TIDMMTFB
RNS Number : 1843O
Motif Bio PLC
30 September 2019
The information contained within this announcement is deemed by
the Company to constitute inside information as stipulated under
the Market Abuse Regulation (EU) No. 596/2014. Upon the publication
of this announcement via the Regulatory Information Service, this
inside information is now considered to be in the public domain
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN PART
DIRECTLY OR INDIRECTLY IN, INTO OR FROM ANY JURISDICTION WHERE TO
DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OR
REGULATIONS OF SUCH JURISDICTION.
Motif Bio plc and subsidiary
("Motif Bio", or "the Group")
Motif Bio Reports
Half-Year 2019 Financial Results, Operational Progress and
Proposed Initiatives
Motif Bio plc (AIM/NASDAQ: MTFB) today announced unaudited
financial results for the half year ended June 30, 2019 and
reported on its progress year to date.
Graham Lumsden, CEO of Motif Bio, said: "Receipt in February of
the CRL for iclaprim dealt a major blow to our wholly-owned
subsidiary, Motif BioSciences Inc. We have worked collaboratively
with the U.S. Food & Drug Administration (FDA) to develop a way
forward and based on guidance received during the FDA meeting on 19
September, we believe that a single well-designed adequate and
well-controlled Phase III clinical trial demonstrating safety and
efficacy of iclaprim in patients with hospital-acquired bacterial
pneumonia (HABP), including ventilator-associated bacterial
pneumonia (VABP), along with data on potential mechanisms of
hepatic injury, would enable submission of a New Drug Application
for approval by FDA. Iclaprim has been shown to concentrate in lung
tissue (alveolar macrophages and epithelial lining fluid) following
intravenous administration and a Phase II trial in patients with
HABP/VABP has been completed, demonstrating proof of concept. It
would take several years to enroll and complete a HABP/VABP Phase
III trial and the cost is expected to be tens of millions of
dollars. We believe that the most efficient way to generate future
value from iclaprim is for a partner or other entity with a lower
cost of capital to complete the HABP/VABP Phase III trial and
commercialize the asset globally.
Motif Bio continues to conserve its existing cash resources and
is implementing immediate additional initiatives to curtail further
expense given limited availability of funds. Motif Bio has reached
agreement in principle with its senior secured lender, Hercules
Capital, Inc. (Hercules), to extend the interest only period on the
Hercules loan through October 2019 and allow non-cash
payment-in-kind, or PIK, of the interest payment due on October
1(st) . In connection with this agreement to vary the loan
facility, Motif Bio will provide Hercules with a warrant option to
subscribe for ordinary shares equivalent to 5% of Motif Bio's share
capital at an exercise price of 5 pence (subject to
adjustment).
With the accommodation from Hercules under the loan facility and
other cash conservation initiatives, we believe that the Group has
sufficient cash to continue operations as of September 30, 2019.
However, we will be required to seek additional capital funding in
the immediate future and will provide further updates in due
course.
We are proposing a corporate restructuring, loan amendment and
capital raise as described below and believe that this is the best
path forward for shareholders of Motif Bio.
Proposed Corporate Restructuring and Loan Amendment (subject to
shareholder approval)
-- The Group's ownership of the iclaprim-related assets and all
other operations have been through its ownership of the
wholly-owned US subsidiary, Motif Biosciences Inc. The Hercules
loan as senior secured lender is to Motif BioSciences Inc.,
guaranteed by Motif Bio plc (with the pledge of its ownership of
Motif BioSciences Inc.). Motif Bio plc is proposing a corporate
restructure ('Proposed Restructuring') that we believe will allow
the shareholders of Motif Bio plc to benefit from the monetization
of the iclaprim asset (above the amounts owed to Hercules and other
obligations of Motif BioSciences Inc.), while being relieved of the
liability and guarantee for the Hercules loan.
-- Subject to a shareholder vote and a capital raise ('Proposed
Capital Raise'), Motif Bio has reached agreement in principle with
Hercules that includes the following elements:
1. Hercules will relinquish the loan guarantee from Motif Bio
and relieve it of any future obligations to Hercules;
2. Motif BioSciences Inc. is expected to immediately wind down
operations and hire an advisor to facilitate the sale of its
iclaprim and other assets, ideally by transacting with a company
that intends to develop and commercialize iclaprim;
3. Hercules will be granted a perfected security interest in all
of the intellectual property of Motif BioSciences Inc.; and
4. Hercules will receive a warrant for an additional 20% of
Motif Bio's post capital raise outstanding ordinary shares at an
exercise price of 5 pence (subject to adjustment). With this
warrant position, Hercules will benefit from the future success of
Motif Bio and potential upside in a successful monetization of
iclaprim.
-- Upon completion of the Proposed Restructuring, it is expected
that the Group will become an AIM Rule 15 cash shell and will have
6 months to find a suitable target to reverse into it or face
cancellation from AIM.
-- If this Proposed Restructuring and Proposed Capital Raise is
approved by shareholders and completes in accordance their terms,
then Motif Bio plc will be able to move forward as a debt-free,
publicly-listed company seeking M&A opportunities. Shareholders
today of Motif Bio:
1. would be invested in a company relieved of the liability and
guarantee for the Hercules loan of approximately $6.9 million;
2. would have the benefit of any potential upside from the sale
of, or development and commercialization of, the iclaprim asset
once Hercules receives repayment of the loan, repayment of other
liabilities of Motif BioSciences Inc., and costs of sale and/or
wind down of Motif BioSciences Inc.; and
3. would have the benefit of any future upside potential from
assets or a company acquired by Motif Bio.
-- If Motif Bio is not able to complete the contemporaneous
Proposed Capital Raise and this transaction is not approved by
shareholders, the Group will no longer be able to continue
operations and it would be expected that trading in the Group's
shares would be immediately suspended.
-- The Proposed Restructuring would mean that the existing
obligations under the loan facility are better aligned with our
strategy, namely to bring one or more assets into Motif Bio without
the burden of the debt obligations to Hercules, and for Motif Bio
to be able to benefit from any upside from the sale of, or
development and commercialization of, the iclaprim asset once
Hercules receives repayment of the loan, repayment of other
liabilities of Motif BioSciences Inc., and costs of sale and/or
wind down of Motif BioSciences Inc.
-- The Proposed Restructuring constitutes a fundamental disposal
under Rule 15 of the AIM Rules and is subject to shareholder
approval. In order to effect the Proposed Restructuring, Motif Bio
will need to raise sufficient capital through the Proposed Capital
Raise, which would be managed by Motif Bio's joint broker SP Angel.
An announcement will be made in due course providing further
details on the Proposed Capital Raise and, if successful, a
circular shall be posted to shareholders setting out full details
of the Proposed Restructuring and Proposed Capital Raise.
-- If the Proposed Capital Raise is successful, it is expected
that SP Angel, Motif Bio's joint broker, shall become nominated
adviser (Nomad) effective upon the close of business on 2 October
2019. Peel Hunt LLP, Motif Bio's current Nomad, has given notice of
its resignation as Nomad, to be effective as at the close of
business on 2 October 2019, unless extended.
-- Shareholders should be aware that there is no certainty that
Motif Bio will be able to raise sufficient funding through the
Proposed Capital Raise and that without such funding the Proposed
Restructuring will not be put to shareholders at a general meeting
for approval. If Motif Bio is unable to secure funding through the
Proposed Capital Raise or otherwise, then it is expected that Motif
Bio will no longer be able to continue operations and it is
expected that trading in the Group's shares would be immediately
suspended.
-- Shareholders should further note that upon completion of the
Proposed Capital Raise and the Proposed Restructuring there is no
certainty as to the quantum or timing of any monies due to Motif
Bio from the realization of Motif BioSciences Inc.'s assets,
including iclaprim and it is possible that no benefit from the
realization of same will ever be received by Motif Bio or its
shareholders.
-- It is Motif Bio's expectation to delist from the Nasdaq
Capital Markets in due course. Additional information will be
provided in due course.
Other Corporate and Development Highlights - 2019 Year to
Date:
-- Motif BioSciences Inc. met with the U.S. Food and Drug
Administration (FDA) in May 2019 to discuss potential options to
address the FDA's concerns expressed in its Complete Response
Letter (CRL) regarding the New Drug Application (NDA) for iclaprim
for the treatment of acute bacterial skin and skin structure
infections (ABSSSI). The CRL was received in February 2019 and
stated that the FDA was unable to approve the NDA in its current
form and that additional data would be required. Based on the CRL
and further communications with the FDA, the Group is of the view
that significant funding will be required to advance the iclaprim
asset. The Group is also unlikely to be able to fund the
advancement of the asset without a partner that has a materially
lower cost of capital and other synergies with the iclaprim asset.
As such, the Group evaluated the iclaprim indefinite lived
intangible asset for impairment and, based on its assessment,
recorded a non-cash impairment charge equal to the net book value
of the asset as of June 30, 2019.
-- Motif BioSciences Inc. met with the FDA on September 19, 2019
to discuss a proposed clinical study for the iclaprim product
candidate. The Group continues to believe that a regulatory pathway
will be available. However, there remains uncertainty whether the
path forward would be economically viable. The minutes of the
meeting are expected to be received within 30 days of the
meeting.
-- Motif BioSciences Inc. signed an agreement with Lamellar
Biomedical Limited (Lamellar) to conduct a pre-clinical study
evaluating iclaprim in combination with Lamellar's patented
LAMELLASOME(TM) technology for treating Staphylococcus aureus
infections in cystic fibrosis.
-- Motif BioSciences Inc. signed an agreement with
Otto-von-Guericke University Magdeburg to conduct a study
evaluating iclaprim in a pre-clinical model of the ophthalmic
orphan disease toxoplasma chorioretinitis.
-- Motif BioSciences Inc. announced a pre-clinical study funded
by the National Institute of Health (NIH) National Institute of
Allergy and Infectious Diseases (NIAID) to evaluate iclaprim
against Listeria monocytogenes.
-- The aforementioned agreements were entered into in connection
with the Group's strategy to evaluate further applications for
iclaprim. The studies underlying each agreement are intended to
demonstrate proof-of-concept and may warrant further study and
collaboration. These agreements are for early stage development and
do not have a material financial impact to the Group.
-- Presented iclaprim clinical data at the 28(th) European
Congress of Clinical Microbiology and Infectious Diseases (ECCMID
2019) and the American Society for Microbiology (ASM) Microbe
2019.
-- Appointed Bruce Williams as Interim Chairman of the Board of
Directors following the resignation of Non-executive Chairman
Richard C. E. Morgan, and appointed Andrew Powell, J.D. as
Non-executive Director.
Financial Highlights
-- Net loss for the six months ended June 30, 2019 and for the
six months ended June 30, 2018 was US $6.2 million and US $7.8
million, respectively. Included within the net loss for the six
months ended June 30, 2019 was an indefinite lived intangible asset
non-cash impairment charge in the amount of $6.2 million and a
non-cash gain from revaluation of derivative liabilities of $5.6
million, both of which were non-cash items.
-- General and administrative expenses decreased by US $1.0
million to US $3.1 million in the six months ended June 30, 2019
from US $4.1 million in the six months ended June 30, 2018. This
decrease was primarily attributable to a US $0.8 million reduction
in legal, investor relations, and other professional services, a US
$0.1 million reduction in total employee compensation, and a US
$0.1 million reduction in other general expenses.
-- Research and development expenses decreased by US $5.2
million to US $1.7 million in the six months ended June 30, 2019
from US $6.9 million in the six months ended June 30, 2018. This
decrease was primarily attributable to a US $3.4 million reduction
in costs relating to chemistry manufacturing and control
requirements, a US $1.7 million reduction in costs relating to
regulatory, clinical operating activities and other non-clinical
development activities, and a US $0.1 million reduction in total
R&D employee compensation.
-- At June 30, 2019 and December 31, 2018, cash and cash
equivalents amounted to US $1.8 million and US $12.3 million,
respectively. As of September 30, Motif BioSciences Inc. had cash
and cash equivalents of US $0.03 million and Motif Bio plc had cash
and cash equivalents of US $0.37 million.
-- The loan agreement dated November 15, 2017 with Hercules
Capital, Inc. was amended on February 17, 2019 and, subsequently on
March 22, 2019, such that Motif Bio made an early repayment of US
$7.5 million and received an interest-only period on the remaining
loan balance for the period from March 2019 to June 2019 and the
waiver of any prepayment charges for the remaining term of the
loan. At June 30, 2019, the outstanding principal on the amended
loan agreement was US $7.1 million. The outstanding principal
balance of the amended loan as of September 30, is US $6.9
million.
-- A financing was completed on March 25, 2019, that raised US
$3.3 million of net proceeds, after deducting US $0.3 million of
issuance costs, for a placement of 45,000,000 new ordinary shares
in Motif Bio at 6 pence per share.
-- Two subsequent amendments to the agreement with Hercules.
were entered into, such that Hercules agreed to waive amortization
payments for the months of August and September 2019 and we have
reached agreement in principle to make non-cash payment in kind for
the October 1(st) loan payment as described above.
-- We received a deficiency notice from Nasdaq on July 19, 2019,
indicating non-compliance with Nasdaq Marketplace Rule 5550(b)(2),
requiring Motif Bio to have a minimum Market Value of Listed
Securities (MVLS) of $35 million. On July 26, 2019, we received a
deficiency notice regarding Nasdaq Marketplace Rule 5550(a)(2),
requiring Motif Bio's American Depositary Shares (ADSs) to have a
minimum bid price of $1.00. We are currently addressing both
notices and, per Nasdaq regulations, have 180 calendar days from
the date of notice to regain compliance with the exchange's
continued listing standards. In order to reduce costs, we expect to
de-list from the NASDAQ Capital Market in due course.
-- In connection with our cost containment efforts and the
likelihood of Motif Bio delisting from the Nasdaq Capital Market,
the Group has dismissed PricewaterhouseCoopers LLP (United States)
effective September 27, 2019. There has been no change in status
with respect to PricewaterhouseCoopers LLP (United Kingdom).
The person responsible for the release of this announcement on
behalf of Motif Bio plc is Jonathan Gold, Interim Chief Financial
Officer
For further information, please contact:
Motif Bio plc ir@motifbio.com
Graham Lumsden (Chief Executive Officer)
Peel Hunt (NOMAD & JOINT BROKER) +44 (0)20 7418 8900
Christopher Golden/Oliver Jackson
SP Angel Corporate Finance LLP (JOINT
BROKER) +44 (0)20 3470 0470
David Hignell/Vadim Alexandre
Walbrook PR Ltd. (UK FINANCIAL PR
& IR) +44 (0)20 7933 8780
Paul McManus/Lianne Cawthorne motifbio@walbrookpr.com
MC Services AG (EUROPEAN IR) +49 (0)89 210 2280
Raimund Gabriel raimund.gabriel@mc-services.eu
Forward-Looking Statements
This press release contains forward-looking statements. Words
such as "expect," "believe," "intend," "plan," "continue," "may,"
"will," "anticipate," and similar expressions are intended to
identify forward-looking statements. Forward-looking statements
involve known and unknown risks, uncertainties and other important
factors that may cause Motif Bio's actual results, performance or
achievements to be materially different from any future results,
performance or achievements expressed or implied by the
forward-looking statements. Motif Bio believes that these factors
include, but are not limited to, (i) Motif Bio's ability to obtain
shareholder approval in connection with the Proposed Restructuring,
(ii) Motif Bio's ability to execute the Proposed Capital Raise and
Proposed Restructuring (iii) the timing, progress and the results
of clinical trials for Motif Bio's product candidates, (iv) the
timing, scope or likelihood of regulatory filings and approvals for
Motif Bio's product candidates, (v) Motif Bio's ability to
successfully commercialise its product candidates, (vi) Motif Bio's
ability to effectively market any product candidates that receive
regulatory approval, (vii) Motif Bio's commercialisation, marketing
and manufacturing capabilities and strategy, (viii) Motif Bio's
expectation regarding the safety and efficacy of its product
candidates, (ix) the potential clinical utility and benefits of
Motif Bio's product candidates, (x) Motif Bio's ability to advance
its product candidates through various stages of development,
especially through pivotal safety and efficacy trials, (xi) Motif
Bio's estimates regarding the potential market opportunity for its
product candidates, (xii) Motif Bio's ability to raise additional
capital to sustain its operations and pursue its strategy and
(xiii) 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. Additionally, there can be no assurance that Motif Bio
will regain compliance with Nasdaq rules or maintain its ADS
listing on Nasdaq. Motif Bio undertakes no obligation to update or
revise any forward-looking statements.
Management's Discussion and Analysis of Financial Condition and
Results of Operations
Overview
We have been a biopharmaceutical company focused on the
development and commercialization of novel therapies against
serious and potentially life-threatening infections and other
diseases. Our strategy has been to expand our portfolio through
acquisition and in-licensing, while taking measures to reduce our
overall cost structure. The receipt in February of the Complete
Response Letter for iclaprim presented a major hurdle to our
wholly-owned subsidiary, Motif BioSciences Inc. After working
collaboratively with FDA to develop the path forward and based on
guidance received during the FDA meeting on 19 September, we
believe that a single well-designed adequate and well-controlled
Phase III clinical trial demonstrating safety and efficacy of
iclaprim in patients with hospital-acquired bacterial pneumonia
(HABP), including ventilator-associated bacterial pneumonia (VABP),
along with data on potential mechanisms of hepatic injury would
enable submission of a New Drug Application for approval by FDA.
Iclaprim has been shown to concentrate in lung tissue (alveolar
macrophages and epithelial lining fluid) following intravenous
administration and a Phase II trial in patients with HABP/VABP has
been completed, demonstrating proof of concept. It would take
several years to enroll and complete a HABP/VABP Phase III trial
and the cost is expected to be tens of millions of dollars. We
believe that the most efficient way to generate future value from
iclaprim is for a partner or other entity with a lower cost of
capital to complete the HABP/VABP Phase III trial and commercialize
the asset globally. As a result, we are proposing a corporate
restructuring, loan amendment and capital raise as described below
and believe that this is the best path forward for shareholders of
Motif Bio.
Motif Bio continues to conserve its existing cash resources and
is implementing immediate additional initiatives to curtail further
expense given limited availability of funds. Motif Bio has reached
agreement in principle with Hercules Capital, Inc. (Hercules) to
extend the interest only period through October 2019 and allow
non-cash payment-in-kind, or PIK, of the interest payment due on
October 1(st) . In connection with this agreement, Motif Bio will
provide Hercules with a warrant option to purchase ordinary shares
equivalent to 5% of Motif Bio's share capital at an exercise price
of 5 pence (subject to adjustment).
With the accommodation from Hercules and other cash conservation
initiatives, we believe that the Group has sufficient cash to
continue operations as of September 30, 2019. However, we will be
required to seek additional capital funding in the immediate future
and will provide further updates in due course.
Outlook:
Proposed Corporate Restructuring and Loan Amendment (subject to
shareholder approval)
The Group's ownership of the iclaprim-related assets and all
other operations have been through its ownership of the
wholly-owned US subsidiary, Motif Biosciences Inc. The Hercules
loan as senior secured lender is to Motif BioSciences Inc.,
guaranteed by Motif Bio plc (with the pledge of its ownership of
Motif BioSciences Inc.). Motif Bio plc is proposing a corporate
restructure ('Proposed Restructuring') that we believe will allow
the shareholders of Motif Bio plc to benefit from the monetization
of the iclaprim asset (above the amounts owed to Hercules and other
obligations of Motif Biosciences, Inc.), while being relieved of
the liability and guarantee for the Hercules loan.
Subject to a shareholder vote and a capital raise ('Proposed
Capital Raise'), Motif Bio has reached agreement in principle with
Hercules that includes the following elements:
-- Hercules will relinquish the loan guarantee from Motif Bio
and relieve it of any future obligations to Hercules;
-- Motif BioSciences Inc. is expected to immediately wind down
operations and hire an advisor to facilitate the sale of its
iclaprim and other assets, ideally by transacting with a company
that intends to develop and commercialize iclaprim;
-- Hercules will be granted a perfected security interest in all
of the intellectual property of Motif BioSciences Inc.; and
-- Hercules will receive a warrant for an additional 20% of
Motif Bio's post capital raise outstanding ordinary shares at an
exercise price of 5 pence (subject to adjustment). With this
warrant position, Hercules will benefit from the future success of
Motif Bio and potential upside in a successful monetization of
iclaprim.
Upon completion of the Proposed Restructuring, it is expected
that the Group will become an AIM Rule 15 cash shell and will have
6 months to find a suitable target to reverse into it or face
cancellation from AIM.
If this Proposed Restructuring and Proposed Capital Raise is
approved by shareholders and completes in accordance their terms,
then Motif Bio will be able to move forward as a debt-free,
publicly-listed company seeking M&A opportunities. Shareholders
today of Motif Bio:
-- would be invested in a company relieved of the liability and
guarantee for the Hercules loan of approximately $6.9 million;
-- would have the benefit of any potential upside from the sale
of, or development and commercialization of, the iclaprim asset
once Hercules receives repayment of the loan, repayment of other
liabilities of Motif BioSciences Inc., and costs of sale and/or
wind down of Motif BioSciences Inc.; and
-- would have the benefit of any future upside potential from
assets or a company acquired by Motif Bio.
If Motif Bio is not able to complete the Proposed Capital Raise
and this transaction is not approved by shareholders, the Group
will no longer be able to continue operations and it would be
expected that trading in the Group's shares would be immediately
suspended.
The Proposed Restructuring would mean that the existing
obligations under the loan facility are better aligned with our
strategy, namely to bring one or more assets into Motif Bio without
the burden of the debt obligations to Hercules, and for Motif Bio
to be able to benefit from any upside from the sale of, or
development and commercialization of, the iclaprim asset once
Hercules receives repayment of the loan, repayment of other
liabilities of Motif BioSciences Inc., and costs of sale and/or
wind down of Motif BioSciences Inc.
The Proposed Restructuring constitutes a fundamental disposal
under Rule 15 of the AIM Rules and is subject to shareholder
approval. In order to effect the Proposed Restructuring, Motif Bio
will need to raise sufficient capital through the Proposed Capital
Raise, which would be managed by Motif Bio's joint broker SP Angel.
An announcement will be made in due course providing further
details on the Proposed Capital Raise and, if successful, a
circular shall be posted to shareholders setting out full details
of the Proposed Restructuring and Proposed Capital Raise.
If the Proposed Capital Raise is successful, it is expected that
SP Angel, Motif Bio's joint broker, shall become nominated adviser
(Nomad) effective upon the close of business on 2 October 2019.
Peel Hunt LLP, Motif Bio's current Nomad, has given notice of its
resignation as Nomad, to be effective as at the close of business
on 2 October 2019, unless extended.
Shareholders should be aware that there is no certainty that
Motif Bio will be able to raise sufficient funding through the
Proposed Capital Raise and that without such funding the Proposed
Restructuring will not be put to shareholders at a general meeting
for approval. If Motif Bio is unable to secure funding through the
Proposed Capital Raise or otherwise, then it is expected that Motif
Bio will no longer be able to continue operations and it is
expected that trading in the Group's shares would be immediately
suspended.
Shareholders should further note that upon completion of the
Proposed Capital Raise and the Proposed Restructuring there is no
certainty as to the quantum or timing of any monies due to Motif
Bio from the realization of Motif BioSciences Inc.'s assets,
including iclaprim and it is possible that no benefit from the
realization of same will ever be received by Motif Bio or its
shareholders.
It is Motif Bio's expectation to delist from the Nasdaq Capital
Market in due course. Additional information will be provided in
due course.
In connection with our cost containment efforts and the
likelihood of Motif Bio delisting from the Nasdaq Capital Market,
the Group dismissed PricewaterhouseCoopers LLP (United States)
effective September 27, 2019. There has been no change in status
with respect to PricewaterhouseCoopers LLP (United Kingdom).
Iclaprim Interim Impairment Assessment
The iclaprim product candidate is designed to treat infections
caused by multi-drug resistant bacteria. Iclaprim, is a novel
diaminopyrimidine antibiotic that inhibits an essential bacterial
enzyme called "dihydrofolate reductase" ("DHFR").
Diaminopyrimidines are a class of chemical compounds that inhibit
different enzymes in the production of tetrahydrofolate, a form of
folic acid, which is required for the production of bacterial DNA
and RNA. The inhibition of DHFR represents a differentiated and
under-utilized mechanism of action compared with most other
antibiotics. Iclaprim is a targeted Gram-positive antibiotic that
is rapidly bactericidal and highly potent against MRSA and other
Gram-positive bacteria in vitro. "Gram-positive" or "Gram-negative"
refer to how bacteria react to the Gram stain test based on the
outer casing of the bacteria, and the bacterial cell wall
structure. Each type of bacteria may be associated with different
diseases.
We performed an interim impairment test over the iclaprim
indefinite lived asset as of June 30, 2019. The assessment was
based on a discounted cash flow model taking into account the
conditions that existed as of June 30, 2019, including the
uncertainty around the timing and results of the Type B meeting
with the FDA and our ability to find a suitable strategic partner
to support the additional clinical advancement. As a result of the
interim impairment assessment, a non-cash impairment charge equal
to the full net carrying value, or US $6.2 million, was recorded as
of June 30, 2019. We are subject to all of the risks applicable to
the development of new products, and we may encounter unforeseen
expenses, difficulties, complications, delays and other unknown
factors that may harm our business.
Results of Operations:
Comparison of the six months ended June 30, 2019 and June 30,
2018
General and Administrative Expenses
General and administrative expenses decreased by US $1.0 million
to US $3.1 million in the six months ended June 30, 2019 from US
$4.1 million in the six months ended June 30, 2018. This decrease
was primarily attributable to a US $0.8 million reduction in legal,
investor relations, and other professional services, a US $0.1
million reduction in total employee compensation, and a US $0.1
million reduction in other general expenses.
Research and Development Expenses
Research and development expenses decreased by US $5.2 million
to US $1.7 million in the six months ended June 30, 2019 from US
$6.9 million in the six months ended June 30, 2018. This decrease
was primarily attributable to a US $3.4 million reduction in costs
relating to chemistry manufacturing and control requirements, a US
$1.7 million reduction in costs relating to regulatory, clinical
operating activities and other non-clinical development activities,
and a US $0.1 million reduction in total R&D employee
compensation.
Loss on Impairment
An interim impairment test over the iclaprim indefinite lived
asset was performed as of June 30, 2019. The assessment was based
on a discounted cash flow model taking into account the conditions
that existed as of June 30, 2019, including the uncertainty around
the timing and results of the Type B meeting with the FDA and the
timing of a strategic partner to support the additional clinical
advancement. As a result of the interim impairment assessment, a
non-cash impairment charge equal to the full net carrying value, or
US $6.2 million, was recorded as of June 30, 2019.
Interest Income and Interest expense
Interest income was US $0.04 million for the six months ended
June 30, 2019, compared to US $0.009 million for the six months
ended June 30, 2018. Interest income is earned based on interest
rate and cash holdings during the period. Interest expense was US
$0.8 million for the six months ended June 30, 2019 and US $1.1
million for the six months ended June 30, 2018, due to interest on
our loan with Hercules Capital Inc. drawn in November 2017 as well
as the amortization of deferred financing costs from the Hercules
loan, as amended.
Gain (Loss) from Revaluation of Derivative Liabilities
In November 2016, we issued warrants that are classified as a
liability due to potential variability in the number of shares that
may be issued upon exercise if we fail to maintain an effective
registration statement. We issued additional warrants in 2017 that
are also classified as a derivative liability. These derivative
liabilities are carried at fair value and are remeasured each
reporting period using the Black-Scholes option pricing model. Our
stock price has a significant impact on the value of the liability
and, in general, a decrease in our stock price will decrease our
derivative liability balance and decrease the loss from revaluation
of our derivative liabilities, or cause us to recognize a gain from
revaluation of our derivative liabilities. The gain for the six
months ended June 30, 2019 was US $5.6 million, compared to a gain
of US $4.4 million for the six months ended June 30, 2018.
Net Foreign Exchange Gain (Loss)
The net foreign exchange gains for the six months ended June 30,
2019 was US $0.04 million, compared to a loss of US $0.08 million
in the six months ended June 30, 2018. In both periods the gain and
loss recognized relates to the re-measurement of our liability
classified ordinary share warrants (Note 9), Sterling denominated
cash deposits to US dollars at the closing US dollar to Sterling
exchange rate as well as the gains and losses resulting from the
settlement of transactions denominated in foreign currency.
Liquidity and Capital Resources
At June 30, 2019 and December 31, 2018, we had cash and cash
equivalents of approximately US $1.8 million and US $12.3 million,
respectively. We anticipate that we will continue to generate
losses for the foreseeable future. We are subject to all of the
risks applicable to the development of new products, and we may
encounter unforeseen expenses, difficulties, complications, delays
and other unknown factors that may harm our business.
Our operations have been financed primarily by net proceeds from
the issuance of American Depositary Shares ("ADSs") on the NASDAQ
Capital Market, the issuance of ordinary shares on the AIM market
of the London Stock Exchange, the net proceeds of our Hercules Loan
Agreement entered into in November 2017 and the issuance of
convertible promissory notes to related parties.
Cash used to fund operating expenses is affected by the timing
of when we pay expenses, as reflected in the change in our
outstanding accounts payable and accrued expenses.
We expect to continue to incur losses and need to raise
additional capital in the immediate future. Such funding may not be
available to us on acceptable terms, or at all.
On July 19, 2019, we received a deficiency notice from Nasdaq
indicating non-compliance with Nasdaq Marketplace Rule 5550(b)(2),
requiring Motif Bio to have a minimum Market Value of Listed
Securities (MVLS) of $35 million. On July 26, 2019, we received a
deficiency notice regarding Nasdaq Marketplace Rule 5550(a)(2),
requiring Motif Bio's American Depositary Shares (ADSs) to have a
minimum bid price of $1.00. In order to reduce costs, we expect to
de-list from the NASDAQ market in due course.
The Hercules Loan Agreement, as amended, subjects our subsidiary
to various affirmative and restrictive covenants, including, but
not limited to, financial reporting obligations, and certain
limitations on indebtedness, liens (including a negative pledge on
intellectual property), investments, distributions (including
dividends), collateral, transfers, mergers or acquisitions, taxes,
corporate changes, and deposit accounts. In addition, we are
subject to certain restrictive covenants in connection with our
grant of a guarantee of the obligations of our subsidiary and the
pledge of our equity in our subsidiary. Compliance with these
covenants may limit our flexibility in operating our business and
our ability to take actions that might be advantageous to us and
our shareholders. We may be required to repay the entire amount of
outstanding indebtedness under the term loan in cash if we fail to
stay in compliance with our covenants or suffer some other event of
default under the Hercules Loan Agreement, as amended (Note 8).
Hercules could also exercise its rights as collateral agent to take
possession and dispose of the collateral securing the term loan for
its benefit, which collateral includes all of our property,
including the Group's cash funds, other than our intellectual
property. Our business, financial condition and results of
operations could be substantially harmed as a result of any of
these events.
Cash Flows
Six months ended
-------------------------------
June 30, 2019 June 30, 2018
--------------- --------------
(in thousands) US$ US$
Net cash (used in) / provided by:
Operating activities (5,460) (14,872)
Financing activities (4,950) 12,048
Effect of exchange rate changes on
cash and cash equivalents (31) (22)
(10,441) (2,846)
=============== ==============
Operating Activities
Net cash used in operating activities was US $5.5 million in the
six months ended June 30, 2019, which reflects an operating loss of
US $4.8 million, excluding a US $6.2 million non-cash loss recorded
related to the impairment of the iclaprim indefinite live
intangible asset, a US $0.7 million reduction in current
liabilities, and a US $0.4 million increase in prepaid expenses and
other current assets. The net operating loss is primarily comprised
of regulatory and operating activities, including activities
supporting interactions with the FDA regarding concerns raised in
its CRL received in February 2019 for our iclaprim product
candidate.
Net cash used in operating activities was US $14.9 million for
the six months ended June 30, 2018, which reflects and operating
loss of US $11.0 million, primarily from regulatory and clinical
operating activities, including activities supporting our NDA
submission for iclaprim, and a US $4.1 million reduction in current
liabilities.
Financing Activities
Net cash used in financing activities amounts to US $5.0 million
for the six month ended June 30, 2019. This includes net proceeds
of US $3.3 million from the March 25, 2019 placement of 45,000,000
new ordinary shares at GBP0.06 per share and US $0.2 million of
proceeds from warrant exercises. These proceeds were offset by US
$7.9 million and US $0.6 million of principal and cash interest
paid under our Hercules Loan Agreement, respectively.
Net cash provided by financing activities amounted to US $12.1
million in the six months ended June 30, 2018, primarily due to net
proceeds of US $12.7 million from the May 17, 2018 placement of
32,258,064 new ordinary shares at 31 pence per share and US $0.1
million of proceeds from warrant and option exercises. These
proceeds were partially offset by US $0.8 million in cash interest
paid under our Hercules Loan Agreement.
Financial Statements:
Motif Bio plc
Unaudited interim condensed consolidated statements of comprehensive loss
For the six months June 30, 2019 and 2018
(in thousands, except share and per share data)
For the six months ended
June 30,
-------------------------------------
Note 2019 2018
----- ------------ ---------------------
US $ US $
Operations
General and administrative expenses 2 (3,084) (4,138)
Research and development expenses 2 (1,732) (6,877)
Loss on impairment 6 (6,196) ---
Operating loss (11,012) (11,015)
Interest income 3 42 9
Interest expense 3 (820) (1,055)
Gain from revaluation of derivative liabilities 9 5,597 4,360
Net foreign exchange gain (loss) 37 (67)
Loss before income taxes (6,156) (7,768)
Income tax expense 4 - (9)
Net loss for the period (6,156) (7,777)
------------ ---------------------
Total comprehensive loss for the period (6,156) (7,777)
============ =====================
Net loss per share 5
Basic (0.02) (0.03)
Diluted (0.02) (0.04)
============ =====================
Weighted average number of ordinary shares
Basic 321,751,131 272,199,780
Diluted 321,751,131 277,586,288
============ =====================
The accompanying footnotes are an integral part of these
condensed consolidated interim financial statements.
Motif Bio plc
Unaudited interim condensed consolidated statements of financial
position
At June 30, 2019 and December 31, 2018
(in thousands)
At June 30,
At December
Note 2019 31, 2018
----- ------------- ---------------------------
US $ US $
ASSETS
Non-current assets
Intangible assets 6 -- 6,196
Other non-current assets 17 18
Total non-current assets 17 6,214
------------- ---------------------------
Current assets
Prepaid expenses and other current
assets 596 231
Cash 1,838 12,279
Total current assets 2,434 12,510
------------- ---------------------------
Total assets 2,451 18,724
============= ===========================
LIABILITIES
Non-current liabilities
Term loan, net of deferred financing
costs 8 4,065 10,131
Other non-current liabilities 8 269 196
------------- ---------------------------
Total non-current liabilities 4,334 10,327
Current liabilities
Trade and other payables 7 6,508 7,207
Term Loan, current portion 8 2,674 4,327
Derivative Liability 9 57 5,789
Total current liabilities 9,239 17,323
------------- ---------------------------
Total liabilities 13,573 27,650
============= ===========================
Net liabilities (11,122) (8,926)
============= ===========================
EQUITY
Share capital 10 4,633 4,032
Share premium 10 96,454 93,456
Group reorganization reserve 10 9,938 9,938
Accumulated deficit 10 (122,147) (116,352)
Total equity (11,122) (8,926)
============= ===========================
The accompanying footnotes are an integral part of these
condensed consolidated interim financial statements.
Motif Bio plc
Unaudited interim condensed consolidated statements of changes in equity
For the six months ended June 30, 2019 and 2018
(in thousands)
Group
Share Share reorganization Accumulated
capital premium reserve deficit Total
Note US $ US $ US $ US $ US $
----- -------------- --------------- ------------------------ ---------------------- ----------
Balance at
December 31,
2017 3,589 80,873 9,938 (103,308) (8,908)
Loss for the
period - - - (7,777) (7,777)
-------------- --------------- ------------------------ ---------------------- ----------
Total
comprehensive
loss for the
period - - - (7,777) (7,777)
Issue of share
capital 10 433 12,989 - - 13,422
Cost of issuance 10 - (749) - - (749)
Exercise of
share options
and warrants 9,11 10 343 - - 353
Share-based
payments 11 - - - 306 306
-------------- --------------- ------------------------ ---------------------- ----------
Balance at June
30, 2018 4,032 93,456 9,938 (110,779) (3,353)
============== =============== ======================== ====================== ==========
Loss for the
period - - - (6,208) (6,208)
-------------- --------------- ------------------------ ---------------------- ----------
Total
comprehensive
loss for the
period - - - (6,208) (6,208)
Share-based
payments - - - 635 635
Balance at
December 31,
2018 4,032 93,456 9,938 (116,352) (8,926)
============== =============== ======================== ====================== ==========
Loss for the
period - - - (6,156) (6,156)
-------------- --------------- ------------------------ ---------------------- ----------
Total
comprehensive
loss for the
period - - - (6,156) (6,156)
Issue of share
capital 10 594 2,971 - - 3,565
Cost of issuance 10 - (268) - - (268)
Exercise of
share options
and warrants 9,11 7 295 - - 302
Share-based
payments 11 - - - 361 361
-------------- --------------- ------------------------ ---------------------- ----------
Balance at June
30, 2019 4,633 96,454 9,938 (122,147) (11,122)
============== =============== ======================== ====================== ==========
The accompanying footnotes are an integral part of these
condensed consolidated interim financial statements.
Motif Bio plc
Unaudited interim condensed consolidated statements
of cash flows
For the six months June 30, 2019 and 2018
(in thousands)
Six months ended
Note June 30,
------ ---------------------------------
2019 2018
--------- ----------------------
US $ US $
Operating activities
Operating loss for the period (11,012) (11,015)
Adjustments to reconcile net loss
to net cash used in activities:
Share-based payments 11 361 306
Interest income 3 39 9
Loss on impairment 6 6,196 -
Changes in operating assets and
liabilities:
Prepaid expenses and other current
assets (367) (45)
Trade and other payables 7 (677) (4,127)
--------- ----------------------
Net cash used in operating activities (5,460) (14,872)
--------- ----------------------
Financing activities
Proceeds from issue of share capital 10 3,565 13,422
Costs of issuance of share capital 10 (268) (749)
Proceeds from exercise of warrants
and options 10,11 244 145
Principal payments under term loan 8 (7,901) -
Interest paid 8 (590) (770)
--------- ----------------------
Net cash provided by financing
activities (4,950) 12,048
--------- ----------------------
Net change in cash (10,410) (2,824)
Cash beginning of the period 12,279 22,651
Effect of foreign exchange rate
changes (31) (22)
--------- ----------------------
Cash, end of the period 1,838 19,805
========= ======================
The accompanying footnotes are an integral part of these
condensed consolidated interim financial statements.
1. General information and basis of preparation
These unaudited interim condensed consolidated financial
statements for the six months ended June 30, 2019 together with the
notes thereto (the "Unaudited Interim Condensed Consolidated
Financial Statements") of Motif Bio plc (and together with its
subsidiary, Motif BioSciences Inc., the "Group") have been prepared
in accordance with International Financial Reporting Standards
("IFRS") as issued by the International Accounting Standards Board
("IASB") and as adopted by the European Union. As permitted by
International Accounting Standard 34 - "Interim financial
reporting" ("IAS 34"), the Unaudited Interim Condensed Consolidated
Financial Statements do not include all disclosures required for a
full presentation and do not constitute statutory financial
statements. The Unaudited Interim Condensed Consolidated Financial
Statements should be read in conjunction with the Group's Annual
Consolidated Financial Statements for the years ended December 31,
2018, 2017 and 2016, which have been prepared in accordance with
IFRS as issued by IASB and in conformity with IFRS as adopted by
the European Union.
The Interim Condensed Consolidated Financial Statements are
unaudited and have not been reviewed by auditors. In the opinion of
the Board of Directors, the Interim Condensed Consolidated
Financial Statements present fairly the financial position, and
results from operations and cash flows for the period. The Board of
Directors approved the issuance of the financial statements on
September 30, 2019. Comparative numbers for the six months ended
June 30, 2018 are also unaudited.
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. Reference
should be made to the section "Critical Accounting Policies and
Significant Judgments and Estimates" in the Annual Consolidated
Financial Statements for the years ended December 31, 2018, 2017
and 2016 for a detailed description of the accounting policies and
more significant estimates and judgments used by the Group. The
accounting policies adopted in the preparation of these financial
statements are consistent with those presented in the Group's 2018
Annual Consolidated Financial Statements.
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 Unaudited Interim Condensed Consolidated Financial
Statements are presented in United States Dollars (US $), which is
Motif Bio plc's functional and presentation currency. However,
during the reporting period Motif Bio had foreign currency
exposure. 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 period end exchange rates are generally recognized in profit or
loss.
Outlook
The Group believes that the most efficient way to generate
future value from iclaprim is for a partner or other entity with a
lower cost of capital to complete the HABP/VABP Phase III trial and
commercialize the asset globally. As a result, the Group is
proposing a corporate restructuring, loan amendment and capital
raise as described below and believe that this is the best path
forward for shareholders of Motif Bio.
Motif Bio continues to conserve its existing cash resources and
is implementing immediate additional initiatives to curtail further
expense given limited availability of funds. Motif Bio has reached
agreement in principle with Hercules Capital, Inc. (Hercules) to
extend the interest only period through October 2019 and allow
non-cash payment-in-kind, or PIK, of the interest payment due on
October 1(st) . In connection with this agreement, Motif Bio will
provide Hercules with a warrant option to subscribe for ordinary
shares equivalent to 5% of Motif Bio's share capital at an exercise
price of 5 pence (subject to adjustment).
With the accommodation from Hercules and other cash conservation
initiatives, the Group believes that it has sufficient cash to
continue operations as of September 30, 2019. However, it will be
required to seek additional capital funding in the immediate future
and will provide further updates in due course.
Proposed Corporate Restructuring and Loan Amendment (subject to
shareholder approval)
The Group's ownership of the iclaprim-related assets and all
other operations have been through its ownership of the
wholly-owned US subsidiary, Motif Biosciences Inc. The Hercules
loan as senior secured lender is to Motif BioSciences Inc.,
guaranteed by Motif Bio plc (with the pledge of its ownership of
Motif BioSciences Inc.). Motif Bio plc is proposing a corporate
restructure ('Proposed Restructuring') that we believe will allow
the shareholders of Motif Bio plc to receive the benefit of a
monetization of the iclaprim asset (above the amounts owed to
Hercules and other obligations of Motif Biosciences, Inc.), while
being relieved of the liability and guarantee for the Hercules
loan.
Subject to a shareholder vote and a capital raise ('Proposed
Capital Raise'), Motif Bio has reached agreement in principle with
Hercules that includes the following elements:
-- Hercules will relinquish the loan guarantee from Motif Bio
and relieve it of any future obligations to Hercules;
-- Motif BioSciences Inc. is expected to immediately wind down
operations and hire an advisor to facilitate the sale of its
iclaprim and other assets, ideally by transacting with a company
that intends to develop and commercialize iclaprim;
-- Hercules will be granted a perfected security interest in all
of the intellectual property of Motif BioSciences Inc.; and
-- Hercules will receive a warrant for an additional 20% of
Motif Bio's post capital raise outstanding ordinary shares at an
exercise price of 5 pence (subject to adjustment). With this
warrant position, Hercules will benefit from the future success of
Motif Bio and potential upside in a successful monetization of
iclaprim.
Upon completion of the Proposed Restructuring, it is expected
that the Group will become an AIM Rule 15 cash shell and will have
6 months to find a suitable target to reverse into it or face
cancellation from AIM.
If this Proposed Restructuring and Proposed Capital Raise is
approved by shareholders and completes in accordance their terms,
then Motif Bio will be able to move forward as a debt-free,
publicly-listed company seeking M&A opportunities. Shareholders
today of Motif Bio:
-- would be invested in a company relieved of the liability and
guarantee for the Hercules loan of approximately $6.9 million;
-- would have the benefit of any potential upside from the sale
of, or development and commercialization of, the iclaprim asset
once Hercules receives repayment of the loan, repayment of other
liabilities of Motif BioSciences Inc., and costs of sale and/or
wind down of Motif BioSciences Inc.; and
-- would have the benefit of any future upside potential from
assets or a company acquired by Motif Bio.
If Motif Bio is not able to complete the Proposed Capital Raise
and this transaction is not approved by shareholders, the Group
will no longer be able to continue operations and it would be
expected that trading in the Group's shares would be immediately
suspended.
The Proposed Restructuring would mean that the existing
obligations under the loan facility are better aligned with our
strategy, namely to bring one or more assets into Motif Bio without
the burden of the debt obligations to Hercules, and for Motif Bio
to be able to benefit from any upside from the sale of, or
development and commercialization of, the iclaprim asset once
Hercules receives repayment of the loan, repayment of other
liabilities of Motif BioSciences Inc., and costs of sale and/or
wind down of Motif BioSciences Inc.
The Proposed Restructuring constitutes a fundamental disposal
under Rule 15 of the AIM Rules and is subject to shareholder
approval. In order to effect the Proposed Restructuring, Motif Bio
will need to raise sufficient capital through the Proposed Capital
Raise, which would be managed by Motif Bio's joint broker SP Angel.
An announcement will be made in due course providing further
details on the Proposed Capital Raise and, if successful, a
circular shall be posted to shareholders setting out full details
of the Proposed Restructuring and Proposed Capital Raise.
If the Proposed Capital Raise is successful, it is expected that
SP Angel, Motif Bio's joint broker, shall become nominated adviser
(Nomad) effective upon the close of business on 2 October 2019.
Peel Hunt LLP, Motif Bio's current Nomad, has given notice of its
resignation as Nomad, to be effective as at the close of business
on 2 October 2019, unless extended.
Shareholders should be aware that there is no certainty that
Motif Bio will be able to raise sufficient funding through the
Proposed Capital Raise and that without such funding the Proposed
Restructuring will not be put to shareholders at a general meeting
for approval. If Motif Bio is unable to secure funding through the
Proposed Capital Raise or otherwise, then it is expected that Motif
Bio will no longer be able to continue operations and it is
expected that trading in the Company's shares would be immediately
suspended.
Shareholders should further note that upon completion of the
Proposed Capital Raise and the Proposed Restructuring there is no
certainty as to the quantum or timing of any monies due to Motif
Bio from the realization of Motif BioSciences Inc.'s assets,
including iclaprim and it is possible that no benefit from the
realization of same will ever be received by Motif Bio or its
shareholders.
It is Motif Bio's expectation to delist from the Nasdaq Capital
Market in due course. Additional information will be provided in
due course.
In connection with our cost containment efforts and the
likelihood of Motif Bio delisting from the Nasdaq Capital Market,
the Group dismissed PricewaterhouseCoopers LLP (United States)
effective September 27, 2019. There has been no change in status
with respect to PricewaterhouseCoopers LLP (United Kingdom).
Going Concern
As of June 30, 2019, the Group had $1.8 million in cash, of
which $0.8 million was held by the parent organization Motif Bio
plc (or the Company). Net cash used in operating activities was
$5.5 million for the six months ended June 30, 2019. Operating and
net loss for the six months ended June 30, 2019 was $11.0 million
and $6.2 million, respectively. The Group expects to incur losses
for the foreseeable future.
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 confirmed in its minutes of that Type A meeting
held with the FDA on May 3, 2019 that additional studies are
required to provide the data necessary to address liver toxicity
concerns. On July 12, 2019, the Group requested Type B meeting to
discuss potential study designs and alternatives to address the FDA
concerns noted in the minute. The Type B meeting with the FDA was
held on September 19, 2019. Minutes of such meeting are expected
within approximately 30 days.
After receiving the CRL from the FDA, Motif BioSciences Inc.
entered into discussions with, and amended its loan agreement with,
Hercules. Motif BioSciences Inc. agreed to make early repayments
amounting to $7.5 million and receive an extended interest-only
payment period through to June 2019, as further described in Note
8. As of June 30, 2019, the Group had $7.1 million of principal
outstanding on the loan agreement. Furthermore, in March 2019, the
Group successfully raised $3.3 million in net proceeds from an
equity offering.
The Group will require additional capital in the immediate
future through the Proposed Capital Raise. To the extent that the
Group raises additional funds by issuing equity securities, its
existing stockholders may experience significant dilution. If Motif
Bio is unable to secure funding through the Proposed Capital Raise
or otherwise, then it is expected that Motif Bio will no longer be
able to continue operations and it is expected that trading in the
Company's shares would be immediately suspended and Motif Bio would
wind-down.
As a result, these financial statements have been prepared under
the assumption that the Group will continue as a going concern.
However, due to the Group's recurring operating losses, significant
outstanding obligations and the Proposed Restructuring, the
Directors have concluded there is significant doubt on the Group'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.
Other Significant Events Subsequent to June 30, 2019
In July 2019, the Group received and is currently addressing
deficiency notices from Nasdaq indicating non-compliance with
Nasdaq Marketplace Rules 5550(a)(2) and 5550(b)(2), requiring the
Group's American Depositary Shares (ADSs) to have a minimum bid
price of $1.00 and the Company to have a minimum Market Value of
Listed Securities (MVLS) of $35 million, respectively.
In July 2019, the Hercules Loan Agreement was further amended to
provide the Group with an interest-only period for the month of
August 2019. The agreement was also amended in August 2019 to
provide the Group with an interest-only period for the month of
September 2019. The amendments did not impact the Group's interim
financial results as of and for the six-month period ended June 30,
2019.
Segment Information
The chief operating decision-maker is considered to be the Board
of Directors of the Group. 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 the Group currently
has one operating segment - the development and commercialization
of pharmaceutical formulations.
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. The Group's derivative liability is measured at
fair value using Level 1 and 2 inputs. See discussion in Note 9 on
the inputs utilized in the Black-Scholes option pricing model and
for a rollforward of the derivative liability from December 31,
2018 to June 30, 2019. The Group determined that the book value of
the Hercules Loan Agreement (Note 8) approximates its fair value as
of June 30, 2019 due to the interest being tied to the U.S. Prime
Rate. There were no transfers between fair value levels during the
six months ended June 30, 2019 or 2018.
2. Breakdown of expenses by nature
Six months ended
June 30, 2019 June 30, 2018
(in thousands) US $ US $
------------- -------------
General and administrative
Employee compensation, benefits and share-based payments 1,389 1,522
Director, legal and professional 802 1,346
Investor and public relations advisory fees 421 641
Other expenses 472 629
------------- -------------
3,084 4,138
============= =============
Research and development 1,732 6,877
============= =============
Loss on impairment (Note 6) 6,196 -
=====
3. Finance income and costs
Six months ended
June 30, 2019 June 30, 2018
(in thousands) US $ US $
------------- -------------
Finance income
Interest from financial assets 42 9
------------- -------------
42 9
------------- -------------
Finance costs
Interest expense (564) (771)
Accretion of end of term payment (74) (86)
Amortization of deferred financing costs (182) (198)
------------- -------------
(820) (1,055)
------------- -------------
Net finance costs (778) (1,046)
============= =============
4. Income tax expense
The Group has recorded a loss for the six months ended June 30,
2019 and for all periods presented. The Group does not expect to
have a material tax obligation.
5. 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.
The Group's average stock price during the six-month period ending
June 30, 2019 did not exceed the exercise price of applicable
warrants and options and, as a result, did not have a dilutive
impact.
Six months ended
----------------------------
June 30, 2019 June 30, 2018
(in thousands, except share and per share data) US $ US $
------------- -------------
Basic
Net loss (6,156) (7,777)
------------- -------------
Basic weighted average shares in issue 321,751,131 272,199,780
------------- -------------
Basic loss per share (0.02) (0.03)
============= =============
Diluted
Net loss (6,156) (7,777)
Effect of dilutive securities: liability-classified warrants - (4,360)
------------- -------------
Diluted net loss (6,156) (12,137)
Weighted average shares in issue - basic 321,751,131 272,199,780
Incremental dilutive shares from liability-classified warrants (treasury stock
method) - 5,386,508
------------- -------------
Weighted average shares in issue - diluted 321,751,131 277,586,288
------------- -------------
Diluted loss per share (0.02) (0.04)
============= =============
The following potentially dilutive securities outstanding at
June 30, 2019 and 2018 have been excluded from the computation of
diluted weighted average shares outstanding, as they would be
antidilutive.
Six months ended
2019 2018
---------- -------------
Warrants 10,767,520 11,409,904
Share options 18,109,081 19,189,798
---------- -------------
28,876,601 30,599,703
========== =============
6. Intangible Assets
(in thousands) US $
---------------------------------------- -------
Balance at December 31, 2018 6,196
Accumulated amortization and impairment -
-------
Net book amount at June 30, 2019 6,196
Additions -
Impairment charge (6,196)
-------
Balance at June 30, 2019 -
=======
The Group performs an impairment test over the indefinite lived
asset on an annual basis or when a triggering event has occurred.
As the result of receipt of a Complete Response Letter from U.S.
Food & Drug Administration ("FDA") and the Type A meeting,
including minutes thereof, held with the FDA on May 3, 2019, the
Group concluded a triggering event occurred and as a result
conducted an interim impairment test for iclaprim as of June 30,
2019. 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 Group specific
risk. Our approach to assigning values to each of our assumptions
used within the impairment test, are consistent with external
sources of data, further adjusted for specific considerations given
the uncertainty described below. The aforementioned discounted cash
flow model and related assumptions took into account the conditions
that existed at June 30, 2019 including the concerns raised by the
FDA included in the minutes of the May 3, 2019 meeting, the
uncertainty regarding the results of the Type B meeting held on
September 19, 2019, which will not be fully known until the minutes
to the meeting are
available, and whether it will result in a reasonable path
forward, as well as the uncertainty surrounding the Groups ability
to find a strategic partner on acceptable terms to support the
continued clinical advancement for iclaprim. The assessment also
analyzed the impact of changes to the discount rate and probability
of success. The sensitivity analysis evaluated favorable and
unfavorable changes with a minimum range of 10%. The sensitivity
did not have a meaningful impact to the Group's assessment. The
Group estimated that the net present value of the cash flows of the
Group's indefinite lived intangible asset was a nominal amount. As
a result of the interim impairment assessment, the Group recorded a
non-cash impairment charge equal to the full net carrying value as
of June 30, 2019.
7. Trade and other payables
At June 30, 2019 At December 31, 2018
(in thousands) US $ US $
---------------- --------------------
Trade payables (1) (2) 5,360 3,169
Accrued expenses - Contract research organization 74 74
Accrued expenses - Other (2) 1,074 3,964
6,508 7,207
================ ====================
(1) Trade payables at June 30, 2019 and December 31, 2018
include $2.3 million billed by the Group's contract research
organization.
(2) Trade payable at June 30, 2019 also include $2.2 million
billed by the Group's supplier of active pharmaceutical ingredient.
This amount was previously included in Accrued expenses - Other as
of December 31, 2018.
8. Interest bearing loans and borrowings
At June 30, 2019 At December 31, 2018
(in thousands) US $ US $
------------------------------------- ---------------- --------------------
Term loan, non-current 4,170 10,345
Unamortized deferred financing costs (105) (214)
---------------- --------------------
Net non-current 4,065 10,131
================ ====================
Term loan, current portion 2,929 4,655
Unamortized deferred financing costs (255) (328)
---------------- --------------------
Net current portion 2,674 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 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.
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 June 30, 2019, and customary security over all assets of
the Group, 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 $0.75 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 $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 $0.43 million.
The end of term charge is payable upon loan maturity or the date
that the Group prepays the outstanding loan balance.
The Hercules Loan Agreement was amended effective on February
17, 2019 and, subsequently, on March 22, 2019. Pursuant to the
amendments, the Group made early repayments of $7.5 million and
received an interest-only period on the remaining loan balance for
the period from March 2019 through June 2019 and the waiver of any
prepayment charges for the remaining term of the loan. In
connection with the amendments to the Hercules Loan Agreement, the
Group incurred $0.05 in fees and recorded a $0.06 million
modification loss. The fees were classified as a direct reduction
from the Loan balance and will be amortized over the life of the
loan. The modification loss was recorded as interest expense with a
corresponding adjustment to the Loan balance.
In July 2019 the Hercules Loan Agreement was further amended to
provide the Group with an interest-only period for the month of
August 2019. The agreement was also amended in August 2019 to
provide the Group with an interest-only period for the month of
September 2019. The amendments did not impact the Group's interim
financial results as of and for the six-month period ended June 30,
2019.
Motif Bio has reached agreement in principle with Hercules
Capital, Inc. (Hercules) to extend the interest only period through
October 2019 and allow non-cash payment-in-kind, or PIK, of the
interest payment due on October 1(st) . In connection with this
agreement, Motif Bio will provide Hercules with a warrant option to
subscribe for ordinary shares equivalent to 5% of Motif Bio's share
capital at an exercise price of 5 pence (subject to adjustment). In
connected with the Proposed Capital Raise, Motif Bio has reached
agreement in principle with Hercules that includes the following
elements:
-- Hercules will relinquish the loan guarantee from Motif Bio
and relieve it of any future obligations to Hercules;
-- Motif BioSciences Inc. is expected to immediately wind down
operations and hire an advisor to facilitate the sale of its
iclaprim and other assets, ideally by transacting with a company
that intends to develop and commercialize iclaprim;
-- Hercules will be granted a perfected security interest in all
of the intellectual property of Motif BioSciences Inc.; and
-- Hercules will receive a warrant for an additional 20% of
Motif Bio's post capital raise outstanding ordinary shares at an
exercise price of 5 pence (subject to adjustment). With this
warrant position, Hercules will benefit from the future success of
Motif Bio and potential upside in a successful monetization of
iclaprim.
The Hercules Loan Agreement, as amended, subjects the Group's
subsidiary Motif Biosciences, Inc. to various affirmative and
restrictive covenants, including, but not limited to, financial
reporting obligations, and certain limitations on indebtedness,
liens (including a negative pledge on intellectual property),
investments, distributions (including dividends), collateral,
transfers, mergers or acquisitions, taxes, corporate changes, and
deposit accounts. In addition, the Group is subject to certain
restrictive covenants in connection with the grant of a guarantee
of the obligations of the subsidiary and the pledge of the its
equity in the subsidiary. Compliance with these covenants may limit
the Group's flexibility in operating its business and its ability
to take actions that might be advantageous to the Group and its
shareholders. The Group may be required to repay the entire amount
of outstanding indebtedness under the term loan in cash if it fails
to stay in compliance with amended covenants or suffer some other
event of default under the Hercules Loan Agreement, as amended.
Hercules could also exercise its rights as collateral agent to take
possession and dispose of the collateral securing the term loan for
its benefit, which collateral includes all of the Group's property,
including the cash funds held by the subsidiary, other than our
intellectual property. The Group's business, financial condition
and results of operations could be substantially harmed as a result
of any of these events.
For the six months ended June 30, 2019, the Group recognized
total interest expense of $0.8 million, comprised of interest
expense of $0.5 million, accretion expense related to the
end-of-term payment of $0.1 million and amortization expense
related to the deferred financing costs of $0.2 million. The Group
believes and represents that it is in compliance with covenant
requirements, as amended, as of June 30, 2019 and as of the date
that these financial statements are issued.
9. Warrants
Warrant activity
The Company has issued warrants for services performed and in
conjunction with various equity financings. The Company's warrants
have either a Sterling or US Dollar exercise price. The following
is a summary of the Company's warrant activity during the six
months ended June 30, 2019:
Weighted Average
Number of Warrants Exercise Price
---------------------------- --------------------------
Ordinary shares ADS (3) Ordinary shares ADS
---------------- --------- ----------------- --------
Outstanding as of
January 1, 2019 21,915,552 1,336,354 GBP 0.273 $8.08
Granted - - - -
Forfeited - (50,000) - $ 7.26
Exercised (830,780) - GBP 0.228 -
--------------- --------- ------ --------- ----
Outstanding as of
June 30, 2019 21,084,772 1,286,354 GBP 0.273 $8.11
=============== ========= ====== ========= ====
The Company's warrants outstanding and exercisable as of June
30, 2019 were as follows:
Type of Warrant Outstanding Number Outstanding and Exercisable Exercise Price Expiration Date
---------------------------- ---------------------------------- ---------------- -----------------
Ordinary shares (1) 724,705 GBP GBP 0.20 April 2, 2020
Ordinary shares (1) 1,082,384 GBP GBP 0.50 July 21, 2020
Ordinary shares (2) 10,317,252 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) 10,000 US $ 7.26 July 31, 2022
ADS (2) (3) 73,452 US $ 9.53 November 14, 2022
(1) Warrants totaling 10,767,520 of ordinary shares are equity
classified.
(2) Warrants totaling 10,317,252 of ordinary shares and
1,286,354 of ADS are liability classified.
(3) Each ADS represents 20 ordinary shares.
Liability classified warrants
ADS warrants
On November 23, 2016, the Group closed an initial U.S. public
offering of 2,438,491 ADSs and 1,219,246 ADS warrants at a price of
US $6.98 per ADS/warrant combination. Each ADS represents 20
ordinary shares. The warrants have an exercise price of US $8.03
per ADS and expire on November 23, 2021. In the event the Group
fails to maintain the effectiveness of its Registration Statement
and a Restrictive Legend Event has occurred, the warrant shall only
be exercisable on a cashless basis. This would result in
variability in the number of shares issued and therefore, the
warrants were designated as a financial liability carried at fair
value through profit and loss. On issuance of the ADS warrants, the
Group recorded a derivative liability of $3.8 million using the
Black-Scholes model. The Group develops its own assumptions for use
in the Black-Scholes option pricing model that have observable
inputs and 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 US $7.26 per
ADS. The warrant vested 5,000 ADSs at issuance, with the remaining
55,000 ADSs 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 and outstanding as of June 30,
2019. The performance conditions related to remaining 50,000 ADSs
were not achieved. The vested warrants may be exercised on a
cashless basis and expire 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 $0.1 million using the Black-Scholes model.
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 $0.4 million
using the Black-Scholes model.
At June 30, 2019 and December 31, 2018, the liability classified
ADS warrants had a fair value of $0.05 million and $3.8 million,
respectively, using the following weighted-average assumptions in
the Black-Scholes model:
June 30, December 31,
2019 2018
-------- ------------
Share price (US $) 0.67 6.59
Exercise price (US $) 8.11 8.08
Expected volatility 86 % 75 %
Number of periods to exercise 2.46 2.98
Risk free rate 1.73 % 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 28 pence per share/warrant combination. The warrants have
an exercise price of GBP0.322 per warrant and expire on November
23, 2021. In the event that the Group fails to maintain the
effectiveness of the Registration Statement, the warrant shall only
be exercisable on a cashless basis. This would result in
variability in the number of shares issued and therefore, the
warrants were designated as a financial liability carried at fair
value through profit and loss. On issuance of the warrants, the
Group recorded a derivative liability of $1.8 million using the
Black-Scholes model.
At June 30, 2019 and December 31, 2018, the liability classified
ordinary warrants had a fair value of $0.01 million and $2.0
million using the Black-Scholes model and the following
assumptions:
June 30, December 31,
2019 2018
-------- ------------
Share price
(GBP)................................................................................
.............. 0.02 0.31
Exercise price
(GBP)................................................................................
......... 0.322 0.322
Expected
volatility...........................................................................
................. 86 % 74 %
Number of periods to
exercise........................................................................ 2.40 2.90
Risk free
rate.................................................................................
..................... 1.73 % 2.46 %
Expected
dividends............................................................................
............... - -
The following is a summary of the Group's liability classified
warrant activity, including both ADS and Ordinary warrants, during
the six months ended June 30, 2019:
Fair value
(in thousands)
Liability classified warrants US $
---------------------------------------------------------------------------------------------------- ----------
Balance at December 31, 2018...................................................................... 5,789
Issued during the
period................................................................................... -
Exercised during the
period............................................................................. (56)
Impact of foreign exchange............................................................................ (79)
Gain from revaluation of derivative liabilities............................................. (5,597)
----------
Balance at June 30,
2019............................................................................... 57
----------
10. Share capital
Allotted, called up and fully paid: Number US $
--------------------------------------------------------------------------------------------------------------- ----------- -----
(in thousands, except share data)
In issue at December 31,
2018................................................................................................ 296,660,243 4,032
----------- -----
Issued:
Ordinary shares of 1p
each............................................................................................. 830,780 7
Ordinary shares of 1p
each............................................................................................. 45,000,000 594
In issue at June 30,
2019.......................................................................................................... 342,491,023 4,633
----------- -----
During January through June of 2019, 830,780 ordinary shares
were issued upon the exercise of warrants.
On March 25, 2019, the Group placed 45,000,000 new ordinary
shares at 6 pence per share and received $3.3 million of net
proceeds.
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 reorganization reserve arose in March 2015 when Motif
Bio plc became the parent of the Group. 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 Motif Bio
has always owned Motif BioSciences Inc. The reserve on
consolidation represents the difference between the nominal value
of the shares of Motif Bio 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 Motif Bio shares was used in the
calculation of the reorganization reserve.
11. Share-based payments
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 Motif Bio 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.
The following is a summary of the Group's option activity for
the six months ending June 30, 2019.
Weighted
average
exercise
Number of price
share
options US $
----------- -----------
Outstanding at December 31,
2018..................................................................... 18,387,038 0.34
Granted during the
period...............................................................................
......... 100,000 0.11
Forfeited during the
period...............................................................................
....... (300,000) 0.42
Cancelled during the period
................................................................................... (77,957) 0.70
Exercised during the period
.................................................................................... - -
Expired during the
period...............................................................................
......... - -
-----------
Outstanding at June 30,
2019............................................................................... 18,109,081 0.34
Exercisable at June 30,
2019................................................................................ 13,387,155 0.31
===========
The total expense recognized for the periods arising from
stock-based payments are as follows:
Six months ended
June 30, 2019 June 30, 2018
US $ US $
------------- -------------
General and administrative
expense..................................................................... 327 250
Research and development
expense..................................................................... 34 56
------------- -------------
Total share-based payment
expense.................................................................... 361 306
============= =============
12. Employee costs
The aggregate payroll costs of Executive Directors and key
management personnel were as follows:
Six months ended
June 30, 2019 June 30, 2018
US $ US $
------------- -------------
(in thousands)
Wages and
salaries.........................................................................
.......................... 1,357 1,646
Social security and other employer
costs............................................................. 113 158
Share based payments (1)
.................................................................................
....... 361 306
------------- -------------
1,831 2,110
============= =============
(1) The total share based payments amount represented is net of
forfeitures and/or cancellations of option awards. For the
six-month period ended June 30, 2019 and 2018, the impact of such
forfeitures and/or cancellations was of $0.05 million of $0.38
million, respectively (Note 11).
13. Related party transactions
Transactions with Amphion Innovations plc and Amphion
Innovations US, Inc.
At June 30, 2019, Amphion Innovations plc owned less than 5% of
the issued ordinary shares in Motif Bio plc. Richard Morgan and
Robert Bertoldi were directors of Amphion Innovations plc in the
period. Richard Morgan and Robert Bertoldi were also directors of
the Company until their respective resignations on March 18, 2019
and July 16, 2018. 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 to be provided is US $120,000 per
annum. The agreement was terminated as of December 31, 2018. The
Group did not make any payments post the termination date. The
Group paid $120,000 to Amphion Innovations US, Inc. in 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 agreement was
terminated as of December 31, 2018. The Group paid $125,000 in
2018. The Group did not make any payments post the termination
date.
Consultancy Agreement with Jonathan Gold
On April 7, 2017, the Group entered into a consultancy agreement
with Mr. Gold. Under the terms of this agreement, Mr. Gold received
a fixed fee of $16,167 per month for strategic financial expert
advice and guidance. The term of this agreement was twelve months,
commencing January 1, 2017. This agreement was suspended as of
December 31, 2017.
14. Subsequent Events
In July 2019, the Group received and is currently addressing
deficiency notices from Nasdaq indicating non-compliance with
Nasdaq Marketplace Rules 5550(a)(2) and 5550(b)(2), requiring the
company's American Depositary Shares (ADSs) to have a minimum bid
price of $1.00, the company to have a minimum Market Value of
Listed Securities (MVLS) of $35 million, respectively.
In July 2019, the Hercules Loan Agreement was further amended to
provide the Group with an interest-only period for the month of
August 2019. The agreement was also amended in August 2019 to
provide the Group with an interest-only period for the month of
September 2019. The amendments did not impact the Group's interim
financial results as of and for the six-month period ended June 30,
2019.
Outlook
The Group believes that the most efficient way to generate
future value from iclaprim is for a partner or other entity with a
lower cost of capital to complete the Phase III HABP/VABP trial and
commercialize the asset globally. As a result, the Group is
proposing a corporate restructuring, loan amendment and capital
raise as described below and believe that this is the best path
forward for shareholders of Motif Bio.
Motif Bio continues to conserve its existing cash resources and
is implementing immediate additional initiatives to curtail further
expense given limited availability of funds. Motif Bio has reached
agreement in principle with Hercules Capital, Inc. (Hercules) to
extend the interest only period through October 2019 and allow
non-cash payment-in-kind, or PIK, of the interest payment due on
October 1(st) . In connection with this agreement, Motif Bio will
provide Hercules with a warrant option to subscribe for ordinary
shares equivalent to 5% of Motif Bio's share capital at an exercise
price of 5 pence (subject to adjustment).
With the accommodation from Hercules and other cash conservation
initiatives, the Group believes that it has sufficient cash to
continue operations as of September 30, 2019. However, it will be
required to seek additional capital funding in the immediate future
and will provide further updates in due course.
Proposed Corporate Restructuring and Loan Amendment (subject to
shareholder approval)
The Group's ownership of the iclaprim-related assets and all
other operations have been through its ownership of the
wholly-owned US subsidiary, Motif Biosciences Inc. The Hercules
loan as senior secured lender is to Motif BioSciences Inc.,
guaranteed by Motif Bio plc (with the pledge of its ownership of
Motif BioSciences Inc.). Motif Bio plc is proposing a corporate
restructure ('Proposed Restructuring') that we believe will allow
the shareholders of Motif Bio plc to receive the benefit of a
monetization of the iclaprim asset (above the amounts owed to
Hercules and other obligations of Motif Biosciences Inc.), while
being relieved of the liability and guarantee for the Hercules
loan.
Subject to a shareholder vote and a capital raise ('Proposed
Capital Raise'), Motif Bio has reached agreement in principle with
Hercules that includes the following elements:
-- Hercules will relinquish the loan guarantee from Motif Bio
and relieve it of any future obligations to Hercules;
-- Motif BioSciences Inc. is expected to immediately wind down
operations and hire an advisor to facilitate the sale of its
iclaprim and other assets, ideally by transacting with a company
that intends to develop and commercialize iclaprim;
-- Hercules will be granted a perfected security interest in all
of the intellectual property of Motif BioSciences Inc.; and
-- Hercules will receive a warrant for an additional 20% of
Motif Bio's post capital raise outstanding ordinary shares at an
exercise price of 5 pence (subject to adjustment). With this
warrant position, Hercules will benefit from the future success of
Motif Bio and potential upside in a successful monetization of
iclaprim.
Upon completion of the Proposed Restructuring, it is expected
that the Group will become an AIM Rule 15 cash shell and will have
6 months to find a suitable target to reverse into it or face
cancellation from AIM.
If this Proposed Restructuring and Proposed Capital Raise is
approved by shareholders and completes in accordance their terms,
then Motif Bio will be able to move forward as a debt-free,
publicly-listed company seeking M&A opportunities. Shareholders
today of Motif Bio:
-- would be invested in a company relieved of the liability and
guarantee for the Hercules loan of approximately $6.9 million;
-- would have the benefit of any potential upside from the sale
of, or development and commercialization of, the iclaprim asset
once Hercules receives repayment of the loan, repayment of other
liabilities of Motif BioSciences Inc., and costs of sale and/or
wind down of Motif BioSciences Inc.; and
-- would have the benefit of any future upside potential from
assets or a company acquired by Motif Bio.
If Motif Bio is not able to complete a capital raise and this
transaction is not approved by shareholders, the Company will no
longer be able to continue operations and it would be expected that
trading in the Company's shares would be immediately suspended.
The Proposed Restructuring would mean that the existing
obligations under the loan facility are better aligned with our
strategy, namely to bring one or more assets into Motif Bio without
the burden of the debt obligations to Hercules, and for Motif Bio
to be able to benefit from any upside from the sale of, or
development and commercialization of, the iclaprim asset once
Hercules receives repayment of the loan, repayment of other
liabilities of Motif BioSciences Inc., and costs of sale and/or
wind down of Motif BioSciences Inc.
The Proposed Restructuring constitutes a fundamental disposal
under Rule 15 of the AIM Rules and is subject to shareholder
approval. In order to effect the Proposed Restructuring, Motif Bio
will need to raise sufficient capital through the Proposed Capital
Raise, which would be managed by Motif Bio's joint broker SP Angel.
An announcement will be made in due course providing further
details on the Proposed Capital Raise and, if successful, a
circular shall be posted to shareholders setting out full details
of the Proposed Restructuring and Proposed Capital Raise.
If the Proposed Capital Raise is successful, it is expected that
SP Angel, Motif Bio's joint broker, shall become nominated adviser
(Nomad) effective upon the close of business on 2 October 2019.
Peel Hunt LLP, Motif Bio's current Nomad, has given notice of its
resignation as Nomad, to be effective as at the close of business
on 2 October 2019, unless extended.
Shareholders should be aware that there is no certainty that
Motif Bio will be able to raise sufficient funding through the
Proposed Capital Raise and that without such funding the Proposed
Restructuring will not be put to shareholders at a general meeting
for approval. If Motif Bio is unable to secure funding through the
Proposed Capital Raise or otherwise, then it is expected that Motif
Bio will no longer be able to continue operations and it is
expected that trading in the Group's shares would be immediately
suspended.
Shareholders should further note that upon completion of the
Proposed Capital Raise and the Proposed Restructuring there is no
certainty as to the quantum or timing of any monies due to Motif
Bio from the realization of Motif BioSciences Inc.'s assets,
including iclaprim and it is possible that no benefit from the
realization of same will ever be received by Motif Bio or its
shareholders.
It is Motif Bio's expectation to delist from the Nasdaq Capital
Market in due course. Additional information will be provided in
due course.
In connection with our cost containment efforts and the
likelihood of Motif Bio delisting from the Nasdaq Capital Market,
the Group dismissed PricewaterhouseCoopers LLP (United States)
effective September 27, 2019. There has been no change in status
with respect to PricewaterhouseCoopers LLP (United Kingdom).
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
IR EAANEDDNNEFF
(END) Dow Jones Newswires
September 30, 2019 09:22 ET (13:22 GMT)
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