116,558,191
-------------- ----------- -----------
Diluted net
loss...........................................................
................................... (0.07) (0.19) (0.35)
-------------- ----------- -----------
The following potentially dilutive securities outstanding at
December 31, 2018, 2017 and 2016 have been excluded from the
computation of diluted weighted average shares outstanding, as they
would be antidilutive.
2018 2017 2016
---------- ---------- ----------
Warrants.................................................................
........................... 12,878,944 49,399,947 5,726,364
Share
options..................................................................
.................. 18,387,038 17,065,534 6,810,357
---------- ---------- ----------
31,265,982 66,465,481 12,536,721
---------- ---------- ----------
9. Intangible assets (Group)
(in thousands)
As of December 31, 2016
Cost......................................................................................................
.................................................. 6,196
Accumulated amortization and
impairment................................................................................. -
-----
Net book amount at December 31,
2016........................................................................................ 6,196
Additions.................................................................................................
............................................. -
Amortization
charge....................................................................................................
....................... -
-----
Net book amount at December 31,
2017...................................................................................... 6,196
-----
As of December 31, 2017
Cost......................................................................................................
.................................................. 6,196
Accumulated amortization and
impairment................................................................................. -
-----
Net book amount at December 31,
2017........................................................................................ 6,196
Additions.................................................................................................
............................................. -
Amortization
charge....................................................................................................
....................... -
-----
Net book amount at December 31,
2018...................................................................................... 6,196
-----
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 GBP0.20 per share;
-- 9,432,033 warrants at the placing price of GBP0.20 per ordinary share; and
-- a milestone payment of US $0.5 million paid by Motif
BioSciences Inc. to Acino Pharma AG in 2018 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 was applied to the
expected milestone payment of US $0.5 million as the liability was
settled in full in 2018.
Details of the purchase consideration and amounts attributed to
net assets acquired are as follows:
(in thousands) US $
-----
Purchase consideration:
Ordinary shares in Motif Bio plc.................................................................. 3,356
Warrants to subscribe for ordinary shares in Motif Bio plc.................. 2,340
-----
Total purchase
consideration.............................................................................. 5,696
-----
Iclaprim
assets................................................................................................
...... 6,196
-----
Milestone
payment........................................................................................... (500)
-----
Net assets
acquired.............................................................................................. 5,696
-----
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 indefinite lived
asset on an annual basis or when a triggering event has occurred.
The Group conducted its annual impairment test for iclaprim as of
December 31, 2018. In performing the test, the Group developed a
discounted cash flow model, which utilized assumptions including,
but not limited to, probability of success, market size and related
growth assumptions, market share and related growth assumptions,
expected period of treatment, pricing, patent life, operating
costs, and a discount rate reflective of market conditions and
Company specific risk. The aforementioned discounted cash flow
model and related assumptions took into account the conditions that
existed as December 31, 2018 including inquiries and data requests
that had been received from the U.S. Food & Drug Administration
("FDA") as a part of the normal submission process related to the
New Drug Application ("NDA") for iclaprim.
The Group's indefinite lived intangible asset passed the
impairment test as the net present value of cash flows was in
excess of the carrying value as of December 31, 2018, and
therefore, there was no impairment to the indefinite lived
intangible asset. In order to evaluate the sensitivity of its fair
value calculations on the impairment test, the Company compared the
carrying value of the asset to the fair value. As of December 31,
2018, the fair value of the indefinite lived intangible asset
exceeded the carrying value with sufficient headroom.
Subsequent to December 31, 2018, the Group announced on February
14, 2019 the receipt of a Complete Response Letter (CRL) from the
FDA regarding the NDA for iclaprim for the treatment of acute
bacterial skin and skin structure infections. The CRL states that
the FDA cannot approve the NDA in its present form and indicates
that additional data is needed to further evaluate the risk for
liver toxicity before the NDA may be approved. The Group is
evaluating and taking action on potential options to address the
deficiencies and is scheduled to meet with the FDA on May 3, 2019.
The Group evaluated these subsequent events and determined that
they were non-adjusting to the statement of financial position as
they were not knowable or expected as of December 31, 2018. While
Management believes the assumptions used in their impairment
assessment are reasonable and there continues to have sufficient
headroom even after taking into considerations the subsequent
events identified, if the Group is unable to execute its strategies
regarding the remediation effort or the ability to finance, it may
be necessary to record an impairment charge in the future.
10. Prepaid expenses and other receivables
Group Company
-------------------------- --------------------------
(in thousands) Dec 31, 2018 Dec 31, 2017 Dec 31, 2018 Dec 31, 2017
Amounts due within one year US$ US$ US$ US$
------------ ------------ ------------ ------------
Prepayments and other
receivables....................................... 231 318 154 249
------------ ------------ ------------
231 318 154 249
------------ ------------ ------------ ------------
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, 2018 Dec 31, 2017 Dec 31, 2018 Dec 31, 2017
(in thousands) US$ US$ US$ US$
------------ ------------ ------------ ------------
Cash and cash equivalents at
bank....................................... 12,279 22,651 560 629
------------ ------------ ------------
12,279 22,651 560 629
------------ ------------ ------------ ------------
12. Trade payables and accrued liabilities
Group Company
-------------------------------- --------------------------------
12 months ended 12 months ended 12 months ended 12 months ended
(in thousands) Dec 31, 2018 Dec 31, 2017 Dec 31, 2018 Dec 31, 2017
Amounts due within one year US$ US$ US$ US$
--------------- --------------- --------------- ---------------
Trade payables(1)
.........................................
............................... 3,169 6,464 - -
Accrued expenses - Contract research
organization........ 74 1,294 - -
Accrued expenses other(2)
.........................................
................ 3,964 3,008 176 -
Other
Payable..................................
.........................................
.. - 124 - 159
--------------- --------------- --------------- ---------------
7,207 10,890 176 159
--------------- --------------- --------------- ---------------
(1) Trade payables include $2.3 million and $5.7 million billed
by the Group's contract research organization at December 31, 2018
and 2017, respectively.
(2) Accrued expenses - Other include $2.4 million and $1.3
million in obligations for the manufacturing of the active
pharmaceutical ingredient for iclaprim at December 31, 2018 and
2017, respectively.
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 and third party contract
manufacturers are due in 2019.
13. Interest bearing loans and borrowings (Group)
Dec 31, 2018 Dec 31, 2017
(in thousands) US $ US $
----------------------------------------------------------------------------------- ------------ ------------
Term loan, non-current ...................................................... 10,345 15,000
Unamortized deferred financing costs............................ (214) (943)
------------ ------------
Net non-current............................................................... 10,131 14,057
------------ ------------
Term loan, current portion................................................. 4,655 -
Unamortized deferred financing costs............................ (328) -
------------ ------------
Net current portion........................................................ 4,327 -
------------ ------------
On November 15, 2017, the Group entered into a credit agreement
(the "Hercules Loan Agreement") for up to $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 $15.0 million was drawn down
at closing. The milestones for the second tranche of $5.0 million
were not achieved and is no longer available to the Group.
The terms include an initial interest-only period of 15 months;
a 30-month capital and interest repayment period thereafter; an
interest rate tied to a margin above the US prime rate, currently
11% as of December 31, 2018, and customary security over all assets
of Motif BioSciences, Inc., except for intellectual property where
there is a negative pledge. The Group is subject to customary
covenants, including a restriction on the amount of the Group's
cash resources that can be held outside the United States to $0.8
million. Under the credit agreement, the Group issued Hercules
warrants to purchase up to 73,452 of its ADS (each representing 20
ordinary shares) 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 US$1 million. In connection with the Hercules Loan Agreement
closing, the Group incurred $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,
or $0.4 million. 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, 2018, the Group recognized
total interest expense of $2.2 million, comprised of interest
expense of $1.6 million, accretion expense related to the
end-of-term payment of $0.2 million and amortization expense
related to the deferred financing costs of $0.4 million. The Group
believes and represents that it is in compliance with covenant
requirements as of December 31, 2018 and as of the date that these
financial statements are issued.
Subsequent to December 31, 2018, the Group announced that it
amended the Hercules Loan Agreement, effective February 17, 2019.
Pursuant to the amendment, the Group made an early repayment of $7
million and an additional repayment of $0.5 million on the earlier
of 90 days (May 18, 2019), or receipt of funds from an equity raise
of $2 million or greater. The additional repayment was remitted on
April 1, 2019. The amendment provides for a three-month
interest-only period from March 2019 to May 2019 on the remaining
loan balance and waiver of any prepayment charges for the remaining
term of the loan. On March 22, 2019, the Group entered into another
amendment agreement that provided for one additional month of an
interest only period for the month of June 2019. In addition,
Hercules Capital, Inc. provided the Group a letter stating that the
receipt and aging of invoices relating to a validation campaign of
iclaprim mesylate from a third-party vendor are excluded from the
determination of compliance with covenants under the Hercules Loan
Agreement, as amended. The financial data included in the above
table does not include the effect of these amendments.
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 ordinary shares or ADS 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, 2018:
Weighted Average
Number of Warrants Exercise Price
--------------------------- ------------------------
Ordinary shares ADS Ordinary shares ADS
--------------- --------- ----------------- -----
Outstanding as of January 1, 2018 22,672,867 1,336,354 GBP 0.272 $8.08
Granted - - - $ -
Exercised (757,315) - GBP 0.246 $ -
--------------- --------- ------ --------- ----
Outstanding as of December 31, 2018 21,915,552 1,336,354 GBP 0.273 $8.08
=============== ========= ====== ========= ====
The Group's warrants outstanding and exercisable as of December
31, 2018 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) 10,505,648 GBP GBP 0.322 November 23, 2021
ADS (2)(3) 1,202,902 US $ 8.03 November 23, 2021
Ordinary shares (1) 8,960,431 GBP GBP 0.20 April 2, 2025
ADS (2)(3)(4) 10,000 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 10,505,648 of ordinary shares and
1,336,354 of ADS are liability classified.
(3) Each ADS represents 20 ordinary shares.
(4) Warrant provides for purchase up to 60,000 ADSs, of which
10,000 ADSs were vested and exercisable as of December 31,
2018.
Liability classified warrants
ADS warrants
On November 23, 2016, the Group closed an initial U.S. offering
of 2,438,491 ADS 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 $3.8 million 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.
A total of 10,000 ADSs were vested as of December 31, 2018. 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 $0.1
million 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 ADSs 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 $0.4
million 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, 2018 and 2017, the liability classified ADS
warrants had a fair value of US $3.8 million and $8.9 million using
the following weighted-average assumptions in the Black-Scholes
model:
December 31, December 31,
2018 2017
------------ ---------------------------
Share price (US
$)................................................................
.............................. 6.59 10.81
Exercise price (US
$)................................................................
......................... 8.08 8.08
Expected
volatility........................................................
.................................... 75 % 76 %
Number of periods to
exercise..........................................................
............. 2.98 3.97
Risk-free
rate..............................................................
........................................ 2.46 % 2.10 %
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 $1.8 million using the
Black-Scholes model.
At December 31, 2018 and 2017, the liability classified ordinary
warrants had a fair value of US $2.0 million and $3.7 million using
the Black-Scholes model and the following assumptions:
December 31, December 31,
2018 2017
------------ ------------
Share price
(GBP)............................................................................
.................. 0.31 0.41
Exercise price
(GBP)............................................................................
.............. 0.322 0.322
Expected
volatility.......................................................................
..................... 74 % 76 %
Number of periods to
exercise....................................................................... 2.90 3.90
Risk-free
rate.............................................................................
......................... 2.46 % 2.09 %
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, 2018 and 2017:
(in thousands) Fair value
Liability classified warrants US $
----------------------------------------------------------------------------------------------------- ----------
Balance at January 1, 2017........................................................................... 5,798
Issued during the
year.................................................................................. 529
Exercised during the year............................................................................ (285)
Impact of foreign exchange......................................................................... 192
Loss from revaluation of derivative liabilities....................................... 6,392
----------
Balance at December 31, 2017................................................................... 12,626
Issued during the
year.................................................................................. -
Exercised during the year............................................................................ (84)
Impact of foreign exchange......................................................................... (99)
Gain from revaluation of derivative liabilities....................................... (6,654)
----------
Balance at December 31, 2018................................................................... 5,789
----------
15. 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,
2017..................................................................................... 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
Granted during the
year......................................................................................
............ 5,050,000 0.49
Forfeited during the
year......................................................................................
.......... (2,656,116) 0.34
Cancelled during the
year......................................................................................
........... (946,644) 0.56
Exercised during the year
..........................................................................................
.... (125,736) 0.14
-----------
Outstanding at December 31,
2018............................................................................. 18,387,038 0.34
-----------
Exercisable at December 31,
2018............................................................................... 12,360,958 0.30
-----------
The range of exercise prices of the options at December 31, 2018
was US $0.14 - $0.91. The weighted remaining average contractual
term of options outstanding at December 31, 2018 and 2017 was 6.7
years and 7.0 years, respectively. The weighted average remaining
contractual term of options exercisable at December 31, 2018 was
5.9 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, 2018 was $0.4
per option. 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, 2018
--------------
Share price (US
$)...............................................................................................
...................... 0.49
Exercise price (US
$)...............................................................................................
.................. 0.49
Expected
volatility.......................................................................................
............................. 77.34%
Term.............................................................................................
................................................ 10 years
Risk-free
rate.............................................................................................
................................ 2.87%
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, 2018 Dec 31, 2017 Dec 31, 2016
(in thousands) US $ US $ US $
------------- ------------- -------------
General and administrative
expense....................................................... 750 1,143 513
Research and development
expense........................................................ 191 565 -
------------- ------------- -------------
Total share-based payment
expense....................................................... 941 1,708 513
------------- ------------- -------------
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 $1.2 million. 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
period. The Group concluded that the cumulative adjustment to
correct the error should be recorded in the year ended December 31,
2017. The out-of-period correction increased General and
Administrative expense by $0.8 million and Research and Development
expense by $0.4 million for the year ended December 31, 2017. None
of these adjustments had an impact on the cash resources of the
Group.
16. Share capital (Company)
Allotted, called up and fully paid: Number US $
----------------------------------------------------------------------------------------------------------- ----------- -----
(in thousands, except share data)
In issue at December 31,
2016...................................................................................................... 195,741,528 2,728
Issued:
Ordinary shares of 1p
each................................................................................................
.. 143,700 2
Ordinary shares of 1p
each................................................................................................
.. 326,880 4
Ordinary shares of 1p
each................................................................................................
.. 66,666,667 847
Ordinary shares of 1p
each................................................................................................
.. 250,000 3
Ordinary shares of 1p
each................................................................................................
.. 390,353 5
In issue at December 31,
2017...................................................................................................... 263,519,128 3,589
----------- -----
Issued:
Ordinary shares of 1p
each................................................................................................
.. 757,315 9
Ordinary shares of 1p
each................................................................................................
.. 32,258,064 433
Ordinary shares of 1p
each................................................................................................
.. 125,736 1
In issue at December 31,
2018...................................................................................................... 296,660,243 4,032
----------- -----
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 GBP0.30 per share. The Company raised $24.6 million in
gross proceeds and incurred $1.7 million 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.
During January through June of 2018, 757,315 ordinary shares
were issued upon the exercise of warrants.
On May 17, 2018, the Group placed 32,258,064 new ordinary shares
at GBP0.31 per share. The Company raised $13.4 million in gross
proceeds and incurred $0.7 milling of issuance costs in connection
with this offering. These issuance costs, which include placement
fees, are recorded as a reduction in equity.
In June 2018, 125,736 ordinary shares were issued upon the
exercise of a stock option.
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.
17. Financial assets and financial liabilities
The Group and Company hold the following financial
instruments:
Group Company
----------------- -----------------
Financial assets Financial assets
(in thousands) at amortized cost at amortized cost
Financial assets US $ US $
------------------------------------------------------------------------- ----------------- -----------------
2018
Prepaid expenses and other
receivables......................................................... 231 154
Due from
affiliate................................................................
................................. - 20,105
Cash and cash
equivalents..............................................................
.................. 12,279 560
----------------- -----------------
12,510 20,819
----------------- -----------------
2017
Prepaid expenses and other
receivables......................................................... 318 249
Due from
affiliate................................................................
................................. - 47,733
Cash and cash
equivalents..............................................................
.................. 22,651 629
----------------- -----------------
22,969 48,611
----------------- -----------------
Group Company
--------------------- ---------------------
Financial liabilities Financial liabilities
(in thousands) at amortized cost at amortized cost
Financial liabilities US $ US $
----------------------------------------------------------------- --------------------- ---------------------
2018
Trade payables and accrued
liabilities......................................................
..... 7,207 174
Derivative
liabilities......................................................
...................................... 5,789 5,789
--------------------- ---------------------
12,996 5,963
--------------------- ---------------------
2017
Trade and other
payables.........................................................
.......................... 10,890 160
Payable on completion of clinical
trial........................................................... 500 -
Derivative
liabilities......................................................
...................................... 12,626 12,626
--------------------- ---------------------
24,016 12,786
--------------------- ---------------------
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, 2017 to
December 31, 2018. The Group determined that the book value of the
Hercules Loan Agreement (Note 13) approximates its fair value as of
December 31, 2018 due the proximity of the transaction date 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, 2018
or 2017.
There were no non-recurring fair value measurements for the
years ended December 31, 2018 or 2017.
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).
18. 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 $39.8 million increase in its investment in Motif
BioSciences, Inc. is attributable to $0.8 million related to the
Company's share options that were granted to BioSciences, Inc.
employees during the fiscal 2018 year and a reclassification of
$39.0 million from Due from Affiliates related to the disbursement
of cash from the Company to Motif Biosciences, Inc. The Company
currently considers such disbursement of cash to be an investment
with no repayment obligation. This decision was made in 2018. The
Company completed an impairment assessment of the investment
balance in connection with the assessment of its intangible asset.
The material assumptions were the same. Based on the results of the
assessment, the Company determined that the investment balance was
not impaired. Refer to Note 9 to the financial statements for
further detail.
19. Related party transactions
Transactions with Amphion Innovations plc and Amphion
Innovations US, Inc.
At December 31, 2018, Amphion Innovations plc and its wholly
owned subsidiary, Amphion Innovations US, Inc., or collectively,
the Amphion Group, owned 8.51% 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. 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, 2018, 2017 and 2016 in accordance with the terms of
the agreement. Notice was provided in September 2018 to terminate
the agreement as of December 31, 2018.
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 during the years ended December 31,
2018 and 2017 in accordance with the terms of the agreement. Notice
was provided in September 2018 to terminate the agreement as of
December 31, 2018.
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 and ended in 2017.
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. In connection with Mr. Gold
assuming the executive role as Chief Financial Officer of February
2, 2018, this agreement was suspended as of December 31, 2017.
Refer to the Directory Remuneration Report for compensation details
related to Mr. Gold's role as Chief Financial Officer.
Intercompany Receivable (Company)
The Company had a net due from its wholly-owned subsidiary,
Motif BioSciences, Inc., of US$20.2 million and $47.7 million at
December 31, 2018 and 2017, respectively. The receivable is payable
on demand and does not bear interest. The decrease in its
receivable balance from Motif BioSciences, Inc. is attributable a
reclassification from the due from to the investment account in
Motif BioSciences, Inc. The Company currently considers a
disbursement of cash to support the operation of Motif BioSciences
Inc. an investment with no repayment obligation. This decision was
made in 2018. The Company evaluated the receivable for
recoverability, in connection with the assessment of its intangible
asset. The material assumptions were the same. Based on the results
of the assessment, the Company determined that receivable balance
was not impaired and there was no expected credit loss to
recognize. Refer to Notes 9 and 18 to the financial statements for
further detail.
20. Subsequent events
On February 14, 2019, the Group announced the receipt of a
Complete Response Letter (CRL) from the U.S. Food & Drug
Administration (FDA) regarding the New Drug Application (NDA) for
iclaprim for the treatment of acute bacterial skin and skin
structure infections. The CRL states that the FDA cannot approve
the NDA in its present form and indicates that additional data are
needed to further evaluate the risk for liver toxicity before the
NDA may be approved. The Group is evaluating and taking action on
potential options to address the deficiencies.
On February 17, 2019, the Group announced it entered into an
amendment agreement with its lender Hercules Capital, Inc.
(Hercules) in relation to the Hercules Loan Agreement dated
November 15, 2017. Pursuant to the amendment, Motif BioSciences
Inc. made an early repayment of $7 million and an additional
repayment of $0.5 million on the earlier of 90 days (May 18, 2019)
or receipt of funds from an equity raise of $2 million or greater.
This additional repayment was remitted on April 1, 2019. The
amendment provides for a three-month interest-only period from
March 2019 to May 2019 on the remaining loan balance and waiver of
any prepayment charges for the remaining term of the loan. On March
22, 2019, the Group entered into another amendment agreement that
provided for one additional month of an interest only period for
the month of June 2019. In addition, Hercules Capital, Inc.
provided Motif BioSciences, Inc. a letter stating that the receipt
and aging of invoices relating to a validation campaign of iclaprim
mesylate from a third-party vendor are excluded from the
determination of compliance with covenants under the Hercules Loan
Agreement, as amended.
On March 20, 2019, the Group announced FDA has granted the
Company's request for a Type A meeting to discuss the points raised
in the Complete Response Letter received from the FDA related to
the New Drug Application for iclaprim for the treatment of acute
bacterial skin and skin structure infections. The meeting is
scheduled to take place on May 3, 2019.
On March 25, 2019, the Group raised $3.3 million of net
proceeds, after deducting $0.3 million of issuance costs, from a
placement in the United Kingdom of 45,000,000 new ordinary shares
at GBP0.6 per share.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR GGUUGCUPBPGC
(END) Dow Jones Newswires
April 15, 2019 02:00 ET (06:00 GMT)
Grafico Azioni Motif Bio (LSE:MTFB)
Storico
Da Giu 2024 a Lug 2024
Grafico Azioni Motif Bio (LSE:MTFB)
Storico
Da Lug 2023 a Lug 2024