Filed Pursuant to Rule 424(b)(3)
Registration No. 333-284350
PROSPECTUS
358,750,000,000 Ordinary Shares Representing
35,875,000 American Depositary Shares
___________________
This prospectus relates to
the potential offer and sale from time to time by C/M Capital Master Fund, LP, or the Selling Shareholder, of up to 358,750,000,000 of
our ordinary shares, nominal value £0.00005 per share, or Ordinary Shares, represented
by 35,875,000 American Depositary Shares, or Depositary Shares, that have been or may be issued by us to the Selling Shareholder
pursuant to a Securities Purchase Agreement, dated as of January 17, 2025, by and between us and C/M, or the Purchase Agreement, establishing
an equity line of credit, or the Equity Financing. Such Depositary Shares include (a) 35,000,000 Depositary Shares, or the Purchase Shares,
underlying 350,000,000,000 Ordinary Shares by that we may elect, in our sole discretion, to issue and sell to the Selling Shareholder,
from time to time from and after the Commencement Date (as defined herein) under the Purchase Agreement, and subject to applicable stock
exchange rules (assuming the shares to be issued and sold at a price of $1.00 per share) and (b) up to 875,000 Depositary Shares, or the
Commitment Shares, underlying 8,750,000,000 Ordinary Shares that may be issued to the Selling Shareholder to release the Company of its
liability to pay the Commitment Fee (as defined herein) as consideration for it entering into the Purchase Agreement (assuming the shares
to be issued at a price of $1.00 per share).
The actual number of shares
issuable will vary depending on the then-current market price of our Depositary Shares sold to the Selling Shareholder under the Purchase
Agreement, but will not exceed the number set forth in the preceding sentences unless we file an additional registration statement under
the Securities Act of 1933, as amended, or the Securities Act, with the Securities and Exchange Commission, or SEC. See “The
Committed Equity Financing” for a description of the Purchase Agreement and “Selling Shareholder” for additional
information regarding the Selling Shareholder.
We
are not selling any securities under this prospectus and will not receive any of the proceeds from the sale of the Depositary Shares by
the Selling Shareholder. Additionally, we will not receive any proceeds from the issuance or sale of the Commitment Shares, if issued
to release the Company of its liability to pay the Commitment Fee (as defined herein). However, we may receive up to $35.0 million in
aggregate gross proceeds from the Selling Shareholder under the Purchase
Agreement in connection with sales of Depositary Shares to the Selling Shareholder pursuant
to the Purchase Agreement after the date of this prospectus. The purchase price per Depositary Share that the Selling Shareholder
will pay for Depositary Shares purchased from us under the Purchase Agreement will
fluctuate based on the market price of our Depositary Shares at the time we elect to sell shares to the Selling Shareholder and,
further, to the extent that we sell Depositary Shares under the Equity Financing, substantial amounts of Depositary Shares could be issued
and resold, which would cause dilution and may impact our stock price.
This prospectus provides you
with a general description of such securities and the general manner in which the Selling Shareholder may offer or sell the securities.
More specific terms of any securities that the Selling Shareholder may offer or sell may be provided in a prospectus supplement that describes,
among other things, the specific amounts and prices of the securities being offered and the terms of the offering. The prospectus supplement
may also add, update or change information contained in this prospectus.
The Selling Shareholder may
offer, sell or distribute all or a portion of the Depositary Shares acquired under the Purchase Agreement and hereby registered publicly
or through private transactions at prevailing market prices or at negotiated prices. We will bear all costs, expenses and fees in connection
with the registration of the Depositary Shares, including with regard to compliance with state securities or “blue sky” laws.
The timing and amount of any sales are within the sole discretion of the Selling Shareholder. The Selling Shareholder is an underwriter
under the Securities Act of 1933, as amended, with respect to the resale of shares held by it. Although the Selling Shareholder is obligated
to purchase Depositary Shares under the terms and subject to the conditions and limitations of the Purchase Agreement to the extent we
choose to sell such Depositary Shares to it (subject to certain conditions), there can be no assurances that we will choose to sell any
Depositary Shares to the Selling Shareholder, or that the Selling Shareholder will sell any or all of the Depositary Shares, if any, purchased
under the Purchase Agreement pursuant to this prospectus. The Selling Shareholder will bear all commissions and discounts, if any, attributable
to its sale of Depositary Shares. See “Plan of Distribution.”
Our Depositary Shares are listed on the NASDAQ
Capital Market under the symbol “BDRX.” The last reported closing price of our Depositary Shares on the NASDAQ Capital Market
on January 24, 2025 was $4.58.
Investing in our securities
involves risks. See “Risk Factors” beginning on page 13 of this prospectus for a discussion of the factors you should
carefully consider before deciding to purchase these securities.
Neither the Securities
and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus
is truthful or complete. Any representation to the contrary is a criminal offense.
The date of this prospectus is January 27, 2025
TABLE OF CONTENTS
ABOUT THIS PROSPECTUS
This
prospectus is part of a registration statement on Form F-1 that we filed with the SEC whereby the Selling Shareholder named
herein may, from time to time, sell the securities offered by it described in this prospectus. We will not receive any proceeds from the
sale by such Selling Shareholder of the securities offered by it described in this prospectus.
Neither
we nor the Selling Shareholder has authorized anyone to provide you with any information or to make any representations other than those
contained in this prospectus or any applicable prospectus supplement or any free writing prospectuses prepared by or on behalf of us or
to which we have referred you. Neither we nor the Selling Shareholder take responsibility for, and can provide no assurance as to the
reliability of, any other information that others may give you. Neither we nor the Selling Shareholder will make an offer to sell these
securities in any jurisdiction where such offer or sale is not permitted. No dealer, salesperson or other person is authorized to give
any information or to represent anything not contained in this prospectus, any applicable prospectus supplement or any related free writing
prospectus. You should assume that the information appearing in this prospectus or any prospectus supplement is accurate as of the date
on the front of those documents only, regardless of the time of delivery of this prospectus or any applicable prospectus supplement, or
any sale of a security. Our business, financial condition, results of operations and prospects may have changed since those dates.
The
Selling Shareholder and its permitted transferees may use this registration statement to sell securities from time to time through any
means described in the section titled “Plan of Distribution.” More specific terms of any securities that the Selling
Shareholder and its permitted transferees offer and sell may be provided in a prospectus supplement that describes, among other things,
the specific amounts and prices of the securities being offered and the terms of the offering.
We
may also provide a prospectus supplement or post-effective amendment to the registration statement to add information to, or update or
change information contained in, this prospectus. Any statement contained in this prospectus will be deemed to be modified or superseded
for purposes of this prospectus to the extent that a statement contained in such prospectus supplement or post-effective amendment modifies
or supersedes such statement. Any statement so modified will be deemed to constitute a part of this prospectus only as so modified, and
any statement so superseded will be deemed not to constitute a part of this prospectus. You should read both this prospectus and any applicable
prospectus supplement or post-effective amendment to the registration statement together with the additional information to which we refer
you in the sections of this prospectus titled “Where You Can Find More Information.”
This
prospectus contains summaries of certain provisions contained in some of the documents described herein, but reference is made to the
actual documents for complete information. All of the summaries are qualified in their entirety by the actual documents. Copies of some
of the documents referred to herein have been filed or will be filed as exhibits to the registration statement of which this prospectus
is a part, and you may obtain copies of those documents as described below under “Where You Can Find More Information.”
Unless the context specifically
indicates otherwise, references in this prospectus supplement to “Biodexa Pharmaceuticals PLC,” “Biodexa,” “the
Company,” “we,” “our,” “ours,” “us,” “the Group,” or similar terms refer
to Biodexa Pharmaceuticals PLC and its consolidated subsidiaries.
For investors outside the United States: We have not taken any action
to permit a public offering of the Depositary Shares outside the United States or to permit the possession or distribution of this prospectus
outside the United States. Persons outside the United States who come into possession of this prospectus must inform themselves about
and observe any restrictions relating to the offering of the Depositary Shares and the distribution of this prospectus outside of the
United States.
PRESENTATION OF FINANCIAL AND OTHER INFORMATION
Our
financial statements are prepared in accordance with International Financial Reporting Standards, as issued by the International Accounting
Standards Board. We have made rounding adjustments to some of the figures included in this prospectus. Accordingly, numerical figures
shown as totals in some tables may not be an arithmetic aggregation of the figures that preceded them.
We
prepare our consolidated financial statements in British pounds sterling. Except as otherwise stated, all monetary amounts in this prospectus
are presented in British pounds sterling.
In this prospectus, unless
otherwise specified or the context otherwise requires:
| · | “$” and “U.S. dollar” each refer to the United States dollar (or units thereof);
and |
| · | “£,” “pence” and “p” each refer to the British pound sterling
(or units thereof). |
On March 27, 2023, following
shareholder approval, we effected a one-for-20 reverse split of our ordinary shares, nominal value £0.02 per share, or Ordinary
Shares, and our Ordinary Shares began trading on AIM, a market operated by the London Stock Exchange plc, or AIM, on a split-adjusted
basis as of such date. No fractional shares were issued in connection with the reverse stock split. On March 24, 2023, our shareholders
approved the cancellation of admission of our Ordinary Shares on AIM and this cancellation became effective on April 26, 2023.
Concurrently with the reverse
split, and in order to continue meeting The NASDAQ Stock Market LLC’s, or NASDAQ, minimum 500,000 publicly held shares requirement
pursuant to Rule 5550(a)(4), on March 27, 2023 we effected a ratio change in the number of Ordinary Shares represented by our American
depositary shares, or Depositary Shares, from 25 Ordinary Shares per Depositary Share to five Ordinary Shares per Depositary Share.
On June 14, 2023, we held
our annual general meeting of shareholders, or June AGM, and our shareholders passed resolutions, among other procedural items, to approve
the allotment of, and disapplication of pre-emption rights in respect of, up to 7.0 billion Ordinary Shares, or Shareholder Approval.
On June 14, 2023, we also held a general meeting of shareholders, or June GM, and our shareholders passed resolutions to (x)(i) re-designate
our deferred shares into A Deferred Shares, or the Re-Designation, and (ii) subdivide our Ordinary Shares of £0.02 nominal value
each into one ordinary share of £0.001 nominal value and 19 B Deferred Shares of £0.001 nominal value each, each the Subdivision,
which became effective on June 15, 2023 and (y) adopt new articles of association, which make consequential amendments to the existing
articles of association of the Company to reflect the Re-Designation and the Subdivision, together with certain other changes to reflect
that the Ordinary Shares are no longer admitted to trading on AIM.
On July 5, 2023, and in an
effort to bring our Depositary Share price into compliance with NASDAQ’s minimum bid price per share requirement, we effected a
ratio change in the number of Ordinary Shares represented by our Depositary Shares from five Ordinary Shares per Depositary Share to 400
Ordinary Shares per Depositary Share. No fractional Depositary Shares were issued.
On October 4, 2024, and in
an effort to bring our Depositary Share price into compliance with NASDAQ’s minimum bid price per share requirement, we effected
a ratio change in the number of Ordinary Shares represented by our Depositary Shares from 400 Ordinary Shares per Depositary Share to
10,000 Ordinary Shares per Depositary Share. No fractional Depositary Shares were issued.
On November 22, 2024, we held
a general meeting of shareholders, or November GM, and our shareholders passed resolutions to (i) subdivide our Ordinary Shares of £0.001
nominal value each into one ordinary share of £0.00005 nominal value and 19 C Deferred Shares of £0.00005 nominal value each,
each the November Subdivision, which became effective on November 25, 2024 and (y) adopt new articles of association, or the Articles
of Association, which make consequential amendments to the existing articles of association of the Company to reflect the November Subdivision.
As is standard for deferred shares, each B Deferred Share and C Deferred Share has very limited rights and is effectively valueless. The
B Deferred Shares and C Deferred Shares have the rights and restrictions as set out in the Articles of Association and do not entitle
the holder thereof to receive notice of or attend and vote at any general meeting of the Company or to receive a dividend or other distribution.
The change in the number of
Ordinary Shares resulting from the reverse stock split and change in the number of Depositary Shares (and the underlying Ordinary Shares)
resulting from the change in ratio, including any changes resulting from fractional Depositary Shares not being issued to holders in connection
with the Depositary Share ratio change, has been applied retroactively to all share and per share amounts presented in this prospectus,
to the extent applicable. As a result of retroactively applying changes resulting from fractional Depositary Shares not being issued to
holders in connection with the Depositary Share ratio change, the amount of Ordinary Shares issued in prior transactions may not equal
the amount of Depositary Shares such Depositary Shares are currently exercisable for.
MARKET AND INDUSTRY DATA
Market data and certain industry
data and forecasts used throughout this prospectus were obtained from sources we believe to be reliable, including market research databases,
publicly available information, reports of governmental agencies, and industry publications and surveys. We have relied on certain data
from third-party sources, including internal surveys, industry forecasts, and market research, which we believe to be reliable based on
our management's knowledge of the industry. While we are not aware of any misstatements regarding the industry data presented in this
prospectus, our estimates involve risks and uncertainties and are subject to change based on various factors, including those discussed
under the heading “Risk Factors” and elsewhere in this prospectus.
Solely
for convenience, the trademarks and trade names in this prospectus may be referred to without the ® and ™ symbols, but such
references should not be construed as any indicator that their respective owners will not assert, to the fullest extent under applicable
law, their rights thereto. The trademarks, trade names and service marks in this prospectus are the property of their respective owners.
PROSPECTUS SUMMARY
This summary highlights
selected information that is presented in greater detail elsewhere in this prospectus. This summary does not contain all of the information
that may be important to you. You should read this entire prospectus carefully, including the sections titled "Risk Factors"
and "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated financial statements
and the related notes included elsewhere in this prospectus, before making an investment decision.
Our Business
We
are an acquisition-focused clinical stage biopharmaceutical company developing a pipeline of innovative products for the treatment of
diseases with unmet medical needs, including familial adenomatous polyposis, or FAP, non-muscle invasive bladder cancer, or NMIBC, type
1 diabetes, or T1D, and rare/orphan cancers of the brain.
In
April 2024 we licensed eRapa, a proprietary formulation of rapamycin, from Rapamycin Holdings, Inc. d/b/a Emtora Biosciences, Inc., or
Emtora. Rapamycin is an mTOR inhibitor. As a central regulator of cell metabolism, growth, proliferation and survival, the mTOR pathway
is activated during various cellular processes including tumor formation and angiogenesis. Through the use of nanotechnology and pH sensitive
polymers, eRapa is designed to address the poor bioavailability, variable pharmacokinetics and toxicity generally associated with the
currently available forms of rapamycin. An ongoing Phase 2 study of eRapa in NMIBC is scheduled to report results in mid-2025.
Tolimidone
is a selective activator of the enzyme lyn kinase which increases phosphorylation of insulin substrate -1, thereby amplifying the signaling
cascade initiated by the binding of insulin to its receptor. Lyn kinase modulates key intracellular functions such as proliferation, differentiation,
apoptosis, migration and metabolism. In fat cells, lyn kinase increases utilization of insulin, thus decreasing blood sugar without having
an effect on insulin production. In pancreatic islets, activation of lyn kinase promotes beta cell survival and proliferation, whereas
its inhibition leads to cell death, prevents proliferation and precipitates diabetes. We are developing tolimidone for T1D and are in
the process of initiating a Phase 2a dose confirming study.
MTX110,
which is being studied in aggressive rare/orphan brain cancer indications including recurrent glioblastoma, diffuse midline glioma, or
DMG, and medulloblastoma, is a liquid formulation of the histone deacetylase, panobinostat. Our proprietary formulation enables delivery
of the product via convection-enhanced delivery at potentially chemotherapeutic doses directly to the site of the tumor, by-passing the
blood-brain barrier and avoiding systemic toxicity. We have recruited the first cohort of patients in an ongoing Phase 1 study of MTX110
in recurrent glioblastoma, or rGBM. We have completed and announced the results of two Phase 1 studies in DMG. There is an ongoing Phase
1 investigator-initiated trial in medulloblastoma.
Our
clinical assets are supported by three proprietary drug delivery technologies focused on improving bio-delivery and bio-distribution of
drugs through either sustained delivery (Q-SpheraTM), direct delivery (MidaSolveTM), or targeted delivery (MidaCoreTM):
| · | Our Q-Sphera platform: Our disruptive polymer microsphere microtechnology
is used for sustained delivery to prolong and control the release of therapeutics over an extended period of time, from weeks to months. |
| · | Our MidaSolve platform: Our innovative oligosaccharide nanotechnology
is used to solubilize drugs so that they can be administered in liquid form directly and locally into tumors. |
| · | MidaCore platform: Our gold nanoparticle nanotechnology is used
for targeting sites of disease by using either chemotherapeutic agents or immunotherapeutic agents. |
We are currently focused on our clinical stage
assets and there are no active research and development programs based on our drug delivery technologies.
Recent Developments
The Committed Equity Financing
On
January 17, 2025, we entered into the Purchase Agreement with the Selling Shareholder, pursuant
to which we, subject to the restrictions and satisfaction of the conditions in the Purchase Agreement, have the right, but not the obligation,
to sell to the Selling Shareholder, and the Selling Shareholder is
obligated to purchase, up to $35.0 million of newly issued Depositary Shares. As consideration for the Seller Shareholder’s execution
and delivery of the Purchase Agreement, we have agreed to pay to the Selling Shareholder a fee of $875,000 in cash, or the Commitment
Fee, as described further herein.
We
do not have a right to commence any sales of Depositary Shares to the Selling Shareholder under
the Purchase Agreement until the Commencement Date (as defined in the Purchase Agreement). Over the 36-month period from and after the
Commencement Date (unless the Purchase Agreement is terminated earlier in accordance with its terms), the Selling Shareholder has
no right to require us to sell any Depositary Shares to the Selling Shareholder, but the
Selling Shareholder is obligated to make purchases as we direct, subject to certain conditions.
There are no upper limits on the price per share that the Selling Shareholder must pay for
Depositary Shares. Actual sales of Depositary Shares to the Selling Shareholder will depend
on a variety of factors to be determined by us from time to time, including, among others, market conditions, the trading price of our
Depositary Shares and determinations by us as to the appropriate sources of funding for us and our operations.
At
any time from and after the Commencement Date, on any business day on which the previous business day’s closing sale price of Depositary
Shares was equal to or greater than $1.00, or the Purchase Date, we may direct the Selling Shareholder to purchase a specified number
of Depositary Shares, or a Fixed Purchase, not to exceed $200,000, at a purchase price equal to the lesser of 95% of (i) the daily volume
weighted average price, or VWAP, of the Depositary Shares for the five trading days immediately preceding the applicable Purchase Date
for such Fixed Purchase and (ii) the lowest sale price of a Depositary Share on the trading day immediately preceding the Purchase Date.
In
addition, at any time from and after the Commencement Date, on any business day on which the previous business day’s closing sale
price of the Depositary Shares is equal to or greater than $1.00 and such business day is also the Purchase Date for a Fixed Purchase
of an amount of Depositary Shares not less than the applicable Fixed Purchase Maximum Amount (as defined in the Purchase Agreement), or
the VWAP Purchase Date, we may also direct the Selling Shareholder to purchase an additional
number of Depositary Shares in an amount up to the VWAP Purchase Maximum Amount (as defined in the Purchase Agreement), or a VWAP Purchase,
at a purchase price equal to the lesser of 95% of (i) the closing price of a Depositary Share on the trading day immediately preceding
the applicable VWAP Purchase Date and (ii) the VWAP during the period on the applicable VWAP Purchase Date beginning at the opening of
trading and ending at the VWAP Purchase Termination Time (as defined in the Purchase Agreement).
At
any time from and after the Commencement Date, on any business day that is also the VWAP Purchase Date for a VWAP Purchase, we may also
direct the Selling Shareholder to purchase, on such same business day, or the Additional
VWAP Purchase Date, an additional number of Depositary Shares in an amount up to the Additional VWAP Purchase Maximum Amount (as defined
in the Purchase Agreement), or an Additional VWAP Purchase, at a purchase price equal to the lesser of 95% of (i) the closing price of
a Depositary Share on the trading day immediately preceding the applicable Additional VWAP Purchase Date and (ii) the VWAP during the
Additional VWAP Purchase Period (as defined in the Purchase Agreement) on the applicable Additional VWAP Purchase Date.
If
we make certain issuances of our securities within a specified period of time after a Purchase Date and such securities are issued at
prices, or the New Issuance Price, less than the prices to be paid by the Selling Shareholder in
such Fixed Purchase, VWAP Purchase or Additional VWAP Purchase, the purchase price for such applicable Fixed Purchase, VWAP Purchase and
Additional VWAP Purchase would be reduced to the New Issuance Price, subject to the terms and conditions set forth in the Purchase Agreement.
Under
the Purchase Agreement, in no event may the aggregate amount of Purchase Shares submitted in any single or combination of VWAP Purchase
notices and/or Additional VWAP Purchase notices on a particular date require a payment from the Selling Shareholder to
us that exceeds $2,500,000, unless such limitation is waived by the Selling Shareholder.
The Selling Shareholder is
not obligated to buy any Depositary Shares pursuant to the Purchase Agreement if such Depositary Shares, when aggregated with all other
securities then beneficially owned by the Selling Shareholder and its affiliates (as calculated
pursuant to Section 13(d) of the Securities Exchange Act of 1934, as amended, and Rule 13d-3 promulgated thereunder), would result in
the Selling Shareholder beneficially owning Ordinary Shares (represented by Depositary Shares)
in excess of 9.99% of the then-outstanding Ordinary Shares, or the Beneficial Ownership Limitation.
The
net proceeds under the Purchase Agreement to us will depend on the frequency and prices at which we sell Depositary Shares to the
Selling Shareholder. We expect that any proceeds received by us from such sales to the Selling
Shareholder will be used to fund our development programs, for working capital and other
general corporate purposes.
We
have the right to terminate the Purchase Agreement at any time, upon one business days’ notice, at no cost or penalty. During any
“suspension event” under the Purchase Agreement, the Selling Shareholder does
not have the right to terminate the Purchase Agreement; however, we may not initiate any regular or other purchase of shares by the
Selling Shareholder, until such event of default is cured. In addition, in the event of bankruptcy
proceedings by or against us, the Purchase Agreement will automatically terminate in accordance with its terms.
There
are substantial risks to our shareholders as a result of the sale and issuance of Depositary Shares to the Selling Shareholder
under the Purchase Agreement. These risks include substantial dilution, significant declines in
our stock price and our inability to draw sufficient funds when needed. See “Risk Factors.” The sale of our Depositary
Shares to the Selling Shareholder under the Purchase Agreement will not affect the rights
or privileges of our other shareholders, except that the economic and voting interests of our existing shareholders will be diluted as
a result of any such sale. Although the number of Depositary Shares that our other shareholders own will not decrease, the shares owned
by our other shareholders will represent a smaller percentage of our total outstanding shares after any such sale to the Selling
Shareholder under the Purchase Agreement.
For
more information see “The Committed Equity Financing.”
Promissory Note
On December 20, 2024, or the
Issuance Date, we issued a promissory note to the Selling Shareholder in the aggregate principal amount of $600,000, or the Note, at a
10% original issue discount. The Note is an unsecured obligation of the Company and bears interest at an annual rate of 5%, which may
be increased under certain circumstances, and has a maturity date of one year from the Issuance Date. The Note includes a monthly repayment
schedule, with the entire principal amount of the Note, plus accrued and unpaid interest, due and payable by the Company on the date that
is twelve (12) months from the Issuance Date, or the Maturity Date. The Note may be prepaid prior to the Maturity Date without penalty.
Additionally, during the term of the Note, if we conduct a securities offering with gross proceeds equal to or greater than $500,000,
we shall be obligated to utilize 25% of the gross proceeds of such offering to prepay the Note.
The Note contains customary
representations and warranties by us and provides for certain customary events of default. Generally, if an event of default occurs and
is continuing under the Note, the holder thereof may require us to repay all amount due under the Note, including accrued and unpaid interest,
immediately.
We received the $540,000 pursuant
to the Note on December 24, 2024.
Regained Compliance with NASDAQ
Our
Depositary Shares are currently listed on the NASDAQ Capital Market. We are required to meet certain qualitative and financial tests to
maintain the listing of the Depositary Shares on the NASDAQ Capital Market. On August 27, 2024, we received a Staff Determination
Letter, or the Letter, from the Listing Qualifications Department of The Nasdaq Stock Market LLC, or NASDAQ, notifying us of the Staff’s
determination to delist our securities from the NASDAQ Capital Market because our securities had a closing bid price below $1.00 for 30
consecutive business days, which triggered a notice of delisting pursuant to NASDAQ Listing Rule 5550(a)(2), or the Minimum Bid Price
Requirement. Normally, a company would be afforded a 180-calendar day period to demonstrate compliance with the Minimum Bid Price Requirement.
However, pursuant to NASDAQ Listing Rule 5810(c)(3)(A)(iv), we were not eligible for any compliance period specified in Rule 5810(c)(3)(A)
because we effected reverse stock splits over the prior two-year period with a cumulative ratio of 250 shares or more to one. Accordingly,
and as described in the Letter, unless we timely requested a hearing before a Hearings Panel, or the Panel, our securities would be subject
to suspension/delisting. We requested a hearing, which automatically stayed any suspension or delisting action pending the hearing and
the expiration of any additional extension period granted by the Panel following the hearing.
On October 14, 2024, the Panel
granted our request for an extension of time to demonstrate compliance with the Minimum Bid Price Requirement. On November 7, 2024, we
were formally notified that the Hearings Panel determined that we had regained compliance with the Minimum Bid Price Requirement. We remain
subject to a discretionary panel monitor through February 24, 2025, and we are required to provide prompt notification during this exception
period of any significant events that occur during this time that may affect our compliance with NASDAQ requirements.
Depositary Share Ratio Change and Change
in Nominal Value
On October 4, 2024, and in
an effort to bring our Depositary Share price into compliance with NASDAQ’s minimum bid price per share requirement, we effected
a ratio change in the number of Ordinary Shares represented by our Depositary Shares from 400 Ordinary Shares per Depositary Share to
10,000 Ordinary Shares per Depositary Share. No fractional Depositary Shares were issued.
On November 22, 2024, we held
the November GM, and our shareholders passed resolutions to (i) subdivide our Ordinary Shares of £0.001 nominal value each into
one ordinary share of £0.00005 nominal value and 19 C Deferred Shares of £0.00005 nominal value each, which became effective
on November 25, 2024 and (y) adopt new Articles of Association, which make consequential amendments to the existing articles of association
of the Company to reflect the November Subdivision. As is standard for deferred shares, each C Deferred Share has very limited rights
and is effectively valueless. The C Deferred Shares have the rights and restrictions as set out in the Articles of Association and do
not entitle the holder thereof to receive notice of or attend and vote at any general meeting of the Company or to receive a dividend
or other distribution.
Registered Direct Offering
and Concurrent Private Placement
On
July 22, 2024, we completed the closing of a registered direct offering, or the July 2024 Registered Direct Offering (and collectively
with the July 2024 Private Placement, the Offerings), with certain institutional investors, or the Investors, for the sale of (i) an aggregate
of 202,032 Depositary Shares, and (ii) an aggregate of 11,157 pre-funded warrants exercisable for Depositary Shares, or the July 2024
Pre-Funded Warrants, at a price per Depositary Share of $23.50, and a price per July 2024 Pre-Funded Warrant of $23.4975. The
aggregate gross proceeds to us were approximately $5.0 million, before deducting the
placement agent’s fees and related offering expenses.
The July
2024 Pre-Funded Warrants were sold, in lieu of Depositary Shares, to the Investors such that
the Investors’ purchase of Depositary Shares in the Registered Direct Offering would not otherwise result in the Investor, together
with their affiliates and certain related parties, beneficially owning more than 4.99% or 9.99% of our Ordinary Shares immediately following
the consummation of the July 2024 Registered Direct Offering. Each July 2024 Pre-Funded
Warrant represents the right to purchase one Depositary Share at an exercise price of $0.0025 per share. The July 2024 Pre-Funded
Warrants are exercisable immediately and may be exercised at any time until the July 2024 Pre-Funded
Warrants are exercised in full.
Additionally,
in the concurrent July 2024 Private Placement, we issued and sold to the Investors (i) Series J warrants, or the Series J Warrants, exercisable
for 213,188 Depositary Shares, and (ii) Series K warrants, or Series K Warrants, to purchase an aggregate of 213,188 Depositary Shares.
The warrants are immediately exercisable at an exercise price of $25.00 per Depositary Share, subject to adjustments for certain dilutive
equity issuances. The Series J Warrants will expire five years from the initial exercise date and the Series K Warrants will expire one
year from the initial exercise date. The Investors (together with their respective affiliates) may not exercise the warrants if the
Investor would beneficially own more than 4.99% or 9.99% (such amount to be determined at the option of the Investor upon issuance) of
the number of Ordinary Shares outstanding immediately after giving effect to such exercise. The purchase agreement, or July Purchase Agreement,
contains customary representations, warranties and covenants of the Company and each Investor, and customary indemnification provisions
for a transaction of this type. Pursuant to the terms of the July Purchase Agreement, we agreed to be subject to a lock-up period on subsequent
equity sales, which has since expired. We also agreed to not issue any securities that are subject to a price reset based on the trading
prices of our Ordinary Shares or upon a specified or contingent event in the future or enter into any agreement to issue securities at
a future determined price for a period of 180 days following the closing date of the Offerings, subject to certain exceptions. Additionally,
we agreed to reduce the exercise price of our existing Series E warrants, Series G warrants and Series H warrants held by each Investor
to $25.00 per Depositary Share.
In
connection with the Offerings, we entered into a placement agency agreement, or the Placement Agent Agreement, with Ladenburg Thalmann
& Co. Inc., or Ladenburg, pursuant to which we engaged Ladenburg as the exclusive placement agent for the Offerings. We agreed to
pay Ladenburg a cash fee in an amount equal to 8.0% of the aggregate gross proceeds of the Offerings and to issue to Ladenburg or its
designees the July 2024 Placement Agent Warrants. We also agreed to pay Ladenburg a management fee equal to 1.0% of the gross proceeds
raised in the Offerings and an expense allowance of up to $85,000 for legal fees and other out-of-pocket expenses. The July 2024 Placement
Agent Warrant has substantially the same terms as the Series J Warrants, except that the exercise price of the July 2024 Placement Agent
Warrants is $31.25 and the term of the July 2024 Placement Agent Warrants will terminate on the three-year anniversary of the initial
exercise date.
Warrant Inducement
On
May 22, 2024, we entered into letter agreements, or the Warrant Agreements, with certain accredited investors, collectively referred to
as the Holders, that were holders of an aggregate of 62,906 of our outstanding Series E warrants exercisable for $55.00 per Depositary
Share, or Series E Warrants, and an aggregate of 61,275 of our outstanding Series F warrants exercisable for $55.00 per Depositary Share,
or Series F Warrants, issued on December 21, 2023. Pursuant to the Warrant Agreements, the Holders agreed to exercise the Series E Warrants
and Series F Warrants, as applicable, at a reduced exercise price of $37.50 per Depositary Share; provided that the Warrant Agreements
provide that in the event that any warrant exercise would otherwise cause a holder to exceed the beneficial ownership limitation set forth
in the applicable warrants, we would only issue such number of shares to such holder that would not cause such holder to exceed the maximum
number of shares permitted thereunder, with the balance to be held in abeyance for the benefit of such holder until notice from such holder
that the balance (or portion thereof) may be issued in compliance with such limitation, which abeyance is evidenced through the warrants
which shall be deemed prepaid thereafter (including the payment in full of the exercise price), and exercised pursuant to a notice of
exercise (provided no additional exercise price shall be due and payable). Upon closing of the transaction on May 24, 2024, or the Closing,
we issued 124,182 Depositary Shares to the Holders, with the remaining 931,585 Depositary Shares remaining unissued but held in abeyance
until we receive notice from the holders that the remaining shares may be issued in compliance with the beneficial ownership limitation.
The 37,263 Depositary Shares held in abeyance were not issued following the warrant exercise as the Warrant Agreements prohibit us from
issuing the abeyance shares because doing so would violate the beneficial ownership limitation contained in the Warrant Agreements. The
Warrant Agreements require that the abeyance shares instead be held in abeyance and evidenced by the existing warrants. Abeyance means
being without or waiting for an owner. Since the exercise price has been paid, but the abeyance shares were not issued and the existing
warrants continue to evidence the right to the abeyance shares, the existing warrants had effectively become a “pre-funded warrant”
and the abeyance shares may only be issued by us to the Holders of the existing warrants if the Holders notify us that the issuance may
occur without violation of the beneficial ownership limitation.
In
consideration for the immediate exercise of the Series E Warrants and/or Series F Warrants for cash, we issued one replacement warrant
for each Series E Warrant exercised, or the Series G Warrants, and one replacement warrant for each Series F Warrant exercised, or the
Series H Warrants, and collectively with the Series G Warrant, the Replacement Warrants.
The
Replacement Warrants were exercisable immediately and expire after five years, for the Series G Warrants, and one year, for the Series
H Warrants, from the date of issuance. The registration statement of which this prospectus forms a part includes the Ordinary Shares (represented
by Depositary Shares) issuable upon exercise of the Replacement Warrants, as well as the Ordinary Shares (represented by Depositary Shares)
received upon exercise of the Series E Warrants and Series F Warrants.
Ladenburg, acted
as warrant inducement agent and financial advisor in connection with the transaction and received a cash fee of 8.0% of the gross proceeds
and reimbursement of certain expenses. We also issued to Ladenburg and certain designees of Ladenburg warrants for purchase of an aggregate
of 6,456 Depositary Shares at an exercise price of $62.50, or the Warrant Agent Warrants. The registration statement of which this forms
a part includes the Depositary Shares issuable upon exercise of these warrants.
We
received gross proceeds of approximately $6.05 million from the warrant exercise, prior to deducting the warrant inducement agent fees
and other expenses.
License and Collaboration
Agreement
On
April 25, 2024, we entered into a license and collaboration agreement, or the Emtora License Agreement, with Emtora, relating to the license
of eRapa, an oral product formulation of rapamycin (sirolimus), or the Product, for use in the prevention, treatment, diagnosis, detection,
monitoring and/or predisposition testing of all diseases, states or conditions in humans, or the Field, that includes the nanoparticle
and enteric coated finished pharmaceutical formulations developed at any time by Emtora and its affiliates, or the License. Under the
License, we obtained from Emtora an exclusive, worldwide, sublicensable right to develop, manufacture, commercialize, or otherwise exploit
products containing rapamycin (sirolimus) in the Field. Pursuant to the terms of the License Agreement, the Company and Emtora established
a joint development committee, consisting of two designees of the Company and two designees of Emtora.
As
consideration for the License, we made an upfront payment to Emtora in the form of 378,163 of our Depositary Shares (equal to five percent
(5%) of our outstanding Ordinary Shares, calculated on a fully-diluted basis (including in-the-money warrants)). In addition, we are also
responsible for up to $31.5 million in sales milestones within the first six months of commercial sale of a first-approved indication
of eRapa in certain markets, with decreasing milestones for subsequent approvals for additional indications. There is also a one-time
$10.0 million milestone payable upon cumulative net sales of $1.0 billion. Further, we are also obligated to pay Emtora single digit tiered
royalties on net sales of eRapa, in addition to honoring Emtora’s legacy royalty obligations and paying Emtora fees related to income
derived from sublicensing and the partnering of eRapa. In addition, effective as of the closing of the License Agreement, a promissory
note previously issued by Emtora in favor of the Company in the amount of $250,000 was forgiven. We also made an additional $500,000 cash
payment to Emtora to be used exclusively for a match to an advance from the Cancer Prevention and Research Institute of Texas.
Upon
any change of control of the Company (as defined in the License Agreement), we shall issue Emtora a warrant exercisable for 1,604,328
Depositary Shares, which may only be exercised upon such change of control.
The
License Agreement also provides us with the exclusive option to acquire all of the capital stock of Emtora at a purchase price on commercially
reasonable terms during the period beginning with the filing of a New Drug Application, or NDA, for the Product with the U.S. Food and
Drug Administration, or the FDA, and ending 90 days after acceptance of the filing of the NDA by the FDA.
eRapa Developments
Our open-label
Phase 2 study was conducted in seven United States centers of excellence in 30 adult patients with a median age of 43 years with intact
colon (n=6) or post-colectomy and ileo-rectal anastomosis, and at least 10 adenomas in the rectal remanent (n=24). Patients were sequentially
enrolled into three dosing cohorts of 10 patients each for a 12-month treatment period: 0.5mg every other day (Cohort 1), 0.5mg daily
every other week (Cohort 2), and 0.5mg daily (Cohort 3). Upper and lower endoscopic surveillance occurred at baseline and after six months.
Primary endpoints were the safety and tolerability of eRapa and percentage change from baseline in polyp burden, as measured by the aggregate
of all polyp diameters.
On May 21,
2024, we announced six month results of the Phase 2 clinical trial of eRapa in FAP, which were presented at the 2024 Digestive Disease
Week annual meeting in Washington D.C. In the duodenum, 14 out of 18 patients, or 78%, were non-progressors, with 11 out of 18 of these
patients, or 61%, with a partial response, or PR. In the colorectum, 25 out of 29 patients, or 86%, were non progressors, including all
with an intact colon; of these, 15 out of 29 patients, or 67%, demonstrated PR, including four with an intact colon. Only two drug-related
Grade 3 serious adverse events, or SAEs, occurred during the trial (with no Grade 4 or 5 SAEs reported), and 97% of patients remained
on treatment at six months. In summary, after six months’ treatment, eRapa appeared safe and well-tolerated with a significant 24%
reduction in the total polyp burden at six months compared with baseline (p=0.04) and an overall 83% non-progression rate.
On June 24,
2024, we announced 12 month results of the Phase 2 clinical trial which were presented at the 2024 InSIGHT bi-annual meeting in Barcelona.
Overall, 21 out of 28 patients, or 75%, were deemed to be non-progressors at 12 months, with a median reduction in polyp burden of 17%.
Over the course of 12 months, there were four related Grade 3 or higher and one related SAE reported during the trial, and a 95% compliance
rate at 12 months. One patient was removed from the trial due to non-compliance. In summary, after 12 months’ treatment, eRapa appeared
safe and well-tolerated with a median 17% reduction in the total polyp burden at 12 months compared with baseline and an overall 75% non-progression
rate. The 89% non-progression rate and 29% median reduction in polyp burden in Cohort 2 is likely to be the preferred dosage regimen for
Phase 3.
Tolimidone Developments
On July 16, 2024, we announced Health Canada had
approved a Phase 2a dose confirmation trial of tolimidone in T1D. The study is an Investigator Initiated Trial to be conducted by the
University of Alberta. The trial will measure C-peptide levels (a marker for insulin) and HbA1c (a marker for blood glucose) after three
months compared with baseline and the number of hyperglycemic events initially in 12 patients across three dose groups. The trial may
be expanded in due course.
MTX110 Developments
On October 4, 2024, we announced
an update on progression free and overall survival in our Phase 1 trial of MTX110 in rGBM, also known as the MAGIC-G1 study. At that
time, patients 1 and 2 had deceased, with overall survival since the start of treatment of 12 months and 13 months, respectively. Patients
3 and 4 remained in post-study follow-up. Patient 3 had progression free survival of six months and overall survival of 13 months since
start of treatment. Patient 4 has not yet had confirmed progression and therefore had progression free and overall survival of 12 months
since start of treatment.
The Phase 1 study is an open-label,
dose escalation study designed to assess the feasibility and safety of intermittent infusions of MTX110 administered by convection enhanced
delivery, or CED, via implanted refillable pump and catheter.
Our Corporate Information
Our
principal executive offices are located at 1 Caspian Point, Caspian Way, Cardiff, CF10 4DQ, United Kingdom. The telephone number at our
principal executive office is +44 29 20480 180. Our corporate website is located at www.biodexahpharma.com. Information contained on our
website is not part of, or incorporated in, this prospectus. Our authorized representative in the United States is Donald J. Puglisi of
Puglisi and Associates. Our agent for service in the United States is Donald J. Puglisi of Puglisi and Associates, located at 850 Library
Avenue, Suite 204, Newark, Delaware 19711. Our Depositary Shares are traded on the NASDAQ Capital Market under the symbol “BDRX.”
Implications of Being a Foreign Private Issuer
We are incorporated as a public
limited company in England and Wales, are we are deemed to be a “foreign private issuer” for the purposes of the reporting
rules under the Securities Exchange Act of 1934, as amended, or the Exchange Act. In our capacity as a foreign private issuer, we are
exempt from certain rules under the Exchange Act that would otherwise apply if we were a company incorporated in the United States, including:
| · | the requirement to file periodic reports and financial statements with the SEC as frequently or as promptly
as United States companies with securities registered under the Exchange Act; |
| · | the requirement to file financial statements in accordance with accounting principles generally accepted
in the United States, or U.S. GAAP; |
| · | the proxy rules, which impose certain disclosure and procedural requirements for proxy solicitations;
and |
| · | the requirement to comply with Regulation FD, which imposes certain restrictions on the selective disclosure
of material information. |
In addition, our officers,
directors and principal shareholders are exempt from the reporting and “short-swing” profit recovery provisions of Section
16 of the Exchange Act and the rules under the Exchange Act with respect to their purchases and sales of our Ordinary Shares. Accordingly,
an investor may receive less information about us that it would receive about a public company incorporated in the United States.
The Offering
| Issuer |
|
Biodexa Pharmaceuticals PLC |
| |
|
|
| Depositary Shares offered by the Selling Shareholder |
|
Up to 358,750,000,000 Ordinary Shares represented by 35,875,000 Depositary
Shares that have been or may be issued by us to the Selling Shareholder pursuant to the Purchase Agreement, including (i) up to 35,000,000
Purchase Shares and (ii) if issued to the Selling Shareholder to release the Company of its liability to pay the Commitment Fee, up to
875,000 Commitment Shares. The actual number of Depositary Shares (and the underlying
Ordinary Shares) issued and sold pursuant to the Purchase Agreement will vary depending on the then-current market price of our Depositary
Shares sold to the Selling Shareholder in this offering. We are registering the number of Ordinary Shares (represented by Depositary Shares)
issuable under the Purchase Agreement assuming the shares to be issued are sold at a price of $1.00 per share. |
| |
|
|
| Total Ordinary Shares outstanding immediately prior to this offering |
|
6,685,918,922 Ordinary Shares (including those represented by Depositary Shares) as of January 15, 2025. |
| |
|
|
| Total Ordinary Shares to be outstanding immediately after this offering |
|
365,435,918,922 Ordinary Shares (including those represented by Depositary Shares), assuming that the Selling Shareholder sells all of the Depositary Shares offered pursuant to this prospectus. |
| |
|
|
| Terms of the Offering |
|
The Selling Shareholder will determine when and how it sells the Depositary Shares offered in this prospectus as described in “Plan of Distribution.” |
| |
|
|
| Depositary Shares |
|
Each Depositary Share represents 10,000 Ordinary
Shares.
The depositary (through its custodian) will hold
the Ordinary Shares underlying your Depositary Shares. You will have rights as provided in the deposit agreement among us, JPMorgan Bank
Chase Bank, N.A., as depositary, and all owners and holders from time to time of Depositary Shares issued thereunder. You may, among other
things, cancel your Depositary Shares and withdraw the underlying Ordinary Shares against a fee paid to the depositary (which may be reimbursable
by the Company). In certain limited instances described in the deposit agreement, we may amend or terminate the deposit agreement without
your consent. If you continue to hold your Depositary Shares, you agree to be bound by the terms of the deposit agreement then in effect.
To better understand the terms of the Depositary
Shares and the deposit agreement, including applicable fees and charges, you should carefully read “Description of American Depositary
Shares” in this prospectus. You should also read the deposit agreement, which is an exhibit to the registration statement that includes
this prospectus. |
| |
|
|
| Depositary |
|
JPMorgan Chase Bank, N.A. |
| |
|
|
| Use of proceeds |
|
We will not receive any proceeds from the resale of the Depositary
Shares to be offered by the Selling Securityholder. Additionally, we will not receive any proceeds from the issuance or sale of
the Commitment Shares if issued to the Selling Shareholder to release the Company of its liability to pay the Commitment Fee. We may receive
up to $35.0 million in gross proceeds from C/M in connection with the sale of our Depositary Shares under the Purchase Agreement. We intend
to use any net proceeds from any sales of Depositary Shares to C/M under the Equity Financing to fund our development programs, for working
capital and other general corporate purposes. Pending other uses, we intend to invest the net proceeds to us in short-term, interest-bearing
investments. We cannot predict whether the net proceeds invested will yield a favorable return. See “Use of Proceeds.” |
| Risk factors |
|
You should read the “Risk Factors” section starting on page 13 of this prospectus for a discussion of factors to consider before deciding to invest in our securities. |
| |
|
|
| Dividend policy |
|
We have never declared or paid any cash dividends to our shareholders, and we currently do not expect to declare or pay any cash dividends in the foreseeable future. See “Dividend Policy.” |
| |
|
|
| Listing |
|
Our Depositary Shares are listed on the NASDAQ Capital Market under the symbol “BDRX.” |
RISK FACTORS
Our business has significant
risks. In addition to the other information included in this annual report, including the matters addressed in the section of the annual
report entitled “Cautionary Note Regarding Forward-Looking Statements” and in our financial statements and the related notes,
you should consider carefully the risks described below. The risks and uncertainties described below are not the only risks and uncertainties
we may face. Additional risks and uncertainties not presently known to us, or that we currently consider immaterial could also negatively
affect our business, financial condition, results of operations, prospects, profits and stock prices. If any of the risks described below
actually occur, our business, financial condition, results of operations, prospects, profits and stock prices could be materially adversely
affected.
Summary of Risk Factors
The
occurrence of one or more of the events or circumstances described in this section titled “Risk Factors,” alone or
in combination with other events or circumstances, may materially adversely affect our business, financial condition and operating results.
In that event, the trading price of our securities could decline, and you could lose all or part of your investment. Such risks include,
but are not limited to:
| • | It is not possible to predict the actual number of Depositary Shares, if any, we will sell under the Purchase
Agreement, or the actual gross proceeds resulting from those sales or the dilution to you from those sales. |
| • | Future resales and/or issuances of our Depositary Shares, including pursuant to this prospectus, or the
perception that such sales may occur, may cause the market price of our shares to drop significantly. |
| • | We have incurred significant losses since our inception and anticipate that we will continue to incur
losses in the future. |
| • | Our requirement for additional financing in the short-term represents a material uncertainty that raises
substantial doubt about our ability to continue as a going concern. |
| • | If we require or seek to raise additional capital to fund our operations and we fail to obtain necessary
financing, we may be unable to complete the development of our product candidates. |
| • | Our operations are in early-stage development with no sources of recurring revenue and there is no assurance
that we will successfully develop and license our product candidates or ever become profitable. |
| • | We are exposed to political, regulatory, social and economic risk relating to the United Kingdom’s
exit from the European Union. |
| • | We have undertaken in the past, and may in the future undertake, strategic acquisitions. Failure to integrate
acquisitions could adversely affect our value. |
| • | Our future success is dependent on product development and the ability to successfully license our product
candidates to partners who can seek regulatory approval and commercialization of our product candidates. |
| • | Our development efforts are in the early stages. All of our product candidates are in clinical development
or preclinical development phases. If we are unable to advance our product candidates through clinical development, obtain regulatory
approval and ultimately commercialize our product candidates, or experience significant delays in doing so, our business will be materially
harmed. |
| • | The results of preclinical studies and early clinical trials are not always predictive of future results.
Any product candidate that we advance in clinical trials may not achieve favorable results in later clinical trials, if any, or receive
marketing approval. |
| • | The regulatory approval processes in the United States and Europe are lengthy, time consuming and inherently
unpredictable, and if we are ultimately unable to obtain regulatory approval for our product candidates, our business may be substantially
harmed. |
| • | We seek to establish agreements with potential licensing partners and collaborators and, if we are not
able to establish them on commercially reasonable terms, we may have to alter our development and commercialization plans. |
| • | If we enter into agreements with a licensing or collaboration partner for the development and commercialization
of our product candidates, our prospects with respect to those product candidates will depend in significant part on the success of those
collaborations. |
| • | The commercial success of any of our product candidates is not guaranteed. |
| • | The pharmaceutical and biotechnology industries are highly competitive. |
| • | Changes in healthcare policies, laws and regulations, including legislative measures aimed at reducing health care costs, may impact
our ability to obtain approval for or commercialize any of our future product candidates, if approved. |
| • | Coverage and adequate reimbursement may not be available for our
current or any future product candidates, which could make it difficult for us to sell profitably, if approved. |
| • | Our business may be adversely affected by economic conditions and current economic weakness. |
| • | Our business may be impacted by political events, war, terrorism, business interruptions and other geopolitical
events and uncertainties beyond our control. |
| • | We may in the future be unable to retain and recruit qualified scientists, key executives, key employees or key consultants, may delay
our development efforts or otherwise harm our business. |
| • | Public health crises, such as the COVID-19 pandemic, have had, and could in the future have, a negative
effect on our business. |
| • | Our success depends in part on our ability to protect rights in our intellectual property, which cannot
be assured. |
| • | We rely on third parties to conduct our preclinical and clinical trials. If these third parties do not
successfully carry out their contractual duties or meet expected deadlines, we may not be able to obtain regulatory approval for or commercialize
our product candidates and our business could be substantially harmed. |
| • | We rely on third parties to manufacture our product candidates, and we expect to continue to rely on third
parties for the clinical as well as any future commercial supply of our product candidates and other future product candidates. The development
of our current and future product candidates, and the commercialization of any approved products, could be stopped, delayed or made less
profitable if any such third party fails to provide us with sufficient clinical or commercial quantities of such product candidates or
products, fails to do so at acceptable quality levels or prices or fails to achieve or maintain satisfactory regulatory compliance. |
| • | We are dependent on third party suppliers, and if we experience problems with any of these third parties,
the manufacturing of our product candidates could be delayed, which could harm our results of operations. |
| • | If we cannot meet NASDAQ’s continued listing requirements, NASDAQ may delist our Depositary Shares,
which could have an adverse impact on the liquidity and market price of our Depositary Shares. |
| • | The price of our Depositary Shares may be volatile. |
| • | The liquidity of our Depositary Shares may have an adverse effect on share price. |
| • | Shareholder ownership interests in the Company may be diluted as a result of, among other things, future
financings and/or additional acquisitions, and may have a material negative effect on the market price of our securities. |
| • | Our disclosure controls and procedures may not prevent or detect all errors or acts of fraud. |
| • | As a foreign private issuer, we are not required to comply with many of the corporate governance standards
of NASDAQ applicable to companies incorporated in the United States. |
| • | Your right to participate in any future rights offerings may be limited, which may cause dilution to your holdings. |
| • | Protections found in provisions under the United Kingdom City Code on Takeovers and Mergers may delay
or discourage a takeover attempt, including attempts that may be beneficial to holders of our Ordinary Shares and Depositary Shares. |
Risks Related to the Equity Financing
It
is not possible to predict the actual number of Depositary Shares, if any, we will sell under the Purchase Agreement, or the actual gross
proceeds resulting from those sales or the dilution to you from those sales.
Pursuant to the Purchase Agreement,
the Selling Shareholder shall, subject to the restrictions and satisfaction of the conditions in the Purchase Agreement, purchase from
us up to $35.0 million of Depositary Shares, upon the terms and subject to the conditions and limitations set forth in the Purchase Agreement,
or the Commitment Amount, and, accordingly, we have registered 350,000,000,000 Ordinary Shares represented by 35,000,000 Depositary Shares
for issuance under the Purchase Agreement and resale pursuant to this prospectus, assuming that that $35.0 million of Depositary Shares
are issued and sold at a price of $1.00 per share (and excluding any Commitment Shares offered hereby). The Depositary Shares that may
be issued under the Purchase Agreement may be sold, subject to the restrictions and satisfaction of the conditions in the Purchase Agreement,
by us to the Selling Shareholder at our discretion from time to time from the Commencement Date (as defined below) until the earliest
to occur of (i) the first day of the month next following the 36-month anniversary of the Commencement Date, (ii) the date on which the
Selling Shareholder shall have purchased the Commitment Amount, (iii) the ninetieth day after the date on which, pursuant to or within
the meaning of any bankruptcy law, we commence a voluntary case or any person commences a proceeding against us, in each case that is
not discharged or dismissed prior to such ninetieth day, and (iv) the date on which, pursuant to or within the meaning of any bankruptcy
law, a custodian is appointed for us or for all or substantially all of our property, or we make a general assignment for the benefit
of our creditors, or each, a Termination Event.
We do not have a right to
commence any sales of Depositary Shares to the Selling Shareholder under the Purchase Agreement until the time when all of the conditions
to our right to commence sales of Depositary Shares to the Selling Shareholder set forth in the Purchase Agreement have been satisfied,
or the Commencement Date, including the effectiveness of the registration statement of which this prospectus forms a part. Over the 36-month
period from and after the Commencement Date, we will generally have the right to control the timing and amount of any sales of our Depositary
Shares to the Selling Shareholder under the Purchase Agreement. Sales of our Depositary Shares, if any, to the Selling Shareholder under
the Purchase Agreement will depend upon market conditions and other factors to be determined by us. We may ultimately decide to sell to
the Selling Shareholder all, some or none of the Depositary Shares that may be available for us to sell to the Selling Shareholder pursuant
to the Purchase Agreement. Accordingly, we cannot guarantee that we will be able to sell all of the Commitment Amount or how much in proceeds
we may obtain under the Purchase Agreement. If we cannot sell securities under the Committed Equity Financing, we may be required to utilize
more costly and time-consuming means of accessing the capital markets, which could have a material adverse effect on our liquidity and
cash position.
Because the purchase price
per Depositary Share to be paid by the Selling Shareholder for the Depositary Shares that we may elect to sell to the Selling Shareholder
under the Purchase Agreement, if any, will fluctuate based on the market prices of our Depositary Shares at the time we make such election,
it is not possible for us to predict, as of the date of this prospectus and prior to any such sales, the number of Depositary Shares that
we will sell to the Selling Shareholder under the Purchase Agreement, the purchase price per share that the Selling Shareholder will pay
for Depositary Shares purchased from us under the Purchase Agreement, or the aggregate gross proceeds that we will receive from those
purchases the Selling Shareholder under the Purchase Agreement.
We are registering 358,750,000,000
Ordinary Shares under this prospectus. As of January 15, 2025, there were 6,685,918,922 Ordinary Shares outstanding. If all of the 358,750,000,000
Ordinary Shares offered for resale by the Selling Shareholder under this prospectus were issued and outstanding as of January 15, 2025,
such shares would represent approximately 98.2% of total number of Ordinary Shares outstanding.
The actual number of Depositary
Shares issuable will vary depending on the then current market price of our Depositary Shares sold to the Selling Shareholder in this
offering and the number of Depositary Shares we ultimately elect to sell to the Selling Shareholder under the Purchase Agreement. If it
becomes necessary for us to issue and sell to the Selling Shareholder under the Purchase Agreement more than the 350,000,000,000 Ordinary
Shares being registered for resale under this prospectus in order to receive aggregate gross proceeds equal to $35.0 million under
the Purchase Agreement, we must file with the SEC one or more additional registration statements to register under the Securities Act
the resale by the Selling Shareholder of any such additional Depositary Shares we wish to sell from time to time under the Purchase Agreement,
which the SEC must declare effective, in each case before we may elect to sell any additional Depositary Shares under the Purchase Agreement.
In addition, the Selling Shareholder
is not obligated to buy any Depositary Shares under the Purchase Agreement if such shares, when aggregated with all other securities then
beneficially owned by the Selling Shareholder and its affiliates (as calculated pursuant to Section 13(d) of the Exchange Act, and Rule
13d-3 promulgated thereunder), would result in the Selling Shareholder beneficially owning Ordinary Shares in excess of the Beneficial
Ownership Limitation. Our inability to access a portion or the full amount available under the Purchase Agreement, in the absence of any
other financing sources, could have a material adverse effect on our business or results of operation.
The Selling Shareholder
will pay less than the then-prevailing market price for our Depositary Shares, which could cause the price of our Depositary Shares to
decline.
The purchase price of our
Depositary Shares to be sold to the Selling Shareholder under the Purchase Agreement is derived from the market price of our Depositary
Shares on the NASDAQ. Shares to be sold to the Selling Shareholder pursuant to the Purchase Agreement will be purchased at a discounted
price.
For example, we may effect
sales to the Selling Shareholder pursuant to a Fixed Purchase Notice at a purchase price equal to the lesser of
95% of (i) the VWAP of the Depositary Shares for the five trading days immediately preceding the applicable Purchase Date for such Fixed
Purchase and (ii) the lowest sale price of a Depositary Share on the trading day preceding applicable Purchase Date. See “The
Committed Equity Financing” for more information.
As a result of this pricing
structure, the Selling Shareholder may sell the shares they receive immediately after receipt of such shares, which could cause the price
of our Depositary Shares to decrease.
Investors who buy Depositary
Shares from the Selling Shareholder at different times will likely pay different prices.
Pursuant
to the Purchase Agreement, we have discretion (subject to the restrictions and satisfaction of the conditions in the Purchase Agreement)
to vary the timing, price and number of Depositary Shares we sell to the Selling Shareholder. If and when we elect to sell Depositary
Shares to the Selling Shareholder pursuant to the Purchase Agreement, after the Selling Shareholder has acquired such shares, the Selling
Shareholder may resell all, some or none of such shares at any time or from time to time in its sole discretion and at different prices.
As a result, investors who purchase shares from the Selling Shareholder in this offering at different times will likely pay different
prices for those shares, and so may experience different levels of dilution and in some cases substantial dilution and different outcomes
in their investment results. Investors may experience a decline in the value of the shares they purchase from the Selling Shareholder
in this offering as a result of future sales made by us to the Selling Shareholder at prices lower than the prices such investors paid
for their shares in this offering. In addition, if we sell a substantial number of shares to the Selling Shareholder under the Purchase
Agreement, or if investors expect that we will do so, the actual sales of shares or the mere existence of our arrangements with the Selling
Shareholder may make it more difficult for us to sell equity or equity-related securities in the future at a time and at a price that
we might otherwise wish to effect such sales.
We may
use proceeds from sales of our Depositary Shares made pursuant to the Purchase Agreement
in ways with which you may not agree or in ways which may not yield a significant return.
We
will have broad discretion over the use of proceeds from sales of our Depositary Shares made pursuant
to the Purchase Agreement, including for any of the purposes described in the section entitled “Use of Proceeds,” and
you will not have the opportunity, as part of your investment decision, to assess whether the proceeds are being used appropriately. Because
of the number and variability of factors that will determine our use of the net proceeds, their ultimate use may vary substantially from
their currently intended use. While we expect to use the net proceeds from this offering as set forth in “Use of Proceeds,”
we are not obligated to do so. The failure by us to apply these funds effectively could harm our business, and the net proceeds may be
used for corporate purposes that do not increase our operating results or enhance the value of our Depositary Shares.
Future
resales and/or issuances of our Depositary Shares, including pursuant to this prospectus, or the perception that such sales may occur,
may cause the market price of our shares to drop significantly.
On January 17, 2025, we entered
into the Purchase Agreement, pursuant to which the Selling Shareholder shall, subject to the restrictions and satisfaction of the conditions
in the Purchase Agreement, purchase from us up to an aggregate of $35.0 million of Depositary Shares, upon the terms and subject to the
conditions and limitations set forth in the Purchase Agreement.
The Depositary Shares that
may be issued under the Purchase Agreement may be sold, subject to the restrictions and satisfaction of the conditions in the Purchase
Agreement, by us to the Selling Shareholder at our discretion from time to time from the date of effectiveness of the registration statement
of which this prospectus forms a part until a Termination Event.
The purchase price for Depositary
Shares that we may sell to the Selling Shareholder under the Purchase Agreement will fluctuate based on the trading price of shares of
our Depositary Shares. Depending on market liquidity at the time, sales of Depositary Shares may cause the trading price of Depositary
Shares to decrease. We generally have the right to control the timing and amount of any future sales of Depositary Shares to the Selling
Shareholder. Additional sales of Depositary Shares, if any, to the Selling Shareholder will depend upon market conditions and other factors
to be determined by us. We may ultimately decide to sell to the Selling Shareholder all, some or none of the additional Depositary Shares
that may be available for us to sell pursuant to the Purchase Agreement. If and when we do sell Depositary Shares to the Selling Shareholder,
after the Selling Shareholder has acquired Depositary Shares, the Selling Shareholder may resell all, some or none of Depositary Shares
at any time or from time to time in its discretion and at different prices. Therefore, sales to the Selling Shareholder by us could result
in substantial dilution to the interests of other holders of Depositary Shares. In addition, if we sell a substantial number of shares
of our Depositary Shares to the Selling Shareholder under the Purchase Agreement, or if investors expect that we will do so, the shares
held by the Selling Shareholder will represent a significant portion of our public float and may result in substantial decreases to the
price of our Depositary Shares. The actual sales of Depositary Shares or the mere existence of our arrangement with the Selling Shareholder
may also make it more difficult for us to sell equity or equity-related securities in the future at a time and at a price that we might
otherwise wish to effect such sales.
In addition, Depositary Shares
issuable upon exercise or vesting of incentive awards under our incentive plans are, once issued, eligible for sale in the public market,
subject to any lock-up agreements and, in some cases, limitations on volume and manner of sale applicable to affiliates under Rule 144.
Furthermore, Depositary Shares reserved for future issuance under our incentive plan may become available for sale in future.
As of January 15, 2025, we
also had 770,026 outstanding warrants (including pre-funded warrants) exercisable for 7,700,260,000 Ordinary Shares (represented by Depositary
Shares) with a weighted-average exercise price of $38.42 per Depositary Share. The Depositary Shares underlying such warrants will, upon
issuance, be freely tradeable without restriction or further registration under the Securities Act.
The market price of Depositary
Shares could drop significantly if the holders described above sell or are perceived by the market as intending to sell. These factors
could also make it more difficult for us to raise additional funds through future offerings of shares of our Depositary Shares or other
securities.
Risks Related to Our Financial Operations and Capital Needs
We have incurred significant losses since
our inception and anticipate that we will continue to incur losses in the future.
We are an early-stage biopharmaceutical
company. Investment in biopharmaceutical product development is highly speculative because we entail substantial upfront capital expenditures
and significant risk that a product candidate will fail in development, will fail to gain regulatory approval or otherwise fail to become
commercially viable. We continue to incur significant development and other expenses related to our ongoing operations. As a result, we
are not profitable and have incurred substantial losses since our inception. For the six months ended June 30, 2024, we had a net loss
of £3.31 million and an accumulated deficit of £147.88 million. For the years ended December 31, 2023, 2022 and 2021 we had
a net loss of £7.08 million, £7.66 million and £5.46 million, respectively. For the year ended December 31, 2023, we
had an accumulated deficit of £144.77 million.
We expect to continue to incur
losses for the foreseeable future, and do not expect these losses to reduce as we continue our development of, and work with any licensing
partners to seek regulatory approvals for, our product candidates.
We may encounter unforeseen
expenses, difficulties, complications, delays and other unknown factors that may adversely affect our business. The size of our future
net losses will depend, in part, on the rate of future growth of our expenses and our ability to generate revenues. If we fail to find
licensing partners, if we abandon any development programs, or if any of our licensed product candidates fail in clinical trials or do
not gain regulatory approval, or if approved, fail to achieve market acceptance, we may never become profitable. Even if we achieve profitability
in the future, we may not be able to sustain profitability in subsequent periods. Our prior losses and expected future losses have had
and will continue to have an adverse effect on our shareholders’ equity and working capital.
Our requirement for additional financing
in the short-term represents a material uncertainty that raises substantial doubt about our ability to continue as a going concern.
We have experienced net losses
and significant cash outflows from cash used in operating activities over the past years as we develop our portfolio.
Our future viability is dependent
on our ability to raise cash from financing activities to finance our development plans until milestones and/or royalties can be secured
from partnering our assets, generate cash from operating activities and to successfully obtain regulatory approval to allow marketing
of our development products. Our failure to raise capital as and when needed could have a negative impact on our financial condition and
ability to pursue our business strategies.
Our consolidated financial
statements have been presented on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities
in the normal course of business. As at December 31, 2023 and June 30, 3024, we had cash and cash equivalents of £5.97 million and
£5.06 million, respectively.
We have prepared cash flow
forecasts and considered the cash flow requirement for the next three years, including the period 12 months from the date of approval
of the financial statements included in this prospectus. Our forecasts show that further financing will be required before the end of
the first quarter of 2025.
Our forecast of the period
of time through which our financial resources will be adequate to support our operations is a forward-looking statement and involves risks
and uncertainties, and actual results could vary as a result of a number of factors, including the timing of clinical trials. We have
based this estimate on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we currently
expect. If we lack sufficient capital to expand our operations or otherwise capitalize on our business opportunities, our business, financial
condition and results of operations could be materially adversely affected.
If we raise additional funds
through the issuance of debt securities or additional equity securities, it could result in dilution to our existing shareholders, increased
fixed payment obligations and these securities may have rights senior to those of our ordinary shares (including the Depositary Shares)
and could contain covenants that would restrict our operations and potentially impair our competitiveness, such as limitations on our
ability to incur additional debt, limitations on our ability to acquire, sell or license intellectual property rights and other operating
restrictions that could adversely impact our ability to conduct our business. Any of these events could significantly harm our business,
financial condition and prospects.
We believe the environment
for financing of small and micro-cap biotech companies remains challenging. While this may present acquisition and/or merger opportunities
with other companies with limited or no access to financing, any attendant financing is likely to be dilutive. We and our advisors
continue to evaluate financing options, including those connected to acquisitions and/or mergers, potentially available to us, including
fundraising and the partnering of assets and technologies of the Company. There can be no assurance that any of the courses of action
to finance the Company, will be successful. This requirement for additional financing in the short term represents a material uncertainty
that may cast doubt upon our ability to continue as a going concern. Should it become evident in the future that there are no realistic
financing options available to us which are actionable before our cash resources run out, then we will no longer be a going concern. In
such circumstances, we would no longer be able to prepare financial statements under paragraph 25 of IAS 1. Instead, the financial statements
would be prepared on a liquidation basis and assets would be stated at net realizable value and all liabilities would be accelerated to
current liabilities.
We believe there are adequate
options and time available to secure additional financing for the Company and after considering the uncertainties, we considered it appropriate
to continue to adopt the going concern basis in preparing the financial information.
Our ability to continue as
a going concern is dependent upon our ability to obtain additional capital and/or dispose of assets, for which there can be no assurance
we will be able to do on a timely basis, on favorable terms or at all.
Our operations are in early-stage development
with no sources of recurring revenue and there is no assurance that we will successfully develop and license our product candidates or
ever become profitable.
We are at a relatively early
stage of our commercial development. To date, we have generated a minimal amount of revenue from our product candidates. Our ability to
generate revenue and become and remain profitable depends, in part, on our ability to successfully find a licensing partner for our product
candidates, or other product candidates we may in-license or acquire, and have such candidates successfully commercialized. Our current
strategy is, once proof-of-concept of our product candidates has been established, to generate revenue via a partner, thereby earning
royalty and/or milestone income; however, this is not expected to materialize in the foreseeable future, and there can be no guarantee
we will be able to find a licensing partner for our product candidates. Even if our product candidates were to successfully achieve regulatory
approval, we do not know when any of the product candidates will generate revenue, if at all. Our ability to generate revenue from our
product candidates also depends on a number of additional factors, including our ability, and the ability of any licensing partners, to:
| • | successfully complete development activities; |
| • | complete and submit new drug applications to the European Medicines Agency, or the EMA, the Medicines
and Healthcare Products Regulatory Agency in the United Kingdom, or the MHRA, the FDA, and any other foreign regulatory authorities, and
obtain regulatory approval for products for which there is a commercial market; |
| • | set a commercially viable price; |
| • | obtain commercial qualities of the products at acceptable cost levels; |
| • | develop and maintain a commercial organization capable of sales, marketing and distribution in the markets
where the product is to be sold; and |
| • | obtain adequate reimbursement from third parties, including government, departments and healthcare payors. |
In addition, because of the
numerous risks and uncertainties associated with product development, including that our product candidates may not advance through development
or achieve the endpoints of applicable clinical trials, we are unable to predict the timing or amount of increased expenses, or when or
if we will be able to achieve or maintain profitability. Even if we are able to complete the process described above, we anticipate incurring
significant costs.
Even if we are able to generate
royalty and/or milestone revenues from the sale of product candidates, we may not become profitable and may need to obtain additional
funding to continue operations. If we fail to become profitable or are unable to sustain profitability on a continuing basis, then we
may be unable to continue our operations at planned levels and may be forced to cease or reduce our operations.
There can be no assurance
that we will operate profitably, produce a reasonable return, if any, on investment, or remain solvent. If our strategy proves unsuccessful,
stockholders could lose all or part of their investment.
If we require or seek to raise additional
capital to fund our operations and we fail to obtain necessary financing, we may be unable to complete the development of our product
candidates.
We expect to continue to spend
substantial amounts of our cash resources going forward in order to advance the development of our product candidates. We believe we have
sufficient funds to continue our operations into the first quarter of 2025, and we believe that we will need to raise additional capital
to fund our operations thereafter.
Until such time as we can
generate a sufficient amount of revenue from the product candidates we license, if ever, we expect that we may finance future cash needs
through, among other things, public or private equity or debt offerings. Such offerings may take place in the United Kingdom, the United
States or other foreign countries. However, if we are unable to raise capital when needed, or on terms acceptable to us, our business
could be significantly harmed. If we raise additional funds through the issuance of debt or additional equity securities, such issuance
could result in dilution to our existing shareholders and/or increased fixed payment obligations. Furthermore, these securities may have
rights senior to those of our Ordinary Shares and could contain covenants that would restrict our operations and potentially impair our
competitiveness, such as limitations on our ability to incur additional debt, limitations on our ability to acquire, sell or license intellectual
property rights and other operating restrictions that could adversely impact our ability to conduct our business. Any of these events
could significantly harm our business, financial condition and prospects.
Our forecast of the period
of time through which our financial resources will be adequate to support our operations is a forward-looking statement and involves risks
and uncertainties, and actual results could vary as a result of a number of factors, including the factors discussed elsewhere in this
“Risk Factors” section. We have based this estimate on assumptions that may prove to be wrong, and we could utilize
our available capital resources sooner than we currently expect. Changing circumstances could cause us to consume capital significantly
faster than we currently anticipate, and we may need to spend more than currently expected because of circumstances beyond our control.
Our future funding requirements, both near and long-term, will depend on many factors, including, but not limited to:
| • | any acquisitions and the commercialization of other assets, including licensed assets; |
| • | the initiation, progress, timing, costs and results of clinical trials for any product candidates we advance
to clinical trials; |
| • | the attainment of milestones and the need to make any royalty payments on any of our product candidates
or any other future product candidates; |
| • | the number and characteristics of product candidates we in-license or acquire and develop; |
| • | the outcome, timing and cost of regulatory approvals by the EMA, the MHRA, the FDA and any other comparable
foreign regulatory authorities, including the potential for such regulatory authorities to require that we perform more studies, or more
costly studies, than those we currently expect; |
| • | the cost of filing, prosecuting, defending and enforcing any patent claims or other intellectual property
rights; and |
| • | the effect of competing technological and market developments. |
Further, our forecast also
does not reflect the possibility that we may not be able to access a portion of our existing cash, cash equivalents and investments due
to market conditions. For example, on March 10, 2023, the United States Federal Deposit Insurance Corporation took control and was appointed
receiver of Silicon Valley Bank. If other banks and financial institutions enter receivership or become insolvent in the future in response
to financial conditions affecting the banking system and financial markets, our ability to access our existing cash, cash equivalents
and investments may be threatened and could have a material adverse effect on our business and financial condition.
If a lack of available capital
means that we are unable to expand our operations or otherwise capitalize on our business opportunities, our business, financial condition
and results of operations could be materially adversely affected.
In previous years, we and our independent
registered public accounting firm have identified material weaknesses in our internal control over financial reporting. Any failure by
us to maintain an effective system of internal controls or provide reliable financial and other information in the future, may cause investors
to lose confidence in our financial statements and SEC filings and the market price of our securities may be materially and adversely
affected.
The Sarbanes-Oxley Act of
2002, or the Sarbanes-Oxley Act, requires, among other things, that we maintain effective internal controls for financial reporting and
disclosure controls and procedures. We are required, under Section 404 of the Sarbanes-Oxley Act, to furnish a report by management on,
among other things, the effectiveness of our internal control over financial reporting. This assessment includes disclosures of any material
weaknesses identified by management in its internal control over financial reporting.
A material weakness is a control
deficiency, or combination of control deficiencies, in internal control over financial reporting that results in more than a reasonable
possibility that a material misstatement of annual or interim financial statements will not be prevented or detected on a timely basis.
Section 404 of the Sarbanes-Oxley Act also generally requires an attestation from our independent registered public accounting firm on
the effectiveness of our internal control over financial reporting. However, for as long as we remain a non-accelerated filer, we are
not required to comply with the independent registered public accounting firm attestation requirement.
In previous years, we and
our independent registered public accounting firm have identified material weaknesses in our internal controls over financial reporting.
Although we have instituted remedial measures to address the material weaknesses identified and to continually review and evaluate our
internal control systems to allow management to report on the sufficiency of our internal control over financial reporting, we cannot
assure you that we will not discover additional weaknesses in our internal control over financial reporting. Any such additional weaknesses
or failure to adequately remediate any existing weakness could materially and adversely affect our financial condition and results of
operations, as well as our ability to accurately report our financial condition and results of operations in a timely and reliable
manner.
Additionally, the material
weaknesses previously identified, or other material weaknesses or significant deficiencies we may become aware of in the future, could
result in our determining that our controls and procedures are not effective in future periods or could result in a material misstatement
of the consolidated financial statements that would not be prevented or detected.
Any failure to maintain effective
internal controls over financial reporting could severely inhibit our ability to accurately report our financial condition, results of
operations or cash flows. If we are unable to conclude that our internal control over financial reporting is effective, or if our independent
registered public accounting firm determines we have a material weakness or significant deficiency in our internal control over financial
reporting once that firm begin its Section 404 reviews, we could lose investor confidence in the accuracy and completeness of our financial
statements and reports, the market price of our Ordinary Shares and/or Depositary Shares could decline, and we could be subject to sanctions
or investigations by NASDAQ, the SEC or other regulatory authorities. Failure to remedy any material weakness in our internal control
over financial reporting, or to implement or maintain other effective control systems required of public companies, could also restrict
our future access to the capital markets.
Risks Related to Our Business, Strategy and
Industry
We have undertaken in the past, and may in the future undertake,
strategic acquisitions. Failure to integrate acquisitions could adversely affect our value.
One of the ways we have
grown our pipeline and business in the past is through strategic acquisitions of other businesses, product candidates, and technologies.
We may, from time to time, evaluate additional acquisition opportunities, and may, in the future, strategically make further acquisitions
of, and investments in, businesses, compounds, products and technologies when we believe the opportunity is advantageous to our prospects,
such as the acquisition of eRapa and tolimidone. There can be no assurance that in the future we will be able to find appropriate acquisitions
or investments. In connection with these acquisitions or investments, we may:
| • | issue stock that would dilute our shareholders’ percentage of ownership; |
| • | be obligated to make milestone or other contingent or non-contingent payments; |
| • | incur debt and assume liabilities; and/ or |
| • | incur amortization expenses related to intangible assets or incur large and immediate write-offs. |
We also may be unable to find
suitable acquisition candidates and may not be able to complete acquisitions on favorable terms, if at all, or obtain adequate financing
for such acquisitions. If we do complete an acquisition, this may not ultimately strengthen our competitive position or ensure that we
will not be viewed negatively by customers, financial markets or investors. Further, acquisitions could also pose numerous additional
risks to our operations, including:
| • | problems integrating the purchased business, products or technologies without substantial costs, delays
or other problems; |
| • | increases to our expenses; |
| • | the failure to have discovered undisclosed liabilities of the acquired asset or company for which we may
not be adequately indemnified; |
| • | diversion of management’s attention from their day-to-day responsibilities and our core business; |
| • | inability to enforce indemnification and non-compete agreements; |
| • | the failure to successfully incorporate acquired products or technologies into our business; |
| • | the failure of the acquired business, products or technologies to perform as well as anticipated; |
| • | the failure to realize expected synergies and cost savings; |
| • | unexpected safety issues and/or clinical trial failure of the acquisition’s products; |
| • | harm to our operating results or financial condition, particularly during the first several reporting
periods after the acquisition is completed; |
| • | entrance into markets in which we have limited or no prior experience; and |
| • | potential loss of key employees or customers, particularly those of the acquired entity. |
We may not be able to complete
one or more acquisitions or effectively integrate the operations, products or personnel gained through any such acquisition without a
material adverse effect on our business, financial condition and results of operations.
Our future success is dependent on product
development and the ability to successfully license our product candidates to partners who can seek regulatory approval and commercialization
of our product candidates.
We continue to conduct research
and development for our product candidates and, to a lesser extent, clinical trials for certain of our product candidates; however there
can be no assurance that any of our targeted developments will be successful. We must develop functional products that address specific
market needs. We must therefore engage in new development activities, which may not produce innovative, commercially viable results in
a timely manner or at all. In addition, we may not be able to develop new technologies or identify specific market needs that are addressable
by our technologies, or technologies available to us. We may encounter delays and incur additional development and production costs and
expenses, over and above those expected, in order to develop technologies and products suitable for licensing. If any of our development
programs are curtailed, this may have a material adverse effect on our business and financial conditions.
Our business is dependent
on our ability to complete the development of product candidates, and license our product candidates to partners who will seek to obtain
regulatory approval for and commercialize our product candidates in a timely manner. Any licensing partner cannot commercialize a product
without first obtaining regulatory approval from the appropriate regulatory authorities in a country. Before obtaining regulatory approvals
for the commercial sale of any product candidate for a target indication, it must be demonstrated with substantial evidence gathered in
preclinical and well-controlled clinical studies that the product candidate is safe and effective for use for that target indication and
that the manufacturing facilities, processes and controls are adequate. The process of developing, obtaining regulatory approval for and
commercializing product candidates is long, complex and costly. Even if a product candidate were to successfully obtain approval from
the EMA, the MHRA, the FDA and/or comparable foreign regulatory authorities, any approval might contain significant limitations related
to use restrictions for certain age groups, warnings, precautions or contraindications, or may be subject to burdensome post-approval
study or risk management requirements. If our product candidates are unable to obtain regulatory approval in one or more jurisdictions,
or any approval contains significant limitations, we may not be able to obtain sufficient funding or generate sufficient revenue to continue
the development of any other product candidate. Furthermore, even if a product candidate obtains approval from the regulatory authorities,
it is likely that, in order to obtain royalty and/or milestone revenue from any of our licensing partners, our licensing partners may
need to expand their commercial operations, establish commercially viable pricing and obtain approval for adequate reimbursement from
third parties and government departments and healthcare payors for such products. If our product candidates are unable to successfully
be commercialized, we may not be able to earn sufficient revenues to continue our business.
Our development efforts are in the early
stages. All of our product candidates are in clinical development or preclinical development phases. If we are unable to advance our product
candidates through clinical development, obtain regulatory approval and ultimately commercialize our product candidates, or experience
significant delays in doing so, our business will be materially harmed.
Clinical testing is expensive
and can take many years to complete, and its outcome is inherently uncertain. Failure can occur at any time during the clinical trial
process. The results of any preclinical studies and early clinical trials of our product candidates may not be predictive of the results
of later-stage clinical trials, even after seeing promising results in earlier clinical trials. Product candidates in later stages of
clinical trials may fail to show the desired safety and efficacy traits despite having progressed through preclinical studies and initial
clinical trials. A number of companies in the biopharmaceutical industry, including many with greater resources and experience than us,
have suffered significant setbacks in advanced clinical trials due to lack of efficacy or adverse safety profiles, notwithstanding promising
results in earlier trials.
We have determined not to
conduct additional clinical trials in humans, other than pilot trials to establish proof of concept in indications other than those for
which the drug is approved. We expect our licensing partners will be responsible for future clinical trials. We and any of our current
or potential licensing partners may experience delays in ongoing or future clinical trials and we do not know whether planned clinical
trials will begin or enroll subjects on time, need to be redesigned or be completed on schedule, if at all.
There is no assurance that
current or future clinical trials of our product candidates, will be successful or will generate positive clinical data and we may not
receive marketing approval from the FDA, European Commission, or other regulatory authorities for any of our product candidates. We have
limited experience submitting NDAs, biologics license applications, or BLAs, and investigational new drug applications, or INDs, to the
FDA, as well as clinical trial applications, or CTAs, or marketing authorization applications, or MAAs, to the EMA. eRapa, Tolimidone
and MTX110 are both at a relatively early stage in their clinical development. There can be no assurance that the FDA will permit any
of our future NDAs, BLAs, or INDs, including the NDA for eRapa, tolimidone or MTX110 or any future INDs for our other product candidates,
to go into effect in a timely manner or at all. Without an IND or CTA for a product candidate, we will not be permitted to conduct clinical
trials in the United States or the European Union, respectively, of such product candidate.
Drug
or biological product development is a difficult, long, time-consuming, expensive and uncertain process, and delay or failure can occur
at any stage of any of our clinical trials. Failure to obtain regulatory approval for our product candidates will prevent us from commercializing
and marketing them. Clinical trials may be delayed, suspended or prematurely terminated for a variety of reasons, such as:
| • | delay or failure to complete preclinical studies; |
| • | insufficient financial and other resources to complete the necessary preclinical studies and clinical
trials; |
| • | delay or failure in reaching agreement with the applicable regulatory authorities on a trial design; |
| • | delay or failure in obtaining authorization to commence a trial or inability to comply with conditions
imposed by a regulatory authority regarding the scope or design of a clinical trial; |
| • | delay or failure in reaching agreement on acceptable terms with prospective contract research organizations,
or CROs, and clinical trial providers and sites, the terms of which can be subject to extensive negotiation and may vary significantly
among different CROs and trial sites; |
| • | delay or failure in obtaining institutional review board, or IRB, approval or the approval of other reviewing
entities, including foreign regulatory authorities, to conduct a clinical trial at each site; |
| • | failure to recruit, or subsequent withdrawal of, clinical trial sites from clinical trials as a result
of changing standards of care or the ineligibility of a site to participate in our clinical trials; |
| • | delay or failure in recruiting and enrolling suitable subjects to participate in a trial; |
| • | delay or failure in having subjects complete a trial or return for post-treatment follow-up; |
| • | clinical sites and investigators deviating from trial protocol, failing to conduct the trial in accordance
with regulatory requirements, or dropping out of a trial; |
| • | inability to identify and maintain a sufficient number of trial sites, many of which may already be engaged
in other clinical trial programs, including some that may be for the same indication; |
| • | failure of third party clinical trial managers or clinical sites to satisfy contractual duties or meet
expected deadlines; |
| • | delay or failure in adding new clinical trial sites; |
| • | ambiguous or negative interim results, or results that are inconsistent with earlier results; |
| • | the need for clinical trial protocol modifications based on comments from the EMA, the MHRA, the FDA,
a responsible IRB, a data safety monitoring boards, or other regulatory authority, or on results from earlier stage or concurrent preclinical
and clinical studies; |
| • | decisions by the EMA, the MHRA, the FDA, a responsible IRB, other regulatory authorities, or us, or recommendation
by a data safety monitoring board, to suspend or terminate a clinical trial at any time for safety issues or for any other reason; |
| • | unacceptable risk-benefit profile or unforeseen safety issues or adverse side effects; |
| • | failure to demonstrate a benefit from using our product candidate over existing marketed products or established
standard of care treatment; |
| • | manufacturing issues, including problems with manufacturing or obtaining from third parties sufficient
quantities of raw materials, active pharmaceutical ingredients, or API, or product candidates for use in clinical trials; and |
| • | changes in governmental regulations or administrative actions or lack of adequate funding to continue
the clinical trial. |
Many of these factors are
beyond our control. If we experience delays in the completion of, or termination of, any ongoing or future clinical trial of our product
candidates, the commercial prospects of our product candidates will be harmed, and our ability to generate product revenues from any of
these product candidates will be delayed. In addition, any delays in completing clinical trials may slow down our product candidate development
and approval process and jeopardize the ability to commence product sales and generate revenues. Any of these occurrences may harm our
business, financial condition and prospects significantly. In addition, many of the factors that cause, or lead to, a delay in the commencement
or completion of clinical trials may also ultimately lead to the denial of regulatory approval of our product candidates. It is possible
that none of our product candidates will ever complete successfully the clinical development process and obtain regulatory approval, even
if we expend substantial time and resources seeking such approval.
Negative results in the development
of our lead product candidates may also prevent or delay our ability to continue or conduct clinical programs or receive regulatory approvals
for our other product candidates. For example, although we believe our preclinical studies and animal testing of eRapa, tolimidone and
MTX110 demonstrate indications of acceptable safety and effectiveness profiles, future clinical trials may fail to demonstrate adequate
levels of safety or effectiveness. Moreover, in the case of MTX110, anti-tumor activity may be different in each tumor type that we plan
to evaluate in the clinical trial. Therefore, even though we plan to pursue clinical development for multiple tumor types, the tumor response
may be low in patients with some cancers compared to others. As a result, we may be required to discontinue development of MTX110 for
patients with those tumor types and/or mutations due to insufficient clinical benefit, while continuing development for a more limited
population of patients. Consequently, in order to obtain regulatory approval, we may have to reach agreement with the FDA on defining
the optimal patient population, study design, and size, any of which may require significant additional resources and delay our clinical
trials and ultimately the approval, if any, of any of our product candidates.
We may experience setbacks
that could delay or prevent regulatory approval of, or our ability to commercialize, our product candidates, including:
| • | negative or inconclusive results from our preclinical studies or clinical trials or positive results from
the clinical trials of others for product candidates similar to ours leading to their approval, and evolving to a decision or requirement
to conduct additional preclinical testing or clinical trials or abandon a program; |
| • | product-related side effects experienced by patients or subjects in our clinical trials or by individuals using drugs or therapeutics
that we, the FDA, other regulators or others view as relevant to the development of to our product candidates; |
| • | delays in submitting INDs or comparable foreign applications or delays or failure in obtaining the necessary
approvals from regulators to commence a clinical trial, or a suspension or termination of a clinical trial once commenced; |
| • | conditions imposed by the FDA or comparable foreign authorities regarding the scope or design of our clinical
trials, including our clinical endpoints; |
| • | inability to maintain compliance with regulatory requirements, including current good manufacturing practices, or cGMP, and complying
effectively with other procedures; |
| • | inadequate supply or quality of product candidates or other materials necessary for the conduct of our clinical trials; |
| • | greater than anticipated clinical trial costs; |
| • | inability to compete with other therapies; |
| • | poor efficacy of our product candidates during clinical trials; |
| • | trial results taking longer than anticipated; |
| • | trials being subjected to fraud or data capture failure or other technical mishaps leading to the invalidation of our trials; |
| • | the results of our trials not supporting application for conditional approval in the EU; |
| • | unfavorable FDA or other regulatory agency inspection and review of a clinical trial site; |
| • | failure of our third-party contractors or investigators to comply with regulatory requirements or otherwise meet their contractual
obligations in a timely manner, or at all; |
| • | delays and changes in regulatory requirements, policy and guidelines, including the imposition of additional
regulatory oversight around clinical development generally or with respect to our technology in particular; or |
| • | varying interpretations of data by the FDA and similar foreign regulatory agencies. |
In addition, because we have
limited financial and personnel resources and are focusing primarily on developing our lead product candidates, we may forgo or delay
pursuit of other future product candidates that may prove to have greater commercial potential and may fail to capitalize on viable commercial
products or profitable market opportunities. If we do not accurately evaluate the commercial potential or target market for a future product
candidate, we may relinquish valuable rights to those future product candidates through collaboration, licensing, or other royalty arrangements
in cases in which it would have been more advantageous for us to retain sole development and commercialization rights to such future product
candidates.
The results of preclinical studies and early
clinical trials are not always predictive of future results. Any product candidate that we advance in clinical trials may not achieve
favorable results in later clinical trials, if any, or receive marketing approval.
The research and development
of drugs and biological products is expensive and extremely risky. Only a small percentage of product candidates that enter the development
process ever receive marketing approval. Before obtaining marketing approval from regulatory authorities for the sale of our product candidates,
we must conduct extensive clinical trials to demonstrate the safety and efficacy of the product candidates in humans. The outcome of clinical
testing is uncertain. We may face unforeseen challenges in our product candidate development strategy, and we can provide no assurances
that any of our clinical trials will be conducted as planned or completed on schedule, or at all, that we will ultimately be successful
in our current and future clinical trials, or that our product candidates will be able to receive regulatory approval. A failure of one
or more clinical trials can occur at any stage of testing, which may result from a multitude of factors, including, among other things,
flaws in study design, dose selection issues, placebo effects, patient enrollment criteria and failure to demonstrate favorable safety
or efficacy. The outcome of preclinical testing and early clinical trials may not be predictive of the success of later clinical trials,
and preliminary or interim results of a clinical trial do not necessarily predict final results. For example, it is not uncommon for product
candidates to exhibit unforeseen safety or efficacy issues when tested in humans despite promising results in preclinical animal model
studies. Accordingly, we cannot assure you that any clinical trials that we may conduct will demonstrate consistent or adequate efficacy
and safety to support marketing approval. In general, the FDA and regulatory authorities outside the United States require two adequate
and well-controlled clinical trials demonstrating safety and effectiveness, including a Phase 3 clinical trial, before granting marketing
approval of a drug product.
Many companies in the pharmaceutical
industry have suffered significant setbacks in late-stage clinical trials even after achieving promising results in preclinical testing
and early-stage clinical trials, and we cannot be certain that we will not face similar setbacks. Moreover, preclinical and clinical data
are often susceptible to varying interpretations and analyses, and many companies that have believed their product candidates performed
satisfactorily in preclinical studies and clinical trials have nonetheless failed to obtain marketing approval of their products. Furthermore,
the failure of any product candidates that we develop to demonstrate safety and efficacy in any clinical trial could negatively impact
the perception of other product candidates that we develop or cause regulatory authorities to require additional testing before approving
any of our product candidates.
If we are required to conduct
additional clinical trials or other testing our product candidates, if we are unable to successfully complete clinical trials of our product
candidates or other testing, if the results of these trials or tests are not positive or are only modestly positive, if there are safety
concerns or if we determine that the observed safety or efficacy profile would not be competitive in the marketplace, we may:
| • | be delayed in obtaining marketing approval for product candidates we develop; |
| • | not obtain marketing approval at all; |
| • | obtain marketing approval in some countries and not in others; |
| • | obtain approval for indications or patient populations that are not as broad as intended or desired; |
| • | obtain approval with labeling that includes significant use or distribution restrictions or safety warnings; |
| • | be subject to additional post-marketing testing requirements; or |
| • | have the product removed from the market after obtaining marketing approval. |
Our product development costs
will also increase if we experience delays in clinical trials or in obtaining marketing approvals. We do not know whether any of our clinical
trials will continue or begin as planned, will need to be restructured or will be completed on schedule, or at all. We may also decide
to change the design or protocol of one or more of our clinical trials, including to add additional patients or arms, which could result
in increased costs and expenses or delays. Significant clinical trial delays also could shorten any periods during which we may have the
exclusive right to commercialize our product candidates or allow our competitors to bring products to market before we do and impair our
ability to successfully commercialize our product candidates and may harm our business and results of operations.
We or our collaborators may experience delays
or difficulties in the enrollment and/or retention of patients in clinical trials, which could delay or prevent our receipt of necessary
regulatory approvals.
Successful and timely completion
of clinical trials will require that we or our collaborators sponsoring trials for our product candidates enroll a sufficient number of
patients. Patient enrollment, which is an important factor in the timing of clinical trials, is affected by many factors, including the
size and nature of the patient population and competition for patients eligible for our clinical trials with competitors, which may have
ongoing clinical trials for product candidates that are under development to treat the same indications as one or more of our product
candidates or approved products for the conditions for which we are developing our product candidates.
Trials may be subject to delays
as a result of patient enrollment taking longer than anticipated or patient withdrawal. We may not be able to initiate or continue clinical
trials for our product candidates if we are unable to locate and enroll a sufficient number of eligible patients to participate in these
trials as required by the FDA, EMA, or comparable foreign regulatory authorities. We cannot predict how successful we or our collaborators
will be at enrolling subjects in future clinical trials. Trial subject enrollment is affected by other factors including:
| • | the severity and difficulty of diagnosing the disease under investigation; |
| • | the eligibility and exclusion criteria for the trial in question; |
| • | the size of the patient population and process for identifying patients; |
| • | our ability to recruit clinical trial investigators with the appropriate competencies and experience; |
| • | the design of the trial protocol; |
| • | the perceived risks and benefits of the product candidate in the trial in relation to other available
therapies, including any new products that may be approved for the indications we are investigating; |
| • | the availability of competing commercially available therapies and other competing therapeutic candidates’
clinical trials for the disease or condition under investigation; |
| • | the willingness of patients to be enrolled in our clinical trials; |
| • | the risk that subjects enrolled in clinical trials will drop out of our trials before completion; |
| • | our ability to obtain and maintain clinical trial subject informed consents |
| • | the efforts to facilitate timely enrollment in clinical trials; |
| • | the patient referral practices of physicians; |
| • | the ability to monitor patients adequately during and after treatment; and |
| • | the proximity and availability of clinical trial sites for prospective patients. |
In addition, the U.S. Congress
recently amended the FDCA to require sponsors of a Phase 3 clinical trial, or other “pivotal study” of a new drug or biologic
to support marketing authorization, to design and submit a diversity action plan for such clinical trial. The action plan must describe
appropriate diversity goals for enrollment, as well as a rationale for the goals and a description of how the sponsor will meet them.
Although none of our product candidates has reached Phase 3 of clinical development, we or our licensing partners must submit a diversity
action plan to the FDA by the time a Phase 3 trial, or pivotal study, protocol is submitted to the agency for review, unless we or our
licensing partners are able to obtain a waiver for some or all of the requirements for a diversity action plan. It is unknown at this
time how the diversity action plan may affect the planning and timing of any future Phase 3 trial for our product candidates or what specific
information FDA will expect in such plans. However, initiation of such trials may be delayed if the FDA objects to a proposed diversity
action plans for any future Phase 3 trial of our product candidates, and we or our licensing partners may experience difficulties recruiting
a diverse population of patients in attempting to fulfill the requirements of any approved diversity action plan.
Inability to enroll a sufficient
number of patients for clinical trials would result in significant delays and could require us to abandon one or more clinical trials
altogether. Enrollment delays in these clinical trials may result in increased development costs for our product candidates, which would
cause the value of our company to decline and limit our ability to obtain additional financing. Furthermore, we expect to rely on CROs
and clinical trial sites to ensure the proper and timely conduct of our clinical trials and we will have limited influence over their
performance.
We are exposed to political, regulatory,
social and economic risk relating to the United Kingdom’s exit from the European Union.
Following the result of a
referendum in 2016, the United Kingdom left the European Union on January 31, 2020, commonly referred to as Brexit. Pursuant to the formal
withdrawal arrangements agreed between the United Kingdom and the European Union, the United Kingdom was subject to a transition period
until December 31, 2020, during which European Union rules continued to apply. The Trade and Cooperation Agreement between the United
Kingdom and the European Union, which outlines the future trading relationship between the United Kingdom and the European Union, was
agreed in December 2020. The impact of the new trade agreement on the general and economic conditions in the United Kingdom remains uncertain.
There may be, for example, additional costs in materials and equipment sourced from the European Union and/or delays that could have a
material adverse effect on our business, financial condition and results of operations.
From a regulatory perspective,
the United Kingdom’s withdrawal from the European Union could bear significant complexity and risks. A basic requirement of
European Union law relating to the grant of a marketing authorization for a medicinal product in the European Union is that the applicant
is established in the European Union. Following the withdrawal of the United Kingdom from the European Union, marketing authorizations
previously granted to applicants established in the United Kingdom may no longer be valid. Moreover, the scope of a marketing authorization
for a medicinal product granted by the European Commission pursuant to the centralized procedure might not, in the future, include the
United Kingdom. In these circumstances, an authorization granted by competent United Kingdom authorities would be required to place medicinal
products on the United Kingdom market.
Any of these factors could
significantly increase the complexity of our activities in the European Union and in the United Kingdom, could depress our economic activity
and restrict our access to capital, which could have a material adverse effect on our business, financial condition and results of operations
and reduce the price of our Ordinary Shares and Depositary Shares.
The regulatory approval processes in the United States and Europe
are lengthy, time consuming and inherently unpredictable, and if we are ultimately unable to obtain regulatory approval for our product
candidates, our business may be substantially harmed.
The time required to obtain
approval for a product candidate by the EMA, the MHRA, the FDA and other comparable foreign regulatory authorities is unpredictable, and
it typically takes many years following the commencement of preclinical studies and clinical trials, if approval is obtained at all, and
depends upon numerous factors, including the substantial discretion of the regulatory authorities. In addition, approval policies, regulations,
or the type and amount of clinical data necessary to gain approval may change during the course of a product candidate’s clinical
development and may vary among jurisdictions. We have not obtained regulatory approval for any product candidate, and it is possible that
we may never obtain regulatory approval for any product candidate we may seek to develop in the future. Neither we nor any current or
future collaborator is permitted to market any drug product candidates in the United States until we receive regulatory approval of a
NDA from the FDA, and we cannot market it in the European Union or the United Kingdom until we receive a marketing authorization approval
from the EMA or the MHRA, respectively, or in any other country until we obtain regulatory authorization as required under the laws of
such country.
Our product candidates could
fail to receive regulatory approval from the EMA, the MHRA, the FDA and other comparable foreign regulatory authorities for many reasons,
including:
| • | disagreement with the design or implementation of the clinical trials; |
| • | failure to demonstrate that a product candidate is safe and effective for its proposed indication; |
| • | failure of clinical trial results to meet the level of statistical significance required for approval; |
| • | failure to demonstrate that a product candidate’s clinical and other benefits outweigh its safety
risks; |
| • | disagreement with our interpretation of data from preclinical studies or clinical trials; |
| • | the insufficiency of data collected from clinical trials of our product candidates to support the submission
and filing of a NDA, BLA, MAA or other submission or to obtain regulatory approval; |
| • | regulatory authorities may find deficiencies in good clinical practice, or GCP, compliance or may find
our record keeping, or the record keeping of our clinical trial sites, to be inadequate; |
| • | disapproval of the manufacturing processes or facilities of third party manufacturers with whom we or
any licensing partner contracts with for clinical and commercial supplies; or |
| • | changes in approval policies or regulations that render the preclinical and clinical data insufficient
for approval. |
Of the large number of products
in development, only a small percentage successfully complete the FDA, EMA, MHRA, or other comparable regulatory approval processes and
are commercialized. The lengthy approval and marketing authorization process as well as the unpredictability of future clinical trial
results may result in our failing to obtain regulatory approval and marketing authorization to market our product candidates, which would
significantly harm our business, financial condition, results of operations and prospects.
In addition, the EMA, the
MHRA, the FDA and other comparable foreign regulatory authorities may require more information, including additional preclinical or clinical
data to support approval, which may delay or prevent approval and any commercialization plans, or we or any licensing partner may decide
to abandon the development program. If approval were to be obtained, regulatory authorities may approve any of our product candidates
for fewer or more limited indications than is requested, may grant approval contingent on the performance of costly post-marketing clinical
trials, or may approve a product candidate with a label that does not include the labeling claims necessary or desirable for the successful
commercialization of that product candidate. In addition, if our product candidate produces undesirable side effects or safety issues,
the regulatory authorities (the FDA, MHRA, EMA or a comparable foreign regulatory authority) may require the establishment of Risk Evaluation
and Mitigation Strategy, or REMS, which may, for instance, restrict distribution of the products and impose burdensome implementation
requirements on us or any licensing partner. Any of the foregoing scenarios could materially harm the commercial prospects for our product
candidates.
Our product candidates may cause undesirable
side effects or have other properties that could delay or prevent their regulatory approval and limit the commercial profile of an approved
label, and such side effects or other properties could result in significant negative consequences following any marketing approval of
any of our product candidates.
Undesirable side effects caused
by any of our product candidates could cause us, our licensing partners, if any, or regulatory authorities to interrupt, delay or halt
clinical trials and could result in a more restrictive label or the delay or denial of regulatory approval by the EMA, the MHRA, the FDA
or other comparable foreign regulatory authority. Results of the clinical trials could reveal a high and unacceptable severity and prevalence
of side effects or risks associated with a product candidate’s use. In such an event, our trials could be suspended or terminated
and the regulatory authorities could order us to cease further development of or deny approval of our product candidates for any or all
targeted indications. The drug-related side effects could affect patient recruitment to clinical trials for our product candidates or
the ability of enrolled subjects to complete the trial or result in potential product liability claims. Any of these occurrences may harm
our business, financial condition and prospects significantly.
Additionally, if undesirable
side effects of our products are identified following marketing approval, a number of potentially significant negative consequences could
result, including:
| • | marketing of such product may be suspended; |
| • | a product recall or product withdrawal; |
| • | regulatory authorities may withdraw approvals of such product or may require additional warnings on the
label; |
| • | the requirement to develop a REMS for each product or, if a strategy is already in place, to incorporate
additional requirements under the REMS, or to develop a similar strategy as required by a comparable foreign regulatory authority; |
| • | the requirement to conduct additional post-market studies; and |
| • | being sued and held liable for harm caused to subjects or patients. |
Consequently, our reputation and business operations
may suffer.
Any of these events could
prevent the achievement or maintaining of market acceptance of the particular product or product candidate, if approved, and could significantly
harm our business, results of operations and prospects.
Even if we receive regulatory approval of any product candidates,
we will be subject to ongoing regulatory oversight and continued regulatory review, which may result in significant additional expense
and we may be subject to penalties if we fail to comply with regulatory requirements or experience unanticipated problems with any of
our product candidates.
Our product candidates, if
they receive regulatory approval, will be subject to the ongoing requirements of the EMA, the MHRA, the FDA and other regulatory agencies
governing the manufacture, quality control, further development, labeling, packaging, storage, distribution, safety surveillance, import,
export, advertising, promotion, recordkeeping and reporting of safety and other post-market information. These requirements include submissions
of safety and other post-marketing information and reports, establishment registration and listing, as well as continued compliance with
cGMP for product manufacturing and GCP requirements for any clinical trials that we conduct post-approval. The safety profile of any product
is closely monitored by the EMA, the MHRA, the FDA and other regulatory authorities after approval. If the EMA, the MHRA, the FDA or other
regulatory authorities become aware of new safety information after approval of any of our products or product candidates, regulatory
authorities may require labeling changes or establishment of a risk mitigation strategy or similar strategy, impose significant restrictions
on a product’s indicated uses or marketing, or impose ongoing requirements for potentially costly post-approval studies or post-market
surveillance.
In addition, manufacturers
of drug and biological products and their facilities are subject to continual review and periodic inspections by the EMA, the MHRA, the
FDA and other governmental regulatory authorities for compliance with cGMP and other applicable regulations. If a previously unknown problem
with a product, such as adverse events of unanticipated severity or frequency, or a problem with the facility where the product is manufactured
is discovered, a regulatory agency may impose restrictions on that product, the manufacturing facility or the party commercializing the
product, including requiring recall or withdrawal of the product from the market or suspension of manufacturing. If our product candidates
or the manufacturing facilities for our product candidates fail to comply with applicable regulatory requirements, a regulatory agency
may:
| • | issue warning letters or untitled letters; |
| • | mandate modifications to, or the withdrawal of, marketing and promotional materials or require corrective
information to be provided to healthcare professionals; |
| • | require the violating party to enter into a consent decree, which can include the imposition of various
fines, reimbursements of inspection costs, required due dates for specific actions and penalties for non-compliance; |
| • | seek an injunction or impose civil or criminal penalties or monetary fines; |
| • | require revisions to the labeling, including limitations on approved uses or the addition of additional
warnings, contraindications or other safety information, including boxed warnings; |
| • | suspend, vary or withdraw regulatory approval; |
| • | require additional post-market clinical trials to assess the safety of the product; |
| • | suspend any ongoing clinical studies; |
| • | refuse to approve pending applications or supplements to applications filed by us or any licensing partner; |
| • | suspend or impose restrictions on operations, the products, manufacturing or ourselves; or |
| • | seize or detain products, refuse to permit the import or export of products or require a product recall. |
In the EU, the EMA may require
an equivalent risk management plan, or RMP. Non-compliance with European Union requirements regarding safety monitoring or pharmacovigilance
can also result in significant financial penalties. Similarly, failure to comply with the European Union’s requirements regarding
the protection of personal information can also lead to significant penalties and sanctions.
The occurrence of any of these
events or penalties described above may inhibit our ability to generate revenue from product candidates that are commercialized by any
of our licensing partners.
The FDA’s, EMA’s,
MHRA’s, and other comparable foreign regulatory authorities’ policies may change and additional government regulations may
be enacted that could prevent, limit or delay regulatory approval of our product candidates. If we are slow or unable to adapt to changes
in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we
may lose any marketing approval that we may have obtained, which would adversely affect our business, prospects and ability to achieve
or sustain profitability.
Obtaining and maintaining regulatory approval
of any of our other product candidates in one jurisdiction does not mean that we will be successful in obtaining regulatory approval of
our product candidates in other jurisdictions.
Obtaining and maintaining
regulatory approval of our other product candidates in one jurisdiction does not guarantee that we will be able to obtain or maintain
regulatory approval in any other jurisdiction, while a failure or delay in obtaining regulatory approval in one jurisdiction may have
a negative effect on the regulatory approval process in others. For example, even if the FDA grants marketing approval of a product candidate,
similar foreign regulatory authorities must also approve the manufacturing, marketing and promotion of the product candidate in those
countries. Approval and licensure procedures vary among jurisdictions and can involve requirements and administrative review periods different
from, and greater than, those in the United States, including additional nonclinical studies or clinical trials as clinical trials conducted
in one jurisdiction may not be accepted by regulatory authorities in other jurisdictions. In many jurisdictions outside the United States,
a product candidate must be approved for reimbursement before it can be approved for sale in that jurisdiction. In some cases, the price
that we intend to charge for our products is also subject to approval.
We may also submit marketing
applications in other countries. Regulatory authorities in jurisdictions outside of the United States have requirements for approval of
product candidates with which we must comply prior to marketing in those jurisdictions. Obtaining similar foreign regulatory approvals
and compliance with similar foreign regulatory requirements could result in significant delays, difficulties and costs for us and could
delay or prevent the introduction of our products in certain countries. We do not currently have any product candidates approved for sale
in any jurisdiction, including international markets, and we do not have experience in obtaining regulatory approval in international
markets. If we fail to comply with the regulatory requirements in international markets and/or receive applicable marketing approvals,
our target market will be reduced and our ability to realize the full market potential of our product candidates will be harmed.
We seek to establish agreements with potential
licensing partners and collaborators and, if we are not able to establish them on commercially reasonable terms, we may have to alter
our development and commercialization plans.
Our current development and
commercialization strategy is to deploy our proprietary drug delivery technologies to formulate a compelling portfolio of novel first-in-class
sustained release formulations of products with significant commercial potential for licensing to pharmaceutical company partners at proof-of-concept
stage, which would potentially result in revenue generation from product royalty and/or milestone deals. We seek to work with licensing
or collaboration partners for the development and commercialization of one or more of our product candidates. For example, in January
2019, we entered into that certain Licensing, Collaboration and Distribution Agreement, or the CMS License Agreement, with China Medical
System Holdings Limited, or CMS, as guarantor, and two of its wholly owned subsidiaries, CMS Bridging Limited, or CMS Bridging, and CMS
Medical Hong Kong Limited, or CMS Medical HK, each a CMS Party, pursuant to which, among other things, we agreed to license certain of
our products to the CMS Parties in exchange for, among other things, royalty revenue. Future collaborators may include large and mid-size
pharmaceutical companies, regional and national pharmaceutical companies and biotechnology companies.
We face significant competition
in seeking appropriate licensing or collaboration partners. Whether we reach a definitive agreement will depend, among other things, upon
our assessment of the partner’s resources and expertise, the terms and conditions of the proposed collaboration and the proposed
partner’s evaluation of a number of factors. Those factors may include the potential differentiation of our product candidate from
competing product candidates, design or results of clinical trials, the likelihood of approval by the FDA or comparable foreign regulatory
authorities and the regulatory pathway for any such approval, the potential market for the product candidate, the costs and complexities
of manufacturing and delivering the product to patients and the potential of competing products. The partner may also consider alternative
product candidates or technologies for similar indications that may be available for collaboration and whether such collaboration could
be more attractive than the one with us for our product candidate.
These agreements are complex
and time consuming to negotiate and document. Further, there have been a significant number of recent business combinations among large
pharmaceutical companies that have resulted in a reduced number of potential future licensing and collaboration partners.
We may not be able to negotiate
agreements with these potential partners on a timely basis, on acceptable terms, or at all. If we are unable to do so, we may have to
curtail the development of the product candidate for which we are seeking to collaborate, reduce or delay its development program or one
or more of our other development programs.
If we enter into agreements with a licensing
or collaboration partner for the development and commercialization of our product candidates, our prospects with respect to those product
candidates will depend in significant part on the success of those collaborations.
We expect a material amount
of our revenue in the future will be derived from licensing or collaboration agreements with other biopharmaceutical companies, research
institutes and universities and similar agreements. We may enter into additional agreements with a licensing or collaboration partner
for the development and commercialization of certain of our product candidates. If we enter into such agreements, we will have limited
control over the amount and timing of resources that our partners will dedicate to the development or commercialization of our product
candidates. Our ability to generate revenues from these arrangements will depend on any future licensing partners’ ability to successfully
perform the functions assigned to them in these arrangements. In addition, any future licensing or collaboration partner may have the
right to abandon research or development projects and terminate applicable agreements, including funding obligations, prior to or upon
the expiration of the agreed upon terms.
Agreements involving our product
candidates pose a number of risks, including:
| • | partners have significant discretion in determining the efforts and resources that they will apply to
these matters; |
| • | partners may not perform their obligations as expected; |
| • | partners may not pursue development and commercialization of our product candidates or may elect not to
continue or renew development or commercialization programs, based on clinical trial results, changes in their strategic focus or available
funding or external factors, such as an acquisition, that divert resources or create competing priorities; |
| • | partners may delay clinical trials, provide insufficient funding for a clinical trial, stop a clinical
trial or abandon a product candidate, repeat or conduct new clinical trials or require a new formulation of a product candidate for clinical
testing; |
| • | a partner with marketing and distribution rights to one or more products may not commit sufficient resources
to the marketing and distribution of such product or products; |
| • | disagreements with partners, including disagreements over proprietary rights, contract interpretation
or the preferred course of development, might cause delays or termination of the research, development or commercialization of product
candidates, might lead to additional responsibilities for us with respect to product candidates, or might result in litigation or arbitration,
any of which would be time-consuming and expensive; |
| • | partners may not properly maintain or defend our intellectual property rights or may use our proprietary
information in such a way as to invite litigation that could jeopardize or invalidate our intellectual property or proprietary information
or expose us to potential litigation; |
| • | partners may infringe the intellectual property rights of third parties, which may expose us to litigation
and potential liability; and |
| • | agreements may be terminated and, if terminated, may result in a need for additional capital to pursue
further development or commercialization of the applicable product candidates. |
Agreements may not lead to
development or commercialization of product candidates in the most efficient manner, or at all. If any future partners of ours is involved
in a business combination, it could decide to delay, diminish or terminate the development or commercialization of any product candidate
licensed to it by us.
The commercial success of any of our product
candidates is not guaranteed.
There can be no assurance
that any of our product candidates currently in development will be successfully developed into any commercially viable product or products
and/or be manufactured in commercial quantities at an acceptable cost or be marketed successfully and profitably. If we, or our partners,
encounter delays at any stage, and fail successfully to address such delays, it may have a material adverse effect on our business, financial
condition and prospects. In addition, our success will depend on the market’s acceptance of these products and there can be no guarantee
that this acceptance will be forthcoming or that our technologies will succeed as an alternative to competing products. If a market fails
to develop or develops more slowly than anticipated, we may be unable to recover the costs we may have incurred in the development of
particular products and may never achieve profitable royalty or licensing revenues from that product.
The pharmaceutical and biotechnology industries
are highly competitive.
The development and commercialization
of new drug products is highly competitive. Our business faces competition from a range of major and specialty pharmaceutical and biotechnology
companies worldwide with respect to our product candidates, and will face competition in the future with respect to any product candidates
that we may seek to develop or commercialize.
There are a number of pharmaceutical
and biotechnology companies that currently market and sell products or are pursuing development of products that could compete with our
product candidates. With respect to eRapa, there are no currently approved products with a FAP indication, though certain non-steroidal
anti-inflammatory drugs may be prescribed off label. Panbela Therapeutics, Inc. and Recursion Pharmaceuticals, Inc. are developing products
for FAP. With respect to tolimidone, teplizumab, the first disease-modifying treatment of Type 1 diabetes, or T1D, has been approved for
the delay of Stage 3 T1D and a number of companies are researching potentially disease-modifying approaches to T1D including stem cell
therapies by Vertex Pharmaceuticals, Inc. and CRISPR Therapeutics AG and SAB Biotherapeutics, Inc. is developing an immunotherapeutic.
In addition, the JDRF T1D Fund has invested in approximately 30 private companies working on a variety of approaches to the treatment
of T1D. With respect to MTX110, there are a number of companies researching potential therapeutic treatments of GBM including CNS Pharmaceuticals,
Inc. and Plus Therapeutics, Inc. Chimerix Inc. is among a number of companies developing a product for DMG.
Some of these competitive
products and therapies are based on scientific approaches that are the same or similar to our approach, and others are based on entirely
different approaches. Potential competitors also include academic institutions, government agencies and other public and private research
organizations that conduct research, seek patent protection and establish collaborative arrangements for research, development, manufacturing
and commercialization.
Our competitors in the biotechnology
and pharmaceutical industries may have superior research and development capabilities, products, manufacturing capability or sales and
marketing expertise. Many of our competitors may have significantly greater financial and human resources and may have more experience
in research and development.
As a result of these factors,
our competitors may obtain regulatory approval of their products more rapidly than we are able to or may obtain patent protection of other
intellectual property rights that limit our ability to develop or commercialize our product candidates. Our competitors may also develop
products that are more effective, more widely used and less costly than our own product candidates, and may be more successful in commercializing
their products.
We anticipate that we will
face increased competition in the future as new companies enter our markets and alternative products and technologies become available.
Mergers and acquisitions in the pharmaceutical and biotechnology industries may result in even more resources being concentrated among
a smaller number of our competitors. Smaller and other early-stage companies may also prove to be significant competitors, particularly
through collaborative arrangements with large and established companies. These third parties compete with us in recruiting and retaining
qualified scientific, management and commercial personnel, as well as in acquiring technologies complementary to, or necessary for, our
programs.
Changes in healthcare policies,
laws and regulations, including legislative measures aimed at reducing health care costs, may impact our ability to obtain approval for
or commercialize any of our future product candidates, if approved.
All aspects of our business,
including research and development, manufacturing, marketing, pricing, sales, litigation, and intellectual property rights, are subject
to extensive legislation and regulation. Changes in applicable U.S. federal and state laws and agency regulation, as well as foreign laws
and regulations, could have a materially negative impact on our business. In the United States and in some other jurisdictions, there
have been a number of legislative and regulatory changes and proposed changes regarding the healthcare system that could prevent or delay
marketing approval of our product candidates or any potential future product candidates of ours, restrict or regulate post-approval activities,
or affect our ability to profitably sell any product candidates for which we obtain marketing approval. Increased scrutiny by the U.S.
Congress of the FDA’s approval process may significantly delay or prevent marketing approval, as well as subject us to more stringent
product labeling and post-marketing testing and other requirements. Congress also must reauthorize the FDA’s user fee programs every
five years and often makes changes to those programs in addition to policy or procedural changes that may be negotiated between the FDA
and industry stakeholders as part of this periodic reauthorization process. Congress most recently reauthorized the user fee programs
in September 2022 without any substantive policy changes.
Among policy makers and payors
in the United States and elsewhere, there is significant interest in promoting changes in healthcare systems with the stated goals of
containing healthcare costs, improving quality and/or expanding access. In the United States, the pharmaceutical industry has been a focus
of these efforts and has been significantly affected by major legislative initiatives. In March 2010, Congress passed the ACA, which substantially
changed the way healthcare is financed by both the government and private insurers, and significantly impacts the U.S. pharmaceutical
industry. We expect that changes or additions to the ACA, the Medicare and Medicaid programs, and changes stemming from other health care
reform measures, especially with regard to health care access, financing or other legislation in individual states, could have a material
adverse effect on the health care industry in the United States.
The Drug Supply Chain Security
Act, or DSCSA, which will become fully effective and applicable in November 2024, imposes obligations on manufacturers of pharmaceutical
products related to product tracking and tracing. Furthermore, in February 2022, FDA released proposed regulations to amend the national
standards for licensing of wholesale drug distributors by the states; establish new minimum standards for state licensing third-party
logistics providers; and create a federal system for licensure for use in the absence of a state program, each of which is mandated by
the DSCSA. Other legislative and regulatory proposals have been made to expand post-approval requirements and restrict sales and promotional
activities for pharmaceutical products. We are unsure whether additional legislative changes will be enacted, or whether the current regulations,
guidance or interpretations will be changed, or whether such changes will have any impact on our business.
Additionally, there has been
heightened governmental scrutiny in the United States of biopharmaceutical pricing practices considering the rising cost of prescription
drugs and biologics. Such scrutiny has resulted in several recent congressional inquiries and proposed and enacted federal and state legislation
designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and manufacturer
patient programs, and reform government program reimbursement methodologies for products. For example, President Biden's Executive Order
14087, issued October 2022, called for CMS to prepare and submit a report to the White House on potential payment and delivery modes that
would complement the Inflation Reduction Act of 2022, or IRA, lower drug costs, and promote access to innovative drugs. In February 2023,
CMS published its report which described three potential models focusing on affordability, accessibility and feasibility of implementation
for further testing by the CMS Innovation Center. As of February 2024, the CMS Innovation Center continues to test the proposed models
and has started to roll out plans for access model testing of certain product types (e.g., cell and gene therapies) by states and manufacturers.
At the state level, state legislatures are increasingly passing legislation and implementing regulations designed to control pharmaceutical
pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure
and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing. In December
2020, the U.S. Supreme Court held unanimously that federal law does not preempt the states’ ability to regulate pharmaceutical benefit
managers, or PBMs, and other members of the health care and pharmaceutical supply chain, an important decision that may lead to further
and more aggressive efforts by states in this area. Then, in mid-2022, the Federal Trade Commission, or FTC, launched sweeping investigations
into the practices of the PBM industry that could lead to additional federal and state legislative or regulatory proposals targeting such
entities’ operations, pharmacy networks, or financial arrangements. In addition, in the last few years, several states have formed
prescription drug affordability boards, or PDABs, with the authority to implement upper payment limits, or UPLs, on drugs sold in their
respective jurisdictions. There are several pending federal lawsuits challenging the authority of states to impose UPLs, however.
Most recently, in August 2022,
President Biden signed into the law the IRA. Among other things, the IRA has multiple provisions that may impact the prices of drug products
that are both sold into the Medicare program and throughout the United States. Starting in 2023, a manufacturer of a drug or biological
product covered by Medicare Parts B or D must pay a rebate to the federal government if the product’s price increases faster than
the rate of inflation. This calculation is made on a drug product by drug product basis and the amount of the rebate owed to the federal
government is directly dependent on the volume of a drug product that is paid for by Medicare Parts B or D. Additionally, starting in
payment year 2026, CMS will negotiate drug prices annually for a select number of single source Part D drugs without generic or biosimilar
competition. CMS will also negotiate drug prices for a select number of Part B drugs starting for payment year 2028. If a drug product
is selected by CMS for negotiation, it is expected that the revenue generated from such drug will decrease. Any additional federal
or state healthcare reform measures could limit the amounts that third-party payers will pay for future healthcare products and services,
and, in turn, could significantly reduce the projected value of certain development projects and reduce our profitability.
Outside of the United States,
particularly in the European Union, the coverage status and pricing of prescription pharmaceuticals and biologics is subject to governmental
control. In these countries, pricing negotiations with governmental authorities can take considerable time after the receipt of marketing
approval for a product. Furthermore, the requirements may differ across the E.U. Member States. To obtain coverage and reimbursement or
pricing approval in some countries, we may be required to conduct a clinical trial that compares the cost-effectiveness of our product
candidate to other available therapies. If reimbursement of our products is unavailable or limited in scope or amount, or if pricing is
set at unsatisfactory levels, our business could be harmed. Also, at national level, actions have been taken to enact transparency and
anti-gift laws (similar to the U.S. Physician Payments Sunshine Act) regarding payments between pharmaceutical companies and healthcare
professionals.
Coverage
and adequate reimbursement may not be available for our current or any future product candidates, which could make it difficult for us
to sell profitably, if approved.
Market
acceptance and sales of any product candidates that we commercialize, if approved, will depend in part on the extent to which reimbursement
for these products and related treatments will be available from third-party payors, including government health administration authorities,
managed care organizations and private health insurers. Significant uncertainty exists as to the coverage and reimbursement status of
any products for which we may obtain regulatory approval. Third-party payors decide which therapies they will pay for and establish reimbursement
levels. Third-party payors in the United States often rely upon Medicare coverage policy and payment limitations in setting their own
coverage and reimbursement policies. However, decisions regarding the extent of coverage and amount of reimbursement to be provided for
any product candidates that we develop will be made on a payor-by-payor basis. One payor’s determination to
provide coverage for a drug does not assure that other payors will also provide coverage for the drug. Additionally,
a third-party payor’s decision to provide coverage for a therapy does not imply that an adequate reimbursement rate will be approved.
Third-party payors are increasingly challenging the price, examining the medical necessity and reviewing the cost-effectiveness of medical
products, therapies and services, in addition to questioning their safety and efficacy. We may incur significant costs to conduct expensive
pharmaco-economic studies in order to demonstrate the medical necessity and cost-effectiveness of our product candidates, in addition
to the costs required to obtain FDA approvals. Our product candidates may not be considered medically necessary or cost-effective.
Each
payor determines whether or not it will provide coverage for a therapy, what amount it will pay the manufacturer for the therapy, and
on what tier of its list of covered drugs, or formulary, it will be placed. The position on a payor’s formulary, generally determines
the co-payment that a patient will need to make to obtain the therapy and can strongly influence the adoption of such therapy
by patients and physicians. Patients who are prescribed treatments for their conditions and providers prescribing such services generally
rely on third-party payors to reimburse all or part of the associated healthcare costs. Patients are unlikely to use our products, and
providers are unlikely to prescribe our products, unless coverage is provided and reimbursement is adequate to cover a significant portion
of the cost of our products and their administration. Therefore, coverage and adequate reimbursement is critical to new medical product
acceptance.
In the United States, no uniform
policy of coverage and reimbursement for products exists among third-party payors. Therefore, coverage and reimbursement for our products
can differ significantly from payor to payor. As a result, obtaining coverage and reimbursement approval of a product from a government
or other third-party payor is a time-consuming and costly process that could require us to provide to each payor supporting scientific,
clinical and cost-effectiveness data for the use of our products on a payor-by-payor basis, with no assurance that coverage and adequate
reimbursement will be obtained. Even if we obtain coverage for a given product, the resulting reimbursement payment rates might not be
adequate for us to achieve or sustain profitability or may require co-payments that patients find unacceptably high. Additionally, third-party
payors may not cover, or provide adequate reimbursement for, long-term follow-up evaluations required following the use of product candidates,
once approved.
A
primary trend in the U.S. healthcare industry and elsewhere is cost containment. Third-party payors have attempted to control costs by
limiting coverage and the amount of reimbursement for particular medications. We cannot be sure that coverage and reimbursement will be
available for any product that we may commercialize and, if reimbursement is available, what the level of reimbursement will be. Even
if favorable coverage and reimbursement status is attained for one or more product candidates for which we receive regulatory approval,
less favorable coverage policies and reimbursement rates may be implemented in the future. Inadequate coverage and reimbursement may impact
the demand for, or the price of, any drug for which we obtain marketing approval. If coverage and adequate reimbursement are not available,
or are available only to limited levels, we may not be able to successfully commercialize our current and any future product candidates
that we develop.
We are subject to environmental laws and
regulations that govern the use, storage, handling and disposal of hazardous materials and other waste products.
We are subject to environmental
laws and regulations governing the use, storage, handling and disposal of hazardous materials and other waste products. We have health
and safety policies and procedures in place to assess the risks associated with use of hazardous materials, and the assessment includes
information for employees on how the substances should be used to avoid contamination of the environment and inadvertent exposure to themselves
and their colleagues. Despite our precautions for handling and disposing of these materials, we cannot eliminate the risk of accidental
contamination or injury. In the event of a hazardous waste spill or other accident, we could be liable for damages, penalties or other
forms of censure. If we fail to comply with any laws or regulations, or if an accident occurs, we may have to pay significant penalties
and may be held liable for any damages that result. This liability could exceed our financial resources and could harm our reputation.
We may also have to incur significant additional costs to comply with current or future environmental laws and regulations. Our failure
to comply with any government regulation applicable to our laboratory and the materials used in our laboratory may adversely affect our
ability to develop, produce, market or partner any products we may commercialize or develop.
Our employees, principal investigators,
consultants and commercial partners may engage in misconduct or other improper activities, including noncompliance with regulatory standards
and requirements, which could have a material adverse effect on our business.
We are exposed to the risk
of employee fraud or other misconduct by our employees, principal investigators, consultants and commercial partners. Misconduct by such
parties could include intentional failures to comply with applicable regulations, provide accurate information to regulatory authorities,
comply with manufacturing standards, comply with healthcare fraud and abuse laws and regulations, report financial information or data
accurately, or disclose unauthorized activities to us. In particular, sales, marketing and business arrangements in the healthcare industry
are subject to extensive laws and regulations intended to prevent fraud, kickbacks, self-dealing and other abusive practices. These laws
and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentive
programs and other business arrangements. Such misconduct could also involve the improper use of information obtained in the course of
clinical trials, which could result in regulatory sanctions and serious harm to our reputation. We have adopted a Code of Business Conduct
and Ethics, but it is not always possible to identify and deter employee misconduct, and the precautions we have taken to detect and prevent
this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations
or other actions or lawsuits stemming from a failure to be in compliance with such laws or regulations. If any such actions are instituted
against us and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on
our business and results of operations, including the imposition of significant fines or other sanctions.
Unexpected facility shutdowns or system failures may occur and
our disaster recovery plans may not be sufficient.
We depend on the performance,
reliability and availability of our properties, machinery, and laboratory equipment and information technology systems. We may not be
able to access our facilities as a result of events beyond our control, such as extreme weather conditions, quarantines, flood, fire,
theft, terrorism and acts of God.
Further, any damage to or
failure of our equipment and/or systems could also result in disruptions to our operations. A complete or partial failure of our information
technology systems, or those of our CROs and other third parties on which we rely, or corruption of data could result in our inability
to access information that we need in order to meet our obligations to our customers or a breach of confidentiality with respect to our
or our customers’ proprietary information. If such an event were to occur and cause interruptions in our operations, it could result
in a material disruption of our drug development programs. For example, the loss of clinical trial data from completed or ongoing clinical
trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data.
Our disaster recovery plans may not adequately address every potential event and our insurance policies may not cover any loss in full
or in part (including losses resulting from business interruptions) or damage that we suffer fully or at all. The occurrence of one or
more of these events could have a material adverse effect on our business, financial position, reputation or prospects, and might lead
to a claim for damages.
Our business may be adversely affected by economic conditions
and current economic weakness.
Any economic downturn either
globally, regionally or locally in any country in which we operate may have an adverse effect on the demand for any products derived from
our product candidates. A more prolonged economic downturn may lead to an overall decline in our sales, limiting our ability to generate
a profit and positive cash flow. The markets in which we expect the products to be offered are directly affected by many national and
international factors that are beyond our control, such as political, economic, currency, social and other factors.
Geopolitical risks could result in increased
market volatility and uncertainty, which could negatively impact our business, financial condition and results of operation.
The
uncertain nature, scope, magnitude, and duration of hostilities stemming from geopolitical conflicts, including the potential effects
of such hostilities as well as sanctions, embargoes, asset freezes, cyberattacks and other actions taken in response to such hostilities
on the world economy and markets, have disrupted global markets and contributed to increased market volatility and uncertainty, which
could have an adverse impact on macroeconomic and other factors that affect our business and supply chain. Any disruption in our supply
chain could reduce our revenue and adversely impact our financial results. Such a disruption could occur as a result of any number of
events, including, but not limited to, military conflicts, geopolitical developments, war or terrorism, including the ongoing conflicts
in Ukraine and Israel and Gaza and disruptions in utility and other services. Any inability to obtain adequate deliveries or any other
circumstance that would require us to seek alternative sources of supply or to manufacture, assemble, and test such components internally
could significantly delay our ability to ship our products, which could damage relationships with current and prospective customers and
could harm our reputation and brand and could adversely affect our business, financial condition, and results of operations.
We
do not and cannot know if the ongoing conflicts and the economic sanctions imposed as a result of the conflicts, could escalate and result
in broader economic and security concerns which could adversely affect our business. It is not possible to predict the broader consequences
of these conflicts, which could include further sanctions, embargoes, regional instability, geopolitical shifts and adverse effects on
macroeconomic conditions, the availability and cost of materials, supplies, labor, currency exchange rates and financial markets, all
of which could have a material adverse effect on our business, financial condition and results of operations.
We are exposed to the risks of doing business internationally.
We
have in the past, and may in the future, operate outside of the United Kingdom. These international operations are subject to a number
of risks inherent in operating in different countries. These include, but are not limited to, risks regarding:
| • | currency exchange rate fluctuations; |
| • | restrictions on repatriation of earnings; |
| • | difficulty of effective enforcement of contractual provisions in local jurisdictions; |
| • | inadequate intellectual property (including confidentiality) protection in foreign countries; |
| • | public health epidemics or outbreaks, such as COVID-19; |
| • | trade-protection measures, import or export licensing requirements and fines, penalties or suspension or
revocation of export privileges; and |
| • | changes in a specific country’s or a region’s political or economic conditions, including
the implications of the United Kingdom’s withdrawal from the European Union. |
The occurrence of any of these events or conditions
could adversely affect our ability to increase or maintain our operations in various countries.
We are exposed to risks related to currency
exchange rates.
We currently conduct a portion
of our operations outside of the United Kingdom. Because we use the British pound sterling as our financial statement reporting currency,
changes in currency exchange rates have had and could have a significant effect on our operating results when our operating results are
translated from the local currency into the British pound sterling. Exchange rate fluctuations between local currencies and the British
pound sterling create risk in several ways, including the following: weakening of the British pound sterling, as seen, for example, following
the results of the Brexit referendum, may increase the British pound sterling cost of overseas research and development expenses and the
cost of sourced product components outside the United Kingdom; strengthening of the British pound sterling may decrease the value of our
revenues denominated in other currencies; the exchange rates on non-sterling transactions and cash deposits can distort our financial
results; and commercial pricing and profit margins are affected by currency fluctuations. Future changes in currency exchange rates could
have a material adverse effect on our financial results.
We are subject to cybersecurity risks, including
the misappropriation or compromise of our information, our information technology systems, and other cybersecurity incidents that may
result in operational or service disruption, harm to our reputation, litigation, fines, penalties and liabilities, and the incurrence
of costs in an effort to minimize those risks.
In the normal course of conducting
our business, we collect and store sensitive data on our networks and on networks and platforms of third parties upon which we rely, including
intellectual property, personal information of our employees, and our proprietary business information and that of our customers, vendors
and business partners. Despite the security measures we have in place and any additional measures we may implement in the future
to safeguard our systems and to mitigate potential security risks, our facilities and systems, and those of our third-party service providers,
could be vulnerable to cybersecurity incidents, computer viruses, lost or misplaced data, programming errors, human errors, acts of vandalism,
viruses, bugs, worms, or other malicious codes, malware, including as a result of advanced persistent threat intrusions, and other attacks
by computer hackers, cracking, application security attacks, social engineering, including through phishing attacks, supply chain attacks
and vulnerabilities through our third-party service providers, denial-of-service attacks, such as credential stuffing, credential harvesting,
personnel misconduct or error, supply-chain attacks, software bugs, server malfunctions, software or hardware failures, loss of data or
other information technology assets, adware, telecommunications failures, earthquakes, fires, floods, and other similar threats. Any steps
we take to deter, identify, and mitigate these risks may not be successful and may cause us to incur increasing costs.
Such threats are prevalent
and continue to rise, are increasingly difficult to detect, and come from a variety of sources, including traditional computer “hackers,”
threat actors, “hacktivists,” organized criminal threat actors, personnel, such as through theft or misuse, sophisticated
nation states, and nation-state-supported actors. In particular, ransomware attacks, including those from organized criminal threat actors,
nation-states and nation-state supported actors, are becoming increasingly prevalent and severe and can lead to significant interruptions,
delays, or outages in our operations, loss of data, including sensitive customer information, loss of income, significant extra expenses
to restore data or systems, reputational loss and the diversion of funds.
Some threat actors also now
engage and are expected to continue to engage in cyber-attacks, including without limitation nation-state actors, for geopolitical reasons
and in conjunction with military conflicts and defense activities. During times of war and other major conflicts, we, the third parties
upon which we rely, and our customers may be vulnerable to a heightened risk of these attacks, including retaliatory cyber-attacks, that
could materially disrupt our systems and operations, supply chain and ability to produce, sell and distribute our goods and services.
While we take steps to detect
and remediate vulnerabilities, we may not be able to detect and remediate all vulnerabilities because the threats and techniques used
to exploit such vulnerabilities change frequently and are often sophisticated in nature. Therefore, such vulnerabilities could be exploited
but may not be detected until after a cybersecurity incident has occurred, if at all. Further, we may experience delays in developing
and deploying remedial measures designed to address any such identified vulnerabilities.
We rely on third-party service
providers and technologies to operate critical business systems to process sensitive information in a variety of contexts, including,
without limitation, cloud-based infrastructure, encryption and authentication technology, employee email, and other functions. We also
rely on third-party service providers to assist with our clinical trials, provide other products or services, or otherwise to operate
our business. Our ability to monitor these third parties’ information security practices is limited, and these third parties may
not have adequate information security measures in place. If our third-party service providers experience a cybersecurity incident or
other interruption, we could experience adverse consequences. While we may be entitled to damages if our third-party service providers
fail to satisfy their privacy or security-related obligations to us, any award may be insufficient to cover our damages, or we may be
unable to recover such award. In addition, supply-chain attacks have increased in frequency and severity, and we cannot guarantee that
third parties and infrastructure in our supply chain or our third-party partners’ supply chains have not been compromised or that
they do not contain exploitable defects or bugs that could result in a breach of or disruption to our information technology systems,
including our services, or the third-party information technology systems that support us and our services.
Any of the previously identified
or similar threats could cause a cybersecurity incident or other interruption that could result in unauthorized, unlawful, or accidental
acquisition, modification, destruction, loss, alteration, encryption, disclosure of, or access to our sensitive data or our information
technology systems, or those of the third parties upon whom we rely. A cybersecurity incident or other interruption could disrupt our
ability, and that of third parties upon whom we rely, to provide our products and services and conduct clinical trials.
The costs related to significant
cybersecurity incidents or disruptions could be material and cause us to incur significant expenses. If the information technology systems
of our CROs, clinical sites, and other contractors and consultants become subject to disruptions or cybersecurity incidents, we may have
insufficient recourse against such third parties and we may have to expend significant resources to mitigate the impact of such an event,
and to develop and implement protections to prevent future events of this nature from occurring.
If any such incidents were
to occur and cause interruptions in our operations, it could result in a disruption of our business and development programs. For example,
the loss of clinical trial data from completed or ongoing clinical trials for a product candidate could result in delays in our regulatory
approval efforts and significantly increase our costs to recover or reproduce the data, or may limit our ability to effectively execute
a product recall, if required in the future. To the extent that any disruption or cybersecurity incident were to result in the loss of
or damage to our data or applications, or inappropriate disclosure of personal, confidential or proprietary information, we could incur
liability and the further development of any product candidates could be delayed. Applicable data privacy and security obligations may
require us to notify relevant stakeholders, regulatory authorities, and other individuals of cybersecurity incidents, and take other remedial
measures. Such disclosures and measures are costly, and the disclosure or the failure to comply with such requirements could lead to adverse
consequences. Any such event could also result in legal claims or proceedings, liability under laws that protect the privacy of personal
information and significant regulatory penalties, and damage to our reputation and a loss of confidence in us and our ability to conduct
clinical trials, which could delay the clinical development of our product candidates.
We may incur substantial costs in our efforts
to comply with evolving global data protection laws and regulations, and any failure or perceived failure by us to comply with such laws
and regulations may harm our business and operations.
We
maintain a large quantity of sensitive information, including confidential business and personal information in connection with the conduct
of our clinical trials and related to our employees, and we are subject to laws and regulations governing the privacy and security of
such information. In the United States, there are numerous federal and state privacy and data security laws and regulations governing
the collection, use, disclosure and protection of personal information, including federal and state health information privacy laws, federal
and state security breach notification laws, and federal and state consumer protection laws. The legislative and regulatory landscape
for privacy and data protection continues to evolve, and there has been an increasing focus on privacy and data protection issues, including
with respect to regulatory enforcement and private litigation, which may affect our business and is expected to increase our compliance
costs and exposure to liability. In the United States, numerous federal and state laws and regulations could apply to our operations or
the operations of our partners, including state data breach notification laws, state health information privacy laws, and federal and
state consumer protection laws and regulations, that govern the collection, use, disclosure, and protection of health-related and other
personal information. In addition, we may obtain health information from third parties (including research institutions from which we
obtain clinical trial data) that are subject to privacy and security requirements under HIPAA, as amended by HITECH and regulations promulgated
thereunder. Depending on the facts and circumstances, we could be subject to significant penalties if we obtain, use, or disclose, or
are subject to an actual or alleged data breach regarding, individually identifiable health information in a manner that is not authorized
or permitted by HIPAA.
In
addition, various U.S. states have enacted privacy and security laws and regulations, and such laws and regulations vary from state to
state, constantly evolve, and remain subject to significant change. In some cases, such laws and regulations can impose more restrictive
requirements than HIPAA and other U.S. federal laws, thus complicating compliance efforts. By way of example, California has enacted the
California Consumer Privacy Act, or CCPA, which went into effect in January of 2020. The CCPA established a new privacy framework for
covered businesses by creating an expanded definition of personal information, establishing new data privacy rights for California residents,
requiring covered business to provide new disclosures to California residents, and creating a new and potentially severe statutory damages
framework for violations of the CCPA and for businesses that fail to implement reasonable security procedures and practices to prevent
data breaches. Additionally in 2020, California voters passed the California Privacy Rights Act, or CPRA, which went into full effect
on January 1, 2023. The CPRA significantly amends the CCPA, potentially resulting in further uncertainty, additional costs and expenses
in an effort to comply and additional potential for harm and liability for failure to comply. Among other things, the CPRA established
a new regulatory authority, the California Privacy Protection Agency, which is tasked with enacting new regulations under the CPRA and
will have expanded enforcement authority. In addition to California, more U.S. states are enacting similar legislation, increasing compliance
complexity, and increasing risks of failures to comply. In 2023, comprehensive privacy laws in Virginia, Colorado, Connecticut, and Utah
all took effect, and laws in Montana, Oregon, and Texas will take effect in 2024. In addition, laws in other U.S. states are set to take
effect beyond 2024, and additional U.S. states have proposals under consideration, all of which are likely to increase our regulatory
compliance costs and risks, exposure to regulatory enforcement action and other liabilities. While these state privacy laws, like the
CCPA, also exempt some data processed in the context of clinical trials (and most also exempt employee and business personal data), these
developments further complicate compliance efforts, and increase legal risk and compliance costs for us and the third parties upon whom
we rely. The scope and enforcement of these laws is uncertain and subject to rapid change. For example, increasing concerns about health
information privacy have recently prompted the federal government to take a newly expansive view of the scope of existing privacy laws
and regulations. Congress and some states are considering (and in some cases have passed) new laws and regulations that further and more
broadly protect the privacy and security of personal health information.
The
interplay of federal and state laws may be subject to varying interpretations by courts and government agencies, creating complex compliance
issues for us and our clients and potentially exposing us to additional expense, adverse publicity and liability. Further, as regulatory
focus on privacy issues continues to increase and laws and regulations concerning the protection of personal information expand and become
more complex, these potential risks to our business could intensify.
In
the European Union, the General Data Protection Regulation (EU) 2016/679, or GDPR, lays down the legal framework for data protection and
privacy. The GDPR applies directly in all European Union member states (until December 31, 2020, this included the United Kingdom) and
applies to companies with an establishment in the European Economic Area, or EEA, and to certain other companies not in the EEA that process
personal data in relation to offering or providing goods or services to individuals located in the EEA, or monitor the behavior of individuals
located in the EEA. In the United Kingdom, the GDPR has been implemented into United Kingdom domestic law, pursuant to the Data Protection,
Privacy and Electronic Communications (Amendments etc.) (EU Exit) Regulations 2019 (as amended), which makes some minor technical amendments
to ensure the GDPR is operable in the United Kingdom, or the UK GDPR. The UK GDPR is also supplemented by the Data Protection Act 2018.
United Kingdom and European Union data protection law is therefore aligned. The GDPR and UK GDPR implement stringent operational requirements
for both controllers and processors of personal data, including, for example, expanded disclosures about how personal information is to
be used, limitations on retention of information, increased requirements pertaining to health data and pseudonymized (i.e., key-coded)
data, increased cyber security requirements, new rights for individuals to be “forgotten” and rights to data portability,
as well as enhanced current rights (e.g., access requests), mandatory data breach notification requirements and higher standards for controllers
to demonstrate that they have obtained a valid legal basis for certain data processing activities. In particular, medical or health data,
genetic data and biometric data are all classified as “special category” data under the GDPR and the UK GDPR, and afforded
greater protection and require additional compliance obligations. Further, the GDPR provides that European Union member states may make
their own further laws and regulations in relation to the processing of genetic, biometric or health data, which could result in differences
between member states, limit our ability to use and share personal data or could cause our costs to increase, and harm our business and
financial condition.
The
GDPR the UK GDPR also regulate the transfer of personal data subject to the GDPR or UK GDPR to so-called third countries that have not
been found by the European Commission to provide an adequate level of data protection. The GDPR and UK GDPR only permit exports of personal
data outside of the EU and UK, respectively, to “non-adequate” countries where there is a suitable data transfer mechanism
in place to safeguard personal data. As from 2020, legal developments in Europe have created complexity and uncertainty regarding such
transfers. For instance, on July 16, 2020, the Court of Justice of the European Union, or CJEU, invalidated, by means of the so-called
Schrems II judgment, the E.U.-U.S. Privacy Shield Framework, or the Privacy Shield, under which personal data could be transferred
from the EEA to U.S. entities who had self-certified under the Privacy Shield scheme. However, on July 10, 2023, the European Commission
adopted an adequacy decision for a new mechanism for transferring data from the European Union to the United States – the E.U.-U.S.
Data Privacy Framework, which provides E.U. individuals with several new rights, including the right to obtain access to their data, or
obtain correction or deletion of incorrect or unlawfully handled data, and allows U.S. companies to self-certify to the U.S. Department
of Commerce their compliance with a set of agreed privacy principles in order to freely receive E.U. personal data. The adequacy decision
followed the signing of an executive order in the U.S. introducing new binding safeguards to address the points raised in the Schrems
II judgment. Notably, the new obligations were geared to ensure that data can be accessed by U.S. intelligence agencies only to the
extent necessary and proportionate and to establish an independent and impartial redress mechanism to handle complaints from Europeans
concerning the collection of their data for national security purposes. The UK-US Data Bridge (the UK extension to the Data Privacy Framework)
came into force shortly after the E.U. – U.S. Data Privacy Framework, and provides UK individuals with similar rights. Organizations
that have not certified under the under the E.U. – U.S. Data Privacy Framework (or the UK-US Data Bridge) may utilize another data
transfer mechanism, such as the EU Commission approved Standard Contractual Clauses, or the UK equivalent, respectively. The European
Commission and the UK government will continually review developments in the United States along with their adequacy decisions. Consequently,
there is some risk of any data transfers from the EU and UK being halted. In addition, in June of 2021, the European Commission issued
a decision, which will sunset on June 27, 2025 without further action, that the United Kingdom ensures an adequate level of protection
for personal data transferred under the E.U. GDPR from the E.U. to the United Kingdom. Adequacy decisions can be adapted or even withdrawn
in the event of developments affecting the level of protection in the applicable jurisdiction.
Failure
to comply with European Union laws, including failure under the GDPR and UK GDPR, Data Protection Act 2018, ePrivacy Directive and other
laws relating to the security of personal data may result in fines up to €20 million (or £17.5 million under the UK GDPR)
or up to 4% of the total worldwide annual turnover of the preceding financial year, if greater, and other administrative penalties including
criminal liability, which may be onerous and adversely affect our business, financial condition, results of operations and prospects.
The GDPR and UK GDPR also confer a private right of action on data subjects and consumer associations to lodge complaints with supervisory
authorities, seek judicial remedies, and obtain compensation for damages resulting from violations of the GDPR and UK GDPR, respectively.
Failure to comply with the GDPR, UK GDPR, and related laws may lead to increased risk of private actions from data subjects and consumer
not-for-profit organizations, including a new form of class action that is available under the GDPR and UK GDPR. Further, if we have to
rely on third parties to carry out services for us, including processing personal data on our behalf, we are required under GDPR and UK
GDPR to enter into contractual arrangements to flow down or help ensure that these third parties only process such data according to our
instructions and have sufficient security measures in place. Any security breach or non-compliance with our contractual terms or breach
of applicable law by such third parties could result in enforcement actions, litigation, fines and penalties or adverse publicity and
could cause customers to lose trust in us, which would have an adverse impact on our reputation and business. Future customers or other
service providers may respond to these evolving laws and regulations by asking us to make certain privacy or data-related contractual
commitments that we are unable or unwilling to make. This could lead to the loss of future customers or other business relationships.
We may in the future be unable to retain
and recruit qualified scientists, key executives and directors, key employees or key consultants,
may delay our development efforts or otherwise harm our business.
Our future development and
prospects depend to a large degree on the experience, performance and continued service of our senior management team, including members
of our Board of Directors. We have invested in our management team at all levels. We have entered into contractual arrangements with our
directors and senior management team with the aim of securing the services of each of them. However, retention of these services or the
identification of suitable replacements cannot be guaranteed. There can be no guarantee that the services of the current directors and
senior management team will be retained, or that suitably skilled and qualified individuals can be identified and employed, which may
adversely impact our ability to develop our technologies and/or provide our services at the time requested by our customers or our ability
to market our services and technologies, and otherwise to grow our business, could be impaired. The loss of the services of any of the
directors or other members of the senior management team and the costs of recruiting replacements may have a material adverse effect on
us and our commercial and financial performance.
The ability to continue to
attract and retain employees with the appropriate expertise and skills also cannot be guaranteed. Finding and hiring any additional personnel
and replacements could be costly and might require us to grant significant equity awards or other incentive compensation, which could
adversely impact our financial results, and there can be no assurance that we will have sufficient financial resources to do so. Effective
product development and innovation, upon which our success is dependent, is in turn dependent upon attracting and retaining talented technical
and scientific personnel, who represent a significant asset and serve as the source of our technological and product innovations. If we
are unable to hire, train and retain such personnel in a timely manner, the development and introduction of our products could be delayed
and our ability to sell our products and otherwise to grow our business will be impaired and the delay and inability may have a detrimental
effect upon our performance.
Risks related to global public health concerns
Public health crises, such as the COVID-19
pandemic, have had, and could in the future have, a negative effect on our business.
Pandemics
or disease outbreaks, such as the COVID-19 pandemic, have created and may continue to create significant volatility, uncertainty and economic
disruption in the markets we operate in and may negatively impact business and healthcare activity globally. In response to the COVID-19
pandemic, governments around the world imposed measures designed to reduce the transmission of COVID-19 and individuals continue to respond
to the fear of contracting COVID-19. It is not possible to accurately predict the extent of the adverse effects of the pandemic on
our business. However, we have experienced certain impacts and may experience others which, if they continue for an extended period of
time, could have material adverse effects on our operations and the execution of our business plans. For example, we experienced some
delays in our clinical trials, in particular our Phase 1 trials of MTX110 in DMG at Columbia University and in medulloblastoma at the
University of Texas. Individuals defer seeking treatment, physicians have fewer in-person meetings to recruit and enroll patients, and
recruited patients are hindered by restrictions in traveling to and accessing clinical sites. In addition, resources at hospitals have
been diverted to dealing with the pandemic, causing delays in scheduling screening evaluations, implant procedures, and follow-up monitoring
visits. As a result of the foregoing factors, the expected timeline for data readouts of our clinical trials may be negatively impacted,
which would adversely affect our business.
The
extent to which fear of exposure to or actual effects of COVID-19, new variants, disease outbreak, epidemic or a similar widespread health
concern impacts our business will depend on future developments, which are highly uncertain and cannot be predicted with confidence, such
as the speed and extent of geographic spread of the disease, the duration of the outbreak, travel restrictions, the efficacy of vaccination
and treatment; impact on the United States, United Kingdom and international healthcare systems, the United States, United Kingdom and
worldwide economy; the timing, scope and effectiveness of United States, United Kingdom and international governmental response; and the
impact on the health, well-being and productivity of our employees. To the extent that pandemics or disease outbreak, such the COVID-19
pandemic, adversely affects our business and financial results, it may also have the effect of heightening many of the other risks described
in this “Risk Factors” section.
Risks related to our intellectual property
Our success depends in part on our ability
to protect rights in our intellectual property, which cannot be assured.
Our success and ability to
compete effectively are in large part dependent upon exploitation of proprietary technologies and products that we have developed internally
or have acquired or in-licensed. To date, we have relied on copyright, trademark and trade secret laws, as well as confidentiality procedures,
non-compete and/or work for hire invention assignment agreements and licensing arrangements with our employees, consultants, contractors,
customers and vendors, to establish and protect our rights to our technology and, to the best extent possible, control the access to and
distribution of our technology, software, documentation and other proprietary information, all of which offer only limited protection.
Where we have the right to do so under our agreements, we seek to protect our proprietary position by filing patent applications in the
United States, the United Kingdom and worldwide related to our novel technologies and products that are important to our business. The
patent positions of biotechnology and pharmaceutical companies generally are highly uncertain, involve complex legal and factual questions
and have in recent years been the subject of much litigation. As a result, the issuance, scope, validity, enforceability and commercial
value of our patents, including those patent rights licensed to us by third parties, are highly uncertain. There can be no assurance that:
| • | the scope of our patents provides and will provide us with exclusivity with respect to any or all of our
product candidates and technologies, as well as any other technologies and/or products that address the same problems as our technologies
and product candidates by a different means, whether in the same manner as us or not; |
| • | pending or future patent applications will be issued as patents; |
| • | our patents, and/or those patents to which we are licensed, are and will remain valid and enforceable
and will not be subject to invalidity or revocation proceedings and that such proceedings will not result in a complete or partial loss
of rights; |
| • | our entitlement to exploit patents from time to time (including patents registered solely in our name
or our affiliates’ name or in the joint names of us or an affiliate and a third party or patents which are licensed to us) is and
will be sufficient to protect our core intellectual property rights against third parties, our commercial activities from competition
or to support comprehensively our ability to develop and market our proposed products either now or in the future; |
| • | the lack of any particular patents or rights to exploit any particular patents, and the scope of our patents,
will not have a material adverse effect on our ability to develop and market our proposed product candidates, either now or in the future; |
| • | we have or will have the resources to pursue any infringer of: (i) patents registered in our name (whether
solely or jointly with a third party) from time to time; or (ii) patents licensed to us where we or an affiliate have the financial responsibility
to bring such infringement actions pursuant to the relevant license agreement; |
| • | we will develop technologies or product candidates which are patentable, either alone or in conjunction
with third parties; |
| • | the ownership, scope or validity of any patents registered in our name (either solely or jointly) from
time to time will not be challenged by third parties, including parties with whom we, or any affiliate, have entered into collaboration
projects or co-ownership arrangements and that any such challenge will not be successful; |
| • | any patent or patent application owned solely or jointly by us will not be challenged on grounds that
we failed to identify the correct inventors or that we failed to comply with our duty of disclosure to the United States Patent and Trademark
Office or any equivalent office in a foreign jurisdiction having a disclosure requirement; |
| • | any issued patent in our sole or joint name from time to time will not be challenged in one or more post-grant
proceedings, including but not limited to inter partes review, derivation proceedings, interferences, and that like; and that any
such challenge will not result in a complete or partial loss of rights to such issued patent or patents; |
| • | any patent applications in our sole or joint name from time to time will not be opposed by any third party,
including parties to collaboration, co-existence and any other contractual relationship with us or any of its members; |
| • | the license agreements between us and third parties are and will be valid and subsisting in the future
or until their expiry dates, and that we have complied with our contractual obligations under the license agreements; |
| • | all intellectual property capable of being commercialized that is or has been generated pursuant to collaboration
agreements between us and third parties will be or has been identified; |
| • | all intellectual property generated pursuant to collaboration agreements and to which we have a contractual
entitlement or generated by employees has been lawfully assigned into our sole name (or to one of our subsidiaries); |
| • | in respect of all intellectual property generated pursuant to a collaboration agreement between us and
a third party to which we and that third party have a joint contractual entitlement, that such intellectual property has been lawfully
assigned into joint names and the rights between us and that third party are properly regulated by a co-ownership agreement; and |
| • | beyond contractual warranties, the licensors of intellectual property to us or our affiliates own the
relevant patents and that those patents have not and will not be the subject of, or subject to, infringement, invalidity or revocation
actions. |
The steps we have taken to
protect our proprietary rights may not be adequate to preclude misappropriation of our proprietary information or infringement of our
intellectual property rights, both inside and outside of the United Kingdom and United States. The rights already granted under any of
our currently issued patents and those that may be granted under future issued patents may not provide us with the proprietary protection
or competitive advantages we are seeking. If we are unable to obtain and maintain patent protection for our technology and products, or
if the scope of the patent protection obtained is not sufficient, our competitors could develop and commercialize technology and products
similar or superior to ours, and our ability to successfully commercialize our technology and products may be adversely affected.
With respect to patent rights,
we do not know whether any of the pending patent applications for any of our licensed compounds will result in the issuance of patents
that protect our technology or products, or which will effectively prevent others from commercializing competitive technologies and products.
Although we have a number of issued patents covering our technology, our pending applications cannot be enforced against third parties
practicing the technology claimed in such applications unless and until a patent issues from such applications. Further, the examination
process may require us to narrow the claims, which may limit the scope of patent protection that may be obtained. Because the issuance
of a patent is not conclusive as to its inventorship, scope, validity or enforceability, issued patents that we own or have licensed from
third parties may be challenged in the courts or patent offices in the European Union, United Kingdom, the United States and other foreign
jurisdictions. Overall, such challenges may result in the loss of patent protection, the narrowing of claims in such patents, or the invalidity
or unenforceability of such patents, which could limit our ability to stop others from using or commercializing similar or identical technology
and products, or limit the duration of the patent protection for our technology and products. Protecting against the unauthorized use
of our patented technology, trademarks and other intellectual property rights is expensive, difficult and may in some cases not be possible.
In some cases, it may be difficult or impossible to detect third party infringement or misappropriation of our intellectual property rights,
even in relation to issued patent claims, and proving any such infringement may be even more difficult.
The patent prosecution process
is expensive and time-consuming, and we may not be able to file and prosecute all necessary or desirable patent applications at a reasonable
cost or in a timely manner. It is also possible that we will fail to identify patentable aspects of inventions made in the course of our
development and commercialization activities before it is too late to obtain patent protection on them. Further, given the amount of time
required for the development, testing and regulatory review of new product candidates, patents protecting such candidates might expire
before or shortly after such candidates are commercialized. We expect to seek extensions of patent terms where they are available in any
countries where we are prosecuting patents. However, the applicable authorities, including the FDA in the United States, and any equivalent
regulatory authority in other countries, may not agree with our assessment of whether such extensions are available, and may refuse to
grant extensions to our patents, or may grant more limited extensions than we request. If this occurs, our competitors may be able to
take advantage of our investment in development and clinical trials by referencing our clinical and preclinical data and launch their
product earlier than might otherwise be the case. Changes in either the patent laws or interpretation of the patent laws in the European
Union, the United Kingdom, the United States and other countries may diminish the value of our patents or narrow the scope of our patent
protection. The laws of foreign countries may not protect our rights to the same extent as the laws of the United Kingdom or the United
States, and these foreign laws may also be subject to change. Publication of discoveries in the scientific literature often lag behind
the actual discoveries, and patent applications typically are not published until 18 months after filing or, in some cases, not at all.
Therefore, we cannot be certain that we were the first to make the inventions claimed in our owned or licensed patents or pending patent
applications, or that we were the first to file for patent protection of such inventions.
Previously, in the United
States, assuming the other requirements for patentability are met, the first to make the claimed invention was entitled to the patent.
Outside the United States, the first to file a patent application is entitled to the patent. In March 2013, the United States transitioned
to a “first to file” system in which the first inventor to file a patent application will be entitled to the patent. Under
either the previous or current system, third parties will be allowed to submit prior art prior to the issuance of a patent by the United
States Patent and Trademark Office, and may become involved in opposition, derivation, reexamination, inter-partes review or interference
proceedings challenging our patent rights or the patent rights of others. An adverse determination in any such submission, proceeding
or litigation could reduce the scope of, or invalidate, our patent rights, which could adversely affect our competitive position with
respect to third parties.
Our commercial success depends, in part, upon our not infringing
intellectual property rights owned by others.
Although we believe that we
have proprietary platforms for our technologies and product candidates, we cannot determine with certainty whether any existing third
party patents or the issuance of any third party patents in the future would require us to alter our technology, obtain licenses or cease
certain activities. We may become subject to claims by third parties that our technology infringes their intellectual property rights,
in which case we will have no option other than to defend the allegation, which may be possible to resolve through negotiation or which
might result in court proceedings. An adverse outcome in any of these circumstances is that we might be subject to significant liabilities,
be required to cease using a technology or to pay license fees (both prospectively and retrospectively); and may be subject to the payment
of significant damages. We could incur substantial costs in any litigation or other proceedings relating to patent rights, even if it
is resolved in our favor. If the proceedings occur in the United States, it is likely that we will be responsible for our own legal costs,
no matter the outcome of the litigation. In contrast, in the United Kingdom, the losing party typically is ordered to pay the winning
party’s costs, although it is rare to have a complete recovery of all costs from the losing side. Some of our competitors may be
able to sustain the costs of complex litigation more effectively or for a longer time than we can because of their substantially greater
resources. In addition, uncertainties or threatened or actual disputes relating to any patent, patent application or other intellectual
property right (including confidential information) could have a material adverse effect on our ability to market a product, enter into
collaborations in respect of the affected products, or raise additional funds.
The policing of unauthorized
use of our patented technologies and product candidates is difficult and expensive. There can be no assurance that the steps we take will
prevent misappropriation of, or prevent an unauthorized third party from obtaining or using, the technologies, know-how and products we
rely on. In addition, effective protection may be unavailable or limited in some jurisdictions. Any misappropriation of our proprietary
technology, product candidates and intellectual property could have a negative impact on our business and our operating results. Litigation
may be necessary in the future to enforce or protect our rights or to determine the validity or scope of the proprietary rights of others.
Litigation could cause us to incur substantial costs and divert resources and management attention away from our daily business and there
can be no guarantees as to the outcome of any such litigation. In addition, a defendant in any such litigation may counterclaim against
us, resulting in additional time and expense to defend against such a counterclaim, which defense may not be successful.
We may become involved in lawsuits to protect
or enforce our intellectual property, which could be expensive, time consuming and unsuccessful.
Competitors may infringe on
our patents or misappropriate or otherwise violate our intellectual property rights. To counter infringement or unauthorized use, litigation
may be necessary in the future to enforce or defend our intellectual property rights, to protect our trade secrets or to determine the
validity and scope of our own intellectual property rights or the proprietary rights of others. This can be expensive and time consuming.
Many of our current and potential competitors have the ability to dedicate substantially greater resources to defend our intellectual
property rights than we can. Accordingly, despite our efforts, we may not be able to prevent third parties from infringing upon or misappropriating
our intellectual property. Litigation could result in substantial costs and diversion of management resources, which could harm our business
and financial results. In addition, in an infringement proceeding, a court may decide that a patent owned by or licensed to us is invalid
or unenforceable, or may refuse to stop the other party from using the technology at issue on the grounds that our patents do not cover
the technology in question. An adverse result in any litigation proceeding could put one or more of our patents at risk of being invalidated,
held unenforceable or interpreted narrowly. Furthermore, because of the substantial amount of discovery required in connection with intellectual
property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of
litigation.
Third parties may initiate legal proceedings
alleging that we are infringing their intellectual property rights, the outcome of which would be uncertain and could have a material
adverse effect on the success of our business.
Our commercial success depends
upon our ability and the ability of our collaborators and licensing partners to develop, manufacture, market and sell our product candidates,
and to use our proprietary technologies without infringing the proprietary rights of third parties. We may become party to, or threatened
with, future adversarial proceedings or litigation regarding intellectual property rights with respect to our products and technology.
Third parties may assert infringement claims against us based on existing patents or patents that may be granted in the future. If we
are found to infringe a third party’s intellectual property rights, we could be required to obtain a license from such third party
to continue developing and commercializing our products and technology. However, we may not be able to obtain any required license on
commercially reasonable terms or at all. Even if we are able to obtain a license, it may be non-exclusive, thereby giving our competitors
access to the same technologies licensed to us. We could be forced, including by court order, to cease commercializing the infringing
technology or product. In addition, in any such proceeding or litigation, we could be found liable for monetary damages. A finding of
infringement could prevent us from commercializing our product candidates or force us to cease some of our business operations, which
could materially harm our business. Any claims by third parties that we have misappropriated our confidential information or trade secrets
could have a similar negative impact on our business.
We may be subject to claims that our employees have wrongfully
used or disclosed alleged trade secrets of their former employers.
Many of our employees, including
our senior management, were previously employed at other biotechnology or pharmaceutical companies. Some of these employees, including
members of our senior management, executed proprietary rights, non-disclosure and non-competition agreements in connection with such previous
employment. Although we try to ensure that our employees do not use the proprietary information or know-how of others in their work for
us, we may be subject to claims that we or these employees have used or disclosed intellectual property, including trade secrets or other
proprietary information, of any such employee’s former employer. We are not aware of any threatened or pending claims related to
these matters or concerning the agreements with our senior management, but in the future litigation may be necessary to defend against
such claims. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property
rights or personnel. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a
potential distraction to management.
If we are unable to protect the confidentiality of our trade
secrets, our business and competitive position could be harmed.
In addition to seeking patents
for some of our technology and product candidates, we also rely on trade secrets, including unpatented know-how, technology and other
proprietary information, to maintain our competitive position. We seek to protect these trade secrets, in part, by entering into non-disclosure
and confidentiality agreements with parties who have access to them, such as our employees, corporate collaborators, outside scientific
collaborators, contract manufacturers, consultants, advisors and other third parties. We also enter into confidentiality and invention
or patent assignment agreements with our employees and consultants. Despite these efforts, any of these parties may breach the agreements
and disclose our proprietary information, including our trade secrets, and we may not be able to obtain adequate remedies for such breaches.
In addition, a court may determine that we failed to take adequate steps to protect our trade secrets, in which case it may not be possible
to enforce our trade secret rights. Enforcing a claim that a party illegally disclosed or misappropriated a trade secret is difficult,
expensive and time-consuming, and the outcome is unpredictable. In addition, some may be less willing or unwilling to protect trade secrets.
If any of our trade secrets were to be lawfully obtained or independently developed by a competitor, we would have no right to prevent
such competitor from using that technology or information to compete with us, which could harm our competitive position.
We may face potential product liability,
and, if successful claims are brought against us, we may incur substantial liability and costs. If the use of our product candidates harms
patients or is perceived to harm patients even when such harm is unrelated to our product candidates, our regulatory approvals could be
revoked or otherwise negatively impacted and we could be subject to costly and damaging product liability claims.
In carrying out our activities,
we may potentially face contractual and statutory claims, or other types of claims from customers, suppliers and/or investors. In addition,
we are exposed to potential product liability risks that are inherent in the research, development, production and supply of products.
Subjects enrolled in our clinical trials, consumers, healthcare providers or other persons administering or selling products based on
our and our collaborators’ technology may be able to bring claims against us based on the use of such products. If we cannot successfully
defend ourselves against claims that any product candidates commercialized caused injuries, we could incur substantial costs and liabilities.
Irrespective of their merits or actual outcome, liability claims may result in:
| • | decreased demand for any product candidates that we may develop; |
| • | withdrawal of clinical trial participants; |
| • | termination of clinical trials; |
| • | significant negative media attention and injury to our reputation; |
| • | significant costs to defend the related litigation; |
| • | substantial monetary awards to trial subjects or patients; |
| • | diversion of management and scientific resources from our business operations; and |
| • | the inability to commercialize any products that we may develop. |
While we have obtained product
liability coverage, our insurance coverage may not be sufficient to cover our entire product liability related expenses or losses and
may not cover us for any expenses or losses we may suffer. Moreover, insurance coverage is becoming increasingly expensive and, in the
future, we may not be able to maintain insurance coverage at a reasonable cost, in sufficient amounts or upon adequate terms to protect
us against losses due to product liability. If we determine that it is prudent to increase our product liability, we may be unable to
obtain this increased product liability insurance on commercially reasonable terms or at all. Large judgments have been awarded in class
action or individual lawsuits based on drugs that had unanticipated side effects, including side effects that may be less severe than
those of our products. A successful product liability claim or series of claims brought against us could cause the price of the Ordinary
Shares and/or Depositary Shares to decline and, if judgments exceed our insurance coverage, could decrease our cash and have a material
adverse effect our business, results of operations, financial condition and prospects.
Risks Related to our Relationships with Third
Parties
We rely on third parties to conduct our
preclinical and clinical trials. If these third parties do not successfully carry out their contractual duties or meet expected deadlines,
we may not be able to obtain regulatory approval for or commercialize our product candidates and our business could be substantially harmed.
We are, and may continue to
be, reliant on other parties for the successful development and commercialization of many of our product candidates. We rely upon CROs
and clinical investigators for the conduct of our clinical trials and upon contract laboratories for execution of our preclinical studies,
and we control only certain aspects of their activities. Nevertheless, we are responsible for ensuring that each of our studies and trials
is conducted in accordance with the applicable protocol and legal, regulatory and scientific standards, and our reliance on the CROs or
collaboration partners does not relieve us of our regulatory responsibilities. We also rely on third parties to assist in conducting our
preclinical studies in accordance with good laboratory practices, or GLP, and requirements with respect to animal welfare. We and our
CROs or collaboration or licensing partners are required to comply with GCP, which are regulations and guidelines enforced by the MHRA,
the FDA, the EMA and comparable foreign regulatory authorities for all of our products in clinical development. Regulatory authorities
enforce GCP regulations, and other regulations applicable to clinical trials and investigational drug or biological products, through
periodic inspections of trial sponsors, CROs, principal investigators and trial sites. If we or any of our CROs or partners fail to comply
with applicable GCP regulations or other clinical trial regulations, the data generated in our clinical trials may be deemed unreliable
and the EMA, the MHPA, the FDA or comparable foreign regulatory authorities may require us to perform additional clinical trials before
approving our marketing applications. We cannot be assured that upon inspection by a given regulatory authority, that such regulatory
authority will determine that any of our clinical trials comply with GCP requirements or other applicable regulations. In addition, our
clinical trials must be conducted with product produced under cGMP requirements. Failure to comply with these regulations may require
us to repeat preclinical and clinical trials, which would delay the regulatory approval process.
Our CROs and other contractors
or collaborators are not our employees, and except for remedies available to us under such agreements with such CROs, we cannot control
whether or not they devote sufficient time and resources to our on-going or future clinical or nonclinical programs, as applicable. If
CROs do not successfully carry out their contractual duties or obligations or meet expected deadlines or if the quality or accuracy of
the clinical data they obtain is compromised due to the failure to adhere to our clinical protocols, regulatory requirements or for other
reasons, then our clinical trials may be extended, delayed or terminated and we may not be able to obtain regulatory approval for or successfully
commercialize our product candidates. As a result, our results of operations and the commercial prospects for our product candidates would
be harmed, our costs could increase and our ability to generate revenues could be delayed.
If any of our relationships
with these third parties terminate, we may not be able to enter into arrangements with alternative third parties on commercially reasonable
terms, or at all. Entering into arrangements with alternative CROs, clinical trial investigators or other third parties involves additional
cost and requires management focus and time, in addition to requiring a transition period when a new CRO, clinical trial investigator
or other third party begins work. If third parties do not successfully carry out their contractual duties or obligations or meet expected
deadlines, if they need to be replaced or if the quality or accuracy of the clinical data they obtain are compromised due to the failure
to adhere to our clinical protocols, regulatory requirements or for other reasons, any clinical trials such third parties are associated
with may be extended, delayed or terminated, and we may not be able to obtain marketing approval for or successfully commercialize our
product candidates. As a result, we believe that our financial results and the commercial prospects for our product candidates in the
subject indication would be harmed, our costs could increase and our ability to generate revenue could be delayed.
Because we have relied on
third parties, our internal capacity to perform these functions is limited. Outsourcing these functions involves risk that third parties
may not perform to our standards, may not produce results in a timely manner or may fail to perform at all. In addition, the use of third-party
service providers requires us to disclose our proprietary information to these parties, which could increase the risk that this information
will be misappropriated. We currently have a small number of employees, which limits the internal resources we have available to identify
and monitor our third-party providers. To the extent we are unable to identify and successfully manage the performance of third-party
service providers in the future, our business may be adversely affected. Though we carefully manage our relationships with our CROs, there
can be no assurance that we will not encounter similar challenges or delays in the future or that these delays or challenges will not
have a material adverse impact on our business, financial condition and prospects.
We rely on third parties to manufacture
our product candidates, and we expect to continue to rely on third parties for the clinical as well as any future commercial supply of
our product candidates and other future product candidates. The development of our current and future product candidates, and the commercialization
of any approved products, could be stopped, delayed or made less profitable if any such third party fails to provide us with sufficient
clinical or commercial quantities of such product candidates or products, fails to do so at acceptable quality levels or prices or fails
to achieve or maintain satisfactory regulatory compliance.
We do not currently have,
and we do not plan to build, the infrastructure or capability internally to manufacture current product candidates or any future product
candidates for use in the conduct of our clinical trials or, if approved, for commercial supply. We rely on, and expect to continue to
rely on, contract manufacturing organizations, or CMOs. Reliance on third-party contractors may expose us to more risk than if we were
to manufacture our product candidates ourselves. Although our agreements with CMOs require them to perform according to certain cGMP requirements
such as those relating to quality control, quality assurance, maintenance of production and testing records, and qualified personnel,
we do not control the manufacturing processes of our CMOs, and we are dependent on such CMOs for the production of our product candidates
in accordance with cGMP and other relevant applicable regulations.
In complying with the manufacturing
regulations of the FDA and other comparable foreign regulatory authorities, we and our third-party manufacturers must spend significant
time, money and effort in the areas of design and development, testing, production, record-keeping and quality control to assure that
the product candidates meet applicable specifications and other regulatory requirements. If either we or our CMOs fail to comply with
these requirements, we may be subject to regulatory enforcement action, including the seizure of product candidates and shutting down
of production.
Even if we are able to establish
and maintain agreements with third-party manufacturers, reliance on third-party manufacturers entails additional risks, including:
| • | reliance on the third party for regulatory, compliance and quality assurance; |
| • | the possible breach of the manufacturing agreement by the third party; |
| • | the possible misappropriation of our proprietary information, including our trade secrets and know-how;
and |
| • | the possible termination or nonrenewal of the agreement by the third party at a time that is costly or
inconvenient for us. |
We or our third-party manufacturers
may encounter shortages in the raw materials or APIs necessary to produce our product candidates in the quantities needed for our clinical
trials or, if our product candidates are approved, in sufficient quantities for commercialization or to meet an increase in demand, as
a result of capacity constraints or delays or disruptions in the market for the raw materials or active pharmaceutical ingredients, including
shortages caused by the purchase of such raw materials or APIs by our competitors or others. The failure by us or our third-party manufacturers
to obtain the raw materials or APIs necessary to manufacture sufficient quantities of our product candidates, may have a material adverse
effect on our business.
Our third-party manufacturers
are subject to inspection and approval by regulatory authorities before we can commence the manufacture and sale of any of our product
candidates, and thereafter are subject to ongoing inspection from time to time. Our third-party manufacturers may not be able to comply
with cGMP regulations or similar regulatory requirements outside of the United States. Our failure, or the failure of our third-party
manufacturers, to comply with applicable regulations could result in regulatory actions, such as the issuance of notices of inspectional
observations, warning letters or sanctions being imposed on us, including clinical holds, fines, injunctions, civil penalties, delays,
suspension or withdrawal of approvals, license revocation, seizures or recalls of product candidates or commercial products (if any),
operating restrictions and criminal prosecutions, any of which could significantly and adversely affect supplies of our products. If any
of our third-party suppliers fails to comply with cGMP or other applicable manufacturing regulations, our ability to develop and commercialize
our product candidates could suffer significant interruptions.
Any disruption, such as a
fire, natural hazards or vandalism at our CMOs, or any impacts on our CMOs due to health pandemics, could significantly interrupt our
manufacturing capability. We currently do not have alternative production plans in place or disaster-recovery facilities available. In
case of a disruption, we will have to establish alternative manufacturing sources. This would require substantial capital on our part,
which we may not be able to obtain on commercially acceptable terms or at all. Additionally, we would likely experience months of manufacturing
delays as we build facilities or locate alternative suppliers and seek and obtain necessary regulatory approvals. If this occurs, we will
be unable to satisfy manufacturing needs on a timely basis, if at all. If changes to CMOs occur, then there also may be changes to manufacturing
processes inherent in the setup of new operations for our product candidates and any products that may obtain approval in the future.
Any such changes could require the conduct of bridging studies and regulatory approval before we can use any materials produced at new
facilities or under new processes in clinical trials or, for any products reaching approval, in our commercial supply. Further, business
interruption insurance may not adequately compensate us for any losses that may occur and we would have to bear the additional cost of
any disruption. For these reasons, a significant disruptive event of any CMOs could have drastic consequences, including placing our financial
stability at risk.
Our product candidates and
any drugs that we may develop may compete with other product candidates and drugs for access to manufacturing facilities. There are no
assurances we would be able to enter into similar arrangements, on acceptable terms, with other manufacturers that operate under cGMP
regulations and that might be capable of manufacturing for us. Any performance failure on the part of our existing or future manufacturers
could delay clinical development or marketing approval.
If we were to experience an
unexpected loss of supply of or if any supplier were unable to meet our clinical or commercial demand for any of our product candidates,
we could experience delays in our planned clinical studies or commercialization. We could be unable to find alternative suppliers of acceptable
quality and experience that can produce and supply appropriate volumes at an acceptable cost or on favorable terms. Moreover, our suppliers
are often subject to strict manufacturing requirements and rigorous testing requirements, which could limit or delay production. The long
transition periods necessary to switch manufacturers and suppliers, if necessary, would significantly delay our clinical trials and, for
any product candidates that reach approval, the commercialization of our products, which would materially adversely affect our business,
financial condition and results of operation.
We are dependent on third party suppliers,
and if we experience problems with any of these third parties, the manufacturing of our product candidates could be delayed, which could
harm our results of operations.
We are dependent upon certain
qualified suppliers, of which there are a limited number, for the supply of raw materials, components, devices and manufacturing equipment,
some of which are manufactured or supplied by small companies with limited resources and experience to support commercial pharmaceutical
and biologics production. Additionally, these suppliers may also have upstream suppliers who supply materials, components, devices and
manufacturing equipment, which may indirectly impact our business operations. Thus, the success of our business may be adversely affected
by the underperformance of third parties, exploitation by third parties of our commercial dependence and by unforeseen interruptions to
third parties’ businesses. Although the existence of several alternative suppliers for each function mitigates the risks associated
with this dependence, as does the availability of commercial insurance in respect of the impact of accidental events, the failure of a
third party to properly to carry out their contractual duties or regulatory obligations could be highly disruptive to our business. Supply
chain failures can result in significant clinical or commercial supply interruptions which could materially hamper our ability to conduct
clinical trials or to supply adequate commercial supplies (if any of our product candidates receive marketing authorization), and efforts
to qualify new suppliers can be costly and time consuming. Further, any action taken by a third party that is detrimental to our reputation
could have a negative impact on our ability to register our trademarks and/or market and sell our products, if any.
For some of these raw materials,
components, devices and manufacturing equipment, we rely and may in the future rely on sole source vendors or a limited number of vendors.
The supply of the reagents and other specialty materials and equipment that are necessary to produce our product candidates could be reduced
or interrupted at any time. In such case, identifying and engaging an alternative supplier or manufacturer could result in delay, and
we may not be able to find other acceptable suppliers or manufacturers on acceptable terms, or at all. Switching suppliers or manufacturers
may involve substantial costs and is likely to result in a delay in our desired clinical and commercial timelines. If any of our product
candidates receive marketing authorization and we change suppliers or manufacturers for commercial production, applicable regulatory agencies
must approve such changes and may require us to conduct additional studies or trials. If key suppliers or manufacturers are lost, or if
the supply of the materials is diminished or discontinued, we may not be able to develop, manufacture and market our product candidates
in a timely and competitive manner, or at all. An inability to continue to source product from any of these suppliers, which could be
due to a number of issues, including regulatory actions or requirements affecting the supplier, adverse financial or other strategic developments
experienced by a supplier, labor disputes or shortages, unexpected demands or quality issues, could adversely affect our ability to satisfy
demand for our product candidates, which could adversely and materially affect our product approval or commercialization plans and operating
results or our ability to conduct clinical trials, either of which could significantly harm our business.
As we continue to develop
our product candidates and manufacturing processes, we expect that we will need to obtain rights to and supplies of certain materials
and equipment to be used as part of that process. We may not be able to obtain rights to such materials on commercially reasonable terms,
or at all, and if we are unable to alter our process in a commercially viable manner to avoid the use of such materials or find a suitable
substitute, it would have a material adverse effect on our business. Even if we are able to alter our process so as to use other materials
or equipment, such a change may lead to a delay in our clinical development and/or commercialization plans. If such a change occurs for
product candidate that is already in clinical testing, the change may require us to perform both in vitro or in vivo comparability studies
and to collect additional data from patients prior to undertaking more advanced clinical trials. These factors could cause the delay of
studies or trials, regulatory submissions, required approvals or commercialization of product candidates that we develop, cause us to
incur higher costs and prevent us from commercializing our product candidates successfully.
Our counterparties may become insolvent.
There is a risk that parties
with whom we trade or have other business relationships with (including partners, joint venturers, customers, suppliers, subcontractors
and other parties) may become insolvent. This may be due to general economic conditions or factors specific to that company. In the event
that a party with whom we trade becomes insolvent, this could have an adverse impact on our revenues and profitability.
Our relationships with customers, healthcare
providers, physicians, prescribers, purchasers, third party payors, charitable organizations and patients are subject to applicable anti-kickback,
fraud and abuse and other healthcare laws and regulations, which could expose us to criminal sanctions, civil penalties, contractual damages,
reputational harm and diminished profits and future earnings.
Although we do not currently
have any products on the market, upon commercialization of any of our product candidates, if approved, we will be subject to additional
healthcare statutory and regulatory requirements and oversight by federal and state governments in the United States as well as foreign
governments in the jurisdictions in which we conduct our business. Healthcare providers, physicians and third-party payors in the United
States and elsewhere play a primary role in the recommendation and prescription of drug and biological products. Arrangements with third-party
payors and customers can expose pharmaceutical manufacturers to broadly applicable fraud and abuse and other healthcare laws and regulations,
including, without limitation, the federal Anti-Kickback Statute, or AKS, and the False Claims Act, or FCA, which may constrain the business
or financial arrangements and relationships through which such companies sell, market and distribute pharmaceutical products. In particular,
the research of any of our product candidates, as well as the promotion, sales and marketing of healthcare items and services, as well
as certain business arrangements in the healthcare industry, are subject to extensive laws designed to prevent fraud, kickbacks, self-dealing
and other abusive practices. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion,
structuring and commission(s), certain customer incentive programs and other business arrangements generally. Activities subject to these
laws also involve the improper use of information obtained in the course of patient recruitment for clinical trials.
The healthcare laws that may
affect us include: the federal fraud and abuse laws, including the AKS; false claims and civil monetary penalties laws, including the
FCA and Civil Monetary Penalties Law; federal data privacy and security laws, including HIPAA, as amended by HITECH; and the federal Physician
Payments Sunshine Act related to ownership and investment interests held by physicians and their immediate family members, as well as
payments and/or other transfers of value made to physicians, certain advanced non-physician healthcare practitioners and teaching hospitals.
In addition, many states have similar laws and regulations that may differ from each other and federal law in significant ways, thus complicating
compliance efforts. Moreover, several states require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary
compliance guidelines and the relevant compliance guidance promulgated by the federal government and may require manufacturers to report
information related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures. Additionally,
some state and local laws require the registration of pharmaceutical sales representatives in the jurisdiction.
The scope and enforcement
of each of these laws is uncertain and subject to rapid change in the current environment of healthcare reform, especially in light of
the lack of applicable precedent and regulations. Ensuring business arrangements comply with applicable healthcare laws, as well as responding
to possible investigations by government authorities, can be time- and resource-consuming and can divert a company’s attention from
other aspects of its business.
It is possible that governmental
and enforcement authorities will conclude that our business practices may not comply with current or future statutes, regulations or case
law interpreting applicable fraud and abuse or other healthcare laws and regulations. If any such actions are instituted against us, and
we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business, including
the imposition of significant civil, criminal and administrative penalties, damages, fines, disgorgement, imprisonment, reputational harm,
possible exclusion from participation in federal and state funded healthcare programs, contractual damages and the curtailment or restricting
of our operations, as well as additional reporting obligations and oversight if we become subject to a corporate integrity agreement or
other agreement to resolve allegations of non-compliance with these laws. Further, if any of the physicians or other healthcare providers
or entities with whom we expect to do business is found not to be in compliance with applicable laws, they may be subject to significant
criminal, civil or administrative sanctions, including exclusions from government funded healthcare programs. Any action for violation
of these laws, even if successfully defended, could cause a pharmaceutical manufacturer to incur significant legal expenses and divert
management’s attention from the operation of the business. Therefore, even if we are successful in defending against any such actions
that may be brought against us, our business may be impaired. Prohibitions or restrictions on sales or withdrawal of future marketed products
could materially affect business in an adverse way.
Risks Related to Ownership of Our Securities and Our Status as a
U.S. Listed Company
If we cannot meet NASDAQ’s continued
listing requirements, NASDAQ may delist our Depositary Shares, which could have an adverse impact on the liquidity and market price of
our Depositary Shares.
Our
Depositary Shares are currently listed on the NASDAQ Capital Market. We are required to meet certain qualitative and financial tests to
maintain the listing of the Depositary Shares on the NASDAQ Capital Market. On August 27, 2024, we received a Letter from the Listing
Qualifications Department of NASDAQ, notifying us of the Staff’s determination to delist our securities from the NASDAQ Capital
Market because our securities had not complied with the Minimum Bid Price Requirement. Normally, a company would be afforded a 180-calendar
day period to demonstrate compliance with the Minimum Bid Price Requirement. However, pursuant to NASDAQ Listing Rule 5810(c)(3)(A)(iv),
we were not eligible for any compliance period specified in Rule 5810(c)(3)(A) because we effected reverse stock splits over the prior
two-year period with a cumulative ratio of 250 shares or more to one. Accordingly, and as described in the Letter, unless we timely requested
a hearing before the Panel, our securities would be subject to suspension/delisting. We requested a hearing, which automatically stayed
any suspension or delisting action pending the hearing and the expiration of any additional extension period granted by the Panel following
the hearing.
On October 14, 2024, the Panel
granted our request for an extension of time to demonstrate compliance with the Minimum Bid Price Requirement. On November 7, 2024, we
were formally notified that the Panel determined that we had regained compliance with the Minimum Bid Price Requirement. We remain subject
to a discretionary panel monitor through February 24, 2025, and we are required to provide prompt notification during this exception period
of any significant events that occur during this time that may affect our compliance with NASDAQ requirements.
While we have regained compliance
with all applicable requirements for continued listing on the NASDAQ Capital Market, we cannot assure you that we will remain in compliance
with all applicable requirements for continued listing on the NASDAQ Capital Market. If, in the future, we fail to sustain compliance
with all applicable requirements for continued listing on NASDAQ, including during the one-year monitoring period, our Depositary Shares
may be subject to delisting by NASDAQ. This could inhibit the ability of our holders of Depositary Shares to trade their shares in the
open market, thereby severely limiting the liquidity of such shares. Although holders may be able to trade their shares of Depositary
Shares on the over-the-counter market, there can be no assurance that this would occur. Further, the over-the-counter market provides
significantly less liquidity than NASDAQ and other national securities exchanges, is thinly traded and highly volatile, has fewer market
makers and is not followed by analysts. As a result, your ability to trade or obtain quotations for these securities may be more limited
than if they were quoted on NASDAQ or other national securities exchanges.
The price of our Depositary Shares may be
volatile.
The trading price of our Depositary
Shares in the United States has fluctuated, and is likely to continue to fluctuate, substantially in response to various factors, some
of which are beyond our control, including limited trading volume. The stock market in general, and the market for pharmaceutical and
biotechnology stocks in particular, have experienced extreme volatility that has often been unrelated to the operating performance of
these companies. As a result of this volatility, investors may not be able to sell their Depositary Shares at or above the price paid
for the Depositary Shares. In addition, there is no current market for our Ordinary Shares and we do not expect to list our Ordinary Shares
on any exchange or have them quoted for trading on any over-the-counter trading system in the foreseeable future.
In addition to the factors
discussed in this “Risk Factors” section, the factors that could cause volatility in the market price of each Depositary
Share include:
| • | the success of competitive products or technologies; |
| • | actual or anticipated changes in our growth rate relative to our competitors; |
| • | announcements by us or our competitors of new products, significant acquisitions, strategic partnerships,
joint ventures, collaborations or capital commitments; |
| • | the progress of preclinical development, laboratory testing and clinical trials of our product candidates
or those of our competitors; |
| • | the results from our clinical programs and any future trials we may conduct; |
| • | developments in the clinical trials of potentially similar competitive products; |
| • | EMA, MHRA, FDA or international regulatory or legal developments; |
| • | failure of any of our product candidates, if approved, to achieve commercial success; |
| • | developments or disputes concerning patent applications, issued patents or other proprietary intellectual
property rights; |
| • | the recruitment or departure of key personnel; |
| • | the level of expenses related to any of our product candidates or clinical development programs; |
| • | litigation or public concern about the safety of our products; |
| • | actual or anticipated changes in estimates as to financial results, development timelines or recommendations
by securities analysts; |
| • | actual and anticipated fluctuations in our operating results; |
| • | variations in our financial results or those of companies that are perceived to be similar to us; |
| • | share price and volume fluctuations attributable to inconsistent trading volume levels of our shares; |
| • | announcements or expectations of additional financing efforts; |
| • | rumors relating to us or our competitors; |
| • | sales of our Depositary Shares by us, our insiders or our other shareholders; |
| • | changes in the structure of healthcare payment systems; |
| • | market conditions in the pharmaceutical and biotechnology sectors, or general volatility in the market
due to other factors; |
| • | third party reimbursement policies; |
| • | Brexit and any resulting economic or currency volatility; |
| • | developments concerning current or future collaborations, strategic alliances, joint ventures or similar
relationships; and |
| • | reviews of long-term values of our assets, which could lead to impairment charges that could reduce our
earnings. |
These and other market and
industry factors may cause the market price and demand for our Depositary Shares to fluctuate substantially, regardless of our actual
operating performance, which may limit or prevent investors from selling their Depositary Shares at or above the price paid for the Depositary
Shares, and may otherwise negatively affect the liquidity of our Ordinary Shares and Depositary Shares. The realization of
any of the above risks or any of a broad range of other risks, including those described in these “Risk Factors,” could
have a dramatic and material adverse impact on the market price of our Depositary Shares.
The liquidity of our Depositary Shares may
have an adverse effect on share price.
In October 2024, we changed
the ratio of our Ordinary Shares to Depositary Shares, which had the effect of a one-for-25 reverse split of Depositary Shares and reduced
the amount of Depositary Shares publicly traded. There is a risk that there may not be sufficient liquidity in the market to accommodate
significant increases in selling activity or the sale of a large block of our securities. Our Depositary Shares have historically had
limited trading volume, which may also result in volatility.
We may be subject to securities litigation, which is expensive
and could divert management attention.
The market price of our Depositary
Shares may be volatile, and in the past, some companies that have experienced volatility in the market price of their stock have been
subject to securities class action litigation. Any lawsuit to which we are a party, with or without merit, may result in an unfavorable
judgment. We also may decide to settle lawsuits on unfavorable terms.
Any such negative outcome
could result in payments of substantial damages or fines, damage to our reputation or adverse changes to our business practices. Defending
against litigation is costly and time consuming, and could divert our management’s attention and our resources. Furthermore, during
the course of litigation, there could be negative public announcements of the results of hearings, motions or other interim proceedings
or developments, which could have a negative effect on the market price of our Depositary Shares.
Shareholder ownership interests in the Company
may be diluted as a result of, among other things, future financings and/or additional acquisitions, and may have a material negative
effect on the market price of our securities.
We may seek to raise additional
funds from time to time in public or private issuances of equity and such financings may take place in the near future or over the longer
term. Sales of our securities offered through future equity offerings may result in substantial dilution to the interests of our current
shareholders. The sale of a substantial number of securities to investors, or anticipation of such sales, could make it more difficult
for us to sell equity or equity-related securities in the future at a time and at a price that we might otherwise wish to effect sales.
We may also issue Ordinary
Shares (and Depositary Shares underlying such Ordinary Shares) or other securities convertible into Ordinary Shares from time to time
for future acquisitions, including acquisitions of licenses. The issuance of the securities underlying these instruments, or perception
that issuance may occur, will have a dilutive impact on other shareholders and could have a material negative effect on the market price
of our Depositary Shares.
If equity research analysts do not publish
research or publish inaccurate or unfavorable research about our business, our stock price and trading volume could decline.
The trading market for our
securities will depend in part on the research and reports that equity research analysts publish about us or our business. If
no or few equity research analysts cover our Company, the trading price for our securities would
be negatively impacted. We do not have any control over the analysts or the content and opinions included in their reports. The price
of our securities could decline if one or more equity research analysts downgrade our securities
or issue other unfavorable commentary or research about us. If one or more equity research analysts
ceases coverage of us or fails to publish reports on us regularly, demand for our securities could
decrease, which in turn could cause the trading price or trading volume of our securities to
decline.
The rights of holders of Depositary Shares
are not the same as the rights of holders of Ordinary Shares.
We are a public limited company
incorporated under the laws of England and Wales. The Depositary Shares represent a beneficial ownership interest in our Ordinary Shares.
The rights of holders of Depositary Shares are governed by English law, our constitutional documents, and the deposit agreement pursuant
to which the Depositary Shares are issued. The rights and terms of the Depositary Shares are designed to replicate, to the extent reasonably
practicable, the rights attendant to the Ordinary Shares, for which there is currently no active trading market in the United States.
However, because of aspects of United Kingdom law, our constitutional documents and the terms of the deposit agreement, the rights of
holders of Depositary Shares will not be identical to and, in some respects, may be less favorable than, the rights of holders of Ordinary
Shares.
You may not have the same voting rights
as the holders of our Ordinary Shares and may not receive voting materials in time to be able to exercise your right to vote.
Holders of our Depositary
Shares do not have the same rights as shareholders who hold our Ordinary Shares directly and may only exercise their voting rights with
respect to the underlying Ordinary Shares in accordance with the provisions of the deposit agreement. Holders of the Depositary Shares
will appoint the Depositary or its nominee as their representative to exercise the voting rights attaching to the Ordinary Shares represented
by the Depositary Shares. When a general meeting is convened, if you hold Depositary Shares, you may not receive sufficient notice of
a shareholders’ meeting to permit you to withdraw the Ordinary Shares underlying your Depositary Shares to allow you to vote with
respect to any specific matter. Further, we cannot assure purchasers of Depositary Shares that they will receive voting materials in time
to instruct the Depositary to vote, and it is possible that they, or persons who hold their Depositary Shares through brokers, dealers
or other third parties, will not have the opportunity to exercise a right to vote. Furthermore, the Depositary will not be liable for
any failure to carry out any instructions to vote, for the manner in which any vote is cast or for the effect of any such vote. As a result,
purchasers of Depositary Shares may not be able to exercise their right to vote and they may lack recourse if their Depositary Shares
are not voted as they request.
You may not receive distributions on Ordinary Shares represented
by Depositary Shares or any value for them if it is illegal or impractical to make them available to holders of Depositary Shares.
The Depositary of the Depositary
Shares has agreed to pay to you distributions with respect to cash or other distributions it or the custodian receives on Ordinary Shares
or other deposited securities after deducting its agreed fees and expenses. You will receive these distributions in proportion to the
number of Ordinary Shares your Depositary Shares represent. However, the Depositary is not responsible if it decides that it is unlawful
or impractical to make a distribution available to any holders of Depositary Shares. We have no obligation to take any other action to
permit the distribution of our Depositary Shares, Ordinary Shares, rights or anything else to holders of our Depositary Shares. As a result,
you may not receive the distributions made on Ordinary Shares or any value from them if it is illegal or impractical for us to make them
available to you. These restrictions may have a material adverse effect on the value of your Depositary Shares.
You may be subject to limitations on transfer of your Depositary
Shares.
Your Depositary Shares are
transferable on the books of the Depositary. However, the Depositary may close its books at any time or from time to time when it deems
expedient in connection with the performance of its duties. The Depositary may refuse to deliver, transfer or register transfers of your
Depositary Shares generally when our books or the books of the Depositary are closed, or at any time if we or the Depositary deems it
advisable to do so because of any requirement of law or government or governmental body, or under any provision of the deposit agreement,
or for any other reason.
We have no present intention to pay dividends
on our Ordinary Shares in the foreseeable future and, consequently, your only opportunity to achieve a return on your investment during
that time may be if the price of Depositary Shares appreciates.
We have no present intention
to pay dividends on our Ordinary Shares in the foreseeable future. Any determination by our Board of Directors to pay dividends will depend
on many factors, including our financial condition, results of operations, legal requirements and other factors. Accordingly, if the price
of the Depositary Shares falls in the foreseeable future and you sell your Depositary Shares, you will lose money on your investment,
without the likelihood that this loss will be offset in part or at all by cash dividends.
We are a non-accelerated filer, and the reduced reporting obligations
applicable to non-accelerated filers may make our securities less attractive to investors.
We are a “non-accelerated
filer” under the rules of the SEC. For as long as we remain a “non-accelerated filer,” our independent registered public
accounting firm is not required to deliver an annual attestation report on the effectiveness of our internal control over financial reporting.
We will cease to be a non-accelerated filer if (a) the aggregate market value of our outstanding Ordinary Shares held by non-affiliates
as of the last business day of our most recently completed second fiscal quarter is $75 million or more and we reported annual net revenues
of greater than $100 million for our most recently completed fiscal year or (b) the aggregate market value of our outstanding
Ordinary Shares held by non-affiliates as of the last business day of our most recently completed second fiscal quarter is $700 million
or more, regardless of annual net revenues. If we cease to be a non-accelerated filer, we would be subject to the requirement
for an annual attestation report by our independent registered public accounting firm on the effectiveness of our internal control over
financial reporting. We cannot predict whether investors will find our securities less attractive if we rely on this exemption. If some
investors find our securities less attractive as a result, there may be a less active trading market for our securities and our stock
price may be more volatile and may decline.
Our disclosure controls and procedures may
not prevent or detect all errors or acts of fraud.
We are subject to certain
periodic reporting requirements of the Exchange Act. We design our disclosure controls and procedures to reasonably assure that information
we are required to disclose in reports we file or submit under the Exchange Act is accumulated and communicated to management, recorded,
processed, summarized and reported within the time periods specified in the rules and forms of the SEC. We believe that any disclosure
controls and procedures or internal controls and procedures, no matter how well conceived and operated, can provide only reasonable, not
absolute, assurance that the objectives of the control system are met. These inherent limitations include the realities that judgments
in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented
by the individual acts of some persons, by collusion of two or more people, or by an unauthorized override of the controls. Accordingly,
because of the inherent limitations in our control system, misstatements or insufficient disclosure due to error or fraud may occur and
we may not detect them.
Any failure to maintain effective
internal controls and procedures over financial reporting could severely inhibit our ability to accurately report our financial condition,
results of operations or cash flows.
We are incurring increased costs as a result
of operating as a public company, and management will be required to devote substantial time to new compliance initiatives.
We are a public company, and
as such we are incurring significant legal, accounting and other expenses that we did not incur as a private company. We are currently
subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Protection Act,
as well as rules adopted, and to be adopted, by the SEC and the NASDAQ. Our management and other personnel will need to devote a substantial
amount of time to these compliance initiatives. Moreover, we expect these rules and regulations to substantially increase our legal and
financial compliance costs and to make some activities more time-consuming and costly. For example, we expect these rules and regulations
to make it more difficult and more expensive for us to obtain director and officer liability insurance and we may be required to incur
substantial costs to maintain the sufficient coverage. We cannot predict or estimate the amount or timing of additional costs we may incur
to respond to these requirements. The impact of these requirements could also make it more difficult for us to attract and retain qualified
persons to serve on our Board of Directors, our board committees or as members of our senior management.
Risks Related to Investing in a Foreign Private Issuer or United
Kingdom Company
We are a “foreign private issuer”
under the rules and regulations of the SEC and, as a result, are exempt from a number of rules under the Exchange Act and are permitted
to file less information with the SEC than a company incorporated in the United States.
We are incorporated as a public
limited company in England and Wales and are deemed to be a “foreign private issuer” under the rules and regulations of the
SEC. As a foreign private issuer, we are exempt from certain rules under the Exchange Act that would otherwise apply if we were a company
incorporated in the United States, including:
| • | the requirement to file periodic reports and financial statements with the SEC as frequently or as promptly
as United States companies with securities registered under the Exchange Act; |
| • | the requirement to file financial statements prepared in accordance with U.S. GAAP; |
| • | the proxy rules, which impose certain disclosure and procedural requirements for proxy or consent solicitations;
and |
| • | the requirement to comply with Regulation FD, which imposes certain restrictions on the selective disclosure
of material information. |
In addition, our officers,
directors and principal shareholders are exempt from the reporting and “short-swing” profit recovery provisions of Section
16 of the Exchange Act and the related rules with respect to their purchases and sales of Ordinary Shares and Depositary Shares. Accordingly,
you may receive less information about us than you would receive about a public company incorporated in the United States and may be afforded
less protection under the United States federal securities laws than you would be if we were incorporated in the United States.
Additional reporting requirements may apply if we lose our status
as a foreign private issuer.
As a foreign private issuer,
we are not required to comply with all of the periodic disclosure and current reporting requirements of the Exchange Act applicable to
U.S. domestic issuers. In order to maintain our current status as a foreign private issuer, either (1) a majority of our voting
securities must be either directly or indirectly owned of record by non-residents of the United States or (2)(a) a majority of our
executive officers or directors cannot be U.S. citizens or residents, (b) more than 50% of our assets must be located outside the
United States and (c) our business must be administered principally outside the United States.
If we lose our status as a
foreign private issuer, we would be required to comply with the Exchange Act reporting and other requirements applicable to U.S. domestic
issuers, which are more detailed and extensive than the requirements for foreign private issuers. We may also be required to make changes
in our corporate governance practices in accordance with various SEC and NASDAQ rules. The regulatory and compliance costs to us under
U.S. securities laws if we are required to comply with the reporting requirements applicable to a U.S. domestic issuer may be significantly
higher than the cost we would incur as a foreign private issuer. As a result, we expect that a loss of foreign private issuer status would
increase our legal and financial compliance costs and would make some activities highly time consuming and costly. We also expect that
if we were required to comply with the rules and regulations applicable to U.S. domestic issuers, it would make it more difficult and
expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced coverage or incur substantially
higher costs to obtain coverage. These rules and regulations could also make it more difficult for us to attract and retain qualified
members of our Board of Directors.
As a foreign private issuer, we are not
required to comply with many of the corporate governance standards of NASDAQ applicable to companies incorporated in the United States.
Our Board of Directors is
required to maintain an audit committee comprised solely of three or more directors satisfying the independence standards of NASDAQ applicable
to audit committee members. As a foreign private issuer, however, we are not required to comply with most of the other corporate governance
rules of NASDAQ, including the requirement to maintain a majority of independent directors, and nominating and compensation committees
of our Board of Directors comprised solely of independent directors. Although United Kingdom corporate governance rules which we abide
by have comparable requirements, holders of Depositary Shares may not be afforded the benefits of the corporate governance standards of
NASDAQ to the same extent applicable to companies incorporated in the United States.
Your right to participate in any future rights offerings may
be limited, which may cause dilution to your holdings.
Under English law, shareholders
usually have preemptive rights to subscribe on a pro rata basis in the issuance of new shares for cash. The exercise of preemptive rights
by certain shareholders not resident in the United Kingdom may be restricted by applicable law or practice in the United Kingdom and overseas
jurisdictions. We may from time to time distribute rights to our shareholders, including rights to acquire our securities. However, we
cannot make rights available to shareholders in the United States unless we register the rights and the securities to which the rights
relate under the Securities Act or an exemption from the registration requirements is available. Also, under the deposit agreement, the
depositary bank will not make rights available to Depositary Share holders unless either both the rights and any related securities are
registered under the Securities Act, or the distribution of them to Depositary Share holders is exempted from registration under the Securities
Act. We are under no obligation to file a registration statement with respect to any such rights or securities or to endeavor to cause
such a registration statement to be declared effective. Moreover, we may not be able to establish an exemption from registration under
the Securities Act. If the Depositary does not distribute the rights, it may, under the deposit agreement, either sell them, if possible,
or allow them to lapse. Accordingly, Depositary Share holders may be unable to participate in our rights offerings and may experience
dilution in their holdings. We are also permitted under English law to disapply preemptive rights (subject to the approval of our shareholders
by special resolution or the inclusion in our articles of association of a power to disapply such rights) and thereby exclude certain
shareholders, such as overseas shareholders, from participating in a rights offering (usually to avoid a breach of local securities laws).
It may be difficult for you to bring any
action or enforce any judgment obtained in the United States against us or members of our Board of Directors, which may limit the remedies
otherwise available to you.
We are incorporated as a public
limited company in England and Wales and all of our assets are located outside the United States. In addition, all of the members of our
Board of Directors are nationals and residents of countries, including the United Kingdom, outside of the United States. Most or all of
the assets of these individuals are located outside the United States. As a result, it may not be possible for investors to effect service
of process within the United States upon such persons or to enforce judgments obtained in U.S. courts against them or us, including judgments
predicated upon the civil liability provisions of the U.S. federal securities laws.
The United States and the
United Kingdom do not currently have a treaty providing for the reciprocal recognition and enforcement of judgments (other than arbitration
awards) in civil and commercial matters. Consequently, a final judgment for payment given by a court in the United States, whether or
not predicated solely upon U.S. securities laws, would not automatically be recognized or enforceable in England and Wales. In addition,
uncertainty exists as to whether the English and Welsh courts would entertain original actions brought in England and Wales against us
or our directors or executive officers predicated upon the securities laws of the United States or any state in the United States. Any
final and conclusive monetary judgment for a definite sum obtained against us in U.S. courts would be treated by the courts of England
and Wales as a cause of action in itself and sued upon as a debt so that no retrial of the issues would be necessary, provided that certain
requirements are met consistent with English law and public policy. Whether these requirements are met in respect of a judgment based
upon the civil liability provisions of the U.S. securities laws is an issue for the English court making such decision. If an English
court gives judgment for the sum payable under a U.S. judgment, the English judgment will be enforceable by methods generally available
for this purpose.
As a result, U.S. investors
may not be able to enforce against us or our executive officers, board of directors or certain experts named herein who are residents
of the United Kingdom or countries other than the United States any judgments obtained in U.S. courts in civil and commercial matters,
including judgments under the U.S. federal securities laws.
We intend to operate so as to be treated
exclusively as a resident of the United Kingdom for tax purposes, but the relevant tax authorities may treat us as also being a resident
of another jurisdiction for tax purposes.
Under current English law,
the decisions of the English courts and the published practice of His Majesty’s Revenue and Customs suggest that we are likely to
be regarded as being a United Kingdom resident and should remain so if, as we intend that, (i) all major meetings of our Board of Directors
and most routine meetings are held in the United Kingdom with a majority of directors present in the United Kingdom for those meetings;
(ii) at those meetings there are full discussions of, and decisions are made regarding, the key strategic issues affecting us and our
subsidiaries; (iii) those meetings are properly minuted; (iv) at least some of our directors, together with supporting staff, are based
in the United Kingdom; and (v) we have permanent staffed office premises in the United Kingdom sufficient to discharge our functions.
Even if we are considered
by His Majesty’s Revenue and Customs as resident in the United Kingdom for United Kingdom tax purposes, as expected, we would nevertheless
not be treated as resident in the United Kingdom if (a) we were concurrently resident in another jurisdiction (applying the tax residence
rules of that jurisdiction) that has a double tax treaty with the United Kingdom and (b) there is a tiebreaker provision in that tax treaty
which allocates exclusive residence to that other jurisdiction. Because this analysis is highly factual and may depend on future changes
in our management and organizational structure, there can be no assurance regarding the final determination of our tax residence. Should
we be treated as resident for tax purposes in another jurisdiction other than the United Kingdom, we would be subject to taxation in such
jurisdiction in accordance with such jurisdiction’s laws, which could result in additional costs and expenses.
The rights of our shareholders may differ from the rights typically
offered to shareholders of a U.S. corporation.
We are incorporated under
English law. The rights of holders of Ordinary Shares and, therefore, certain of the rights of holders of our Depositary Shares, are governed
by English law, including the provisions of the United Kingdom Companies Act 2006, or the Companies Act, and by our Articles of Association.
These rights differ in certain respects from the rights of shareholders in typical U.S. corporations. See “Description of Share
Capital—Differences in Corporate Law” for a description of the principal differences between the provisions of the Companies
Act applicable to us and, for example, the Delaware General Corporation Law relating to shareholders’ rights and protections.
Protections found in provisions under the
United Kingdom City Code on Takeovers and Mergers may delay or discourage a takeover attempt, including attempts that may be beneficial
to holders of our Ordinary Shares and Depositary Shares.
The United Kingdom City Code
on Takeovers and Mergers, or the City Code, applies, among other things, to an offer for a public limited company whose registered office
is in the United Kingdom and has its place of central management and control in United Kingdom, as determined by United Kingdom Panel
on Takeovers and Mergers, or the Takeover Panel. The Takeover Panel has confirmed we are subject to the City Code.
The City Code provides a framework
within which takeovers of certain companies organized in the United Kingdom are regulated and conducted. The following is a brief summary
of some of the most important rules of the City Code:
| • | In connection with a potential offer, if following an approach by or on behalf of a potential bidder,
the company is “the subject of rumor or speculation” or there is an “untoward movement” in the company’s
share price, there is a requirement for the potential bidder to make a public announcement about a potential offer for the company, or
for the company to make a public announcement about its review of a potential offer. |
| • | When interests in shares carrying 10% or more of the voting rights of a class have been acquired by an
offeror (i.e., a bidder) in the offer period (i.e., before the shares subject to the offer have been acquired) or within the previous
12 months, the offer must be in cash or be accompanied by a cash alternative for all shareholders of that class at the highest price paid
by the offeror or any person acting in concert with them in that period. Further, if an offeror or any person acting in concert with them
acquires any interest in shares during the offer period, the offer for the shares must be in cash or accompanied by a cash alternative
at a price at least equal to the price paid for such shares during the offer period. |
| • | If after an announcement is made, the offeror or any person acting in concert with them acquires an interest
in shares in an offeree company (i.e., a target) at a price higher than the value of the offer, the offer must be increased accordingly. |
| • | The board of directors of the offeree company must appoint a competent independent adviser whose advice
on the financial terms of the offer must be made known to all the shareholders, together with the opinion of the board of directors of
the offeree company. |
| • | Favorable deals for selected shareholders are not permitted, except in certain circumstances where independent
shareholder approval is given and the arrangements are regarded as fair and reasonable in the opinion of the financial adviser to the
offeree. |
| • | All shareholders must be given the same information. |
| • | Those issuing documents in connection with a takeover must include statements taking responsibility for
the contents thereof. |
| • | Profit forecasts, quantified financial benefits statements and asset valuations must be made to specified
standards and must be reported on by professional advisers. |
| • | Misleading, inaccurate or unsubstantiated statements made in documents or to the media must be publicly
corrected immediately. |
| • | Actions during the course of an offer by the offeree company, which might frustrate the offer are generally
prohibited unless shareholders approve these plans. Frustrating actions would include, for example, lengthening the notice period for
directors under their service contract or agreeing to sell off material parts of the target group. |
| • | Stringent requirements are laid down for the disclosure of dealings in relevant securities during an offer,
including the prompt disclosure of positions and dealing in relevant securities by the parties to an offer and any person who is interested
(directly or indirectly) in 1% or more of any class of relevant securities. |
| • | Employees of both the offeror and the offeree company and the trustees of the offeree company’s
pension scheme must be informed about an offer. In addition, the offeree company’s employee representatives and pension scheme trustees
have the right to have a separate opinion on the effects of the offer on employment appended to the offeree board of directors’
circular or published on a website. |
If we are deemed or become a passive foreign investment company,
or PFIC, for U.S. federal income tax purposes in 2024 or in any prior or subsequent year, this may result in adverse U.S. federal income
tax consequences for U.S. taxpayers that are holders of our securities.
We will be treated as a PFIC
for U.S. federal income tax purposes in any taxable year in which either (1) at least 75% of our gross income is “passive income”
or (2) on average at least 50% of our assets by value produce passive income or are held for the production of passive income. Passive
income for this purpose generally includes, among other things, certain dividends, interest, royalties, rents and gains from commodities
and securities transactions and from the sale or exchange of property that gives rise to passive income. Passive income also includes
amounts derived by reason of the temporary investment of funds, including those raised in a public offering. In determining whether a
non-U.S. corporation is a PFIC, a proportionate share of the income and assets of each corporation in which it owns, directly or indirectly,
at least a 25% interest (by value) is taken into account.
We do not believe we were
a PFIC for 2023, but there can be no assurance that we will not be a PFIC for 2024 or for any other taxable year, as our operating results
for any such years may cause us to be a PFIC. If we were to be characterized as a PFIC for U.S. federal income tax purposes in any taxable
year during which a U.S. shareholder owns our securities, and such U.S. shareholder does not make an election to treat us as a “qualified
electing fund,” or a QEF, or make a “mark-to-market” election, then “excess distributions” to a U.S. shareholder,
and any gain realized on the sale or other disposition of our securities will be subject to special rules. Under these rules: (1) the
excess distribution or gain would be allocated ratably over the U.S. shareholder’s holding period for the securities; (2) the amount
allocated to the current taxable year and any period prior to the first day of the first taxable year in which we were a PFIC would be
taxed as ordinary income; and (3) the amount allocated to each of the other taxable years would be subject to tax at the highest rate
of tax in effect for the applicable class of taxpayer for that year, and an interest charge for the deemed deferral benefit would be imposed
with respect to the resulting tax attributable to each such other taxable year. In addition, if the United States Internal Revenue Service,
or the IRS, determines that we are a PFIC for a year with respect to which we have determined that we were not a PFIC, it may be too late
for a U.S. shareholder to make a timely QEF or mark-to-market election. U.S. shareholders who hold or have held our securities during
a period when we were or are a PFIC will be subject to the foregoing rules, even if we cease to be a PFIC in subsequent years, subject
to exceptions for U.S. shareholders who made a timely QEF or mark-to-market election. However, because we do not intend to prepare or
provide the information that would permit the making of a valid QEF election, such an election will not be available to United States
holders.
Changes to U.S. and non-U.S. tax laws could materially adversely
affect our Company and holders of our Ordinary Shares and the Depositary Shares.
The Tax Cuts and Jobs Act,
which was legislation bringing about broad changes in the existing U.S. corporate tax system, was enacted in the United States in December
2017. The Tax Cuts and Jobs Act made significant changes to the U.S. federal income tax laws. Certain provisions of the Tax Cuts and Jobs
Act could have an adverse effect on the Company or holders of our Ordinary Shares or Depositary Shares. The U.S. Treasury Department and
the IRS continue to interpret and issue guidance on how provisions of the Tax Cuts and Jobs Act will be applied and administered. The
interpretations of many provisions of the Tax Cuts and Jobs Act are still unclear. We cannot predict when or to what extent any additional
U.S. federal tax laws, regulations, interpretations, or rulings clarifying the Tax Cuts and Jobs Act will be issued or the impact of any
such guidance on investors or the Company. Holders of Ordinary Shares and Depositary Shares are urged to consult their own tax advisors
regarding the effect of the Tax Cuts and Jobs Act and other potential changes to the U.S. federal tax laws.
We are unable to predict what
tax changes may be enacted in the future or what effect such changes would have on our business, but such changes could affect our effective
tax rates in countries where we have operations and could have an adverse effect on our overall tax position in the future, along with
increasing the complexity, burden and cost of tax compliance. In addition, such changes could impact the holders of Ordinary Shares or
Depositary Shares.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains certain
forward-looking information about the Company that is intended to be covered by the safe harbor for “forward-looking statements”
provided by the Private Securities Litigation Reform Act of 1995. These statements may be made directly in this prospectus or may be incorporated
into this prospectus by reference to other documents. Our representatives may also make forward-looking statements. Forward-looking statements
are statements that are not historical facts. Words such as “expect,” “believe,” “will,” “may,”
“anticipate,” “plan,” “estimate,” “intend,” “should,” “can,” “likely,”
“could” and similar expressions are intended to identify forward-looking statements. Forward-looking statements appear in
a number of places throughout this prospectus and include statements regarding our intentions, beliefs, assumptions, projections, outlook,
analyses or current expectations concerning, among other things, our intellectual property position, success integrating acquisitions,
research and development projects, results of operations, cash needs, capital expenditures, financial condition, liquidity, prospects,
growth and strategies, regulatory approvals and clearances, the markets and industry in which we operate and the trends and competition
that may affect the markets, industry or us.
These forward-looking statements
are based on currently available competitive, financial and economic data together with management’s views and assumptions regarding
future events and business performance as of the time the statements are made and are subject to risks and uncertainties. We wish to caution
you that there are some known and unknown factors that could cause actual results to differ materially from any future results, performance
or achievements expressed or implied by such forward-looking statements, including but not limited to risks related to:
| · | our requirement for additional financing and our ability to continue as a going concern; |
| · | our estimates regarding losses, expenses, future revenues, capital requirements and needs for additional
financing; |
| · | our ability to successfully develop, test and partner with a licensee to manufacture or commercialize
products for conditions using our technology platforms; |
| · | the successful commercialization and manufacturing of our any future product we may commercialize or license; |
| · | the success and timing of our preclinical studies and clinical trials; |
| · | shifts in our business and commercial strategy; |
| · | the filing and timing of regulatory filings, including Investigational New Drug applications, with respect to any of our product candidates
and the receipt of any regulatory approvals; |
| · | the anticipated medical benefits of our product candidates; |
| · | the difficulties in obtaining and maintaining regulatory approval of our product candidates, and the labeling
under any approval we may obtain; |
| · | the success and timing of the potential commercial development of our product candidates and any product
candidates we may acquire in the future, including eRapa, tolimidone and MTX110; |
| · | our plans and ability to develop and commercialize our product candidates and any product candidates we
may acquire in the future; |
| · | the ability to manufacture products in third-party facilities; |
| · | the rate and degree of market acceptance of any of our product candidates; |
| · | the successful development of our commercialization capabilities, including our internal sales and marketing
capabilities; |
| · | obtaining and maintaining intellectual property protection for our product candidates and our proprietary
technology; |
| · | the success of competing therapies and products that are or become available; |
| · | the success of any future acquisitions or other strategic transactions; |
| · | the difficulties of integrating the business of any future acquisitions into our own; |
| · | cybersecurity and other cyber incidents; |
| · | the impact of government laws and regulations; |
| · | regulatory, economic and political developments in the United Kingdom, the European Union, the United
States and other foreign countries, including any impact from the United Kingdom leaving the European Union; |
| · | the difficulties doing business internationally; |
| · | the ownership of our Ordinary Shares and Depositary Shares; |
| · | our ability to continue to meet the listing criteria required to remain listed on the NASDAQ Capital Market; |
| · | our ability to recruit or retain key scientific or management personnel or to retain our senior management; |
| · | the impact and costs and expenses of any litigation we may be subject to now or in the future; |
| · | the performance of third parties, including joint venture partners, our current sales force, our collaborators,
third-party suppliers and parties to our licensing agreements; and |
| · | other risks and uncertainties, including those described in “Risk Factors” in this
prospectus. |
Any forward-looking statements
that we make in this prospectus speak only as of the date of such statement, and we undertake no obligation to update such statements
to reflect events or circumstances after the date of this prospectus or to reflect the occurrence of unanticipated events. Comparisons
of results for current and any prior periods are not intended to express any future trends or indications of future performance, unless
expressed as such, and should only be viewed as historical data. You should, however, review the factors and risks we describe in the
reports we will file from time to time with the SEC after the date of this prospectus. See “Where You Can Find More Information.”
You should also read carefully
the factors described in “Risk Factors” in this prospectus, as well as elsewhere in this prospectus, to better understand
the risks and uncertainties inherent in our business and underlying any forward-looking statements. As a result of these factors, we cannot
assure you that the forward-looking statements in this prospectus will prove to be accurate. Furthermore, if our forward-looking statements
prove to be inaccurate, the inaccuracy may be material. In light of the significant uncertainties in these forward-looking statements,
you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and
plans in any specified timeframe, or at all.
THE COMMITTED EQUITY FINANCING
Overview
On January 17, 2025, we entered
into the Purchase Agreement with the Selling Shareholder. Sales of our Depositary Shares to the Selling Shareholder under the Purchase
Agreement, and the timing of any sales, will be determined by us from time to time in our sole discretion and will depend on a variety
of factors, including, among other things, market conditions, the trading price of our Depositary Shares and determinations by us regarding
the use of proceeds from any sale of such Depositary Shares. The net proceeds from any sales under the Committed Equity Financing will
depend on the frequency with, and prices at, which the Depositary Shares are sold to the Selling Shareholder. To the extent we sell shares
under the Purchase Agreement, we currently plan to use the net proceeds to fund our development programs, for working capital and other
general corporate purposes. We cannot predict whether the net proceeds invested will yield a favorable return.
In accordance with our obligations
under the Purchase Agreement and the Registration Rights Agreement, dated as of January 17, 2025, between us and the Selling Shareholder,
or the Registration Rights Agreement, pursuant to which we agreed to provide the Selling Shareholder with customary registration rights
related to the shares issued under the Purchase Agreement, we have filed a registration statement of which this prospectus forms a part
in order to register the resale of up to: (i) 35,000,000 Purchase Shares that we may elect, in our sole discretion, to issue and sell
to the Selling Shareholder, from time to time after the Commencement Date upon the terms and subject to the conditions and limitations
of the Purchase Agreement (assuming the shares are sold at a price of $1.00 per share); and (ii) 875,000 Commitment Shares that may be
issued to the Selling Shareholder in certain circumstances in connection with related issuances and sales of Purchase Shares to release
the Company of its liability to pay the Commitment Fee as consideration for the Selling Shareholder’s execution and delivery of
the Purchase Agreement (assuming the shares are issued at a price of $1.00 per share).
The Selling Shareholder is
not obligated to buy any Depositary Shares under the Purchase Agreement if such shares, when aggregated with all other securities then
beneficially owned by the Selling Shareholder and its respective affiliates (as calculated pursuant to Section 13(d) of the Exchange Act
and Rule 13d-3 promulgated thereunder), would result in the Selling Shareholder beneficially owning Ordinary Shares in excess of the Beneficial
Ownership Limitation. Our inability to access a portion or the full amount available under the Purchase Agreement, in the absence of any
other financing sources, could have a material adverse effect on our business or results of operation.
The Purchase Agreement and
Registration Rights Agreement contain customary registration rights, representations, warranties, conditions and indemnification obligations
by each party. The representations, warranties and covenants contained in such agreements were made only for purposes of such agreements
and as of specific dates, were solely for the benefit of the parties to such agreements and are subject to certain important limitations.
Purchase Agreement
Pursuant to the Purchase Agreement,
the Selling Shareholder shall, subject to the restrictions and satisfaction of the conditions in the Purchase Agreement, purchase from
us up to $35.0 million of Depositary Shares, upon the terms and subject to the conditions and limitations set forth in the Purchase Agreement,
and, accordingly, we have registered 350,000,000,000 Ordinary Shares representing 35,000,000 Depositary Shares for issuance under the
Purchase Agreement and resale pursuant to this prospectus, assuming that $35.0 million of shares are issued and sold at a price of $1.00
per share. The Depositary Shares that may be issued under the Purchase Agreement may be sold, subject to the restrictions and satisfaction
of the conditions in the Purchase Agreement, by us to the Selling Shareholder at our discretion from time to time from the Commencement
Date until the earliest to occur of a Termination Event.
Purchases of Depositary Shares Under the Purchase
Agreement
During the term described
above, on any business day on which the closing sale price of the Depositary Shares is equal to or greater than $1.00, we will have the
right, but not the obligation, from time to time at our sole discretion, subject to the restrictions and satisfaction of the conditions
in the Purchase Agreement, to direct the Selling Shareholder, by delivery of a Fixed Purchase Notice to purchase a number of Depositary
Shares up to the Fixed Purchase Maximum Amount, at a purchase price equal to the lesser of 95% of (i) the Fixed Purchase Price and (ii)
the daily VWAP (as defined below) of the Depositary Shares for the five trading days immediately preceding the applicable Fixed Purchase
Date.
In addition, at any time from
and after the Commencement Date, on any business day on which the previous business day’s closing sale price of the Depositary Shares
is equal to or greater than $1.00 and such business day is also the Fixed Purchase Date for a Fixed Purchase of an amount of Depositary
Shares not less than the applicable Fixed Purchase Maximum Amount (calculated as of the applicable Fixed Purchase Date), we may also direct
the Selling Shareholder, by delivery of a VWAP Purchase Notice, to purchase, on the VWAP Purchase Date, an additional number of Depositary
Shares at a purchase price equal to the lesser of 95% of (i) the closing price of a Depositary Share
on the trading day immediately preceding the applicable VWAP Purchase Date and (ii) the VWAP during the period on the applicable VWAP
Purchase Date beginning at the opening of trading and ending at the VWAP Purchase Termination Time (as defined in the Purchase Agreement).
At any time from and after
the Commencement Date, on any business day that is also the VWAP Purchase Date for a VWAP Purchase, we may also direct the Selling Shareholder,
by delivery of an Additional VWAP Purchase Notice, to purchase, on the same business day, an additional number of Depositary Shares at
a purchase price equal to the lesser of 95% of (i) the closing price of a Depositary Share on the
trading day immediately preceding the applicable Additional VWAP Purchase Date and (ii) the VWAP during the Additional VWAP Purchase Period
(as defined in the Purchase Agreement) on the applicable Additional VWAP Purchase Date.
Notwithstanding the above,
in no event may the aggregate amount of Purchase Shares submitted in any single or combination of VWAP Purchase Notices and/or Additional
VWAP Purchase Notices on a particular date require a payment from the Selling Shareholder to us that exceeds $2,500,000, unless such limitation
is waived by the Selling Shareholder.
For purposes of the Purchase
Agreement, “VWAP” shall mean the daily volume weighted average price of the Depositary Shares on Nasdaq as reported by Bloomberg
through its “AQR” function.
All such determinations shall
be appropriately adjusted for any sales of Depositary Shares through block transactions, any reorganization, non-cash dividend, stock
split, reverse share split, stock combination, recapitalization, Depositary Share-Ordinary Share ratio change or other similar transaction
during such period.
Commitment Fee, Commitment Shares and Other
Fees
As consideration for its irrevocable
commitment to purchase our Depositary Shares under the Purchase Agreement, we have agreed to pay to the Selling Shareholder the Commitment
Fee as consideration for the Selling Shareholder entering into the Purchase Agreement. In the event that we fail to pay the Commitment
Fee when due, we shall have the right, at our discretion, to issue Depositary Shares representing the value of the Commitment Fee in aggregate,
valued at the closing sale price for the Depositary Shares on Nasdaq on the trading day immediately prior to the date of execution of
the Purchase Agreement, to release us of our liability to pay the Commitment Fee as a liquidated sum. To the extent Commitment Shares
are issued in lieu of paying the Commitment Fee, we intend to issue up to 612,500 Depositary Shares (equal to 1.75% of the Commitment
Amount) upfront, with the remainder paid upon each Fixed Purchase, VWAP Purchase or Additional VWAP Purchase, as the case may be, until
such amount is paid in full.
We have also agreed to pay
to the Selling Shareholder $35,000 in cash as reimbursement for the reasonable, out-of-pocket expenses incurred by the Selling Shareholder,
including the legal fees and disbursements of the Selling Shareholder’s legal counsel, in connection with its due diligence investigation
of our company and in connection with the preparation, negotiation and execution of the Purchase Agreement.
Conditions Precedent to Commencement
Our right to commence delivering
Purchase Notices under the Purchase Agreement and the Selling Shareholder’s obligation to accept a Fixed Purchase Notice, VWAP Purchase
Notice or Additional VWAP Purchase Notice, are subject to the initial satisfaction, at the Commencement Date, of the conditions precedent
thereto set forth in the Purchase Agreement, which conditions include, among others, the following:
| • | the accuracy in all material respects of our representations and warranties included in the Purchase Agreement; |
| • | us having performed, satisfied and complied in all material respects with all covenants, agreements and
conditions required by the Purchase Agreement and the Registration Rights Agreement to be performed, satisfied or complied with by us; |
| • | the absence of any material misstatement or omission in the registration statement that includes this
prospectus; |
| • | this prospectus, in final form, and all reports, schedules, registrations, forms, statements, information
and other documents required to have been filed by us with the SEC pursuant to the reporting requirements of the Exchange Act having been
so filed; |
| • | the Depositary Shares not having been suspended by the SEC, NASDAQ or FINRA and there not having been
imposed any suspension of, or restriction on, accepting additional deposits of common stock by The Depository Trust Company; |
| • | no condition, occurrence, state of facts or event constituting a Material Adverse Effect (as defined in
the Purchase Agreement) shall have occurred and be continuing; |
| • | customary compliance with laws and bankruptcy-related conditions; and |
| • | the receipt by the Selling Shareholder of customary legal opinions, as required under the Purchase Agreement. |
Termination of the Purchase Agreement
Unless earlier terminated
as provided in the Purchase Agreement, the Purchase Agreement will terminate automatically on the earliest to occur of:
| • | the first day of the month next following the 36-month anniversary of the Commencement Date; |
| • | the date on which the Selling Shareholder shall have purchased the Commitment Amount; |
| • | the 90th day after the date on which, pursuant to or within the meaning of any bankruptcy law, we commence
a voluntary case or any person commences a proceeding against us, in each case that is not discharged or dismissed prior to such 90th
day; and |
| • | the date on which, pursuant to or within the meaning of any bankruptcy law, a custodian is appointed for
us or for all or substantially all of our property, or we make a general assignment for the benefit of our creditors. |
We have the right to terminate
the Purchase Agreement at any time after Commencement Date, at no cost or penalty, upon one business day’s prior written notice
to the Selling Shareholder, subject to us satisfying all existing obligations related to any Depositary Shares issued to the Selling Shareholder
prior to the date of termination. We or the Selling Shareholder may also terminate the Purchase Agreement at the close of business on
the one year anniversary of the signing of the Purchase Agreement or thereafter, in the event the Commencement Date shall not have occurred
prior to such one year anniversary due to our failure to satisfy the conditions precedent to commencement. We and the Selling Shareholder
may also terminate the Purchase Agreement at any time by mutual written consent. No termination of the Purchase Agreement by us or by
the Selling Shareholder will affect any of our respective rights and obligations under (i) the Purchase Agreement with respect to any
pending Purchase, and both we and the Selling Shareholder have agreed to complete our respective obligations with respect to any such
pending Purchase under the Purchase Agreement, and (ii) the Registration Rights Agreement, which shall survive any termination of the
Purchase Agreement. Further, no termination of the Purchase Agreement will be deemed to release us or the Selling Shareholder from any
liability for intentional misrepresentation or willful breach of the Purchase Agreement, the Registration Rights Agreement or any other
related transaction documents.
Dilutive Issuances and Purchase Price Adjustment
For as long as the Selling
Shareholder owns any of our Depositary Shares, if within three trading days immediately following a Purchase Date, we make certain issues
of our securities and such securities are issued at prices, or the New Issuance Price, less than the prices to be paid by the Selling
Shareholder in such Fixed Purchase, VWAP Purchase or Additional VWAP Purchase, the purchase price for such applicable Fixed Purchase,
VWAP Purchase or Additional VWAP Purchase would be reduced to the New Issuance Price, subject to the terms and conditions set forth in
the Purchase Agreement.
No Short-Selling or Hedging
The Selling Shareholder has
agreed that neither it nor any entity managed or controlled by it will engage in, directly or indirectly, any (A) “short sale”
(as such term is defined in Rule 200 of Regulation SHO of the Exchange Act) of our Depositary Shares or (B) hedging transaction, which,
with respect to items (A) and (B), establishes a net short position with respect to the Depositary Shares, during the term of the Purchase
Agreement. The Selling Shareholder has also agreed that neither it nor any entity managed or controlled by it will engage in or effect,
in any manner whatsoever, directly or indirectly, any “short sale” (as such term is defined in Rule 200 of Regulation SHO
of the Exchange Act) of our Depositary Shares.
Effect of Sales of our Depositary Shares under
the Purchase Agreement on our Shareholders
The Depositary Shares being
registered for resale in this offering may be issued and sold by us to the Selling Shareholder from time to time at our discretion, during
the terms described above. The resale by the Selling Shareholder of a significant quantity of shares registered for resale in this offering
at any given time, or the perception that these sales may occur, could cause the market price of our Depositary Shares to decline and
to be highly volatile. Sales of our Depositary Shares, if any, to the Selling Shareholder under the Purchase Agreement will be determined
by us in our sole discretion, subject to the satisfaction of certain conditions in the Purchase Agreement, and will depend upon market
conditions and other factors. We may ultimately decide to sell to the Selling Shareholder all, some or none of the Depositary Shares that
may be available for us to sell to the Selling Shareholder pursuant to the Purchase Agreement. If we elect to sell Depositary Shares to
the Selling Shareholder pursuant to the Purchase Agreement, after the Selling Shareholder has acquired such shares, the Selling Shareholder
may resell all, some or none of such Depositary Shares at any time or from time to time in its discretion and at different prices. As
a result, investors who purchase Depositary Shares from the Selling Shareholder in this offering at different times will likely pay different
prices for those shares of Depositary Shares, and so may experience different levels of dilution and in some cases substantial dilution
and different outcomes in their investment results. See “Risk Factors-Risks Related to the Committed Equity Financings-Investors
who buy Depositary Shares from the Selling Shareholder at different times will likely pay different prices.”
Investors may experience a
decline in the value of the Depositary Shares they purchase from the Selling Shareholder in this offering as a result of future sales
made by us to the Selling Shareholder at prices lower than the prices such investors paid for their shares in this offering. In addition,
if we sell a substantial number of Depositary Shares to the Selling Shareholder under the Purchase Agreement, or if investors expect that
we will do so, the actual sales of Depositary Shares or the mere existence of our arrangement with the Selling Shareholder may make it
more difficult for us to sell equity or equity-related securities in the future at a time and at a price that we might otherwise wish
to effect such sales.
Because the purchase price
per share to be paid by the Selling Shareholder for the Depositary Shares that we may elect to sell to the Selling Shareholder under the
Purchase Agreement, if any, will fluctuate based on the market prices of our Depositary Shares at the time we make such election, as of
the date of this prospectus, it is not possible for us to predict the number of Depositary Shares that we will sell to the Selling Shareholder
under the Purchase Agreement, the actual purchase price per share to be paid by the Selling Shareholder for those Depositary Shares, or
the actual gross proceeds to be raised by us from those sales, if any. As of January 15, 2025, there were 6,685,918,922 Ordinary Shares
outstanding. If all of the 358,750,000,000 Depositary Shares offered for resale by the Selling Shareholder under this prospectus were
issued and outstanding as of January 15, 2025, such shares would represent approximately 98.2% of total number of Ordinary Shares outstanding.
The actual number of Depositary Shares issuable will vary depending on the then current market price of shares of our Depositary Shares
sold to the Selling Shareholder in this offering.
The number of Depositary Shares
ultimately offered for sale by the Selling Shareholder for resale under this prospectus is dependent upon the number of Depositary Shares,
if any, we ultimately sell to the Selling Shareholder under the Purchase Agreement. Further, if and when we elect to sell Depositary Shares
to the Selling Shareholder pursuant to the Purchase Agreement, after the Selling Shareholder has acquired such shares, the Selling Shareholder
may resell all, some or none of such Depositary Shares at any time or from time to time in its discretion and at different prices.
The issuance of our Depositary
Shares to the Selling Shareholder pursuant to the Purchase Agreement will not affect the rights or privileges of our existing shareholders,
except that the economic and voting interests of each of our existing shareholders will be diluted. Although the number of Depositary
Shares that our existing shareholders own will not decrease, the Depositary Shares (and the underlying Ordinary Shares) owned by our existing
shareholders will represent a smaller percentage of our total outstanding Ordinary Shares after any such issuance.
The following table sets forth
the amount of gross proceeds we may receive from the Selling Shareholder from our sale of Purchase Shares that we may issue and sell to
the Selling Shareholder from time to time under the Purchase Agreement assuming that all such Purchase Shares are sold at varying purchase
prices designated below:
Assumed Purchase Price
Per Share (1) | | |
Total Number of Purchase Shares to be Issued if
Full Purchase | | |
Percentage of Outstanding
Ordinary Shares After Giving Effect to the
Issuance of Purchase Shares to Selling
Shareholder (2) | | |
Proceeds from the Sale of the Purchase Shares to the Selling
Shareholder (3) | |
| $ | 1.00 | | |
| 35,000,000 | | |
| 98.1% | | |
$ | 35,000,000 | |
| $ | 4.13(4) | | |
| 8,474,576 | | |
| 92.7% | | |
$ | 35,000,000 | |
| $ | 5.00 | | |
| 7,000,000 | | |
| 91.3% | | |
$ | 35,000,000 | |
| $ | 10.00 | | |
| 3,500,000 | | |
| 84.0% | | |
$ | 35,000,000 | |
| $ | 15.00 | | |
| 2,333,333 | | |
| 77.7% | | |
$ | 34,999,995 | |
__________________
| (1) | The purchase price assumes a discount to the market price of our shares, in accordance with the terms
of the Purchase Agreement. |
| (2) | The denominator is based on 6,685,918,922 Ordinary Shares outstanding as of January 15, 2025, adjusted
to include the issuance of the number of Purchase Shares set forth in the adjacent column which we would have issued to the Selling Shareholder
based on the applicable assumed purchase price per share. |
| (3) | We will not receive any proceeds from the issuance of any Commitment Shares if issued to the Selling Shareholder
to release the Company of its liability to pay the Commitment Fee. The proceeds reflected in this column would be reduced by an amount
equal to the product of the final Commitment Shares multiplied by the assumed purchase price per Depositary Share. |
| (4) | Represents the last reported sales price of our Depositary Shares on January 16, 2024, as reported by
NASDAQ, less a 5% discount. |
USE OF PROCEEDS
We will not receive any of
the proceeds from the sale of Depositary Shares offered by the Selling Shareholder. In addition, we will not receive any proceeds from
the issuance or sale of the Commitment Shares if issued to the Selling Shareholder to release the Company of its liability to pay the
Commitment Fee. We may receive up to $35.0 million in aggregate gross proceeds from the Selling Shareholder under the Purchase Agreement
in connection with sales of our Depositary Shares to the Selling Shareholder pursuant to the Purchase Agreement after the date of this
prospectus. However, the actual proceeds may be less than this amount depending on the number of Depositary Shares sold and the price
at which the Depositary Shares are sold.
We intend to use any net proceeds
that we receive under the Purchase Agreement to fund our development programs, for working capital and other general corporate purposes.
The expected use of the net
proceeds from the offering represents our intentions based upon our current plans and business conditions, which could change in the future
as our plans and business conditions evolve. The amounts and timing of our actual expenditures depend on numerous factors, including the
ongoing status of and results from our clinical trials and other studies, the progress of our preclinical development efforts and any
unforeseen cash needs. As a result, our management will have broad discretion in applying the net proceeds of the offerings.
Pending the uses described
above, we plan to invest the net proceeds from this offering in short-term, interest-bearing investments.
DIVIDEND POLICY
Since
inception, we have never declared or paid any cash dividends on our Ordinary Shares and do not anticipate paying any cash dividends on
our Ordinary Shares or the Depositary Shares in the foreseeable future. We intend to retain all available funds and any future earnings
to fund the development and expansion of our business. As a result, investors in the Ordinary Shares and Depositary Shares will benefit
in the foreseeable future only if the Ordinary Shares and Depositary Shares appreciate in value.
Any
determination to pay dividends in the future would be at the discretion of our Board of Directors and will depend upon our results of
operations, cash requirements, financial condition, contractual restrictions, and any future debt agreements and is subject to compliance
with applicable laws, including the United Kingdom Companies Act of 2006, or the Companies Act, which requires English companies to have
profits available for distribution equal to or greater than the amount of the proposed dividend.
CAPITALIZATION
The following table sets forth
our capitalization as of June 30, 2024:
| · | on a pro forma as-adjusted basis to give effect to the
issuance and sale by us of 5,050,808 Depositary Shares and 278,975 pre-funded warrants (representing an aggregate of 2,131,913,200 Ordinary
Shares) in the July 2024 Registered Direct Offering, at an offering price of $0.94 per Depositary Share and $0.9399 per pre-funded warrant,
after deducting placement agent fees and estimated offering expenses by us. |
The adjusted amounts shown
below are unaudited and represent management’s estimate. The information in this table should be read in conjunction with and is
qualified by reference to the financial statements and notes thereto and other financial information contained in this prospectus.
| (£ in thousands) | |
| |
| | |
As of June 30, 2024 | |
| | |
Actual | | |
Pro Forma As-Adjusted
(unaudited) (1)(2) | |
| | |
| | |
| |
| Cash and cash equivalents | |
| 5,055 | | |
| 8,352 | |
| Borrowings, non-current | |
| 208 | | |
| 208 | |
| Total equity | |
| 8,727 | | |
| 12,024 | |
| Total capitalization | |
| 8,935 | | |
| 12,232 | |
_______________________
| (1) | The proceeds have been translated into British pounds sterling at a rate of £1.00 to $1.29138. |
| (2) | All proceeds from the sale of the securities have been reflected within Total equity for purposes of this
table. We will be required to complete an assessment of the accounting and valuation for such instruments, which may result in a portion
of the proceeds being classified outside of Total equity and remeasured to fair value each reporting period (if liability-classified instruments).
Such assessment will be completed in connection with the preparation of our consolidated financial statements for the period in which
the sales occur. |
The table above does not include:
| · | 274,420,765 Ordinary Shares issuable upon the exercise of stock
options outstanding under our equity incentive plans at a weighted-average exercise price of £0.005 per share; |
| · | 99 Ordinary Shares issuable upon the exercise of stock options assumed in connection with the acquisition
of DARA Biosciences, Inc., at a weighted average exercise price of $877.13 per share; |
| · | warrants, including pre-funded warrants and shares held in abeyance upon exercise of warrants,
exercisable for 443,997 Depositary Shares (representing 4,439,970,000 Ordinary Shares), at a weighted-average exercise price of $66.28
per Depositary Share; and |
| · | the Purchase Shares and any Commitment Shares. |
MANAGEMENT’S DISCUSSION AND ANALYSIS AND
RESULTS OF OPERATIONS
The following discussion
and analysis of our financial condition and results of operations should be read together with our audited consolidated financial statements
and the accompanying notes thereto and our unaudited condensed consolidated financial statements and the accompanying notes thereto for
the six months ended June 30, 2024, included elsewhere in this prospectus. We have prepared our consolidated financial statements in this
prospectus in pounds sterling and in accordance with IFRS, as issued by the International
Accounting Standards Board, which may differ in material respects from generally accepted accounting principles in other jurisdictions,
including generally accepted accounting principles in the United States. IFRS differs in some significant respects from
U.S. GAAP. Operating results for the six months ended June 30, 2024 are not necessarily indicative of the results for the full year
ending December 31, 2024, or any future period.
The following discussion
and analysis contains forward-looking statements. Statements that are not statements of historical fact, including expression of management’s
beliefs and expectations, may be forward-looking in nature and based on current plans, estimates, projections and beliefs. Forward-looking
statements are applicable only as of the date made, and we undertake no obligation to update any of them in light of new information or
future events. Forward-looking statements involve inherent risks and uncertainties. A number of important factors could cause actual results
or outcomes to differ materially from those expressed in any forward-looking statement. These factors include those identified under the
headings “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements.”
Information pertaining to
our fiscal year ended December 31, 2021 was included in our Annual Report on Form 20-F for the year ended December 31, 2021, beginning
on page 77 under “Item 5. Operating and Financial Review and Prospects,” which was filed with the SEC on April 26,
2022.
Recent Developments
For information regarding
our recent developments, please see “Business,” which is incorporated herein by reference.
Principal Factors Affecting Results of Operations
We consider the currency exchange
rate between the British pound sterling, Euros and the United States dollar and certain other factors affecting the comparability of results
of operations between periods as those most likely to influence our financial condition and results of operations.
Currency Exchange Rate
We
report our financial results in British pounds sterling and our cash reserves are also largely denominated in British pounds sterling.
During
the periods set forth in our financial statements, incorporated herein by reference, and in particular during 2022 and 2023, there has
been considerable volatility in the British pound sterling against the Euro and the United States dollar. From time to time, we
enter into transactions denominated in a currency other than our functional currency and this results in foreign exchange risk. At this
time, we do not consider the exposure sufficient to utilize derivatives to manage the forward exchange risk.
Components of Consolidated Statement of Comprehensive Income Items
Revenue
Our
income streams comprise revenue derived from supply of services and from research and development contracts. Revenue is recognized in-line
with that set out in Note 1 to our consolidated financial statements for the year ended December 31, 2023.
Operating Expenses
We
classify our operating expenses into two categories: (i) research and development, and (ii) administrative costs. These categories correspond
to different functional areas within the Company.
Our
operating expenses primarily consist of personnel costs, contract research and development costs, professional service fees and depreciation.
Personnel costs for each category of operating expenses include salaries, bonuses, social security, health insurance, other employee benefits
and share-based compensation for personnel in that category. We allocate share-based compensation expense resulting from the amortization
of the fair value of options. Central overheads, such as rent, computer and other technology costs, are not allocated out to departments.
Research
and Development Cost. Research and development costs consist of costs that are directly attributable to our research and development
programs associated with the products described herein. This includes costs of third party contract research organizations, research specialist
professional services providers, chemicals and other consumables used in the research and manufacturing process, depreciation of assets
related to the research and development function, and payroll costs of staff directly assigned to the research and manufacturing operations.
Administrative
Costs. These primarily consist of personnel costs for our executive, finance, corporate development and administrative personnel,
as well as legal, accounting and other professional service fees, other corporate expenses, merger and acquisition costs and initial public
offering costs that are charged to the consolidated statement of comprehensive income. Administrative costs also include depreciation
of administrative assets.
Finance Income
Finance
income includes all interest receivable on cash deposits.
During
the first six months of 2024 and for the fiscal year ended December 31, 2023, finance income also included a gain on an equity settled
derivative financial liability. We issued warrants in fiscal 2023, 2020 and 2019 in connection with registered direct offerings. In 2015,
we assumed fully vested warrants and share options on the acquisition of DARA Biosciences, Inc. The number of Ordinary Shares to be issued
when the warrants and options are exercised is fixed, however the exercise prices are denominated in United States dollars, which is different
from the functional currency of the Company. Therefore, the warrants and share options are classified as equity settled derivative financial
liabilities in the consolidated statement of financial position with any gains or losses being recognized through finance income or finance
expense in the consolidated statement of comprehensive income.
Finance Expense
Finance
expenses include all interest payable on borrowings and loan instruments. In the first six months of 2024, and for the years ended December
31, 2023 and 2022, finance expenses were comprised primarily of interest payable on lease liabilities and other loans.
Taxation
Taxation
represents tax credits receivable by Group companies in respect of qualifying research and development costs incurred.
Results of Operations
Six Months Ended June 30, 2024 Compared to Six Months Ended June
30, 2023
The following table summarizes our consolidated
results of operations for the six month periods ended June 30, 2024 and 2023:
| | |
Six Months Ended June 30, | |
| | |
2024 | | |
2023 | |
| | |
(£ in thousands; unaudited) | |
| Revenue | |
| -- | | |
| 298 | |
| Other income | |
| -- | | |
| -- | |
| Research and development costs | |
| (2,189 | ) | |
| (2,251 | ) |
| Administrative costs | |
| (2,034 | ) | |
| (2,291 | ) |
| Loss from operations | |
| (4,223 | ) | |
| (4,244 | ) |
| Finance income | |
| 839 | | |
| 410 | |
| Finance expense | |
| (49 | ) | |
| (22 | ) |
| Loss before tax | |
| (3,433 | ) | |
| (3,856 | ) |
| Taxation | |
| 125 | | |
| 288 | |
| Loss for the period attributable to the owners of the parent | |
| (3,308 | ) | |
| (3,568 | ) |
Revenue. Total
revenue for the six months to June 30, 2024 was £Nil compared to £0.30 million in the first six months of 2023. The research
and development collaboration with Janssen Pharmaceutical NV, which represented the entire revenue in the first half of 2023, concluded
in September 2023.
Research and Development
Costs. Research and development costs for the six months ended June 30, 2024 reduced by £0.06 million, or 3%, to £2.19
million, compared with £2.25 million for the six months ended June 30, 2023. The percentage of research and development costs as
a percentage of total operating costs increased to 52% in the period from 50%. The reduction in research and development costs in the
first six months ended June 30, 2024 reflects a reduction in spend of £0.54 million on the MAGIC-G1 study in rGBM, the termination
of legacy drug delivery projects and lower personnel costs offset by the addition of MTD228 (tolimidone) and MTX230 (eRapa) for a combined
expenditure of £0.65 million in the period.
Administrative Costs. Administrative
expenses for the six months ended June 30, 2024 decreased by 11% to £2.03 million from £2.29 million in the same period of
the prior year. The decrease in administrative costs in the first six months ended June 30,2024 is a result of a positive reversal in
foreign exchange of £0.23 million and a reduction in professional fees of £0.14 million offset by increases in share-based
payment charge of £0.12 million and sundry other costs.
Finance Income. Finance
income in during the current and prior period included gains in respect of an equity settled derivative financial liability of £0.75
million and £0.39, million respectively. The gains arose as a result of the fall in our share price. In addition, we earned interest
on cash deposits.
Finance Expense. Finance
expense in the period related to lease liabilities and discounted interest on deferred consideration.
Year Ended December 31, 2023 Compared to Year Ended December
31, 2022
The following table summarizes our consolidated
results of operations for the years ended December 31, 2023 and 2022:
| | |
Year Ended December 31, | |
| | |
2023 | | |
2022 | |
| | |
(£ in thousands) | |
| | |
| | |
| |
| Revenue | |
| 381 | | |
| 699 | |
| Total revenue | |
| 381 | | |
| 699 | |
| Other income | |
| 14 | | |
| 22 | |
| Research and development costs | |
| (4,067 | ) | |
| (5,111 | ) |
| Administrative costs | |
| (4,342 | ) | |
| (4,542 | ) |
| Loss from operations | |
| (8,014 | ) | |
| (8,932 | ) |
| Finance income | |
| 570 | | |
| 497 | |
| Finance expense | |
| (41 | ) | |
| (53 | ) |
| Loss before taxation | |
| (7,485 | ) | |
| (8,488 | ) |
| Taxation | |
| 406 | | |
| 832 | |
| Loss from continuing operations | |
| (7,079 | ) | |
| (7,656 | ) |
| Loss for the year attributable to the owners of the parent | |
| (7,079 | ) | |
| (7,656 | ) |
Revenue.
For the year ended December 31, 2023, we generated consolidated revenues from continuing operations of £0.38 million, compared to
£0.70 million in 2022, comprising Q-Sphera formulation services under R&D collaboration agreements for customers in each year,
which have now ceased.
Research
and Development Costs. We incurred research and development costs of £4.07 million in 2023, compared to £5.11 million
in 2022, a reduction of 20%. The reduction in the year reflects our decision to reposition as a therapeutics company and to not expand
our internal drug delivery platform, resulting in a reduction in pre-clinical expense of £0.87 million. Personnel costs also reduced
by £0.39 million as a result of the cost reduction program in March 2023 where eight staff members were made redundant at a one-time
cost of £0.10 million. Expenditure on the MTX110 clinical program increased during the year by £0.41 million offsetting in
part the reduced expense on preclinical programs and staffing.
Administrative
costs. For the year ended December 31, 2023, our administrative costs were £4.34 million, as opposed to £4.54 million
in 2022. During the year we expensed £1.31 million on legal and professional fees in connection with the successful financing transactions
in the year, the acquisition of the tolimidone license in December 2023 and aborted acquisitions. This compares to £1.36 million
expensed in 2022 on the aborted acquisition of Bioasis Technologies Inc., or Bioasis. During the year we provided a loan to Adhera Therapeutics,
Inc., or Adhera, of £0.08 million which was forgiven on completion of the acquisition of the global rights to develop and commercialize
tolimidone in December 2023.
Finance
Income. Finance income represents interest earned on cash balances and gains in respect of equity settled financial liabilities. In
2023, finance income of £0.57 million was credited to the income statement, compared with £0.50 million in 2022, and included
a gain in respect of an equity settled financial liability of £0.49 million (2022: £0.47 million).
Finance
Expense. Finance expenses of £0.04 million were charged in 2023, compared to £0.05 million in 2022. Interest expense primarily
relates to interest expense on lease liabilities.
Liquidity and Capital Resources
Overview
We have incurred significant
net losses and have had negative cash flows from operations during each period from inception through June 30, 2024, and had an accumulated
deficit of £147.88 million as of June 30, 2024. As of June 30, 2024 and December 31, 2023, we had cash and cash equivalents of £5.06
million and £5.97 million, respectively. We have yet to generate a profit and, excluding share issues, cash flows have been consistently
negative from the date of incorporation. Management expects operating losses and negative cash flows to continue for the foreseeable future.
We believe our existing balances of cash and cash equivalents will be insufficient to satisfy our working capital needs and other liquidity
requirements associated with our existing operations over the next 12 months.
Our
future viability is dependent on our ability to raise cash from financing activities to finance our development plans until milestone
and/or royalties can be secured from partnering our assets. Our failure to raise capital as and when needed could have a negative impact
on its financial condition and ability to pursue its business strategies.
We
believe there are adequate options and time available to secure additional financing for the Company, including the Committed Equity Financing,
and after considering the uncertainties, we consider it is appropriate to continue to adopt the going concern basis in preparing the financial
information. Our consolidated financial information have therefore been presented on a going concern basis, which contemplates the realization
of assets and the satisfaction of liabilities in the normal course of business. With respect to the Committed Equity Financing, we may
ultimately decide to sell to the Selling Shareholder all, some or none of the Depositary Shares that may be available for us to sell to
the Selling Shareholder pursuant to the Purchase Agreement. Accordingly, we cannot guarantee that we will be able to sell all of the Commitment
Amount or how much in proceeds we may obtain under the Purchase Agreement. If we cannot sell securities under the Committed Equity Financing,
we may be required to utilize more costly and time-consuming means of accessing the capital markets, which could have a material adverse
effect on our liquidity and cash position.
The
consolidated interim financial information has been presented on a going concern basis, which contemplates the realization of assets and
the satisfaction of liabilities in the normal course of business.
As
at June 30, 2024, we had cash and cash equivalents of £5.06 million. We forecast we currently has enough cash to fund its planned
operations into the first quarter of 2025. If we do not secure additional funding before the first quarter of 2025, we will no longer
be a going concern and would likely be placed in Administration.
We
have prepared cash flow forecasts and considered the cash flow requirement for the Group for the next three years including the period
12 months from the date of approval of this interim financial information. These forecasts show that further financing will be required
before the first quarter of 2025 assuming, inter alia, that certain development programs and other operating activities continue as currently
planned. If we raise additional funds through the issuance of debt securities or additional equity securities, it could result in dilution
to our existing shareholders, increased fixed payment obligations and these securities may have rights senior to those of our ordinary
shares (including the Depositary Shares) and could contain covenants that would restrict our operations and potentially impair our competitiveness,
such as limitations on our ability to incur additional debt, limitations on our ability to acquire, sell or license intellectual property
rights and other operating restrictions that could adversely impact our ability to conduct our business. Any of these events could significantly
harm our business, financial condition and prospects.
Our
Depositary Shares are currently listed on the NASDAQ Capital Market. We are required to meet certain qualitative and financial tests to
maintain the listing of the Depositary Shares on the NASDAQ Capital Market. On August 27, 2024, we received a Letter from the Listing
Qualifications Department of NASDAQ, notifying us of the Staff’s determination to delist our securities from the NASDAQ Capital
Market because our securities had not complied with the Minimum Bid Price Requirement. Normally, a company would be afforded a 180-calendar
day period to demonstrate compliance with the Minimum Bid Price Requirement. However, pursuant to NASDAQ Listing Rule 5810(c)(3)(A)(iv),
we were not eligible for any compliance period specified in Rule 5810(c)(3)(A) because we effected reverse stock splits over the prior
two-year period with a cumulative ratio of 250 shares or more to one. Accordingly, and as described in the Letter, unless we timely requested
a hearing before the Panel, our securities would be subject to suspension/delisting. We requested a hearing, which automatically stayed
any suspension or delisting action pending the hearing and the expiration of any additional extension period granted by the Panel following
the hearing.
On October 14, 2024, the Panel
granted our request for an extension of time to demonstrate compliance with the Minimum Bid Price Requirement. On November 7, 2024, we
were formally notified that the Panel determined that we had regained compliance with the Minimum Bid Price Requirement. We remain subject
to a discretionary panel monitor through February 24, 2025, and we are required to provide prompt notification during this exception period
of any significant events that occur during this time that may affect our compliance with NASDAQ requirements.
If, in the future, we fail
to sustain compliance with all applicable requirements for continued listing on NASDAQ, including during the one-year monitoring period,
our Depositary Shares may be subject to delisting by NASDAQ. This could inhibit the ability of our holders of Depositary Shares to trade
their shares in the open market, thereby severely limiting the liquidity of such shares, and the price of our Depositary Shares could
decline. Delisting may further impair our ability to raise capital.
In
our opinion, the environment for financing of small and micro-cap biotech companies continues to be challenging. While this may present
acquisition and/or merger opportunities with other companies with limited or no access to financing, as noted above, any attendant financings
by us are likely to be dilutive. We continue to evaluate financing options, including those connected to acquisitions and/or mergers,
potentially available to the Company. Any alternatives considered are contingent upon the agreement of counterparties and accordingly,
there can be no assurance that any of alternative courses of action to finance the Company would be successful. This requirement for additional
financing in the short term represents a material uncertainty that may cast significant doubt upon our ability to continue as a going
concern. Should it become evident in the future that there are no realistic financing options available to us which are actionable before
its cash resources run out then we will no longer be a going concern. In such circumstances, we would no longer be able to prepare financial
statements under paragraph 25 of IAS 1. Instead, the financial statements would be prepared on a liquidation basis and assets would be
stated at net realizable value and all liabilities would be accelerated to current liabilities.
As
noted herein, we believe there are adequate options and time available to secure additional financing for us and after considering the
uncertainties, we consider it is appropriate to continue to adopt the going concern basis in preparing these financial statements.
Our
forecast of the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement
and involves risks and uncertainties, and actual results could vary as a result of a number of factors, including the timing of clinical
trials. We have based this estimate on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner
than we currently expect. If we lack sufficient capital to expand our operations or otherwise capitalize on our business opportunities,
our business, financial condition and results of operations could be materially adversely affected.
Cash Flows
The following table presents a summary
of the primary sources and uses of cash from continuing activities for the six months ended June 30, 2024 and 2023 and the years ended
December 31, 2023 and 2022:
| | |
Six Months Ended June 30, | | |
Year Ended December 31, | |
| | |
2024 | | |
2023 | | |
2023 | | |
2022 | |
| | |
(£ in thousands; unaudited) | | |
(£ in thousands) | |
| Cash used in operating activities | |
| (4,807 | ) | |
| (3,881 | ) | |
| (6,826 | ) | |
| (7,048 | ) |
| Cash generated from/(used in) provided by investing activities | |
| (754 | ) | |
| 20 | | |
| (265 | ) | |
| (220 | ) |
| Cash generated from/(used in) provided by financing activities | |
| 4,645 | | |
| 6,252 | | |
| 10,226 | | |
| 47 | |
| Net (decrease) increase in cash and equivalents | |
| (916 | ) | |
| 2,391 | | |
| 3,135 | | |
| (7,221 | ) |
Operating Activities
The following table presents
a summary of the cash used in operations as of the six months ended June 30, 2024 and 2023 and years ended December 31, 2023 and 2022:
| | |
Six Months Ended June 30, | | |
Year Ended
December 31, | |
| | |
2024 | | |
2023 | | |
2023 | | |
2022 | |
| | |
(£ in thousands; unaudited) | | |
(£ in thousands) | |
| Cash flows from operating activities before changes in working capital | |
| (3,935 | ) | |
| (4,086 | ) | |
| (7,622 | ) | |
| (8,246 | ) |
| Changes in working capital | |
| (872 | ) | |
| 205 | | |
| (49 | ) | |
| 520 | |
| Cash used in operations | |
| (4,807 | ) | |
| (3,881 | ) | |
| (7,671 | ) | |
| (7,726 | ) |
Cash flows from Operating
Activities before Changes in Working Capital. Net cash outflow from operating activities before changes in working capital was £3.94
million in the first six months of 2024, as opposed to £4.09 million during the same period in 2023. The decreased cash outflow
of £0.15 million, or 4%, was driven by a decrease in losses attributable to the owners of the Company of £0.26 million, offset
by higher negative non-cash items.
Net
cash outflow from operating activities before changes in working capital was £7.62 million in the year ended December 31, 2023,
as opposed to £8.25 million during the same period in 2022.
This
reduced cash outflow of £0.62 million was driven by lower losses attributable to the owners of the Company of £0.58 million
and a lower tax credit of £0.43 million, offset by reduced share-based payment expenses of £0.10 million and an increase in
net finance income of £0.08 million. Included in cash flows from operating activities in 2023 was £0.08 million in respect
of the forgiveness of a loan to Adhera and in 2022 was £0.21 million in respect of impairment of a loan to Bioasis.
Cash Used in Operations.
Working capital increased in cash flow terms by £0.87 million for the first six months of 2024, compared to a decrease of £0.21
million for the same period in 2023. The increase in the six months ended June 30, 2024 primarily comprised an increase in trade
and other receivables of £1.30 million offset by a decrease in trade and other payables provisions of £0.43 million.
Working
capital increased in cash flow terms by £0.05 million for the year ended December 31, 2023, compared to a decrease of £0.52
million for 2022. The increase in 2023 primarily comprised of an increase in trade and other payables of £0.21 million offset
by the utilization of £0.21 million provision in respect of expected losses on a loan provided to Bioasis and a reduction in debtors
of £0.37 million.
Taxes Paid. Taxes paid
in the six months ended June 30, 2023 and 2022 were £nil. Taxes paid in the years ended December 31, 2023 and 2022 were £nil.
Research
and development tax credits of £0.84 million were received in 2023, as opposed to £0.68 million in 2022. This related to claims
submitted in the prior financial year.
Investing Activities
There was no purchase of property,
plant and equipment in the first six months of 2024, compared to £4,000 in the first six months of 2023. Capital expenditures in
2023 related to laboratory equipment. In addition, we acquired the eRapa license for total consideration of £3.07 million including
cash consideration of £0.85 million. These cash outflows are offset by interest income from bank deposits of £0.10 million.
Purchase
of property, plant and equipment of £0.03 million occurred in the year ended December 31, 2023, compared to £0.06 million
in 2022. In addition, we acquired the tolimidone license for total consideration of £2.94 million, including cash of £0.24
million. These cash outflows are offset interest income from bank deposits of £0.07 million.
Financing Activities
Amounts
paid on lease liabilities. In the six months ended June 30 2024 we paid £93,000 in respect of lease liabilities compared
with £95,000 in the prior period.
In 2023 we paid £0.19 million in respect
of lease liabilities compared with £0.18 million in 2022, this related to rental payments on our facilities in Cardiff.
Shares
Issues Including Warrants, Net of Costs. We raised £4.74 million in net proceeds in the six months ended June 30, 2024
from a warrant inducement transaction in May 2024 private placement. We raised £6.35 million in net proceeds in the six months ended
June 30, 2023 from a private placement in February 2023 and a registered direct offering in May 2023, as well as from warrants exercises.
We
raised £10.43 million in net proceeds during the year ended December 31, 2023 in cash from private placements of our securities,
a registered direct offering and an underwritten public offering, as well as from the exercise of warrants. We raised £0.24 million
in net proceeds during the year ended December 31, 2022 in cash from the registered direct offering in December 2022 and from the exercise
of warrants.
Cash and Cash Equivalents
Cash decreased for the six
months ended June 30, 2024 by £0.92 million, compared to an increase of £2.39 million in the corresponding period in 2023.
As at June 30, 2024, we had cash and cash equivalents of £5.06 million as compared to £5.23 million as at June 30, 2023.
Cash
increased for the year ended December 31, 2023 by £3.14 million, before the impact of foreign exchange movements, compared to an
decrease of £7.22 million in 2022. This increase was primarily due to funds received from financing activities offset by continuing
trading losses. As of December 31, 2023, we had cash and cash equivalents of £5.97 million compared to £2.84 million as at
December 31, 2022.
Cash Commitments
As of June 30, 2024, our cash
resources were expected to provide liquidity into the first quarter of 2025. The Company remains focused on tight control of its cash
commitments at any given time. As of June 30, 2024, our cash requirements primarily relate to the following:
| · | lease obligations, related to our office and research and development facility, which are recognized as
lease liabilities in the consolidated statement of financial position; |
| · | deferred consideration obligations under the license agreement entered into in April 2024 with Emtora; |
| · | purchase obligations, under our commercial supply agreements and related activities; and |
| · | research and development activities related to preclinical and clinical trials for our product candidates
in development. |
The lease on our office and
research and development facility commenced in August 2021 and expires in August 2026. Our cash requirements for our lease obligation
(on a discounted basis) are £0.17 million and £0.21 million, for the short-term (payable within twelve months after the reporting
date) and long-term (payable beyond twelve months after the reporting date), respectively. Our lease obligation includes ancillary contractual
commitments in relation to utilities, maintenance and other services.
We built out the office and
laboratory space at our new facility in the period April through August 2021. We recognized £0.05 million in respect of leasehold
improvements during 2021 and an additional £0.19 million in respect of new laboratory equipment. We expect only modest capital expenditures
in the foreseeable future.
As at June 30, 2024, the Group
had cash and cash equivalents of £5.06 million. We forecast the Company currently has enough cash to fund its planned operations
into the first quarter of 2025. To maintain operations beyond that date, additional funding will be required, which may include public
or private equity or debt offerings. Additional capital may not be available on reasonable terms, if at all. If we are unable to raise
additional capital in sufficient amounts or on terms acceptable to us, we may have to significantly delay, scale back or discontinue the
development of our product candidates and formulations, as well as consider other strategic alternatives. If we do not secure additional
funding before the first quarter of 2025, it will no longer be a going concern and would likely be placed in Administration.
Research and Development, Patents and Licenses,
Etc.
For the six months ended June
30, 2024 and 2023, our research and development expenses were £2.19 million and £2.25 million, respectively.
For the years ended December
31, 2022 and 2021, our research and development expenses were £4.07 million and £5.11 million, respectively.
Trend Information
Other than as disclosed elsewhere
in this prospectus, we are not aware of any trends, uncertainties, demands, commitments or events that are reasonably likely to have a
material adverse effect on our revenues, profitability, liquidity or capital resources, or that would cause the disclosed financial information
to be not necessarily indicative of future operating results or financial conditions.
Off-Balance Sheet Arrangements
As of and at both June 30, 2024 and December 31,
2023, we did not have any off-balance sheet arrangements.
Critical Accounting Estimates
The
preparation of our consolidated financial statements requires us to make estimates, assumptions and judgments that can have a significant
impact on the reported amounts of assets and liabilities, revenue and expenses and related disclosure of contingent assets and liabilities,
at the respective dates of our financial statements. We base our estimates, assumptions and judgments on historical experience and various
other factors that we believe to be reasonable under the circumstances. Actual results may differ from these estimates under different
assumptions or conditions. Management evaluates estimates, assumptions and judgments on a regular basis and makes changes accordingly,
and discusses critical accounting estimates with the Board of Directors.
The
following are considered to be critical accounting policies because they are important to the portrayal of our financial condition or
results of operations and they require critical management estimates and judgments about matters that are uncertain.
Revenue
Supply Research and Development of Services
There
are significant management judgements and estimates involved in the recognition of revenue from the supply of services. Revenue on services
is recognized over the contract term, proportionate to the progress in overall satisfaction of the performance obligations (the services
performed by the Company), measured by cost incurred to date out of total estimate of costs. Our R&D collaboration agreements require
the delivery of services within 12 months.
Income taxes
Deferred tax assets are recognized
for unused tax losses to the extent that it is probable that taxable profit will be available against which the losses can be utilized.
Significant management judgment is required to determine the amount of deferred tax assets that can be recognized based upon the likely
timing and the level of future taxable profits together with future tax planning strategies.
In 2023 and 2022, there were
£73.4 million and £71.1 million of gross unutilized tax losses carried forward, respectively. No deferred tax asset has been
provided in respect of losses, as there was insufficient evidence to support their recoverability in future periods. The losses do not
have an expiry date.
Going Concern
We
are subject to a number of risks similar to those of other development and early commercial stage pharmaceutical companies. These
risks include, amongst others, generation of revenue from the development portfolio and risks associated with research, development, testing
and obtaining related regulatory approvals of our pipeline products. Ultimately, the attainment of profitable operations is dependent
on future uncertain events which include obtaining adequate financing to fulfill our commercial and development activities and generating
a level of revenue adequate to support our cost structure.
We
have experienced net losses and significant cash outflows from cash used in operating activities over the past years as we develop our
portfolio. As at June 30, 2024, we had total equity of £8.73 million (£4.68 million at December 31, 2023), incurred a net
loss after tax for the six months to June 30, 2024 of £3.31 million, as compared to £3.57 million in the same period in 2023,
and used cash in operating activities of £4.81 million (June 30, 2023: £3.88 million) for the same period.
Our
future viability is dependent on our ability to raise cash from financing activities to finance our development plans until commercialization,
generate cash from operating activities and to successfully obtain regulatory approval to allow marketing of our development products.
Our failure to raise capital as and when needed could have a negative impact on our financial condition and ability to pursue our business
strategies.
Our
consolidated financial statements have been presented on a going concern basis, which contemplates the realization of assets and the satisfaction
of liabilities in the normal course of business.
As
of June 30, 2024, we had cash and cash equivalents of £5.06 million.
We
have prepared cash flow forecasts and considered the cash flow requirement for our next three years, including the period twelve months
from the date of the approval of the financial statements. These forecasts show that further financing will be required during the course
of the next 12 months, assuming, inter alia, that certain development programs and other operating activities continue as currently planned. If
we do not secure additional funding before the end of the first quarter of 2025, we will no longer be a going concern and would likely
be placed in administration.
Our
forecast of the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement
and involves risks and uncertainties, and actual results could vary as a result of a number of factors, including the timing of clinical
trials. We have based this estimate on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner
than we currently expect. If we lack sufficient capital to expand our operations or otherwise capitalize on our business opportunities,
our business, financial condition and results of operations could be materially adversely affected.
If
we raise additional funds through the issuance of debt securities or additional equity securities, it could result in dilution to our
existing shareholders, increased fixed payment obligations and these securities may have rights senior to those of our Ordinary Shares
(including the Depositary Shares) and could contain covenants that would restrict our operations and potentially impair our competitiveness,
such as limitations on our ability to incur additional debt, limitations on our ability to acquire, sell or license intellectual property
rights and other operating restrictions that could adversely impact our ability to conduct our business. Any of these events could significantly
harm our business, financial condition and prospects.
In our opinion, the environment
for financing of small and micro-cap biotech companies remains challenging. While this may present acquisition and/or merger opportunities
with other companies with limited or no access to financing, as noted above, any attendant financings by us are likely to be dilutive.
We continue to evaluate financing options, including those connected to acquisitions and/or mergers, potentially available to the Company.
Any alternatives considered are contingent upon the agreement of counterparties and accordingly, there can be no assurance that any alternative
courses of action to finance the Company would be successful. This requirement for additional financing in the short term represents a
material uncertainty that may cast significant doubt upon our ability to continue as a going concern. Should it become evident in the
future that there are no realistic financing options available to the Company which are actionable before its cash resources run out then
the Company will no longer be a going concern. In such circumstances, we would no longer be able to prepare financial statements under
paragraph 25 of IAS 1. Instead, the financial statements would be prepared on a liquidation basis and assets would be stated at net realizable
value and all liabilities would be accelerated to current liabilities. As a result of the foregoing, our independent registered public
accounting firm included an explanatory paragraph in their report on our financial statements as of and for the year ended December 31,
2023 with respect to this uncertainty.
The following are considered
to be critical accounting estimates:
Impairment of Goodwill and Intangible
Assets Not Yet Ready for Use
Intangible
assets not yet ready for use are tested for impairment at the cash generating unit level on an annual basis at the year end and between
annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a cash generating unit
below its carrying value. These events or circumstances could include a significant change in the business climate, legal factors, operating
performance indicators, competition, or sale or disposition of a significant portion of a reporting unit.
The
fair value of each cash generating unit or asset is estimated using the income approach, on a discounted cash flow methodology. This analysis
requires significant judgments, including estimation of future cash flows, which is dependent on internal forecasts, including for revenues
and development costs, estimation of the long-term rate of growth for the business, estimation of the useful life over which cash flows
will occur and determination of our weighted-average cost of capital.
The
carrying value of our goodwill was £0 as of June 30, 2024 and £0 as of June 30, 2022, and intangible assets not yet ready
for use was £6.01 as of June 30, 2024 (2023: £0). The carrying value of our goodwill was £0 as of December 31, 2023
and 2022, and intangible assets not yet ready for use was £2.9 million (2022: £0) as at December 31, 2023.
The
estimates used to calculate the fair value of a cash generating unit change from year to year based on operating results and market conditions.
Changes in these estimates and assumptions could materially affect the determination of fair value and goodwill impairment for each such
unit.
Share-based payments
We account for share-based
payment transactions for employees in accordance with IFRS 2, Share-based Payment, which requires the measurement of the cost of
employee services received in exchange for the options on our Ordinary Shares, based on the fair value of the award on the grant date.
We selected the Black-Scholes-Merton
option pricing model as the most appropriate method for determining the estimated fair value of our share-based awards without market
conditions. For performance-based options that include vesting conditions relating to the market performance of our Ordinary Shares, a
Monte Carlo pricing model was used in order to reflect the valuation impact of price hurdles that have to be met as conditions to vesting.
The resulting cost of an equity
incentive award is recognized as expense over the requisite service period of the award, which is usually the vesting period. Compensation
expense is recognized over the vesting period using the straight-line method and classified in the consolidated statements of comprehensive
income.
The assumptions used for estimating
fair value for share-based payment transactions are disclosed in our annual financial statements and are estimated as follows:
| · | volatility is estimated based on the average annualized volatility of a number of publicly traded peer
companies in the biotech sector; |
| · | the estimated life of the option is estimated to be until the first exercise period, which is typically
the month after the option vests; and |
| · | the dividend return is estimated by reference to our historical dividend payments. Currently, this is
estimated to be zero as no dividend has been paid in the prior periods. |
We also issue warrants exercisable
for Depositary Shares to certain professional advisors in connection with equity transactions that fall within the scope of IFRS 2 and
are accounted for as share based payments. The fair value of the services received in exchange for the grant of warrants is recognized
as an expense of the equity transaction. The total expense is recognized immediately.
Financial liabilities
Fair value through profit
and loss (FVTPL)
We have outstanding warrants
in the Ordinary Share capital of the company. The number of Ordinary Shares to be issued when exercised is fixed, however the exercise
price is denominated in US Dollars being different to the functional currency of the parent company. Therefore, the warrants are classified
as equity settled derivative financial liabilities recognized at fair value through the profit and loss account.
The financial liability is
valued using the either the Monte Carlo model or the Black-Scholes option pricing model. Financial liabilities at FVTPL are stated at
fair value, with any gains or losses arising on re-measurement recognized in profit or loss. The net gain or loss recognized in profit
or loss incorporates any interest paid on the financial liability and is included in the ‘finance income’ or ‘finance
expense’ lines item in the income statement. Fair value is determined in the manner described in our annual financial statements.
Recently Issued and Adopted Accounting Pronouncements
See
Note 1 to our consolidated financial statements included elsewhere in this report for recently adopted accounting pronouncements and recently
issued accounting pronouncements not yet adopted as of the dates of the statement of financial position included in this report.
Quantitative and Qualitative Disclosures about
Market Risk
We are exposed to a variety
of financial risks, including, but not limited to, market risk (including foreign exchange and interest rate risks), credit risks, and
liquidity risks. Our overall risk management program focuses on the unpredictability of financial markets and seeks to minimize potential
adverse effects on its financial performance.
Credit Risk
We are exposed to credit risk
from amounts due from collaborative partners and from cash and cash equivalents and deposits with banks and financial institutions. The
risk from collaborative partners is deemed to be low. For banks and financial institutions, only independently rated parties with high
credit status are accepted. We do not enter into derivatives to manage credit risk. The gross carrying amount of a financial asset is
written off (either partially or in full) to the extent that there is no realistic prospect of recovery.
We do not enter into derivatives
to manage credit risk.
Our total exposure to credit
risk is equal to the total value of the financial assets held at year end. The consolidated entity recognizes a loss allowance for expected
credit losses on financial assets which are either measured at amortized cost or fair value through other comprehensive income. The measurement
of the loss allowance depends upon the consolidated entity's assessment at the end of each reporting period as to whether the financial
instrument's credit risk has increased significantly since initial recognition, based on reasonable and supportable information that is
available, without undue cost or effort to obtain.
Where there has not been a
significant increase in exposure to credit risk since initial recognition, a 12-month expected credit loss allowance is estimated. This
represents a portion of the asset’s lifetime expected credit losses that is attributable to a default event that is possible within
the next 12 months. Where a financial asset has become credit impaired or where it is determined that credit risk has increased significantly,
the loss allowance is based on the asset's lifetime expected credit losses. The amount of expected credit loss recognized is measured
on the basis of the probability weighted present value of anticipated cash shortfalls over the life of the instrument discounted at the
original effective interest rate. For financial assets measured at fair value through other comprehensive income, the loss allowance is
recognized within other comprehensive income. In all other cases, the loss allowance is recognized in profit or loss.
Cash in Bank
We are continually reviewing
the credit risk associated with holding money on deposit in banks and seek to mitigate this risk by holding deposits with banks with high
credit status.
Foreign Exchange Risk
Foreign exchange risk also
arises when our individual entities enter into transactions denominated in a currency other than our functional currency. Our transactions
outside the United Kingdom to Europe and the United States of America drive foreign exchange movements where suppliers invoice in currency
other than British pounds sterling. We do retain some cash balances in US Dollars from our US Dollar denominated equity raises to reduce
the foreign exchange exposure on US$ denominated suppliers related to our NASDAQ listing and US based clinical studies. To the extent
other assets and/or consumables are purchased in foreign currencies, the requisite currency is purchased immediately upon invoice.
Interest Rate Risk
We do not hold any derivative
instruments, or other financial instruments, that expose us to material interest rate risk.
Liquidity Risk
Liquidity risk arises from
our management of working capital. It is the risk that we will encounter difficulty in meeting our financial obligations as they fall
due.
It
is our aim to settle balances as they become due.
Our future viability is
dependent on its ability to raise cash from financing activities to finance its development plans until milestones and/or royalties can
be secured from partnering our assets. Our failure to raise capital as and when needed could have a negative impact on its financial condition
and ability to pursue its business strategies.
As
noted herein, we believe there are adequate options and time available to secure additional financing for the Company and after considering
the uncertainties, we consider it is appropriate to continue to adopt the going concern basis in preparing the financial information.
Our consolidated financial information have therefore been presented on a going concern basis, which contemplates the realization of assets
and the satisfaction of liabilities in the normal course of business.
We
have prepared cash flow forecasts and considered the cash flow requirement for our next three years, including the period twelve months
from the date of the approval of the financial statements. These forecasts show that further financing will be required during the course
of the next 12 months, assuming, inter alia, that certain development programs and other operating activities continue as currently planned. If
we do not secure additional funding before the end of the first quarter of 2025, we will no longer be a going concern and would likely
be placed in administration.
In
our opinion, the environment for financing of small and micro-cap biotech companies remains challenging. While this may present acquisition
and/or merger opportunities with other companies with limited or no access to financing, as noted above, any attendant financings by us
are likely to be dilutive. We continue to evaluate financing options, including those connected to acquisitions and/or mergers, potentially
available to the Company. Any alternatives considered are contingent upon the agreement of counterparties and accordingly, there can be
no assurance that any alternative courses of action to finance the Company would be successful.
This
requirement for additional financing represents a material uncertainty that raises substantial doubt about our ability to continue as
a going concern. As a result, our independent registered public accounting firm included an explanatory paragraph in its report on our
financial statements as of and for the year ended December 31, 2023 with respect to this uncertainty. Should it become evident in the
future that there are no realistic financing options available to us which are actionable before our cash resources run out then we will
no longer be a going concern. In such circumstances, we would no longer be able to prepare financial statements under paragraph 25 of
IAS 1. Instead, the financial statements would be prepared on a liquidation basis and assets would stated at net realizable value and
all liabilities would be accelerated to current liabilities.
Our
ability to continue as a going concern is dependent upon our ability to obtain additional capital and/or dispose of assets, for which
there can be no assurance we will be able to do on a timely basis, on favorable terms or at all.
BUSINESS
Business Overview
We
are an acquisition-focused clinical stage biopharmaceutical company developing a pipeline of innovative products for the treatment of
diseases with unmet medical needs, including familial adenomatous polyposis, or FAP, non-muscle invasive bladder cancer, or NMIBC, type
1 diabetes, or T1D, and rare/orphan cancers of the brain.
In
April 2024 we licensed eRapa, a proprietary formulation of rapamycin, from Rapamycin Holdings, Inc. d/b/a Emtora Biosciences, Inc., or
Emtora. Rapamycin is an mTOR inhibitor. As a central regulator of cell metabolism, growth, proliferation and survival, the mTOR pathway
is activated during various cellular processes including tumor formation and angiogenesis. Through the use of nanotechnology and pH sensitive
polymers, eRapa is designed to address the poor bioavailability, variable pharmacokinetics and toxicity generally associated with the
currently available forms of rapamycin. An ongoing Phase 2 study of eRapa in NMIBC is scheduled to report results in mid-2025.
Tolimidone
is a selective activator of the enzyme lyn kinase which increases phosphorylation of insulin substrate -1, thereby amplifying the signaling
cascade initiated by the binding of insulin to its receptor. Lyn kinase modulates key intracellular functions such as proliferation, differentiation,
apoptosis, migration and metabolism. In fat cells, lyn kinase increases utilization of insulin, thus decreasing blood sugar without having
an effect on insulin production. In pancreatic islets, activation of lyn kinase promotes beta cell survival and proliferation, whereas
its inhibition leads to cell death, prevents proliferation and precipitates diabetes. We are developing tolimidone for T1D and are in
the process of initiating a Phase 2a dose confirming study.
MTX110,
which is being studied in aggressive rare/orphan brain cancer indications including recurrent glioblastoma, diffuse midline glioma, or
DMG, and medulloblastoma, is a liquid formulation of the histone deacetylase, panobinostat. Our proprietary formulation enables delivery
of the product via convection-enhanced delivery at potentially chemotherapeutic doses directly to the site of the tumor, by-passing the
blood-brain barrier and avoiding systemic toxicity. We have recruited the first cohort of patients in an ongoing Phase 1 study of MTX110
in recurrent glioblastoma. We have completed and announced the results of two Phase 1 studies in DMG. There is an ongoing Phase 1 investigator-initiated
trial in medulloblastoma.
Our
clinical assets are supported by three proprietary drug delivery technologies focused on improving bio-delivery and bio-distribution of
drugs through either sustained delivery (Q-SpheraTM), direct delivery (MidaSolveTM), or targeted delivery (MidaCoreTM):
| · | Our Q-Sphera platform: Our disruptive polymer microsphere microtechnology
is used for sustained delivery to prolong and control the release of therapeutics over an extended period of time, from weeks to months. |
| · | Our MidaSolve platform: Our innovative oligosaccharide nanotechnology
is used to solubilize drugs so that they can be administered in liquid form directly and locally into tumors. |
| · | MidaCore platform: Our gold nanoparticle nanotechnology is used
for targeting sites of disease by using either chemotherapeutic agents or immunotherapeutic agents. |
We are currently focused on
our clinical stage assets and there are no active research and development programs.
Revenue. Revenue for
the whole of the Company for the years ended December 31, 2023, 2022 and 2021 is set out below.
| | |
Year ended December 31, | |
| (£ in thousands) | |
2023 | | |
2022 | | |
2021 | |
| | |
| | |
| | |
| |
| Revenue (Europe, including United Kingdom) | |
| 381 | | |
| 699 | | |
| 578 | |
| Revenue (Rest of World) | |
| -- | | |
| -- | | |
| -- | |
| Total Revenue from continuing and discontinued operations | |
| 381 | | |
| 699 | | |
| 578 | |
Recent Developments
The Committed Equity Financing
On
January 17, 2025, we entered into the Purchase Agreement with the Selling Shareholder, pursuant
to which we, subject to the restrictions and satisfaction of the conditions in the Purchase Agreement, have the right, but not the obligation,
to sell to the Selling Shareholder, and the Selling Shareholder is
obligated to purchase, up to $35.0 million of newly issued Depositary Shares. As consideration for the Seller Shareholder’s execution
and delivery of the Purchase Agreement, we have agreed to pay the Commitment Fee to the Selling Shareholder.
We
do not have a right to commence any sales of Depositary Shares to the Selling Shareholder under
the Purchase Agreement until the Commencement Date (as defined in the Purchase Agreement). Over the 36-month period from and after the
Commencement Date (unless the Purchase Agreement is terminated earlier in accordance with its terms), the Selling Shareholder has
no right to require us to sell any Depositary Shares to the Selling Shareholder, but the
Selling Shareholder is obligated to make purchases as we direct, subject to certain conditions.
There are no upper limits on the price per share that the Selling Shareholder must pay for
Depositary Shares. Actual sales of Depositary Shares to the Selling Shareholder will depend
on a variety of factors to be determined by us from time to time, including, among others, market conditions, the trading price of our
Depositary Shares and determinations by us as to the appropriate sources of funding for us and our operations.
At
any time from and after the Commencement Date, on any business day on which the previous business day’s closing sale price of Depositary
Shares was equal to or greater than $1.00 we may direct the Selling Shareholder to purchase a specified number of Depositary Shares not
to exceed $200,000, at a purchase price equal to the lesser of 95% of (i) the daily VWAP of the Depositary Shares for the five trading
days immediately preceding the applicable Purchase Date for such Fixed Purchase and (ii) the lowest sale price of a Depositary Share on
the trading day immediately preceding the Purchase Date.
In
addition, at any time from and after the Commencement Date, on any business day on which the previous business day’s closing sale
price of the Depositary Shares is equal to or greater than $1.00 and such business day is also the Purchase Date for a Fixed Purchase
of an amount of Depositary Shares not less than the applicable Fixed Purchase Maximum Amount (as defined in the Purchase Agreement), we
may also direct the Selling Shareholder to purchase an additional number of Depositary Shares
in an amount up to the VWAP Purchase Maximum Amount (as defined in the Purchase Agreement), at a purchase price equal to the lesser of
95% of (i) the closing price of a Depositary Share on the trading day immediately preceding the applicable VWAP Purchase Date and (ii)
the VWAP during the period on the applicable VWAP Purchase Date beginning at the opening of trading and ending at the VWAP Purchase Termination
Time (as defined in the Purchase Agreement).
At
any time from and after the Commencement Date, on any business day that is also the VWAP Purchase Date for a VWAP Purchase, we may also
direct the Selling Shareholder to purchase, on such same business day, or the Additional
VWAP Purchase Date, an additional number of Depositary Shares in an amount up to the Additional VWAP Purchase Maximum Amount (as defined
in the Purchase Agreement), at a purchase price equal to the lesser of 95% of (i) the closing price of a Depositary Share on the trading
day immediately preceding the applicable Additional VWAP Purchase Date and (ii) the VWAP during the Additional VWAP Purchase Period (as
defined in the Purchase Agreement) on the applicable Additional VWAP Purchase Date.
If
we make certain issuances of our securities within a specified period of time after a Purchase Date and such securities are issued at
prices, or the New Issuance Price, less than the prices to be paid by the Selling Shareholder in
such Fixed Purchase, VWAP Purchase or Additional VWAP Purchase, the purchase price for such applicable Fixed Purchase, VWAP Purchase and
Additional VWAP Purchase would be reduced to the New Issuance Price, subject to the terms and conditions set forth in the Purchase Agreement.
Under
the Purchase Agreement, in no event may the aggregate amount of Purchase Shares submitted in any single or combination of VWAP Purchase
notices and/or Additional VWAP Purchase notices on a particular date require a payment from the Selling Shareholder to
us that exceeds $2,500,000, unless such limitation is waived by the Selling Shareholder.
The Selling Shareholder is
not obligated to buy any Depositary Shares pursuant to the Purchase Agreement if such Depositary Shares, when aggregated with all other
securities then beneficially owned by the Selling Shareholder and its affiliates (as calculated
pursuant to Section 13(d) of the Securities Exchange Act of 1934, as amended, and Rule 13d-3 promulgated thereunder), would result in
the Selling Shareholder beneficially owning Ordinary Shares (represented by Depositary Shares)
in excess of the Beneficial Ownership Limitation.
The
net proceeds under the Purchase Agreement to us will depend on the frequency and prices at which we sell Depositary Shares to the
Selling Shareholder. We expect that any proceeds received by us from such sales to the Selling
Shareholder will be used to fund our development programs, for working capital and other
general corporate purposes.
We
have the right to terminate the Purchase Agreement at any time, upon one business days’ notice, at no cost or penalty. During any
“suspension event” under the Purchase Agreement, the Selling Shareholder does
not have the right to terminate the Purchase Agreement; however, we may not initiate any regular or other purchase of shares by the
Selling Shareholder, until such event of default is cured. In addition, in the event of bankruptcy
proceedings by or against us, the Purchase Agreement will automatically terminate in accordance with its terms.
There
are substantial risks to our shareholders as a result of the sale and issuance of Depositary Shares to the Selling Shareholder
under the Purchase Agreement. These risks include substantial dilution, significant declines in
our stock price and our inability to draw sufficient funds when needed. See “Risk Factors.” The sale of our Depositary
Shares to the Selling Shareholder under the Purchase Agreement will not affect the rights
or privileges of our other shareholders, except that the economic and voting interests of our existing shareholders will be diluted as
a result of any such sale. Although the number of Depositary Shares that our other shareholders own will not decrease, the shares owned
by our other shareholders will represent a smaller percentage of our total outstanding shares after any such sale to the Selling
Shareholder under the Purchase Agreement.
For
more information see “The Committed Equity Financing.”
Promissory Note
On December 20, 2024, we issued
a promissory note to the Selling Shareholder in the aggregate principal amount of $600,000, at a 10% original issue discount. The Note
is an unsecured obligation of the Company and bears interest at an annual rate of 5%, which may be increased under certain circumstances,
and has a maturity date of one year from the Issuance Date. The Note includes a monthly repayment schedule, with the entire principal
amount of the Note, plus accrued and unpaid interest, due and payable by the Company on the date that is twelve (12) months from the Issuance
Date. The Note may be prepaid prior to the Maturity Date without penalty. Additionally, during the term of the Note, if we conduct a securities
offering with gross proceeds equal to or greater than $500,000, we shall be obligated to utilize 25% of the gross proceeds of such offering
to prepay the Note.
The Note contains customary
representations and warranties by us and provides for certain customary events of default. Generally, if an event of default occurs and
is continuing under the Note, the holder thereof may require us to repay all amount due under the Note, including accrued and unpaid interest,
immediately.
We received the $540,000 pursuant
to the Note on December 24, 2024.
Regained Compliance with NASDAQ
Our
Depositary Shares are currently listed on the NASDAQ Capital Market. We are required to meet certain qualitative and financial tests to
maintain the listing of the Depositary Shares on the NASDAQ Capital Market. On August 27, 2024, we received a Letter, from the
Listing Qualifications Department of NASDAQ notifying us of the Staff’s determination to delist our securities from the NASDAQ Capital
Market because our securities had a closing bid price below $1.00 for 30 consecutive business days, which triggered a notice of delisting
pursuant to NASDAQ Listing Rule 5550(a)(2). Normally, a company would be afforded a 180-calendar day period to demonstrate compliance
with the Minimum Bid Price Requirement. However, pursuant to NASDAQ Listing Rule 5810(c)(3)(A)(iv), we were not eligible for any compliance
period specified in Rule 5810(c)(3)(A) because we effected reverse stock splits over the prior two-year period with a cumulative ratio
of 250 shares or more to one. Accordingly, and as described in the Letter, unless we timely requested a hearing before the Panel, our
securities would be subject to suspension/delisting. We requested a hearing, which automatically stayed any suspension or delisting action
pending the hearing and the expiration of any additional extension period granted by the Panel following the hearing.
On October 14, 2024, the Panel
granted our request for an extension of time to demonstrate compliance with the Minimum Bid Price Requirement. On November 7, 2024, we
were formally notified that the Hearings Panel determined that we had regained compliance with the Minimum Bid Price Requirement. We remain
subject to a discretionary panel monitor through February 24, 2025, and we are required to provide prompt notification during this exception
period of any significant events that occur during this time that may affect our compliance with NASDAQ requirements.
Depositary Share Ratio Change and Change
in Nominal Value
On October 4, 2024, and in
an effort to bring our Depositary Share price into compliance with NASDAQ’s minimum bid price per share requirement, we effected
a ratio change in the number of Ordinary Shares represented by our Depositary Shares from 400 Ordinary Shares per Depositary Share to
10,000 Ordinary Shares per Depositary Share. No fractional Depositary Shares were issued.
On November 22, 2024, we held
the November GM, and our shareholders passed resolutions to (i) subdivide our Ordinary Shares of £0.001 nominal value each into
one ordinary share of £0.00005 nominal value and 19 C Deferred Shares of £0.00005 nominal value each, which became effective
on November 25, 2024 and (y) adopt new Articles of Association, which make consequential amendments to the existing articles of association
of the Company to reflect the November Subdivision. As is standard for deferred shares, each C Deferred Share has very limited rights
and is effectively valueless. The C Deferred Shares have the rights and restrictions as set out in the Articles of Association and do
not entitle the holder thereof to receive notice of or attend and vote at any general meeting of the Company or to receive a dividend
or other distribution.
Registered Direct Offering
and Concurrent Private Placement
On
July 22, 2024, we completed the closing of the July 2024 Registered Direct Offering and the July 2024 Private Placement with certain Investors,
for the sale of (i) an aggregate of 202,032 Depositary Shares, and (ii) an aggregate of 11,157 pre-funded warrants exercisable for Depositary
Shares, or the July 2024 Pre-Funded Warrants, at a price per Depositary Share of $23.50, and a price per July 2024 Pre-Funded Warrant
of $23.4975. The aggregate gross proceeds to us were approximately $5.0 million,
before deducting the placement agent’s fees and related offering expenses.
The July
2024 Pre-Funded Warrants were sold, in lieu of Depositary Shares, to the Investors such that
the Investors’ purchase of Depositary Shares in the Registered Direct Offering would not otherwise result in the Investor, together
with their affiliates and certain related parties, beneficially owning more than 4.99% or 9.99% of our Ordinary Shares immediately following
the consummation of the July 2024 Registered Direct Offering. Each July 2024 Pre-Funded
Warrant represents the right to purchase one Depositary Share at an exercise price of $0.0025 per share. The July 2024 Pre-Funded
Warrants are exercisable immediately and may be exercised at any time until the July 2024 Pre-Funded
Warrants are exercised in full.
Additionally,
in the concurrent July 2024 Private Placement, we issued and sold to the Investors (i) Series J Warrants exercisable for 213,188 Depositary
Shares, and (ii) Series K Warrants to purchase an aggregate of 213,188 Depositary Shares. The warrants are immediately exercisable at
an exercise price of $25.00 per Depositary Share, subject to adjustments for certain dilutive equity issuances. The Series J Warrants
will expire five years from the initial exercise date and the Series K Warrants will expire one year from the initial exercise date. The
Investors (together with their respective affiliates) may not exercise the warrants if the Investor would beneficially own more than 4.99%
or 9.99% (such amount to be determined at the option of the Investor upon issuance) of the number of Ordinary Shares outstanding immediately
after giving effect to such exercise. The July Purchase Agreement contains customary representations, warranties and covenants of the
Company and each Investor, and customary indemnification provisions for a transaction of this type. Pursuant to the terms of the July
Purchase Agreement, we agreed to be subject to a lock-up period on subsequent equity sales, which has since expired. We also agreed to
not issue any securities that are subject to a price reset based on the trading prices of our Ordinary Shares or upon a specified or contingent
event in the future or enter into any agreement to issue securities at a future determined price for a period of 180 days following the
closing date of the Offerings, subject to certain exceptions. Additionally, we agreed to reduce the exercise price of our existing Series
E warrants, Series G warrants and Series H warrants held by each Investor to $25.00 per Depositary Share.
In
connection with the Offerings, we entered into a Placement Agent Agreement with Ladenburg, pursuant to which we engaged Ladenburg as the
exclusive placement agent for the Offerings. We agreed to pay Ladenburg a cash fee in an amount equal to 8.0% of the aggregate gross proceeds
of the Offerings and to issue to Ladenburg or its designees the July 2024 Placement Agent Warrants. We also agreed to pay Ladenburg a
management fee equal to 1.0% of the gross proceeds raised in the Offerings and an expense allowance of up to $85,000 for legal fees and
other out-of-pocket expenses. The July 2024 Placement Agent Warrant has substantially the same terms as the Series J Warrants, except
that the exercise price of the July 2024 Placement Agent Warrants is $31.25 and the term of the July 2024 Placement Agent Warrants will
terminate on the three-year anniversary of the initial exercise date.
Warrant Inducement
On
May 22, 2024, we entered into Warrant Agreements with certain Holders that were holders of an aggregate of 62,906 of our outstanding Series
E Warrants exercisable for $55.00 per Depositary Share, and an aggregate of 61,275 of our outstanding Series F Warrants exercisable for
$55.00 per Depositary Share, issued on December 21, 2023. Pursuant to the Warrant Agreements, the Holders agreed to exercise the Series
E Warrants and Series F Warrants, as applicable, at a reduced exercise price of $37.50 per Depositary Share; provided that the Warrant
Agreements provide that in the event that any warrant exercise would otherwise cause a holder to exceed the beneficial ownership limitation
set forth in the applicable warrants, we would only issue such number of shares to such holder that would not cause such holder to exceed
the maximum number of shares permitted thereunder, with the balance to be held in abeyance for the benefit of such holder until notice
from such holder that the balance (or portion thereof) may be issued in compliance with such limitation, which abeyance is evidenced through
the warrants which shall be deemed prepaid thereafter (including the payment in full of the exercise price), and exercised pursuant to
a notice of exercise (provided no additional exercise price shall be due and payable). Upon the Closing, we issued 124,182 Depositary
Shares to the Holders, with the remaining 931,585 Depositary Shares remaining unissued but held in abeyance until we receive notice from
the holders that the remaining shares may be issued in compliance with the beneficial ownership limitation. The 37,263 Depositary Shares
held in abeyance were not issued following the warrant exercise as the Warrant Agreements prohibit us from issuing the abeyance shares
because doing so would violate the beneficial ownership limitation contained in the Warrant Agreements. The Warrant Agreements require
that the abeyance shares instead be held in abeyance and evidenced by the existing warrants. Abeyance means being without or waiting for
an owner. Since the exercise price has been paid, but the abeyance shares were not issued and the existing warrants continue to evidence
the right to the abeyance shares, the existing warrants had effectively become a “pre-funded warrant” and the abeyance shares
may only be issued by us to the Holders of the existing warrants if the Holders notify us that the issuance may occur without violation
of the beneficial ownership limitation.
In
consideration for the immediate exercise of the Series E Warrants and/or Series F Warrants for cash, we issued one Series G Warrant for
each Series E Warrant exercised, and one Series H Warrant for each Series F Warrant exercised.
The
Replacement Warrants were exercisable immediately and expire after five years, for the Series G Warrants, and one year, for the Series
H Warrants, from the date of issuance. The registration statement of which this prospectus forms a part includes the Ordinary Shares (represented
by Depositary Shares) issuable upon exercise of the Replacement Warrants, as well as the Ordinary Shares (represented by Depositary Shares)
received upon exercise of the Series E Warrants and Series F Warrants.
Ladenburg, acted
as warrant inducement agent and financial advisor in connection with the transaction and received a cash fee of 8.0% of the gross proceeds
and reimbursement of certain expenses. We also issued to Ladenburg and certain designees of Ladenburg Warrants Agent Warrants for purchase
of an aggregate of 6,456 Depositary Shares at an exercise price of $62.50. The registration statement of which this forms a part includes
the Depositary Shares issuable upon exercise of these warrants.
We
received gross proceeds of approximately $6.05 million from the warrant exercise, prior to deducting the warrant inducement agent fees
and other expenses.
License and Collaboration
Agreement
On
April 25, 2024, we entered into the Emtora License Agreement with Emtora, relating to the license of eRapa, an oral product formulation
of rapamycin (sirolimus), for use in the prevention, treatment, diagnosis, detection, monitoring and/or predisposition testing of all
diseases, states or conditions in humans, that includes the nanoparticle and enteric coated finished pharmaceutical formulations developed
at any time by Emtora and its affiliates. Under the License, we obtained from Emtora an exclusive, worldwide, sublicensable right to develop,
manufacture, commercialize, or otherwise exploit products containing rapamycin (sirolimus) in the Field. Pursuant to the terms of the
License Agreement, the Company and Emtora established a joint development committee, consisting of two designees of the Company and two
designees of Emtora.
As
consideration for the License, we made an upfront payment to Emtora in the form of 378,163 of our Depositary Shares (equal to five percent
(5%) of our outstanding Ordinary Shares, calculated on a fully-diluted basis (including in-the-money warrants)). In addition, we are also
responsible for up to $31.5 million in sales milestones within the first six months of commercial sale of a first-approved indication
of eRapa in certain markets, with decreasing milestones for subsequent approvals for additional indications. There is also a one-time
$10.0 million milestone payable upon cumulative net sales of $1.0 billion. Further, we are also obligated to pay Emtora single digit tiered
royalties on net sales of eRapa, in addition to honoring Emtora’s legacy royalty obligations and paying Emtora fees related to income
derived from sublicensing and the partnering of eRapa. In addition, effective as of the closing of the License Agreement, a promissory
note previously issued by Emtora in favor of the Company in the amount of $250,000 was forgiven. We also made an additional $500,000 cash
payment to Emtora to be used exclusively for a match to an advance from the Cancer Prevention and Research Institute of Texas.
Upon
any change of control of the Company (as defined in the License Agreement), we shall issue Emtora a warrant exercisable for 1,604,328
Depositary Shares, which may only be exercised upon such change of control.
The
License Agreement also provides us with the exclusive option to acquire all of the capital stock of Emtora at a purchase price on commercially
reasonable terms during the period beginning with the filing of an NDA for the Product with the FDA, and ending 90 days after acceptance
of the filing of the NDA by the FDA.
eRapa Developments
Our open-label
Phase 2 study was conducted in seven United States centers of excellence in 30 adult patients with a median age of 43 years with intact
colon (n=6) or post-colectomy and ileo-rectal anastomosis, and at least 10 adenomas in the rectal remanent (n=24). Patients were sequentially
enrolled into three dosing cohorts of 10 patients each for a 12-month treatment period: 0.5mg every other day (Cohort 1), 0.5mg daily
every other week (Cohort 2), and 0.5mg daily (Cohort 3). Upper and lower endoscopic surveillance occurred at baseline and after six months.
Primary endpoints were the safety and tolerability of eRapa and percentage change from baseline in polyp burden, as measured by the aggregate
of all polyp diameters.
On May 21,
2024, we announced six month results of the Phase 2 clinical trial of eRapa in FAP, which were presented at the 2024 Digestive Disease
Week annual meeting in Washington D.C. In the duodenum, 14 out of 18 patients, or 78%, were non-progressors, with 11 out of 18 of these
patients, or 61%, with a PR. In the colorectum, 25 out of 29 patients, or 86%, were non progressors, including all with an intact colon;
of these, 15 out of 29 patients, or 67%, demonstrated PR, including four with an intact colon. Only two drug-related Grade 3 SAEs occurred
during the trial (with no Grade 4 or 5 SAEs reported), and 97% of patients remained on treatment at six months. In summary, after six
months’ treatment, eRapa appeared safe and well-tolerated with a significant 24% reduction in the total polyp burden at six months
compared with baseline (p=0.04) and an overall 83% non-progression rate.
On June 24,
2024, we announced 12 month results of the Phase 2 clinical trial which were presented at the 2024 InSIGHT bi-annual meeting in Barcelona.
Overall, 21 out of 28 patients, or 75%, were deemed to be non-progressors at 12 months, with a median reduction in polyp burden of 17%.
Over the course of 12 months, there were four related Grade 3 or higher and one related SAE reported during the trial, and a 95% compliance
rate at 12 months. One patient was removed from the trial due to non-compliance. In summary, after 12 months’ treatment, eRapa appeared
safe and well-tolerated with a median 17% reduction in the total polyp burden at 12 months compared with baseline and an overall 75% non-progression
rate. The 89% non-progression rate and 29% median reduction in polyp burden in Cohort 2 is likely to be the preferred dosage regimen for
Phase 3.
Tolimidone Developments
On July 16, 2024, we announced Health Canada had
approved a Phase 2a dose confirmation trial of tolimidone in T1D. The study is an Investigator Initiated Trial to be conducted by the
University of Alberta. The trial will measure C-peptide levels (a marker for insulin) and HbA1c (a marker for blood glucose) after three
months compared with baseline and the number of hyperglycemic events initially in 12 patients across three dose groups. The trial may
be expanded in due course.
MTX110 Developments
On October 4, 2024, we announced
an update on progression free and overall survival in our Phase 1 trial of MTX110 in rGBM, also known as the MAGIC-G1 study. At that
time, patients 1 and 2 had deceased, with overall survival since the start of treatment of 12 months and 13 months, respectively. Patients
3 and 4 remained in post-study follow-up. Patient 3 had progression free survival of six months and overall survival of 13 months since
start of treatment. Patient 4 has not yet had confirmed progression and therefore had progression free and overall survival of 12 months
since start of treatment.
The Phase 1 study is an open-label,
dose escalation study designed to assess the feasibility and safety of intermittent infusions of MTX110 administered by CED via implanted
refillable pump and catheter.
Our Strategy
In early 2023, we decided
to re-position the Company as therapeutics (as opposed to drug delivery) company and we began looking for additional assets to complement
our MTX110 programs. The delivery of proof-of-concept clinical data is the primary focus of our business model going forward.
Our proprietary drug delivery
technologies are no longer a key priority for the Company.
Development
Our intention is to build
a balanced portfolio of clinical-stage development assets, ideally with a focus on rare / orphan indications. eRapa was in-licensed in
April 2024 and is being developed for FAP and NMIBC. We expect to begin enrolling a multi-center registrational Phase 3 trial in FAP in
the first half of 2025. The Phase 2 trial in NMIBC is ongoing. Tolimidone, which was in-licensed in December 2023, is a Phase 2 ready
asset which we intend to develop for T1D. MTX110 is currently in Phase 1 development for three rare / orphan brain cancers.
Our aim is to develop our
clinical assets to proof-of-concept stage before securing partners to undertake the most expensive, later stage development.
Our research and development programs may,
like MTX110, be based on one or more of our enabling technologies.
Manufacturing
We do not intend to establish
our own manufacturing capabilities. For clinical trial material we utilize GMP-certified contract manufacturers.
Commercialization
Once proof-of-concept has
been established, we intend to seek to license our products to a partner who would complete the development, and subsequently market and
sale, of the product in an agreed upon licensed territory. In addition to reimbursement of development costs, the partner would be expected
to make milestone payments based on sales targets and royalty payments.
Pipeline
We
are actively pursuing the development of eRapa in FAP, tolimidone in T1D and MTX110 in three indications. Our development pipeline is
as follows:
Current Clinical Stage Assets
eRapa.
eRapa is a proprietary oral tablet formulation of rapamycin, also known as sirolimus. Rapamycin is an mTOR (mammalian Target Of Rapamycin)
inhibitor. mTOR has been shown to have a significant role in the signaling pathway that regulates cellular metabolism, growth and proliferation
and is activated during tumorgenesis. Rapamycin is approved in the United States for organ rejection in renal transplantation as Rapamune®(Pfizer).
Through the use of nanotechnology and pH sensitive polymers, eRapa is designed to address the poor bioavailability, variable pharmacokinetics
and toxicity generally associated with the currently available forms of rapamycin.
FAP
is characterized as a proliferation of polyps in the colon and/or rectum, usually occurring in mid-teens. There is no approved therapeutic
option for treating FAP patients, for whom active surveillance and surgical resection of the colon and/or rectum remain the standard of
care. If untreated, FAP typically leads to cancer of the colon and/or rectum. There is a significant hereditary component to FAP with
a reported incidence of one in 5,000 to 10,000 in the United States and one in 11,300 to 37,600 in Europe. eRapa has received Orphan Designation
in the United States and we plan to seek such designation in Europe. Importantly, mTOR has been shown to be over-expressed in FAP polyps
– thereby underscoring the rationale for using a potent and safe mTOR inhibitor like eRapa to treat FAP.
The results of the Phase 2
study were presented at two leading scientific conferences in the second quarter of 2024. Following a positive end of Phase 2 meeting
with the FDA, we have requested a Type C meeting with the FDA to finalize the protocol for a Phase 3 multi-center, double-blind, placebo-controlled
study in FAP. The Phase 3 study, which is expected to be registrational, plans to recruit approximately 168 patients across 30 or more
sites, with a primary endpoint being time to a defined progression free survival event. The study is expected to recruit over 18 months
and is supported by a non-dilutive grant of $17.0 million from the Cancer Prevention and Research Institute of Texas.
NMIBC
refers to tumors found in the tissue that lines the inner surface of the bladder. The most common treatment is transurethral resection
of the bladder tumor followed by intravesical Bacillus Calmette-Guerin with chemotherapy depending upon assessment of risk of recurrence.
NMIBC is the fourth most common cancer in men with an incidence of 10.1 per 100,000 and 2.5 per 100,000 in women. Our ongoing multi-center,
double-blind, placebo-controlled Phase 2 study in NMIBC is expected to enroll up to 166 patients with primary endpoints of safety/tolerability
and relapse free survival after 12 months of treatment. The Phase 2 study, which is supported by a $3.0 million non-dilutive grant from
the National Cancer Institute, part of the National Institutes of Health, is expected to read out in the first half of 2025.
Tolimidone.
Tolimidone was originally discovered by Pfizer Inc., or Pfizer, and was developed through Phase 2 for the treatment of gastric ulcers.
Pfizer undertook a broad pre-clinical program to characterize the pharmacology, pharmacokinetics, metabolism and toxicology of tolimidone.
Pfizer discontinued development of the drug due to lack of efficacy for that indication in Phase 2. Tolimidone is a selective activator
of the enzyme Lyn kinase which increases phosphorylation of insulin substrate -1, thereby amplifying the signaling cascade initiated by
the binding of insulin to its receptor.
We
intend to develop tolimidone for the treatment of T1D. As a lyn kinase activator, tolimidone has been shown in preclinical experiments
to have a role in beta cell survival and proliferation. If replicated in clinical studies, tolimidone could have the potential to be disease
modifying and change the treatment paradigm for T1D. T1D affects approximately 8.4 million people worldwide and there are approximately
500,000 new diagnoses per annum.
As
a first step in the planned continued clinical development of tolimidone, we intend to initiate a Phase 2a dose confirmation study to
establish the optimum dose of tolimidone in patients with T1D. The Phase 2a study will be open-label in approximately 15 patients with
T1D treated over a period of three months with endpoints of change in C-peptide levels, HbA1c and number of hyperglycemic events.
For
additional information regarding tolimidone, see “—Recent Developments—Tolimidone Developments”.
MTX110. Using
our MidaSolve technology in combination with panobinostat, an otherwise insoluble drug and one that we believe is among the most effective
agents, MTX110 is designed for direct-to-tumor treatment of intractable brain cancers. Panobinostat is currently marketed under the brand
Farydak® which is used orally in combination therapy for the treatment of multiple myeloma. We are currently researching the utility
of MTX110 to proof-of-concept stage in three indications:
Glioblastoma
Multiforme (GBM): GBM is the most common and aggressive form of brain cancer in adults, usually occurring in the white
matter of the cerebrum. Treatments include radiation, surgical resection and chemotherapy although, in almost all cases, tumors recur.
Based on available date from the American Association of Neurosurgeons, there are approximately 2-3/100,000 population diagnoses of GBM
per annum. Survival with standard of care treatment ranges from approximately 13 months in patient with an unmethylated MGMT gene promotor
to approximately 30 months in patients with a highly methylated MGMT gene promotor. Studies show the global GBM treatment market was valued
at approximately $2.46 billion in 2022, with expected growth of 9.7% per annum through 2030.
Following
IND approval in December 2021, we are in the process of recruiting patients in a Phase 1 study to assess the utility of MTX110 in recurrent
GBM. The Phase 1 study is an open-label, dose escalation study designed to assess the feasibility and safety of intermittent infusions
of MTX110 administered by CED via implanted refillable pump and catheter. The study aims to recruit two cohorts, each with a minimum of
four patients; the first cohort will receive MTX110 only and the second cohort will receive MTX110 but with the option of the treating
investigator to re-position the catheter into an area of new lesion upon progression, with the objective of increasing tumor coverage
and survival.
Diffuse
Midline Glioma (DMG): DMG, formerly known as diffuse intrinsic pontine glioma (DIPG), tumors are located in the pons (middle)
of the brain stem and are diffusely infiltrating. Occurring mostly in children, approximately 1,100 patients worldwide and 300 in the
United States are diagnosed with DMG per annum and median survival is approximately 10 months. There is no effective treatment since surgical
resection is not possible. The standard of care is radiotherapy, which transiently improves symptoms and survival. Chemotherapy does not
improve survival and one likely reason is that many anti-cancer drugs cannot cross the blood-brain barrier to access the tumor.
In
October 2020, we reported the first-in-human study by the University of California, San Francisco of MTX110 in DMG using a CED system.
The Phase 1 study established a recommended dose range for Phase 2, a good safety and tolerability profile but also encouraging survival
data in the seven patients treated.
In
February 2024 we announced top line results from the Investigator-Initiated Study of MTX110 in pediatric patients with DMG conducted by
Columbia University Irving Medical Center. Nine patients were treated in the study (30 mM group,
n=3; 60 mM group, n=4; 90 mM group (optimal dose), n=2).
One patient in the 60 mM group suffered a severe adverse event assessed by the investigators
as not related to the study drug but related to the infusion and tumor anatomy. Median progression free survival was 10 months from diagnosis
(PFS=12) while median overall survival was 16.5 months (OS=16.5).
Medulloblastoma: Medulloblastomas
are malignant embryonal tumors that start in the cerebellum. They are invasive and, unlike most brain tumors, spread through the cerebrospinal
fluid, or CSF, and frequently metastasize to different locations in the brain and spinal cord. Treatments include resection, radiation
and chemotherapy. Approximately 350 patients are diagnosed with medulloblastoma per annum and 3,800 people are living with the disease
in the United States. The cumulative survival rate is approximately 60%, 52%, and 47% at 5 years, 10 years, and 20 years, respectively;
however, recurrence is nearly always fatal with no established standard of care.
The
University of Texas is undertaking a Phase 1 exploratory study in recurrent medulloblastoma patients using direct administration of MTX110
into the fourth ventricle, enabling it to circulate throughout the CSF.
In
2020, our non-exclusive worldwide, sublicensable license to certain patents of panobinostat was terminated by Secura Bio. We view MTX110
as an important asset and currently have two ongoing clinical trials for MTX110 and intend to commence two further clinical trials as
part of our MTX110 clinical program. We continue to enjoy freedom to use panobinostat for research purposes and we plan to continue to
pursue development of MTX110. We believe that the relevant Secura Bio patents may delay a launch of MTX110 for use in patients with DMG
should the product receive accelerated approval, however we do not anticipate it would have any impact on launching MTX110 for use in
patients with GBM. If we are unable to launch a product candidate until the patent expires, there could be a material adverse effect on
our business, financial condition and results of operations.
For
additional information regarding MTX110, see “—Recent Developments—MTX110 Developments.”
Commercial Agreements, Strategic Partnerships and Collaborations
We are currently collaborating
with biopharmaceutical companies, contract research organizations and universities on several of our development programs.
eRapa
License. On April 25, 2024, we entered into the Emtora License Agreement with Emtora, relating to the
license of eRapa, an oral product formulation of rapamycin (sirolimus), for use in the prevention, treatment, diagnosis, detection, monitoring
and/or predisposition testing of all diseases, states or conditions in humans, that includes the nanoparticle and enteric coated finished
pharmaceutical formulations developed at any time by Emtora and its affiliates. Under the License, we obtained from Emtora an exclusive,
worldwide, sublicensable right to develop, manufacture, commercialize, or otherwise exploit products containing rapamycin (sirolimus)
in the Field. Pursuant to the terms of the Emtora License Agreement, the Company and Emtora established a joint development committee,
consisting of two designees of the Company and two designees of Emtora.
As
consideration for the License, we made an upfront payment to Emtora in the form of 378,163 of our Depositary Shares (equal to five percent
(5%) of our outstanding Ordinary Shares, calculated on a fully-diluted basis (including in-the-money warrants)). In addition, we are also
responsible for up to $31.5 million in sales milestones within the first six months of commercial sale of a first-approved indication
of eRapa in certain markets, with decreasing milestones for subsequent approvals for additional indications. There is also a one-time
$10.0 million milestone payable upon cumulative net sales of $1.0 billion. Further, we are also obligated to pay Emtora single digit tiered
royalties on net sales of eRapa, in addition to honoring Emtora’s legacy royalty obligations and paying Emtora fees related to income
derived from sublicensing and the partnering of eRapa. In addition, effective as of the closing of the License Agreement, a promissory
note previously issued by Emtora in favor of the Company in the amount of $250,000 was forgiven. We also made an additional $500,000 cash
payment to Emtora to be used exclusively for a match to an advance from the Cancer Prevention and Research Institute of Texas.
Upon
any change of control of the Company (as defined in the Emtora License Agreement), we shall issue Emtora a warrant exercisable for 1,604,328
Depositary Shares, which may only be exercised upon such change of control.
The
Emtora License Agreement also provides us with the exclusive option to acquire all of the capital stock of Emtora at a purchase price
on commercially reasonable terms during the period beginning with the filing of an NDA for the Product with the FDA, and ending 90 days
after acceptance of the filing of the NDA by the FDA.
Melior License. On
November 22, 2023, we entered into the license agreement, or the Melior License Agreement, with Melior Pharmaceuticals I, Inc., or Melior,
for the development and commercialization of tolimidone in most territories other
than China, South Korea and a number of smaller Asian territories which Melior licensed to Bukwang Pharmaceutical Co. Ltd., or Bukwang.
Under the Melior License Agreement, we obtained from Melior an exclusive, worldwide, sublicensable right to develop, manufacture, commercialize,
or otherwise exploit products containing tolimidone for any field.
Pursuant to the terms of the
License Agreement, we issued to Melior 354,428 Depositary Shares in upfront consideration, and agreed to issue the same to Bukwang. In
addition, we are obligated to pay single digit tiered royalties on net sales of tolimidone to Melior, with Melior agreeing to pay to Bukwang
50% of such royalties pursuant to a royalty agreement.
Under the Melior License Agreement,
we, at our own cost, have the right to control the prosecution, maintenance and enforcement of the tolimidone patents, while Melior has
certain step-in rights if we elect not to prosecute and maintain such tolimidone patents. The Melior License Agreement may be terminated
by Melior if we fail to meet various development diligence obligations.
In connection with the License
Agreement, on November 22, 2023, Melior and Bukwang entered into an amendment to the license agreement with Bukwang, or the Bukwang License.
Under the amendment, or the Bukwang Amendment, Melior and Bukwang agreed that, upon us securing a minimum of $4.0 million in new equity
financing, the Bukwang License shall terminate in its entirety and Bukwang shall transfer to Melior all rights, titles and interests to
certain INDs, know-how and data, and patents relating to tolimidone.
Under the Bukwang Amendment,
Melior and Bukwang entered into the Proposed Royalty Agreement pursuant to which Bukwang shall be entitled to 50% of all payments Melior
receives under the Tolimidone License, including: (i) 50% of the equity issued by us under the Tolimidone License, and (ii) 50% of the
royalties that we will pay to Melior. Further, under the royalty agreement, Bukwang will pay to Melior $100,000 in consideration for Melior’s
waiver of Bukwang’s obligation to pay patent costs pursuant to the Bukwang License, and Melior will take back responsibility for
all tolimidone patent prosecution and maintenance costs.
CMS License Agreement.
On January 29, 2019, we entered into the CMS License Agreement with CMS, as guarantor, and the Licensees. The CMS License Agreement
was effective as of February 26, 2019. Pursuant to the terms of the CMS License Agreement, we agreed to license to the Licensees the exclusive
right to use our technology and our intellectual property rights and information and data related to certain of our clinical and pre-clinical
products, including MTX110, together with any other pipeline products or line extensions which are in or which enter pre-clinical or clinical
development in the first three years following the effective time of the CMS License Agreement, together the Products, to develop and
commercialize the Products in China, including Macau, Hong Kong and Taiwan, with the same rights in certain countries in south east Asia
in respect of which the Licensees notifies us that such licensee wants a license after the grant of a regulatory approval of any of the
Products by the FDA, EMA or by the regulatory authorities in the United Kingdom, France, Germany or Switzerland, collectively the Territory,
such activities to be conducted by the Licensee(s) and affiliates of CMS and local partners as permitted sub-licensees. The Licensees
have the exclusive right to import, obtain market approvals and register, market, distribute, promote and sell the Products in the Territory
at the Licensees’ sole discretion, and in the event we choose not to or fail to meet the Licensees’ binding orders for the
Products under certain circumstances, will be granted the right to manufacture the Products itself. The Licensees will be restricted from
supplying the Products to any customers outside of the Territory, while we will be restricted from supplying the Products into the Territory,
except through the Licensees.
We will manufacture the Products
for the Licensees and their sub-licensees, which Products will be subject to exclusive purchase and supply arrangements with the Licensees
for the Territory.
Further, we agreed to permit
the Licensees to identify their own product and line extension targets in respect of which, if we agree, we will carry out initial development
and then will, for a technology transfer fee, the amount of which will be dependent on the circumstances, transfer the specific program
know-how and data to enable the Licensees to continue to develop using our platform technologies and then to commercialize in the Territory.
We will receive a low single digit royalty on the Net Sales (as such term is defined in the CMS License Agreement) in the Territory. The
Licensees will own any intellectual property rights it creates and any data they collect during the development process and will license
such rights and data to us for the purposes of manufacturing the products in question and also to commercialize the products outside the
Territory, for which we will pay the Licensees a low double digit royalty.
The Licensees shall pay us
lump sum payments on a Product-by-Product basis (in U.S. dollars) upon the achievement of certain regulatory approvals (in six, or potentially
seven, figure amounts) and sales performance milestones (in seven, or potentially, eight figure amounts), as well as royalties upon Net
Sales (as a low double digit percentage for the Products other than MTX110, for which the royalty will be a single digit percentage) in
the Territory.
The CMS License Agreement
may be terminated by either party for specific material breaches or insolvency. In particular, our rights to terminate are limited to
breaches of certain non-compete restrictions, failure to pay milestones or royalties, insolvency, or a failure to develop and/or commercialize
particular Products in particular countries after the grant of an FDA or EMA regulatory approval. In addition, we have the right to terminate
the agreement if the Licensee directly or indirectly infringes upon our intellectual property rights or challenges their validity or,
in relation to a particular Product and a particular Territory at any time, because the Licensee has made a determination that it no longer
wishes to develop and/or commercialize the Product in that country in the Territory. The CMS License Agreement also includes customary
indemnification for a transaction of this type.
Sales and Marketing
We do not currently have any
internal sales and marketing organization or distribution capabilities.
Research and Development
We have leased a laboratory
in Cardiff, Wales in which we are able to undertake basic formulation and analytical work.
Intellectual Property
Our success depends in large
part on our ability to obtain and maintain proprietary protection for our product candidates (and products derived therefrom), technology
and know-how, to operate without infringing the proprietary rights of others and to prevent others from infringing our proprietary rights.
We strive to protect the proprietary technology that we believe is important to our business by, among other methods, seeking and maintaining
patents, where available, that are intended to cover our product candidates (and products derived therefrom), compositions and formulations,
their methods of use and processes for their manufacture and any other inventions that are commercially important to the development of
our business. We also rely on trade secrets, know-how, continuing technological innovation and in-licensing opportunities to develop and
maintain our proprietary and competitive position.
We have developed a strong
intellectual property base globally, comprising patents, know-how, and trade secrets. Currently, we have 53 granted patents, seven applications
in process, in each case covering all major world markets, and 14 separate patent families covering all major regions. We continue to
strengthen our patent portfolio by strategically submitting new patents and divisional patent applications based on our active research
and development activities. Central to our business are our three intellectual property technologies that are designed to enable the targeted
delivery, i.e. right place, and controlled sustained release, i.e. right time, of existing therapeutic drugs. These technologies have
broad applications in multiple therapeutic areas and offer the potential to create multiple revenue opportunities.
Patent rights have been granted
in all the major world markets, including Europe, the United States and Japan, or the Key Markets. The granted patents and pending patent
applications in our patent families are owned solely by us, co-owned with other parties or in-licensed to us. These include patents related
to methods of use of eRapa, tolimidone and MTX110 as well as patents covering sustained release drug delivery, nano-inclusion technology
and nanoparticle technology.
The term of individual patents depends upon the
legal term for patents in the countries in which they are obtained. In most countries, including the United States, the patent term is
20 years from the filing date of a non-provisional patent application. In the United States, a patent’s term may, in certain cases,
be lengthened by patent term adjustment, which compensates a patentee for administrative delays by the United States Patent and Trademark
Office in examining and granting a patent, or may be shortened if a patent is terminally disclaimed over an earlier filed patent.
The term of a United States
patent that covers a drug, biological product or medical device approved pursuant to a pre-market approval may also be eligible for patent
term extension when FDA approval is granted, provided that certain statutory and regulatory requirements are met. The length of the patent
term extension is related to the length of time the drug is under regulatory review while the patent is in force. The Drug Price Competition
and Patent Term Restoration Act of 1984 permits a patent term extension of up to five years beyond the expiration date set for the patent.
Patent extension cannot extend the remaining term of a patent beyond a total of 14 years from the date of product approval, only one patent
applicable to each regulatory review period may be granted an extension and only those claims reading on the approved drug may be extended.
Similar provisions are available in Europe and certain other foreign jurisdictions to extend the term of a patent that covers an approved
drug, provided that statutory and regulatory requirements are met. Thus, in the future, if and when our product candidates receive approval
by the FDA or foreign regulatory authorities, we expect to apply for patent term extensions on issued patents covering those products,
depending upon the length of the clinical trials for each drug and other factors. The expiration dates of our patents and patent applications
referred to above are without regard to potential patent term extension or other market exclusivity that may be available to us.
In addition to patents, we
may rely, in some circumstances, on trade secrets to protect our technology and maintain our competitive position. However, trade secrets
can be difficult to protect. We seek to protect our proprietary technology and processes, in part, by confidentiality agreements with
our employees, corporate and scientific collaborators, consultants, scientific advisors, contractors and other third parties. We also
seek to preserve the integrity and confidentiality of our data and trade secrets by maintaining physical security of our premises and
physical and electronic security of our information technology systems.
Government Regulations
Government authorities in
the United States, at the federal, state and local level, and in other countries and jurisdictions, including the European Union and the
United Kingdom, extensively regulate, among other things, the research, development, testing, manufacture, quality control, approval,
packaging, storage, recordkeeping, labeling, advertising, promotion, distribution, marketing, post-approval monitoring and reporting,
and import and export of pharmaceutical products. The processes for obtaining regulatory approvals in the United States and in foreign
countries and jurisdictions, along with subsequent compliance with applicable statutes and regulations and other regulatory authorities,
require the expenditure of substantial time and financial resources. As we have disclosed herein, we are seeking to license our product
candidates and other formulations to licensing partners. While many of the rules and regulations set forth herein do and will apply to
us, some are more applicable to any licensing partner who seeks to conduct clinical trials of, obtain regulatory approval for and commercialize
any of our product candidates, which could have an impact on any licensing revenue received by us.
Review and Approval of Drugs in the United States
In the United States, the
FDA regulates drugs under the Federal Food, Drug, and Cosmetic Act, or the FDCA, and implementing regulations. Failure to comply with
the applicable United States requirements at any time during the product development process, approval process or after approval may subject
an applicant and/or sponsor to a variety of administrative or judicial sanctions, including refusal by the FDA to approve pending applications,
withdrawal of an approval, imposition of a clinical hold, issuance of warning letters and other types of enforcement letters, product
recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, refusals of government contracts,
restitution, disgorgement of profits, exclusion from participation in government sponsored healthcare programs such as Medicare, or civil
or criminal investigations and penalties brought by the FDA and the Department of Justice, or the DOJ, or other governmental entities.
An applicant seeking approval to market and distribute
a new drug product in the United States must typically undertake the following:
| • | completion of preclinical (or nonclinical) laboratory tests, animal studies and formulation studies in compliance with the FDA’s
good laboratory practice, or GLP, regulations; |
| • | submission to the FDA of an IND application, which must take effect before human clinical trials may begin; |
| • | approval of clinical protocols by an independent institutional review board, or IRB, or ethics committee representing each clinical
site before each site may enroll subjects; |
| • | potential initiation and completion of successive clinical trials that establish safety dose ranges; |
| • | performance of adequate and well-controlled human clinical trials in accordance with good clinical practices, or GCP, and other clinical-trial
related regulations to establish the safety and efficacy of the proposed drug product for each indication; |
| • | preparation and submission to the FDA of a new drug application, or NDA, or a biologics license application, or BLA; |
| • | review of the submission by an FDA advisory committee, where appropriate or if applicable; |
| • | satisfactory completion of one or more FDA inspections of the manufacturing facility or facilities at which the product, or components
thereof, are produced to assess compliance with cGMP requirements and to assure that the facilities, methods and controls are adequate
to preserve the product’s identity, strength, quality and purity; |
| • | satisfactory completion of FDA audits of clinical trial sites to assure compliance with GCPs and the integrity of the clinical data; |
| • | payment of user fees and securing FDA approval of the NDA or BLA; |
| • | agree to comply with any post-approval requirements, including Risk Evaluation and Mitigation Strategies, or REMS, and post-approval
studies required by the FDA; and |
| • | FDA review and approval of the NDA or licensure of the BLA. |
Preclinical Studies
Preclinical studies include
laboratory evaluation of the purity and stability of the manufactured drug substance or API and the formulated finished drug or drug product,
as well as in vitro and animal studies to assess the safety and activity of the drug for initial testing in humans and to establish
a rationale for therapeutic use. The conduct of preclinical studies is subject to federal and state regulations and requirements, including
GLP regulations. The results of the preclinical tests, together with manufacturing information, analytical data, any available clinical
data or literature and plans for clinical trials, among other things, are submitted to the FDA as part of an IND. An IND is a request
for authorization from the FDA to administer an investigational product to humans and must become effective before human clinical trials
may begin. Some long-term nonclinical testing, such as animal tests of reproductive adverse events and carcinogenicity, may continue after
the IND is submitted.
The Consolidated Appropriations
Act for 2023, signed into law on December 29, 2022, (P.L. 117-328) amended the FDCA and the Public Health Service Act to specify that
nonclinical testing for drugs and biologics may, but is not required to, include in vivo animal testing. According to the amended
language, a sponsor may fulfill nonclinical testing requirements by completing various in vitro assays (e.g., cell-based assays,
organ chips, or microphysiological systems), in silico studies (i.e., computer modeling), other human or nonhuman biology-based
tests (e.g., bioprinting), or in vivo animal tests.
Human Clinical Trials in Support of an NDA
Clinical trials involve the
administration of the investigational product to human subjects under the supervision of qualified investigators in accordance with GCP
requirements, which include, among other things, the requirement that all research subjects provide their informed consent in writing
before their participation in any clinical trial. Clinical trials are conducted under written study protocols detailing, among other things,
the inclusion and exclusion criteria, the objectives of the study, the parameters to be used in monitoring safety and the effectiveness
criteria to be evaluated. A protocol for each clinical trial and any subsequent protocol amendments must be submitted to the FDA as part
of the IND. An IND automatically becomes effective 30 days after receipt by the FDA, unless before that time the FDA raises concerns or
questions related to a proposed clinical trial and places the clinical trial on clinical hold. In such a case, the IND sponsor and the
FDA must resolve any outstanding concerns before the clinical trial can begin. Accordingly, submission of an IND may not result in the
FDA allowing clinical trials to commence. A separate submission to an existing IND must also be made for each successive clinical trial
conducted during development of a product candidate, and the FDA must grant permission, either explicitly in writing or implicitly by
not objecting, before each clinical trial can begin.
Following commencement of
a clinical trial, the FDA may also place a clinical hold or partial clinical hold on that trial. A clinical hold is an order issued by
the FDA to the sponsor to delay a proposed clinical investigation or to suspend an ongoing investigation. A partial clinical hold is a
delay or suspension of only part of the clinical work requested under the IND. No more than 30 days after imposition of a clinical hold
or partial clinical hold, the FDA will provide the sponsor a written explanation of the basis for the hold. Following issuance of a clinical
hold or partial clinical hold, an investigation may only resume after the FDA has notified the sponsor that the investigation may proceed.
In addition, an IRB representing
each institution participating in the clinical trial must review and approve the plan for any clinical trial before it commences at that
institution, and the IRB must conduct a continuing review and reapprove the study at least annually. The IRB must review and approve,
among other things, the study protocol and informed consent information to be provided to study subjects. An IRB must operate in compliance
with FDA regulations.
Some trials are overseen by
an independent group of qualified experts organized by the trial sponsor, known as a data safety monitoring board or committee, or DSMB.
This group provides authorization as to whether or not a trial may move forward at designated check points based on access that only the
group maintains to available data from the study.
Information about certain
clinical trials, including details of the protocol and eventually study results, must be submitted within specific timeframes to the National
Institutes of Health, or NIH, for public dissemination on their ClinicalTrials.gov website. Information related to the product, patient
population, phase of investigation, study sites and investigators and other aspects of the clinical trial is made public as part of the
registration of the clinical trial. Sponsors are also obligated to disclose the results of their clinical trials after completion. Disclosure
of the results of these trials can be delayed in some cases for up to two years after the date of completion of the trial. Failure to
timely register a covered clinical study or to submit study results as provided for in the law can give rise to civil monetary penalties
and also prevent the non-compliant party from receiving future grant funds from the federal government. The U.S. Department of Health
and Human Services’ Final Rule and NIH’s complementary policy on ClinicalTrials.gov registration and reporting requirements
became effective in 2017, and both NIH and FDA have brought enforcement actions against non-compliant clinical trial sponsors.
Human clinical trials are typically conducted in
three sequential phases, Phase 1, Phase 2 and Phase 3, which may overlap or be combined:
| • | Phase 1. The product candidate is initially introduced into healthy human subjects and tested for safety, dosage tolerance,
absorption, metabolism, distribution and excretion. In the case of some product candidates for severe or life-threatening diseases, especially
when the product candidate may be too inherently toxic to ethically administer to healthy volunteers, the initial human testing is often
conducted in patients. |
| • | Phase 2. The product candidate is evaluated in a limited patient population to identify possible adverse effects and safety
risks, to preliminarily evaluate the efficacy of the product candidate for specific targeted diseases and to determine dosage tolerance,
optimal dosage and dosing schedule. |
| • | Phase 3. Clinical trials are undertaken to further evaluate dosage, clinical efficacy, potency, and safety in an expanded
patient population at geographically dispersed clinical trial sites. These clinical trials are intended to establish the overall risk/benefit
ratio of the product candidate and provide, if appropriate, an adequate basis for approval and product labeling. These trials may include
comparisons with placebo and/or other comparator treatments. The duration of treatment is often extended to mimic the actual use of a
product during marketing. |
Post-approval clinical trials,
sometimes referred to as Phase 4 clinical trials, may be conducted after initial marketing approval. These clinical trials are used to
gain additional experience from the treatment of patients in the intended therapeutic indication, particularly for long-term safety follow-up.
In certain instances, the FDA may mandate the performance of Phase 4 clinical trials as a condition of approval of an NDA or BLA.
In the Consolidated Appropriations
Act for 2023, Congress amended the FDCA to require sponsors of a Phase 3 clinical trial, or other “pivotal study” of a new
drug to support marketing authorization, to submit a diversity action plan for such clinical trial. The action plan must include the sponsor’s
diversity goals for enrollment, as well as a rationale for the goals and a description of how the sponsor will meet them. A sponsor must
submit a diversity action plan to FDA by the time the sponsor submits the trial protocol to the agency for review. The FDA may grant a
waiver for some or all of the requirements for a diversity action plan. It is unknown at this time how the diversity action plan may affect
Phase 3 trial planning and timing or what specific information FDA will expect in such plans, but if FDA objects to a sponsor’s
diversity action plan and requires the sponsor to amend the plan or take other actions, it may delay trial initiation.
Progress reports detailing
the results of the clinical trials must be submitted at least annually to the FDA and more frequently if serious adverse events occur.
In addition, IND safety reports must be submitted to the FDA for any of the following: serious and unexpected suspected adverse reactions;
findings from other studies or animal or in vitro testing that suggest a significant risk in humans exposed to the drug; and any
clinically important increase in the case of a serious suspected adverse reaction over that listed in the protocol or investigator brochure.
Phase 1, Phase 2 and Phase 3 clinical trials may not be completed successfully within any specified period, or at all. Furthermore, the
FDA or the sponsor may suspend or terminate a clinical trial at any time on various grounds, including a finding that the research subjects
are being exposed to an unacceptable health risk. Similarly, an IRB can suspend or terminate approval of a clinical trial at its institution,
or an institution it represents, if the clinical trial is not being conducted in accordance with the IRB’s requirements or if the
drug has been associated with unexpected serious harm to patients. The FDA will typically inspect one or more clinical sites to assure
compliance with GCP and the integrity of the clinical data submitted with an NDA or BLA.
Submission of an NDA or BLA to the FDA
Assuming successful completion
of required clinical testing and other requirements, the results of the preclinical studies and clinical trials, together with detailed
information relating to the product’s chemistry, manufacture, controls and proposed labeling, among other things, are submitted
to the FDA as part of an NDA or BLA requesting approval to market the product candidate for one or more indications. Data may come from
company-sponsored clinical trials intended to test the safety and effectiveness of a use of a product, or from a number of alternative
sources, including studies initiated by investigators. To support marketing approval, the data submitted must be sufficient in quality
and quantity to establish the safety and effectiveness of the investigational drug product to the satisfaction of the FDA. In particular,
a BLA must contain proof of the biological product candidate’s safety, purity, potency and efficacy for its proposed indication
or indications. Under federal law, the submission of most NDAs is additionally subject to a substantial application user fee, and the
sponsor of an approved NDA is also subject to an annual program user fee. These fees are typically increased annually. Certain exceptions
and waivers are available for some of these fees, such as an exception from the application fee for products with orphan designation and
a waiver of the application fee for the first application filed by a qualifying small business.
The FDA conducts a preliminary
review of an NDA within 60 days of its receipt and informs the sponsor by the 74th day after the FDA’s receipt of the submission
whether the application is sufficiently complete to permit substantive review. The FDA may request additional information rather than
accept an NDA for filing. In this event, the application must be resubmitted with the additional information. The resubmitted application
is also subject to review before the FDA accepts it for filing. Once the submission is accepted for filing, the FDA begins an in-depth
substantive review. The FDA has agreed to specified performance goals in the review process of NDAs and BLAs. Most such applications are
meant to be reviewed within ten months from the date of filing, and most applications for “priority review” products are meant
to be reviewed within six months of filing. Despite these review goals, it is not uncommon for FDA review of an NDA or BLA to extend beyond
the goal date. For instance, the review process may be extended by the FDA for three additional months to consider new information or
clarification provided by the applicant to address an outstanding deficiency identified by the FDA following the original submission.
The FDA may refer applications
for novel drug or biological products or drug or biological products which present difficult questions of safety or efficacy to an advisory
committee, typically a panel that includes independent clinicians and other experts, for review, evaluation and a recommendation as to
whether the application should be approved and under what conditions. The FDA is not bound by the recommendations of an advisory committee,
but it considers such recommendations carefully when making decisions and typically follows the advisory committee’s recommendations.
Before approving an NDA, the
FDA typically will inspect the facility or facilities where the product is or will be manufactured. These pre-approval inspections cover
all facilities associated with an NDA or BLA submission, including drug or biologic component manufacturing (such as APIs), finished product
manufacturing, and control testing laboratories. The FDA will not approve an application unless it determines that the manufacturing processes
and facilities are in compliance with cGMP requirements and adequate to assure consistent production of the product within required specifications.
Additionally, before approving an NDA, the FDA will typically inspect one or more clinical sites to assure compliance with GCP.
Fast Track, Breakthrough Therapy and Priority
Review Designations
The FDA is authorized to designate certain products
for expedited review if they are intended to address an unmet medical need in the treatment of a serious or life-threatening disease or
condition. These programs are fast track designation, breakthrough therapy designation and priority review designation.
Specifically, the FDA may
designate a product for fast track review if it is intended, whether alone or in combination with one or more other drugs, for the treatment
of a serious or life-threatening disease or condition, and it demonstrates the potential to address unmet medical needs by providing a
therapy where none exists or a therapy that may be potentially superior to existing therapy based on efficacy or safety factors. For fast
track products, sponsors may have more frequent interactions with the FDA and the FDA may initiate review of sections of a fast track
product’s NDA or BLA before the application is complete. This rolling review may be available if the FDA determines, after preliminary
evaluation of clinical data submitted by the sponsor, that a fast track product may be effective. The sponsor must also provide, and the
FDA must approve, a schedule for the submission of the remaining information and the sponsor must pay applicable user fees upon submission
of the first section of the NDA or BLA. However, the FDA’s time period goal for reviewing a fast track application does not begin
until the last section of the NDA is submitted. In addition, the fast track designation may be withdrawn by the FDA if the FDA believes
that the designation is no longer supported by data emerging in the clinical trial process.
The FDA may grant breakthrough
therapy designation to a drug or biologic meeting certain statutory criteria upon a request made by the IND sponsor. A product may be
designated as a breakthrough therapy if it is intended, either alone or in combination with one or more other drugs, to treat a serious
or life-threatening disease or condition and preliminary clinical evidence indicates that the product may demonstrate substantial improvement
over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical
development. The FDA may take certain actions with respect to breakthrough therapies, including holding meetings with the sponsor throughout
the development process; providing timely advice to the product sponsor regarding development and approval; involving more senior staff
in the review process; assigning a cross-disciplinary project lead for the review team; and taking other steps to design the clinical
trials in an efficient manner. In addition, breakthrough therapies are eligible for accelerated approval of their respective marketing
applications.
The FDA may designate a product
for priority review if it is a drug that treats a serious condition and, if approved, would provide a significant improvement in safety
or effectiveness. The FDA determines, at the time that the marketing application is submitted, on a case-by-case basis, whether the proposed
drug represents a significant improvement when compared with other available therapies. Significant improvement may be illustrated by
evidence of increased effectiveness in the treatment of a condition, elimination or substantial reduction of a treatment-limiting drug
reaction, documented enhancement of patient compliance that may lead to improvement in serious outcomes, or evidence of safety and effectiveness
in a new subpopulation. A priority designation is intended to direct overall attention and resources to the evaluation of such applications,
and to shorten the FDA’s goal for taking action on a marketing application from ten months to six months for an original BLA or
for an NME NDA from the date of filing.
Even if a product qualifies
for one or more of these programs, the FDA may later decide that the product no longer meets the conditions for qualification or decide
that the time period for FDA review or approval will not be shortened. Furthermore, fast track designation, breakthrough therapy designation,
and priority review do not change the scientific or medical standards for approval or the quality of evidence necessary to support approval
and may not ultimately expedite the development or review process.
Accelerated Approval Pathway
The FDA may grant accelerated
approval to a drug or biologic for a serious or life-threatening condition that provides meaningful therapeutic advantage to patients
over existing treatments based upon a determination from well-controlled clinical trials that the drug has an effect on a surrogate endpoint
that is reasonably likely to predict clinical benefit. The FDA may also grant accelerated approval for such a drug or biologic when the
product has an effect on an intermediate clinical endpoint that can be measured earlier than an effect on irreversible morbidity or mortality,
or IMM, and that is reasonably likely to predict an effect on IMM or other clinical benefit, taking into account the severity, rarity,
or prevalence of the condition and the availability or lack of alternative treatments. Drugs and biologics granted accelerated approval
must meet the same statutory standards for safety and effectiveness as those granted traditional approval.
For the purposes of accelerated
approval, a surrogate endpoint is a marker, such as a laboratory measurement, radiographic image, physical sign, or other measure that
is thought to predict clinical benefit, but is not itself a measure of clinical benefit. Surrogate endpoints can often be measured more
easily or more rapidly than clinical endpoints. An intermediate clinical endpoint is a measurement of a therapeutic effect that is considered
reasonably likely to predict the clinical benefit of a drug or biologic, such as an effect on IMM. The FDA has limited experience with
accelerated approvals based on intermediate clinical endpoints, but has indicated that such endpoints generally may support accelerated
approval where the therapeutic effect measured by the endpoint is not itself a clinical benefit and basis for traditional approval, if
there is a basis for concluding that the therapeutic effect is reasonably likely to predict the ultimate clinical benefit of a drug or
biologic.
The accelerated approval pathway
is most often used in settings in which the course of a disease is long and an extended period of time is required to measure the intended
clinical benefit of a drug, even if the effect on the surrogate or intermediate clinical endpoint occurs rapidly. For example, accelerated
approval has been used extensively in the development and approval of drugs for treatment of a variety of cancers in which the goal of
therapy is generally to improve survival or decrease morbidity and the duration of the typical disease course requires lengthy and sometimes
large clinical trials to demonstrate a clinical or survival benefit.
The accelerated approval pathway
is usually contingent on a sponsor’s agreement to conduct, in a diligent manner, additional post-approval confirmatory studies to
verify and describe the drug’s clinical benefit. As a result, a drug candidate approved on this basis is subject to rigorous post-marketing
compliance requirements, including the completion of Phase 4 or post-approval clinical trials to confirm the effect on the clinical endpoint.
Failure to conduct required post-approval studies, or confirm a clinical benefit during post-marketing studies, would allow the FDA to
withdraw the drug from the market on an expedited basis. All promotional materials for drug candidates approved under accelerated regulations
are subject to prior review by the FDA. As part of the Consolidated Appropriations Act for 2023, Congress provided FDA additional statutory
authority to mitigate potential risks to patients from continued marketing of ineffective drugs previously granted accelerated approval.
Under the act’s amendments to the FDCA, FDA may require the sponsor of a product granted accelerated approval to have a confirmatory
trial underway prior to approval. The sponsor must also submit progress reports on a confirmatory trial every six months until the trial
is complete, and such reports are published on FDA’s website. The amendments also give FDA the option of using expedited procedures
to withdraw product approval if the sponsor’s confirmatory trial fails to verify the claimed clinical benefits of the product.
The FDA’s Decision on an NDA or BLA
The FDA reviews an NDA to
determine, among other things, whether a product is safe and effective for its intended use and whether its manufacturing is cGMP-compliant
to assure and preserve the product’s identity, strength, quality and purity. The FDA reviews a BLA to determine, among other things
whether the product is safe, pure and potent and the facility in which it is manufactured, processed, packed or held meets standards designed
to assure the product’s continued safety, purity and potency. The approval process is lengthy and often difficult, and the FDA may
refuse to approve an NDA or BLA if the applicable regulatory criteria are not satisfied or may require additional clinical or other data
and information. On the basis of the FDA’s evaluation of the NDA and accompanying information, including the results of the inspection
of the manufacturing facilities, the FDA may issue an approval letter or a complete response letter. An approval letter authorizes commercial
marketing of the product with specific prescribing information for specific indications. A complete response letter indicates that the
review cycle of the application is complete and the application will not be approved in its present form. A complete response letter generally
outlines the deficiencies in the submission and may require substantial additional testing or information in order for the FDA to reconsider
the application. If and when those deficiencies have been addressed to the FDA’s satisfaction in a resubmission of the NDA or BLA,
the FDA will issue an approval letter. The FDA has committed to reviewing such resubmissions in two or six months depending on the type
of information included. Even with submission of this additional information, the FDA ultimately may decide that the application does
not satisfy the regulatory criteria for approval.
If the FDA approves a product,
it may limit the approved indications for use for the product, require that contraindications, warnings or precautions be included in
the product labeling, require that post-approval studies, including Phase 1V clinical trials, be conducted to further assess the drug’s
safety after approval, require testing and surveillance programs to monitor the product after commercialization, or impose other conditions,
including distribution restrictions or other risk management mechanisms, such as REMS, which can materially affect the potential market
and profitability of the product. The FDA may prevent or limit further marketing of a product based on the results of post-market studies
or surveillance programs. The FDA may also require an applicant to develop a REMS as a condition of approval to ensure that the benefits
of the product outweigh its risks and to assure its safe use. REMS use risk minimization strategies beyond the professional labeling to
ensure that the benefits of the product outweigh the potential risks. To determine whether a REMS is needed, the FDA will consider the
size of the population likely to use the product, seriousness of the disease, expected benefit of the product, expected duration of treatment,
seriousness of known or potential adverse events, and whether the product is a new molecular entity. REMS can include medication guides,
physician communication plans for healthcare professionals, and elements to assure safe use, or ETASU. ETASU may include, but are not
limited to, special training or certification for prescribing or dispensing, dispensing only under certain circumstances, special monitoring,
and the use of patient registries. The FDA may require a REMS before approval or post-approval if it becomes aware of a serious risk associated
with use of the product. If the FDA concludes a REMS is needed as a condition of approval, the sponsor must submit a proposed REMS during
the application review process; the FDA will not approve the NDA without an approved REMS, if required. The requirement for a REMS can
materially affect the potential market and profitability of a product. After approval, many types of changes to the approved product,
such as adding new indications, manufacturing changes and additional labeling claims, are subject to further testing requirements and
FDA review and approval.
Post-Approval Requirements
Drugs or biologics manufactured
or distributed pursuant to FDA approvals are subject to pervasive and continuing regulation by the FDA, including, among other things,
requirements relating to recordkeeping, periodic reporting, product sampling and distribution, advertising and promotion and reporting
of adverse experiences with the product. After approval, most changes to the approved product, such as adding new indications or other
labeling claims, are subject to prior FDA review and approval. There also are continuing, annual program fee requirements for any marketed
products, as well as new application fees for supplemental applications with clinical data.
In addition, drug and biologic
manufacturers and other entities involved in the manufacture and distribution of approved drugs or biologics are required to register
their establishments with the FDA and state agencies, and are subject to periodic prescheduled or unannounced inspections by the FDA and
the relevant state agencies for compliance with cGMP and other regulatory requirements. Changes to the manufacturing process are strictly
regulated and often require prior FDA approval before being implemented. FDA regulations also require investigation and correction of
any deviations from cGMP and impose reporting and documentation requirements upon the sponsor and any third-party manufacturers that the
sponsor may decide to use. Accordingly, manufacturers must continue to expend time, money and effort in the area of production and quality
control to maintain cGMP compliance.
Once an approval is granted,
the FDA may withdraw the approval if compliance with regulatory requirements and standards is not maintained or if problems occur after
the product reaches the market. Later discovery of previously unknown problems with a product, including adverse events of unanticipated
severity or frequency, or with manufacturing processes, or failure to comply with regulatory requirements, may result in revisions to
the approved labeling to add new safety information; imposition of post-market studies or clinical trials to assess new safety risks;
or imposition of distribution or other restrictions under a REMS program. Other potential consequences include, among other things:
| • | restrictions on the marketing or manufacturing of the product, complete withdrawal of the product from
the market or product recalls; |
| • | fines, warning letters or holds on post-approval clinical trials; |
| • | refusal of the FDA to approve pending NDAs or supplements to approved NDAs, or suspension or revocation
of product license approvals; |
| • | product seizure or detention, or refusal to permit the import or export of products; or |
| • | injunctions or the imposition of civil or criminal penalties. |
The FDA strictly regulates
marketing, labeling, advertising and promotion of products that are placed on the market, and we must comply with the FDA’s advertising
and promotion requirements, such as those related to direct-to-consumer advertising, industry-sponsored scientific and educational activities,
and promotional activities involving the internet, as well as the prohibition on promoting products for uses or in patient populations
that are not described in the product’s approved labeling (known as “off-label use”). Drugs and biologics may be promoted
only for the approved indications and in accordance with the provisions of the approved label. Although physicians may prescribe legally
available products for off-label uses, manufacturers may not market or promote such uses. The FDA and other agencies actively enforce
the laws and regulations prohibiting the promotion of off-label uses, and a company that is found to have improperly promoted off-label
uses may be subject to significant liability.
In addition, the distribution
of prescription pharmaceutical products is subject to the Prescription Drug Marketing Act, or PDMA, which regulates the distribution of
drugs and drug samples at the federal level, and sets minimum standards for the registration and regulation of drug distributors by the
states. Both the PDMA and state laws limit the distribution of prescription pharmaceutical product samples and impose requirements to
ensure accountability in distribution. Furthermore, the Drug Supply Chain Security Act, or DSCSA, was enacted with the aim of building
an electronic system to identify and trace certain prescription drugs distributed in the United States, including most biological products.
The DSCSA mandates phased-in and resource-intensive obligations for pharmaceutical manufacturers, wholesale distributors, and dispensers
over a 10-year period, which culminated in November 2023. Most recently, the FDA announced a one-year stabilization period to November
2024, giving entities subject to the DSCSA additional time to finalize interoperable tracking systems and to ensure supply chain continuity.
From time to time, new legislation and regulations may be implemented that could significantly change the statutory provisions governing
the approval, manufacturing and marketing of products regulated by the FDA. It is impossible to predict whether further legislative or
regulatory changes will be enacted, or FDA regulations, guidance or interpretations changed or what the impact of such changes, if any,
may be.
Abbreviated New Drug Applications for Generic Drugs
In 1984, with passage of the
Hatch-Waxman amendments to the FDCA, Congress authorized the FDA to approve generic drugs that are the same as drugs previously approved
by the FDA under the NDA provisions of the statute and also enacted Section 505(b)(2) of the FDCA. To obtain approval of a generic drug,
an applicant must submit an abbreviated new drug application, or ANDA, to the agency. In support of such applications, a generic manufacturer
may rely on the preclinical and clinical testing previously conducted for a drug product previously approved under an NDA, known as the
reference listed drug, or RLD.
Specifically, in order for
an ANDA to be approved, the FDA must find that the generic version is identical to the RLD with respect to the active ingredients, the
route of administration, the dosage form, and the strength of the drug. At the same time, the FDA must also determine that the generic
drug is “bioequivalent” to the innovator drug. Under the statute, a generic drug is bioequivalent to a RLD if “the rate
and extent of absorption of the drug do not show a significant difference from the rate and extent of absorption of the listed drug.”
Upon approval of an ANDA,
the FDA indicates whether the generic product is “therapeutically equivalent” to the RLD in its publication “Approved
Drug Products with Therapeutic Equivalence Evaluations,” also referred to as the “Orange Book.” Physicians and pharmacists
consider a therapeutic equivalent generic drug to be fully substitutable for the RLD. In addition, by operation of certain state laws
and numerous health insurance programs, the FDA’s designation of therapeutic equivalence often results in substitution of the generic
drug without the knowledge or consent of either the prescribing physician or patient.
In contrast, Section 505(b)(2)
permits the filing of an NDA where at least some of the information required for approval comes from studies not conducted by or for the
applicant and for which the applicant has not obtained a right of reference. A Section 505(b)(2) applicant may eliminate the need
to conduct certain preclinical or clinical studies, if it can establish that reliance on studies conducted for a previously approved product
is scientifically appropriate. Unlike the ANDA pathway used by developers of bioequivalent versions of innovator drugs, which does not
allow applicants to submit new clinical data other than bioavailability or bioequivalence data, the 505(b)(2) regulatory pathway does
not preclude the possibility that a follow-on applicant would need to conduct additional clinical trials or nonclinical studies; for example,
they may be seeking approval to market a previously approved drug for new indications or for a new patient population that would require
new clinical data to demonstrate safety or effectiveness. The FDA may then approve the new product for all or some of the label indications
for which the RLD has been approved, or for any new indication sought by the Section 505(b)(2) applicant, as applicable.
In addition, under the Hatch-Waxman
amendments, the FDA may not approve an ANDA or 505(b)(2) NDA until any applicable period of non-patent exclusivity for the RLD has expired.
These market exclusivity provisions under the FDCA also can delay the submission or the approval of certain applications. The FDCA provides
a period of five years of non-patent data exclusivity for a new drug containing a new chemical entity. A drug is a new chemical entity
if the FDA has not previously approved any other new drug containing the same active moiety, which is the molecule or ion responsible
for the action of the drug substance. In cases where such exclusivity has been granted, an ANDA or 505(b)(2) NDA may not be filed with
the FDA until the expiration of five years unless the submission is accompanied by a Paragraph IV certification (as described below),
in which case the applicant may submit its application four years following the original product approval.
The FDCA also provides for
a period of three years of data exclusivity for an NDA, 505(b)(2) NDA or supplement thereto if one or more new clinical investigations,
other than bioavailability or bioequivalence studies, that were conducted by or for the applicant are deemed by the FDA to be essential
to the approval of the application. This three-year exclusivity period often protects changes to a previously approved drug product, such
as a new dosage form, route of administration, combination or indication. This three-year exclusivity covers only the conditions of use
associated with the new clinical investigations and does not prohibit the FDA from approving follow-on applications for drugs containing
the original active agent. Five-year and three-year exclusivity also will not delay the submission or approval of a traditional NDA filed
under Section 505(b)(1) of the FDCA. However, an applicant submitting a traditional NDA would be required to either conduct or obtain
a right of reference to all of the preclinical studies and adequate and well-controlled clinical trials necessary to demonstrate safety
and effectiveness.
Hatch-Waxman Patent Certification and the 30-Month Stay
Upon approval of an NDA or
a supplement thereto, NDA sponsors are required to list with the FDA each patent with claims that cover the applicant’s product
or an approved method of using the product. Each of the patents listed by the NDA sponsor is published in the Orange Book. When an ANDA
applicant files its application with the FDA, the applicant is required to certify to the FDA concerning any patents listed for the reference
product in the Orange Book, except for patents covering methods of use for which the ANDA applicant is not seeking approval. To the extent
that a Section 505(b)(2) NDA applicant is relying on studies conducted for an already approved product, the applicant is required to certify
to the FDA concerning any patents listed for the approved product in the Orange Book to the same extent that an ANDA applicant would.
Specifically, the applicant
must certify with respect to each patent that:
| I. | the required patent information has not been filed by the original applicant; |
| II. | the listed patent has expired; |
| III. | the listed patent has not expired, but will expire on a particular date and approval is sought after patent
expiration; or |
| IV. | the listed patent is invalid, unenforceable or will not be infringed by manufacture, use or sale of the
new product. |
If a Paragraph I or II certification
is filed, the FDA may make approval of the application effective immediately upon completion of its review. If a Paragraph III certification
is filed, the approval may be made effective on the patent expiration date specified in the application, although a tentative approval
may be issued before that time. If an application contains a Paragraph IV certification, a series of events will be triggered, the outcome
of which will determine the effective date of approval of the ANDA or 505(b)(2) application.
A certification that the new
product will not infringe the already approved product’s listed patents or that such patents are invalid or unenforceable is called
a Paragraph IV certification. If the follow-on applicant has provided a Paragraph IV certification to the FDA, the applicant must also
send notice of the Paragraph IV certification to the NDA and patent holders once the follow-on application in question has been accepted
for filing by the FDA. The NDA and patent holders may then initiate a patent infringement lawsuit in response to the notice of the Paragraph
IV certification. The filing of a patent infringement lawsuit within 45 days after the receipt of a Paragraph IV certification automatically
prevents the FDA from approving the ANDA or 505(b)(2) NDA until the earlier of 30 months after the receipt of the Paragraph IV notice,
expiration of the patent or a decision in the infringement case that is favorable to the ANDA or 505(b)(2) applicant. Alternatively, if
the listed patent holder does not file a patent infringement lawsuit within the required 45-day period, the follow-on applicant’s
ANDA or 505(b)(2) NDA will not be subject to the 30-month stay.
Reference Product Exclusivity for Biological Products
In March 2010, the Patient
Protection and Affordable Care Act, or ACA, was enacted in the United States and included the Biologics Price Competition and Innovation
Act of 2009, or the BPCIA. The BPCIA amended the PHSA to create an abbreviated approval pathway for biological products that are biosimilar
to or interchangeable with an FDA-licensed reference biological product. To date, the FDA has approved a number of biosimilars, and numerous
biosimilars have been approved in Europe. The FDA has also issued several guidance documents outlining its approach to reviewing and approving
biosimilars and interchangeable biosimilars, and has created a public database that contains information on all FDA-licensed biological
products, including biosimilars, called the Purple Book.
A biosimilar product is defined
as one that is highly similar to a reference product notwithstanding minor differences in clinically inactive components and for which
there are no clinically meaningful differences between the biological product and the reference product in terms of the safety, purity
and potency of the product. An interchangeable product is a biosimilar product that can be expected to produce the same clinical results
as the reference product in any given patient and, for products administered multiple times to an individual, that the product and the
reference product may be alternated or switched after one has been previously administered without increasing safety risks or risks of
diminished efficacy relative to exclusive use of the reference biological product without such alternation or switch. Upon licensure by
the FDA, an interchangeable biosimilar may be substituted for the reference product without the intervention of the healthcare provider
who prescribed the reference product.
The biosimilar applicant must
demonstrate that the product is biosimilar based on data from (1) analytical studies showing that the biosimilar product is highly
similar to the reference product; (2) animal studies (including toxicity); and (3) one or more clinical studies to demonstrate
safety, purity and potency in one or more appropriate conditions of use for which the reference product is approved. In addition, the
applicant must show that the biosimilar and reference products have the same mechanism of action for the conditions of use on the label,
route of administration, dosage and strength, and the production facility must meet standards designed to assure product safety, purity
and potency.
A reference biological product
is granted 12 years of data exclusivity from the time of first licensure of the product, and the first approved interchangeable biologic
product will be granted an exclusivity period of up to one year after it is first commercially marketed. As part of the Consolidated Appropriations
Act for 2023, Congress amended the PHSA in order to permit multiple interchangeable products approved on the same day to receive and benefit
from this one-year exclusivity period. If pediatric studies are performed and accepted by the FDA as responsive to a Written Request,
the 12-year exclusivity period will be extended for an additional six months. In addition, the FDA will not accept an application for
a biosimilar or interchangeable product based on the reference biological product until four years after the date of first licensure of
the reference product. “First licensure” typically means the initial date the particular product at issue was licensed in
the United States. Date of first licensure does not include the date of licensure of (and a new period of exclusivity is not available
for) a supplement for the reference product for a subsequent application filed by the same sponsor or manufacturer of the reference product
(or licensor, predecessor in interest or other related entity) for a change (not including a modification to the structure of the biological
product) that results in a new indication, route of administration, dosing schedule, dosage form, delivery system, delivery device or
strength or for a modification to the structure of the biological product that does not result in a change in safety, purity or potency.
Therefore, one must determine whether a new product includes a modification to the structure of a previously licensed product that results
in a change in safety, purity or potency to assess whether the licensure of the new product is a first licensure that triggers its own
period of exclusivity. Whether a subsequent application, if approved, warrants exclusivity as the “first licensure” of a biological
product is determined on a case-by-case basis with data submitted by the sponsor.
The BPCIA is complex and is
still being interpreted and implemented by the FDA. In addition, recent government proposals have sought to reduce the 12-year reference
product exclusivity period. Other aspects of the BPCIA, some of which may impact the BPCIA exclusivity provisions, have also been the
subject of litigation. As a result, the ultimate impact, implementation and meaning of the BPCIA is subject to significant uncertainty.
Pediatric Studies and Exclusivity
Under the Pediatric Research
Equity Act, or PREA, amendments to the FDCA, an NDA, BLA or supplement thereto must contain data that are adequate to assess the safety
and effectiveness of the drug product for the claimed indications in all relevant pediatric subpopulations, and to support dosing and
administration for each pediatric subpopulation for which the product is safe and effective. With enactment of the FDASIA in 2012, PREA
was made permanent and sponsors are required submit pediatric study plans to FDA prior to the assessment data. In particular, a sponsor
that is planning to submit a marketing application for a product that includes a new active ingredient, new indication, new dosage
form, new dosing regimen or new route of administration submit an initial Pediatric Study Plan, or PSP, within 60 days of an end-of-Phase
2 meeting or, if there is no such meeting, as early as practicable before the initiation of the Phase 3 or Phase 2/III study. The
initial PSP must contain an outline of the proposed pediatric study or studies the applicant plans to conduct, including study objectives
and design, age groups, relevant endpoints and statistical approach, or a justification for not including such detailed information and
any request for a deferral of pediatric assessments or a full or partial waiver of the requirement to provide data from pediatric studies
along with supporting information. The FDA and the sponsor must reach an agreement on the PSP. A sponsor can submit amendments to
an agreed-upon initial PSP at any time if changes to the pediatric plan need to be considered based on data collected from preclinical
studies, early phase clinical trials and/or other clinical development programs.
The FDA may, on its own initiative
or at the request of the applicant, grant deferrals for submission of some or all pediatric data until after approval of the product for
use in adults, or full or partial waivers from the pediatric data requirements. The law now requires the FDA to send a PREA Non-Compliance
letter to sponsors who have failed to submit their pediatric assessments required under PREA, have failed to seek or obtain a deferral
or deferral extension or have failed to request approval for a required pediatric formulation. It further requires the FDA to publicly
post the PREA Non-Compliance letter and sponsor’s response. Unless otherwise required by regulation, the pediatric data requirements
do not apply to products with orphan designation, although FDA has taken steps to limit what it considers abuse of this statutory exemption
in PREA by announcing that it does not intend to grant any additional orphan drug designations for rare pediatric subpopulations of what
is otherwise a common disease.
In addition, pediatric exclusivity
is another type of non-patent marketing exclusivity in the United States that, if granted, provides for the attachment of an additional
six months of marketing protection to the term of any existing regulatory exclusivity or listed patents. This six-month exclusivity may
be granted if an NDA sponsor submits pediatric data that fairly respond to a Written Request from the FDA for such data. The data do not
need to show the product to be effective in the pediatric population studied; rather, if the clinical trial is deemed to fairly respond
to the FDA’s request, the additional protection is granted. If reports of requested pediatric studies are submitted to and accepted
by the FDA within the statutory time limits, whatever statutory or regulatory periods of exclusivity or patent protection cover the product
are extended by six months, including orphan drug exclusivity. This is not a patent term extension, but it effectively extends the regulatory
period during which the FDA cannot approve another application. The FDA’s issuance of a Written Request does not require the sponsor
to undertake the described studies.
Orphan Drug Designation and Exclusivity
Under the Orphan Drug Act,
the FDA may designate a drug product as an “orphan drug” if it is intended to treat a rare disease or condition (generally
meaning that it affects fewer than 200,000 individuals in the United States, or more in cases in which there is no reasonable expectation
that the cost of developing and making a drug product available in the United States for treatment of the disease or condition will be
recovered from sales of the product). A company must request orphan product designation before submitting an NDA. If the request is granted,
the FDA will disclose the identity of the therapeutic agent and its potential use. Orphan product designation does not convey any advantage
in or shorten the duration of the regulatory review and approval process.
If a product with orphan designation
subsequently receives the first FDA approval for the disease or condition for which it has such designation or for a select indication
or use within the rare disease or condition for which it was designated, the product generally will receive orphan product exclusivity.
Orphan product exclusivity means that the FDA may not approve any other applications for the same product for the same indication for
seven years, except in certain limited circumstances, such as a showing of clinical superiority to the product with orphan exclusivity
by means of greater effectiveness, greater safety or providing a major contribution to patient care or in instances of drug supply issues.
Competitors, however, may receive approval of either a different product for the same indication for which the orphan product has exclusivity
or for the same product but for a different indication (which could then be used off-label in the orphan indication). If a drug or drug
product designated as an orphan product ultimately receives marketing approval for an indication broader than what was designated in its
orphan product application, it may not be entitled to exclusivity.
Patent Term Restoration and Extension
The term of a United States
patent that covers a drug, biological product or medical device approved pursuant to a PMA may also be eligible for patent term extension
when FDA approval is granted, provided that certain statutory and regulatory requirements are met. The length of the patent term extension
is related to the length of time the product is under regulatory review while the patent is in force. The Hatch-Waxman Act permits a patent
term extension of up to five years beyond the expiration date set for the patent. However, patent extension cannot extend the remaining
term of a patent beyond a total of 14 years from the date of product approval. Only one patent applicable to an approved drug may be granted
an extension, and the extension must be applied for prior to expiration of the patent. The United States Patent and Trade Office reviews
and approves the application for any patent term extension or restoration in consultation with the FDA. Similar provisions are available
in Europe and certain other foreign jurisdictions to extend the term of a patent that covers an approved drug, provided that statutory
and regulatory requirements are met.
Regulation Outside the United States
In order to market any product
outside of the United States, a company must also comply with numerous and varying regulatory requirements of other countries and jurisdictions
regarding quality, safety and efficacy and governing, among other things, clinical trials, marketing authorization, commercial sales and
distribution of drug products. Whether or not it obtains FDA approval for a product, the company would need to obtain the necessary approvals
by the comparable foreign regulatory authorities before it can commence clinical trials or marketing of the product in those countries
or jurisdictions. The approval process ultimately varies between countries and jurisdictions and can involve additional product testing
and additional administrative review periods. The time required to obtain approval in other countries and jurisdictions might differ from
and be longer than that required to obtain FDA approval. Regulatory approval in one country or jurisdiction does not ensure regulatory
approval in another, but a failure or delay in obtaining regulatory approval in one country or jurisdiction may negatively impact the
regulatory process in others.
Regulation and Marketing Authorization in the European Union
The process governing approval of medicinal products
in the European Union follows essentially the same lines as in the United States and, likewise, generally involves satisfactorily completing
each of the following:
| • | preclinical laboratory tests, animal studies and formulation studies all performed in accordance with the applicable European Union
good laboratory practice regulations; |
| • | submission to the relevant national authorities of a clinical trial application, or CTA, which must be approved before human clinical
trials may begin; |
| • | performance of adequate and well-controlled clinical trials to establish the safety and efficacy of the product for each proposed
indication; |
| • | submission to the relevant competent authorities of a marketing authorization application, or MAA, which includes the data supporting
safety and efficacy as well as detailed information on the manufacture and composition of the product in clinical development and proposed
labeling; |
| • | satisfactory completion of an inspection by the relevant national authorities of the manufacturing facility or facilities, including
those of third parties, at which the product is produced to assess compliance with strictly enforced current cGMP; |
| • | potential audits of the non-clinical and clinical trial sites that generated the data in support of the MAA; and |
| • | review and approval by the relevant competent authority of the MAA before any commercial marketing, sale or shipment of the product. |
Preclinical Studies
Preclinical tests include
laboratory evaluations of product chemistry, formulation and stability, as well as studies to evaluate toxicity in animal studies, in
order to assess the potential safety and efficacy of the product. The conduct of the preclinical tests and formulation of the compounds
for testing must comply with the relevant European Union regulations and requirements. The results of the preclinical tests, together
with relevant manufacturing information and analytical data, are submitted as part of the CTA.
Clinical Trial Approval
The new Clinical Trials Regulation,
(EU) No 536/2014, which took effect on January 31, 2022, aims to simplify and streamline the approval of clinical trials in the European
Union. The main characteristics of the regulation include: a streamlined application procedure via a single entry point, the Clinical
Trials Information System, or CTIS; a single set of documents to be prepared and submitted for the application as well as simplified reporting
procedures for clinical trial sponsors; and a harmonized procedure for the assessment of applications for clinical trials, which is divided
in two parts. Part I is assessed by the appointed reporting Member State, whose assessment report is submitted for review by the sponsor
and all other competent authorities of all European Union Member States in which an application for authorization of a clinical trial
has been submitted (Concerned Member States). Part II is assessed separately by each Concerned Member State. Strict deadlines have been
established for the assessment of clinical trial applications. The role of the relevant ethics committees in the assessment procedure
will continue to be governed by the national law of the Concerned Member State. However, overall related timelines will be defined by
the Clinical Trials Regulation.
As in the United States, similar
requirements for posting clinical trial information are present in the European Union (EudraCT) website: https://eudract.ema.europa.eu/
and other countries.
PRIME Designation in the European Union
In March 2016, the EMA launched
an initiative to facilitate development of product candidates in indications, often rare, for which few or no therapies currently exist.
The PRIority MEdicines, or PRIME, scheme is intended to encourage drug development in areas of unmet medical need and provides accelerated
assessment of products representing substantial innovation reviewed under the centralized procedure. Products from small- and medium-sized
enterprises, or SMEs, may qualify for earlier entry into the PRIME scheme than larger companies. Many benefits accrue to sponsors of product
candidates with PRIME designation, including but not limited to, early and proactive regulatory dialogue with the EMA, frequent discussions
on clinical trial designs and other development program elements, and accelerated marketing authorization application assessment once
a dossier has been submitted. Importantly, a dedicated Agency contact and rapporteur from the Committee for Human Medicinal Products,
or CHMP, or Committee for Advanced Therapies, or CAT, are appointed early in PRIME scheme facilitating increased understanding of the
product at EMA’s Committee level. A kick-off meeting initiates these relationships and includes a team of multidisciplinary experts
at the EMA to provide guidance on the overall development and regulatory strategies.
Marketing Authorization
To obtain a marketing authorization
for a product under European Union regulatory systems, an applicant must submit an MAA either under a centralized procedure administered
by the EMA, or one of the procedures administered by competent authorities in the European Union Member States (decentralized procedure,
national procedure or mutual recognition procedure). A marketing authorization may be granted only to an applicant established in the
European Union. Regulation (EC) No 1901/2006 provides that prior to obtaining a marketing authorization in the European Union, applicants
have to demonstrate compliance with all measures included in an EMA-approved Paediatric Investigation Plan, or PIP, covering all subsets
of the pediatric population, unless the EMA has granted (1) a product-specific waiver, (2) a class waiver or (3) a deferral for one or
more of the measures included in the PIP.
The centralized procedure provides for the grant
of a single marketing authorization by the European Commission that is valid across the European Economic Area (i.e., the European Union
as well as Iceland, Liechtenstein and Norway). Pursuant to Regulation (EC) No 726/2004, the centralized procedure is compulsory for specific
products, including for medicines produced by certain biotechnological processes, products designated as orphan medicinal products, advanced
therapy medicinal products and products with a new active substance indicated for the treatment of certain diseases, including products
for the treatment of cancer. For products with a new active substance indicated for the treatment of other diseases and products that
are highly innovative or for which a centralized process is in the interest of patients, the centralized procedure may be optional. The
centralized procedure may at the request of the applicant also be used in certain other cases.
Under the centralized procedure,
the CHMP is also responsible for several post-authorization and maintenance activities, such as the assessment of modifications or extensions
to an existing marketing authorization. Under the centralized procedure in the European Union., the maximum timeframe for the evaluation
of an MAA is 210 days, excluding clock stops, when additional information or written or oral explanation is to be provided by the
applicant in response to questions of the CHMP. Accelerated evaluation might be granted by the CHMP in exceptional cases, when a medicinal
product is of major interest from the point of view of public health and in particular from the viewpoint of therapeutic innovation. If
the CHMP accepts such request, the time limit of 210 days will be reduced to 150 days, but it is possible that the CHMP can revert to
the standard time limit for the centralized procedure if it considers that it is no longer appropriate to conduct an accelerated assessment.
At the end of this period, the CHMP provides a scientific opinion on whether or not a marketing authorization should be granted in relation
to a medicinal product. Within 15 calendar days of receipt of a final opinion from the CHMP, the European Commission must prepare a draft
decision concerning an application for marketing authorization. This draft decision must take the opinion and any relevant provisions
of European Union law into account. Before arriving at a final decision on an application for centralized authorization of a medicinal
product the European Commission must consult the Standing Committee on Medicinal Products for Human Use. The Standing Committee is composed
of representatives of the European Union Member States and chaired by a non-voting European Commission representative. The European Parliament
also has a related “droit de regard.” The European Parliament's role is to ensure that the European Commission has not exceeded
its powers in deciding to grant or refuse to grant a marketing authorization.
The European Commission may
grant a so-called “marketing authorization under exceptional circumstances.” Such authorization is intended for products for
which the applicant can demonstrate that it is unable to provide comprehensive data on the efficacy and safety under normal conditions
of use, because the indications for which the product in question is intended are encountered so rarely that the applicant cannot reasonably
be expected to provide comprehensive evidence, or in the present state of scientific knowledge, comprehensive information cannot be provided,
or it would be contrary to generally accepted principles of medical ethics to collect such information. Consequently, marketing authorization
under exceptional circumstances may be granted subject to certain specific obligations, which may include the following:
| • | the applicant must complete an identified program of studies within a time period specified by the competent
authority, the results of which form the basis of a reassessment of the benefit/risk profile; |
| • | the medicinal product in question may be supplied on medical prescription only and may in certain cases
be administered only under strict medical supervision, possibly in a hospital and in the case of a radiopharmaceutical, by an authorized
person; and |
| • | the package leaflet and any medical information must draw the attention of the medical practitioner to
the fact that the particulars available concerning the medicinal product in question are as yet inadequate in certain specified respects. |
A marketing authorization
under exceptional circumstances is subject to annual review to reassess the risk-benefit balance in an annual reassessment procedure.
Continuation of the authorization is linked to the annual reassessment and a negative assessment could potentially result in the marketing
authorization being suspended or revoked. The renewal of a marketing authorization of a medicinal product under exceptional circumstances,
however, follows the same rules as a “normal” marketing authorization. Thus, a marketing authorization under exceptional circumstances
is granted for an initial five years, after which the authorization will become valid indefinitely, unless the EMA decides that safety
grounds merit one additional five-year renewal.
The European Commission may
also grant a so-called “conditional marketing authorization” prior to obtaining the comprehensive clinical data required for
an application for a full marketing authorization. Such conditional marketing authorizations may be granted for product candidates (including
medicines designated as orphan medicinal products), if (i) the risk-benefit balance of the product candidate is positive, (ii) it is likely
that the applicant will be in a position to provide the required comprehensive clinical trial data, (iii) the product fulfills an unmet
medical need and (iv) the benefit to public health of the immediate availability on the market of the medicinal product concerned outweighs
the risk inherent in the fact that additional data are still required. A conditional marketing authorization may contain specific obligations
to be fulfilled by the marketing authorization holder, including obligations with respect to the completion of ongoing or new studies,
and with respect to the collection of pharmacovigilance data. Conditional marketing authorizations are valid for one year, and may be
renewed annually, if the risk-benefit balance remains positive, and after an assessment of the need for additional or modified conditions
and/or specific obligations. The timelines for the centralized procedure described above also apply with respect to the review by the
CHMP of applications for a conditional marketing authorization.
The European Union medicines
rules expressly permit the European Union Member States to adopt national legislation prohibiting or restricting the sale, supply or use
of any medicinal product containing, consisting of or derived from a specific type of human or animal cell, such as embryonic stem cells.
While the products we have in development do not make use of embryonic stem cells, it is possible that the national laws in certain European
Union Member States may prohibit or restrict us from commercializing our products, even if they have been granted a European Union marketing
authorization.
Unlike the centralized authorization
procedure, the decentralized marketing authorization procedure requires a separate application to, and leads to separate approval by,
the competent authorities of each European Union Member State in which the product is to be marketed. This application is identical to
the application that would be submitted to the EMA for authorization through the centralized procedure. The reference European Union Member
State prepares a draft assessment and drafts of the related materials within 120 days after receipt of a valid application. The resulting
assessment report is submitted to the concerned European Union Member States who, within 90 days of receipt, must decide whether to approve
the assessment report and related materials. If a concerned European Union Member State cannot approve the assessment report and related
materials due to concerns relating to a potential serious risk to public health, disputed elements may be referred to the European Commission,
whose decision is binding on all European Union Member States.
The mutual recognition procedure
similarly is based on the acceptance by the competent authorities of the European Union Member States of the marketing authorization of
a medicinal product by the competent authorities of other European Union Member States. The holder of a national marketing authorization
may submit an application to the competent authority of a European Union Member State requesting that this authority recognize the marketing
authorization delivered by the competent authority of another European Union Member State.
In April 2023 the European
Commission issued a proposal that will revise and replace the existing general pharmaceutical legislation. If adopted and implemented
as currently proposed, these revisions will significantly change several aspects of drug development and approval in the European Union.
Regulatory Data Protection in the European
Union
In the European Union, innovative
medicinal products approved on the basis of a complete independent data package qualify for eight years of data exclusivity upon marketing
authorization and an additional two years of market exclusivity pursuant to Directive 2001/83/EC. Regulation (EC) No 726/2004 repeats
this entitlement for medicinal products authorized in accordance to the centralized authorization procedure. Data exclusivity prevents
applicants for authorization of generics of these innovative products from referencing the innovator’s data to assess a generic
(abridged) application for a period of eight years. During an additional two-year period of market exclusivity, a generic marketing authorization
application can be submitted and authorized, and the innovator’s data may be referenced, but no generic medicinal product can be
placed on the European Union market until the expiration of the market exclusivity. The overall ten-year period will be extended to a
maximum of 11 years if, during the first eight years of those ten years, the marketing authorization holder obtains an authorization for
one or more new therapeutic indications which, during the scientific evaluation prior to their authorization, are held to bring a significant
clinical benefit in comparison with existing therapies. Even if a compound is considered to be a new chemical entity so that the innovator
gains the prescribed period of data exclusivity, another company nevertheless could also market another version of the product if such
company obtained marketing authorization based on an MAA with a complete independent data package of pharmaceutical tests, preclinical
tests and clinical trials.
Periods of Authorization and Renewals
A marketing authorization
has an initial validity for five years in principle. The marketing authorization may be renewed after five years on the basis of a re-evaluation
of the risk-benefit balance by the EMA or by the competent authority of the E.U. Member State. To this end, the marketing authorization
holder must provide the EMA or the competent authority with a consolidated version of the file in respect of quality, safety and efficacy,
including all variations introduced since the marketing authorization was granted, at least six months before the marketing authorization
ceases to be valid. The European Commission or the competent authorities of the E.U. Member States may decide, on justified grounds relating
to pharmacovigilance, to proceed with one further five-year period of marketing authorization. Once subsequently definitively renewed,
the marketing authorization shall be valid for an unlimited period. Any authorization which is not followed by the actual placing of the
medicinal product on the E.U. market (in case of centralized procedure) or on the market of the authorizing E.U. Member State within three
years after authorization ceases to be valid (the so-called sunset clause).
Pediatric Studies
Prior to obtaining a marketing
authorization in the European Union, applicants have to demonstrate compliance with all measures included in an EMA-approved Paediatric
Investigation Plan, or PIP, covering all subsets of the pediatric population, unless the EMA has granted a product-specific waiver, a
class waiver, or a deferral for one or more of the measures included in the PIP. The respective requirements for all marketing authorization
procedures are set forth in Regulation (EC) No 1901/2006, which is referred to as the Paediatric Regulation. This requirement also applies
when a company wants to add a new indication, pharmaceutical form or route of administration for a medicine that is already authorized.
The Paediatric Committee of the EMA, or PDCO, may grant deferrals for some medicines, allowing a company to delay development of the medicine
in children until there is enough information to demonstrate its effectiveness and safety in adults. The PDCO may also grant waivers when
development of a medicine in children is not needed or is not appropriate, such as for diseases that only affect the elderly population.
Before a marketing authorization application can
be filed, or an existing marketing authorization can be amended, the EMA determines that companies actually comply with the agreed studies
and measures listed in each relevant PIP.
Regulatory Requirements after a Marketing Authorization has been
Obtained
In case an authorization for
a medicinal product in the European Union is obtained, the holder of the marketing authorization is required to comply with a range of
requirements applicable to the manufacturing, marketing, promotion and sale of medicinal products. These include:
| • | Compliance with the European Union’s stringent pharmacovigilance or safety reporting rules must
be ensured. These rules can impose post-authorization studies and additional monitoring obligations. |
| • | The manufacturing of authorized medicinal products, for which a separate manufacturer’s license
is mandatory, must also be conducted in strict compliance with the applicable European Union laws, regulations and guidance, including
Directive 2001/83/EC, Directive 2003/94/EC, Regulation (EC) No 726/2004 and the European Commission Guidelines for Good Manufacturing
Practice. These requirements include compliance with European Union cGMP standards when manufacturing medicinal products and active pharmaceutical
ingredients, including the manufacture of active pharmaceutical ingredients outside of the European Union with the intention to import
the active pharmaceutical ingredients into the European Union. |
| • | The marketing and promotion of authorized drugs, including industry-sponsored continuing medical education
and advertising directed toward the prescribers of drugs and/or the general public, are strictly regulated in the European Union notably
under Directive 2001/83EC, as amended, and European Union Member State laws. Direct-to-consumer advertising of prescription medicines
is prohibited across the European Union. |
Orphan Drug Designation and Exclusivity
The European Commission, following
an evaluation by the EMA’s Committee for Orphan Medicinal Products, has designed MTX110 as an orphan medicinal product. Pursuant
to Regulation (EC) No 141/2000 and Regulation (EC) No. 847/2000, the European Commission can grant orphan medicinal product designation
to products for which the sponsor can establish that it is intended for the diagnosis, prevention or treatment of a life-threatening or
chronically debilitating condition affecting not more than five in 10,000 people in the European Union, or a life threatening, seriously
debilitating or serious and chronic condition in the European Union and that without incentives it is unlikely that sales of the drug
in the European Union would generate a sufficient return to justify the necessary investment. In addition, the sponsor must establish
that there is no other satisfactory method approved in the European Union of diagnosing, preventing or treating the condition, or if such
a method exists, the proposed orphan drug will be of significant benefit to patients.
Orphan drug designation is
not a marketing authorization. It is a designation that provides a number of benefits, including fee reductions, regulatory assistance,
and the possibility to apply for a centralized European Union marketing authorization, as well as ten years of market exclusivity following
a marketing authorization. During this market exclusivity period, neither the EMA, the European Commission nor the member states can accept
an application or grant a marketing authorization for a similar medicinal product. A “similar medicinal product” is defined
as a medicinal product containing a similar active substance or substances as those contained in an authorized orphan medicinal product
and that is intended for the same therapeutic indication. The market exclusivity period for the authorized therapeutic indication may
be reduced to six years if, at the end of the fifth year, it is established that the orphan designation criteria are no longer met, including
where it is shown that the product is sufficiently profitable not to justify maintenance of market exclusivity. In addition, a competing
similar medicinal product may in limited circumstances be authorized prior to the expiration of the market exclusivity period, including
if it is shown to be safer, more effective or otherwise clinically superior to the already approved orphan drug. Furthermore, a product
can lose orphan designation, and the related benefits, prior to us obtaining a marketing authorization if it is demonstrated that the
orphan designation criteria are no longer met.
General Data Protection Regulation
As further discussed in “Risk
Factors” under the heading “We may incur substantial costs in our efforts to comply with evolving global data protection
laws and regulations, and any failure or perceived failure by us to comply with such laws and regulations may harm our business and operations,”
the collection, use, disclosure, transfer, or other processing of personal data regarding individuals in the European Union and United
Kingdom, including personal health data, is subject to the GDPR and UK GDPR, respectively, which are wide-ranging in scope and impose
numerous requirements on companies that process personal data, impose strict rules on the transfer of personal data to countries outside
the European Union and United Kingdom, respectively, and permits data protection authorities to impose large penalties for violations.
Compliance with the GDPR and UK GDPR is a rigorous and time-intensive process that may increase the cost of doing business or require
companies to change their business practices to ensure full compliance.
Pricing Decisions for Approved Products
In the European Union, pricing
and reimbursement schemes vary widely from country to country. Some countries provide that products may be marketed only after a reimbursement
price has been agreed. Some countries may require the completion of additional studies that compare the cost-effectiveness of a particular
product candidate to currently available therapies or so-called health technology assessments, in order to obtain reimbursement or pricing
approval. For example, the European Union provides options for its Member States to restrict the range of products for which their national
health insurance systems provide reimbursement and to control the prices of medicinal products for human use. Member States may approve
a specific price for a product or it may instead adopt a system of direct or indirect controls on the profitability of the company placing
the product on the market. Other Member States allow companies to fix their own prices for products, but monitor and control prescription
volumes and issue guidance to physicians to limit prescriptions. Recently, many countries in the European Union have increased the amount
of discounts required on pharmaceuticals and these efforts could continue as countries attempt to manage health care expenditures, especially
in light of the severe fiscal and debt crises experienced by many countries in the European Union. The downward pressure on health care
costs in general, particularly prescription products, has become intense. As a result, increasingly high barriers are being erected to
the entry of new products. Political, economic and regulatory developments may further complicate pricing negotiations, and pricing negotiations
may continue after reimbursement has been obtained. Reference pricing used by various Member States, and parallel trade, i.e., arbitrage
between low-priced and high-priced Member States, can further reduce prices. There can be no assurance that any country that has price
controls or reimbursement limitations for pharmaceutical products will allow favorable reimbursement and pricing arrangements for any
products, if approved in those countries.
Patent Term Extension
In order to compensate the
patentee for delays in obtaining a marketing authorization for a patented product, a supplementary certificate, or SPC, may be granted
extending the exclusivity period for that specific product by up to five years. Applications for SPCs must be made to the relevant patent
office in each European Union member state and the granted certificates are valid only in the member state of grant. An application has
to be made by the patent owner within six months of the first marketing authorization being granted in the European Union (assuming the
patent in question has not expired, lapsed or been revoked) or within six months of the grant of the patent (if the marketing authorization
is granted first). In the context of SPCs, the term “product” means the active ingredient or combination of active ingredients
for a medicinal product and the term “patent” means a patent protecting such a product or a new manufacturing process or application
for it. The duration of an SPC is calculated as the difference between the patent’s filing date and the date of the first marketing
authorization, minus five years, subject to a maximum term of five years.
A six month pediatric extension
of an SPC may be obtained where the patentee has carried out an agreed pediatric investigation plan, the authorized product information
includes information on the results of the studies and the product is authorized in all member states of the European Union.
United Kingdom Regulation
From January 1, 2021, European
Union law no longer directly applies in the United Kingdom. The United Kingdom has adopted existing European Union medicines regulation
as standalone United Kingdom legislation with some amendments to reflect procedural and other requirements with respect to marketing authorizations
and other regulatory provisions.
The Medicines and Healthcare
products Regulatory Agency, or MHRA, is responsible for regulating the United Kingdom medicinal products market (Great Britain and Northern
Ireland). In order to market medicines in the United Kingdom, manufacturers must hold a United Kingdom authorization. On January 1, 2021,
all European Union marketing authorizations were converted to United Kingdom marketing authorizations subject to a manufacturer opt-out.
The United Kingdom has introduced a separate UK-specific processes for regulatory submissions and medicinal product MA, and MHRA guidance
states that the United Kingdom will have the power to take into account marketing authorizations made under the European Union decentralized
and mutual recognition procedures. On January 1, 2024, the MHRA launched the International Recognition Procedure, or IRP, which provides
for an expedited authorization procedure for products that have received positive marketing authorization decisions from trusted partner
agencies, such as the EMA or the FDA. There are two available routes for assessment and recognition under the IRP:
| · | Recognition Route A – 60 days from validation of submission |
| o | Application must be based on a Reference Regulatory, or RR, MA within the previous two years |
| o | Any significant differences from the quality dossier approved by the RR requires assessment under Recognition
Route B |
| o | Evidence of GMP compliance for manufacturing sites should be provided with submission |
| o | None of the Recognition Route B criteria are met |
| · | Recognition Route B – 110 days from validation of submission with one planned clock stop (up to
60 days) at day 70 to allow applicant to respond to issues identified during review |
| · | Application must be based on a RR marketing authorization within the previous ten years. |
| · | Criteria requiring Recognition Route B include, among other things: |
| § | The RR granted a conditional or exceptional circumstances marketing authorization |
| § | Additional manufacturing sites included in the application were not assessed by the RR or a manufacturing
site is not GMP certified |
| § | There are substantial changes to the manufacturing process compared to the process approved by the RR |
| § | Certain product types (e.g., advanced therapy medicinal products, orphan medicines, over-the-counter medicines) |
| § | A Risk Management Plan was not assessed by the RR |
| § | The RR required one or more post-authorization safety studies for the product |
| § | A companion diagnostic is necessary for correct use of the product |
United Kingdom medicines legislation
is subject to future regulatory change under the Medicines and Medical Devices Act 2021. This act sets out a new framework for the adoption
of medicines regulation.
Different rules apply in Northern
Ireland following implementation of the Northern Ireland Protocol, under which European Union central marketing applications continue
to apply there. However, in March 2023, the United Kingdom government and the European Commission reached agreement on a regulatory
framework to replace the Northern Ireland Protocol, referred to as the Windsor Framework. The Windsor Framework is expected to apply as
of January 1, 2025 and will change the existing system under the Northern Ireland Protocol, including the regulation of pharmaceutical
products in the UK. Specifically, the MHRA will be responsible for approving all medicines intended to be marketed in the UK (i.e., Great
Britain and Northern Ireland), while the EMA will no longer be involved in approving medicines intended for sale in Northern Ireland.
The Trade and Cooperation Agreement, which sets
forth a framework for partnership between the European Union and the United Kingdom, became effective as of January 1, 2021. The
Trade and Cooperation Agreement between the European Union and the United Kingdom contains an Annex in relation to medicinal products
with the objective of facilitating availability of medicines, promotion of public health and consumer protection in respect of medicinal
products. The Annex provides for mutual recognition of good manufacturing practice (GMP) inspections and certificates, meaning that manufacturing
facilities do not need to undergo duplicate inspections for the two markets. The Annex establishes a Working Group on Medicinal Products
to deal with matters under the Trade and Cooperation Agreement, facilitate co-operation and for the carrying out of technical discussions.
It is expected that further bilateral discussions will continue with respect to regulatory areas not the subject of the Trade and Cooperation
Agreement, including pharmacovigilance. The Trade and Cooperation Agreement also does not include reciprocal arrangements for the recognition
of batch testing certification. However, the United Kingdom has listed approved countries, including the EEA which will enable UK importers
and wholesales to recognize certain certification and regulatory standards. The European Commission has not adopted such recognition procedures.
It is expected that the establishment of a separate
United Kingdom authorization system, albeit with transitional recognition procedures in the United Kingdom, will lead to additional regulatory
costs. In addition, additional regulatory costs may be incurred with respect to the lack of mutual recognition of batch testing and related
regulatory measures.
Healthcare Law and Regulation
Healthcare providers, physicians
and third-party payors play a primary role in the recommendation and prescription of drug products that are granted marketing approval.
Arrangements with third-party payors and customers are subject to broadly applicable fraud and abuse and other healthcare laws and regulations.
Such restrictions under applicable federal and state healthcare laws and regulations include the following:
| • | the federal Anti-Kickback Statute prohibits, among other things, persons from knowingly and willfully
soliciting, offering, receiving or providing remuneration, directly or indirectly, in cash or in kind, to induce or reward either the
referral of an individual for, or the purchase, order or recommendation of, any good or service, for which payment may be made, in whole
or in part, under a federal healthcare program such as Medicare and Medicaid; A person or entity does not need to have actual knowledge
of the Anti-Kickback Statute or specific intent to violate it to have committed a violation; |
| • | the federal civil and criminal false claims laws and civil monetary penalty laws, including the federal
False Claims Act, which prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, false
or fraudulent claims for payment to, or approval by Medicare, Medicaid, or other federal healthcare programs, knowingly making, using
or causing to be made or used a false record or statement material to a false or fraudulent claim or an obligation to pay or transmit
money to the federal government, or knowingly concealing or knowingly and improperly avoiding or decreasing or concealing an obligation
to pay money to the federal government. Manufacturers can be held liable under the FCA even when they do not submit claims directly to
government payers if they are deemed to “cause” the submission of false or fraudulent claims. The FCA also permits a private
individual acting as a “whistleblower” to bring actions on behalf of the federal government alleging violations of the FCA
and to share in any monetary recovery; |
| • | the Civil Monetary Penalties Law, which prohibits, among other things, the offering or giving of remuneration,
which includes, without limitation, any transfer of items or services for free or for less than fair market value (with limited exceptions),
to a Medicare or Medicaid beneficiary that the person knows or should know is likely to influence the beneficiary’s selection of
a particular supplier of items or services reimbursable by a federal or state governmental program; |
| • | the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, imposes criminal and
civil liability for executing a scheme to defraud any healthcare benefit program or making false statements relating to healthcare matters; |
| • | HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act and its implementing
regulations, also imposes obligations, including mandatory contractual terms, with respect to safeguarding the privacy, security and transmission
of individually identifiable health information; |
| • | the federal false statements statute prohibits knowingly and willfully falsifying, concealing or covering
up a material fact or making any materially false statement in connection with the delivery of or payment for healthcare benefits, items
or services; |
| • | the federal transparency requirements of the Physician Payment Sunshine Act, which requires manufacturers
of drugs, devices, biologics and medical supplies covered by Medicare, Medicaid or a state plans under CHIPs to report to the Centers
for Medicaid Services, or CMS, information related to payments and other transfers of value to physicians, certain non-physician advanced
healthcare practitioners, and teaching hospitals or to entities or individuals at the request of, or designated on behalf of, the physicians
and teaching hospitals as well as certain ownership and investment interests held by physicians and their immediate family members; and |
| • | analogous state and foreign laws and regulations, such as state anti-kickback and false claims laws, may
apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by non-governmental third-party
payors, including private insurers. |
Additionally, similar healthcare
laws and regulations in the European Union, United Kingdom and other jurisdictions, including reporting requirements detailing interactions
with and payments to healthcare providers and laws governing the privacy and security of certain protected information, such as GDPR and
UK GDPR, which imposes obligations and restrictions on the collection and use of personal data relating to individuals located in the
European Union (including health data).
Finally, the majority of states
also have statutes or regulations similar to the aforementioned federal laws, some of which are broader in scope and apply to items and
services reimbursed under Medicaid and other state programs, or, in several states, apply regardless of the payor. Some state laws require
pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance
guidance promulgated by the federal government in addition to requiring drug manufacturers to report information related to payments to
clinicians and other healthcare providers or marketing expenditures. Some states and local jurisdictions require the registration of pharmaceutical
sales representatives. State and foreign laws also govern the privacy and security of health information in some circumstances, many of
which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts.
Because
of the breadth of these laws and the narrowness of their exceptions and safe harbors, it is possible that business activities can be subject
to challenge under one or more of such laws. The scope and enforcement of each of these laws is uncertain and subject to rapid change
in the current environment of healthcare reform, especially in light of the lack of applicable precedent and regulations. Federal and
state enforcement bodies have recently increased their scrutiny of interactions between healthcare companies and healthcare providers,
which has led to a number of investigations, prosecutions, convictions and settlements in the healthcare industry.
Ensuring
that business arrangements with third parties comply with applicable healthcare laws and regulations is costly and time consuming. If
business operations are found to be in violation of any of the laws described above or any other applicable governmental regulations a
pharmaceutical manufacturer may be subject to penalties, including civil, criminal and administrative penalties, damages, fines, disgorgement,
individual imprisonment, exclusion from governmental funded healthcare programs, such as Medicare and Medicaid, contractual damages, reputational
harm, diminished profits and future earnings, additional reporting obligations and oversight if subject to a corporate integrity agreement
or other agreement to resolve allegations of non-compliance with these laws, and curtailment or restructuring of operations, any of which
could adversely affect a pharmaceutical manufacturer’s ability to operate its business and the results of its operations.
Coverage and Reimbursement
The future commercial success
of our product candidate or any of our collaborators' ability to commercialize any approved product candidate successfully will depend
in part on the extent to which governmental payor programs at the federal and state levels, including Medicare and Medicaid, private health
insurers and other third-party payors provide coverage for and establish adequate reimbursement levels for our product candidate. Government
health administration authorities, private health insurers and other organizations generally decide which drugs they will pay for and
establish reimbursement levels for healthcare. In particular, in the United States, private health insurers and other third-party payors
often provide reimbursement for products and services based on the level at which the government, through the Medicare or Medicaid programs,
provides reimbursement for such treatments. In the United States, the United Kingdom, the European Union, and other potentially significant
markets for our product candidate, government authorities and third-party payors are increasingly attempting to limit or regulate the
price of medical products and services, particularly for new and innovative products and therapies, which often has resulted in average
selling prices lower than they would otherwise be. Further, the increased emphasis on managed healthcare in the United States and on country
and regional pricing and reimbursement controls in the United Kingdom and European Union will put additional pressure on product pricing,
reimbursement and usage, which may adversely affect our future product sales and results of operations. These pressures can arise from
rules and practices of managed care groups, judicial decisions and laws and regulations related to Medicare, Medicaid and healthcare reform,
pharmaceutical coverage and reimbursement policies and pricing in general.
Third-party payors are increasingly
imposing additional requirements and restrictions on coverage and limiting reimbursement levels for medical products. For example, federal
and state governments reimburse covered prescription drugs at varying rates generally below average wholesale price. These restrictions
and limitations influence the purchase of healthcare services and products. Third-party payors may limit coverage to specific drug products
on an approved list, or formulary, which might not include all of the FDA-approved drug products for a particular indication. Third-party
payors are increasingly challenging the price and examining the medical necessity and cost-effectiveness of medical products and services,
in addition to their safety and efficacy. We may need to conduct expensive pharmacoeconomic studies in order to demonstrate the medical
necessity and cost-effectiveness of our products, in addition to the costs required to obtain the FDA approvals. Our product candidate
may not be considered medically necessary or cost-effective. A payor's decision to provide coverage for a drug product does not imply
that an adequate reimbursement rate will be approved. Further, one payor’s determination to provide coverage for a drug product
does not assure that other payors will also provide coverage for the drug product. Adequate third-party reimbursement may not be available
to enable us to maintain price levels sufficient to realize an appropriate return on our investment in drug development. Legislative proposals
to reform healthcare or reduce costs under government insurance programs may result in lower reimbursement for our products and product
candidate or exclusion of our product candidate from coverage. The cost containment measures that healthcare payors and providers are
instituting and any healthcare reform could significantly reduce our revenues from the sale of any approved product candidates. We cannot
provide any assurances that we will be able to obtain and maintain third-party coverage or adequate reimbursement for our product candidate
in whole or in part.
Healthcare Reform
In the United States and some
foreign jurisdictions, there have been, and continue to be, several legislative and regulatory changes and proposed changes regarding
the healthcare system that could prevent or delay marketing approval of product and therapeutic candidates, restrict or regulate post-approval
activities, and affect the ability to profitably sell product and therapeutic candidates that obtain marketing approval. The FDA’s
and other regulatory authorities’ policies may change and additional government regulations may be enacted that could prevent, limit
or delay regulatory approval of our product and therapeutic candidates. If we are slow or unable to adapt to changes in existing requirements
or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we may lose any marketing approval
that we otherwise may have obtained and we may not achieve or sustain profitability, which would adversely affect our business, prospects,
financial condition and results of operations.
In addition, the containment
of healthcare costs has become a priority of federal and state governments and the prices of therapeutics have been a focus in this effort.
The U.S. government, state legislatures and foreign governments have shown significant interest in implementing cost-containment programs
to limit the growth of government-paid healthcare costs, including price controls, restrictions on reimbursement, and requirements for
substitution of generic and biosimilar products for branded prescription medicines and biologics, respectively. In recent years, the U.S.
Congress has considered reductions in Medicare reimbursement levels for medicines administered by physicians. CMS, the agency that administers
the Medicare and Medicaid programs, also has authority to revise reimbursement rates and to implement coverage restrictions for most drugs
and biologics. Cost reduction initiatives and changes in coverage implemented through legislation or regulation could decrease utilization
of and reimbursement for any approved products we may market in the future. While Medicare regulations apply only to pharmaceutical benefits
for Medicare beneficiaries, private payors often follow Medicare coverage policy and payment limitations in setting their own reimbursement
rates. Therefore, any reduction in reimbursement that results from federal legislation or regulation may result in a similar reduction
in payments from private payors.
The ACA, as amended by the
Health Care and Education Affordability Reconciliation Act, was enacted in 2010 and substantially changed the way healthcare is financed
by both governmental and private insurers in the United States, and significantly impacted the pharmaceutical industry. The ACA was intended
to broaden access to health insurance, reduce or constrain the growth of healthcare spending, enhance remedies against healthcare fraud
and abuse, add new transparency requirements for healthcare and health insurance industries, impose new taxes and fees on pharmaceutical
manufacturers, and impose additional health policy reforms. With regard to biopharmaceutical products, the ACA, among other things, addressed
a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for therapeutics that are
inhaled, infused, instilled, implanted or injected, increased the minimum Medicaid rebates owed by manufacturers under the Medicaid Drug
Rebate Program and extended the rebate program to individuals enrolled in Medicaid managed care organizations, established annual fees
on manufacturers of certain branded prescription medicines, created a new Medicare Part D coverage gap discount program, and expanded
the 340B drug discount program. As another example, the 2021 Consolidated Appropriations Act signed into law on December 27, 2020 incorporated
extensive healthcare provisions and amendments to existing laws, including a requirement that all manufacturers of medicines and biological
products covered under Medicare Part B report the product’s average sales price, to the U.S. Department of Health and Human Services
beginning on January 1, 2022, subject to enforcement via civil money penalties.
Legislative and regulatory
changes under the ACA remain possible, but it is unknown what form any such changes or any law would take and how or whether it may affect
the biopharmaceutical industry as a whole or our business in the future. We expect that changes or additions to the ACA, the Medicare
and Medicaid programs and changes stemming from other healthcare reform measures, especially with regard to healthcare access, financing
or other legislation in individual states, could have a material adverse effect on the healthcare industry in the United States.
In addition, there has been
heightened governmental scrutiny over the manner in which biopharmaceutical manufacturers set prices for their marketed products. Such
scrutiny has resulted in several recent U.S. Congressional inquiries and proposed and enacted federal and state legislation designed to,
among other things, bring more transparency to medicine pricing, review the relationship between pricing and manufacturer patient programs,
reduce the cost of medicines under Medicare, and reform government program reimbursement methodologies for pharmaceutical products. Notably,
on December 20, 2019, the Further Consolidated Appropriations Act for 2020 became law (P.L. 116-94) and included a piece of bipartisan
legislation called the Creating and Restoring Equal Access to Equivalent Samples Act of 2019, or the CREATES Act. The CREATES Act aims
to address the concern articulated by both the FDA and others in the industry that some brand manufacturers have improperly restricted
the distribution of their products, including by invoking the existence of a REMS for certain products, to deny generic and biosimilar
product developers access to samples of brand products. Because generic and biosimilar product developers need samples to conduct certain
comparative testing required by the FDA, some have attributed the inability to timely obtain samples as a cause of delay in the entry
of generic and biosimilar products. To remedy this concern, the CREATES Act establishes a private cause of action that permits a generic
or biosimilar product developer to sue the brand manufacturer to compel it to furnish the necessary samples on “commercially reasonable,
market-based terms.” Whether and how generic and biosimilar product developments will use this new pathway, as well as the likely
outcome of any legal challenges to provisions of the CREATES Act, remain highly uncertain and its potential effects on our future commercial
products are unknown.
More recently, in August 2022,
President Biden signed into the law the Inflation Reduction Act of 2022, or the IRA. Among other things, the IRA has multiple provisions
that may impact the prices of drug products that are both sold into the Medicare program and throughout the United States. Starting in
2023, a manufacturer of a drug or biological product covered by Medicare Parts B or D must pay a rebate to the federal government if the
drug product’s price increases faster than the rate of inflation. This calculation is made on a drug product by drug product basis
and the amount of the rebate owed to the federal government is directly dependent on the volume of a drug product that is paid for by
Medicare Parts B or D. Additionally, starting in payment year 2026, CMS will negotiate drug prices annually for a select number of single-source
Part D drugs without generic or biosimilar competition. CMS will also negotiate drug prices for a select number of Part B drugs starting
for payment year 2028. If a drug product is selected by CMS for negotiation, it is expected that the revenue generated from such drug
will decrease. CMS has begun to implement these new authorities and entered into the first set of agreements with pharmaceutical manufacturers
to conduct price negotiations in October 2023. However, the IRA’s impact on the pharmaceutical industry in the United States remains
uncertain, in part because multiple large pharmaceutical companies and other stakeholders (e.g., the U.S. Chamber of Commerce) have initiated
federal lawsuits against CMS arguing the program is unconstitutional for a variety of reasons, among other complaints. Those lawsuits
are currently ongoing.
At the state level in the
United States, legislatures have also increasingly passed legislation and implemented regulations designed to control pharmaceutical product
pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access, and marketing cost disclosure
and transparency measures, and in some cases, designed to encourage importation from other countries and bulk purchasing. For example,
in recent years, several states have formed PDABs. Much like the IRA’s drug price negotiation program, these PDABs have attempted
to implement UPLs on drugs sold in their respective states in both public and commercial health plans. In August 2023, Colorado’s
PDAB announced a list of five prescription drugs that would undergo an affordability review. The effects of these efforts remain uncertain
pending the outcomes of several federal lawsuits challenging state authority to regulate prescription drug payment limits. Furthermore,
in December 2020, the U.S. Supreme Court held unanimously that federal law does not preempt the states’ ability to regulate pharmaceutical
benefit managers and other members of the healthcare and pharmaceutical supply chain, an important decision that may lead to further and
more aggressive efforts by states in this area. The Federal Trade Commission in mid-2022 also launched sweeping investigations into the
practices of the PBM industry that could lead to additional federal and state legislative or regulatory proposals targeting such entities’
operations, pharmacy networks, or financial arrangements. Significant efforts to change the PBM industry as it currently exists in the
United States may affect the entire pharmaceutical supply chain and the business of other stakeholders, including biopharmaceutical developers
like us. In addition, regional healthcare authorities and individual hospitals are increasingly using bidding procedures to determine
what pharmaceutical products and which suppliers will be included in their prescription drug and other healthcare programs. These measures
could reduce the ultimate demand for our products, once approved, or put pressure on our product pricing.
We cannot predict the likelihood,
nature or extent of government regulation that may arise from future legislation or administrative or executive action, either in the
United States or abroad. We expect that additional federal, state, and foreign healthcare reform measures will be adopted in the future,
any of which could limit the amounts that federal and state governments will pay for healthcare products and services, which could result
in limited coverage and reimbursement and reduced demand for our products, once approved, or additional pricing pressures.
Competition
We
also face competition from numerous sources including commercial pharmaceutical and biotechnology enterprises, academic institutions,
government agencies, and private and public research institutions. Many of our competitors may have significantly greater research capabilities,
as well as financial, product development, manufacturing, and marketing resources.
There are no currently approved
products with an FAP indication although certain non-steroidal anti-inflammatory drugs may be prescribed off-label. Panbela Therapeutics,
Inc. and Recursion Pharmaceuticals, Inc. are developing products for FAP. Standard of care treatment
for NMIBC usually involves transurethral resection of the tumor followed by intravesical Bacillus Calmette-Guérin
therapy. A number of companies are developing therapeutics for NMIBC including Janssen Pharmaceuticals, CG Oncology, Inc. and Protara
Therapeutics, Inc.
There are relatively few products
available for the treatment of T1D. Exogenous insulin in its various forms is used to compensate for the lack of endogenous insulin common
to all T1D patients. More recently, teplizumab, the first disease-modifying treatment of T1D, has been approved for the delay of Stage
3 T1D. A number of companies are researching potentially disease-modifying approaches to T1D including stem cell therapies by Vertex Pharmaceuticals,
Inc. and CRISPR Therapeutics AG and SAB Biotherapeutics, Inc. is developing an immunotherapeutic. The JDRF T1D Fund has invested in approximately
30 private companies working on a variety of approaches to the treatment of T1D. There are over 400 studies listed as recruiting in T1D
based on the clinicaltrials.gov website.
There are a limited number
of products approved for the treatment of GBM with the current standard of care being surgical resection followed by radiation in combination
with temozolomide. There is no formalized standard of care for the treatment of recurrent GBM or DMG. There are a number of companies
researching potential therapeutic treatments of GBM including CNS Pharmaceuticals, Inc. and Plus Therapeutics, Inc. Chimerix Inc. is among
a number of companies developing a product for DMG. There are approximately 340 studies listed as recruiting in GBM and approximately
70 studies recruiting in DMG based on the clinicaltrials.gov website.
Manufacturing
We do not have our own manufacturing
facilities and we rely on GMP-certified contract manufacturers for our clinical trial material.
Environmental Matters and Seasonality
We may from time to time be
subject to various environmental, health and safety laws and regulations, including those governing air emissions, water and wastewater
discharges, noise emissions, the use, management and disposal of hazardous, radioactive and biological materials and wastes and the cleanup
of contaminated sites. We believe that our business, operations and facilities are being operated in compliance in all material respects
with applicable environmental and health and safety laws and regulations. Based on information currently available to us, we do not expect
environmental costs and contingencies to have a material adverse effect on it. The operation of our laboratory-scale manufacturing facility,
however, entails risks in these areas. Significant expenditures could be required in the future if these facilities are required to comply
with new or more stringent environmental or health and safety laws, regulations or requirements.
Our current business does
not generally reflect any significant degree of seasonality.
Legal Proceedings
From time to time, we may
be subject to various claims or legal proceedings that arise in the ordinary course of our business. Other than as disclosed in this annual
report, we currently are not a party to any legal proceedings, which, in the opinion of management, is likely to have or could reasonably
possibly have a material adverse effect on our business, financial condition or results of operations.
Property, Plant and Equipment
Our current headquarters is
located at 1 Caspian Point, Caspian Way, Cardiff, Wales, where we also have our laboratories and pilot scale manufacturing facility. We
entered into the lease for these premises in April 2021. The new premises comprise 754 square meters (approximately 8,118 square feet).
The lease expires in August 2026. We believe that this facility will be sufficient to meet our current needs.
Employees
The number of our employees
by geographic location and function as of the end of the period for the fiscal years ended December 31, 2023, 2022 and 2021 were as follows:
| | |
As of December 31, | |
| | |
2023 | | |
2022 | | |
2021 | |
| Business functional area: | |
| | | |
| | | |
| | |
| Research and development | |
| 16 | | |
| 22 | | |
| 15 | |
| General and administration | |
| 5 | | |
| 5 | | |
| 5 | |
| | |
| | | |
| | | |
| | |
| Total | |
| 21 | | |
| 27 | | |
| 20 | |
| | |
As of December 31, | |
| | |
2022 | | |
2021 | | |
2023 | |
| Geography: | |
| | |
| | |
| |
| United Kingdom | |
| 19 | | |
| 25 | | |
| 19 | |
| Germany | |
| 1 | | |
| 1 | | |
| 1 | |
| Republic of Ireland | |
| 1 | | |
| 1 | | |
| -- | |
| | |
| | | |
| | | |
| | |
| Total | |
| 21 | | |
| 27 | | |
| 20 | |
To our knowledge, none of
our employees are currently represented by labor unions or covered by collective bargaining agreements. We consider our relationship with
our employees to be good.
Historical Background and Corporate Structure
We were originally formed
as a limited liability company under the laws of England and Wales in 2000 under the name Midatech Ltd, which acquired its base nanoparticle
technology through an assignment of worldwide commercialization rights and joint ownership of patent rights from Consejo Superior de Investigaciones
Cientificas, or CSIC, in Madrid, Spain. Midatech Ltd was a research and development focused biotech company which subsequently advanced
and developed this gold nanoparticle drug delivery platform technology to enhance the delivery of medicines for major therapeutic indications
where clinical therapeutic options are limited, with a particular focus on certain cancers, such as liver and brain cancer.
To better be able to continue
the commercial development of the research and development programs of Midatech Ltd, Midatech Pharma PLC was incorporated on September
12, 2014 under the laws of England and Wales, to be the public holding company of Midatech Ltd and Midatech Pharma (Wales) Limited under
registered number 09216368. On December 8, 2014, we completed our initial public offering of our Ordinary Shares in the United Kingdom.
On March 31, 2020 we announced
that, in the context of prevailing conditions in the capital markets, we did not expect to be able to raise capital to fund the continued
development of MTD201, including scale-up of MTD201 manufacturing at our Bilbao facilities. We determined to conduct a strategic review
of our operations, cease further investment in MTD201 and close our operations in Bilbao, Spain, including making all our employees in
Bilbao redundant.
On April 20, 2020, we announced
an update to the strategic review of operations including the appointment of Noble Capital Markets, Inc. to advise us on options for extracting
value from our technologies, including partnering our clinical stage assets, partnering existing and upcoming proof of concept formulations,
partnering or selling one or more of our technologies or selling the entire Company.
On January 26, 2021, we announced,
among other things, that the strategic review had completed and that we were now focused on executing our realigned strategy of deploying
our technologies to develop more early stage products and seeking licensing partners at proof of concept stage.
On
March 24, 2023, we held a general meeting where our shareholders approved, among other things, a change of our name to “Biodexa
Pharmaceuticals PLC” and the cancellation of admission of our Ordinary Shares from trading on AIM with effect from April 26, 2023.
Additionally, the names of Midatech Ltd and Midatech Pharma (Wales) Limited were subsequently changed to Biodexa Ltd and Biodexa Pharmaceuticals
(Wales) Limited, respectively.
Our principal executive office
and registered offices are located at 1 Caspian Point, Caspian Way Cardiff, United Kingdom CF10 4DQ, and our telephone number is +44 29
2048 0180. Our authorized representative in the United States is Donald J. Puglisi of Puglisi and Associates. Our agent for service in
the United States is Donald J. Puglisi of Puglisi and Associates, located at 850 Library Avenue, Suite 204, Newark, Delaware 19711. Our
Depositary Shares are traded on the NASDAQ Capital Market under the symbol “BDRX.”
We file reports and other
information with the SEC. The SEC maintains an Internet website that contains reports, proxy and information statements, and other information
regarding issuers, including us, that file electronically with the SEC. Our filings with the SEC are available to the public through the
SEC’s website at http://www.sec.gov. Our corporate website is located at www.biodexapharma.com. Information contained
on our website is not part of, or incorporated in, this prospectus.
We have three wholly owned
subsidiaries, as well as several indirectly owned subsidiaries and joint ventures. The following table sets forth a description of the
Group.
| Subsidiaries |
Country of Incorporation |
Voting Interest |
| Subsidiaries of Biodexa Pharmaceuticals PLC |
|
|
| Biodexa Pharmaceuticals (Wales) Limited |
England and Wales |
100% |
| Biodexa Ltd |
England and Wales |
100% |
| Haaland UK Limited (1) |
England and Wales |
100% |
| Subsidiaries of Biodexa Ltd |
|
|
| Pharmida AG (1) |
Switzerland |
100% |
_______________
Capital Expenditures
Our capital expenditures amounted
to £Nil and £4,000 for the six months ended for the six months ended June 30, 2024 and 2023, and £0.03 million and £0.06
million for the years ended December 31, 2023 and 2022.
For the six months ended June
30, 2023, our principal capital expenditures related to laboratory equipment.
For the years ended December
31, 2023 and December 31, 2022, our principal capital expenditures largely related to investment in laboratory equipment.
MANAGEMENT
Directors and Senior Management
The following table sets forth
certain information about our current directors and senior management. The professional address of each of the directors and officers
is care of Biodexa Pharmaceuticals PLC, Caspian Point, 1 Caspian Way, Cardiff, CF10 4DQ, United Kingdom.
| Name (1) |
|
Age at
12/31/2024 |
|
Position/Title |
| Stephen Stamp |
|
63 |
|
Chief Executive Officer and Chief Financial Officer, Director |
| Stephen Parker (3)(4) |
|
66 |
|
Non-Executive Chairman of the Board of Directors |
| Simon Turton, Ph.D. (2)(3)(4) |
|
57 |
|
Senior Independent Non-Executive Director |
| Sijmen (Simon) de Vries, M.D. (2)(4) |
|
65 |
|
Non-Executive Director |
| Ann Merchant (2)(3) |
|
59 |
|
Non-Executive Director |
__________________________
| (1) | The term of the Board of Directors will expire immediately after the annual general meeting held in 2027
for Dr. de Vries, 2026 for Mr. Stamp, Dr. Parker and Ms. Merchant, and 2025 for Dr. Turton. |
| (2) | Remuneration Committee member |
| (3) | Audit Committee member |
| (4) | Nominations Committee member |
Stephen Stamp has served
as our Chief Executive Officer since March 31, 2020, and our Chief Financial Officer and a member of our Board of Directors since September
2019. Prior to joining the Company, Mr. Stamp served as Chief Executive Officer of Ergomed plc (AIM: ERGO) from December 2017 until January
2019 and Chief Financial Officer from January 2016 to July 2018. From March 2013 until July 2015, Mr. Stamp served as the Chief Financial
Officer of Assurex Health, Inc. Mr. Stamp served as Chief Financial Officer of EZCORP Inc. (NASDAQ: EZPW) and KV Pharmaceuticals Co. from
November 2010 to October 2012 and March 2010 to June 2010. Mr. Stamp has also previously served as Chief Operating Officer of Xanodyne
Pharmaceuticals, Inc., and Group Finance Director of Regus PLC (now IWG plc) (LON: IWG) and Shire plc (subsequently acquired by Takeda
Pharmaceuticals Company Limited). Mr. Stamp is a Chartered Accountant and qualified with KPMG LLP. Mr. Stamp has a Bachelor’s degree
in economics from the University of Manchester.
Stephen Parker has
served as our Non-Executive Chairman of the Board of Directors and a director since June 2022.Dr. Parker has a career in the healthcare
and pharma sector that spans over 30 years, including 10 years in advisory roles. Dr. Parker has served as Managing Director of sp2 Consulting
Limited since 2002, as well as an advisor to Opus Corporate Finance LLP since 2019. Dr. Parker has also served as Chairman of Sareum Holdings
plc (AIM: SAR) since May 2016 and Drishti Discoveries Limited since January 2021, as Senior Independent Director of MGC Pharmaceuticals
Limited (ASX, LSE:MXC) since March 2019, and as a director of Eternans Limited since July 2019 and sp2 Asset Management Limited since
September 2018. Previously, Dr. Parker served as a director of Albucasis Limited from September 2013 to September 2019, as Chairman of
Liverpool Chirochem Limited from July 2017 to July 2018, and as a director and Chairman of Silence Therapeutics plc (LSE: SLN) from November
2013 to April 2019. Dr. Parker also has corporate finance experience having been an investment banker focusing on pharma and biotechnology
with Barings Brothers Limited, SBC Warburg Dillon Read, and Apax Partners LLP, and previously served as a director at subsidiaries of
Celtic Pharma GP Limited and Chief Financial Officer of Oxford GlycoSciences. Dr. Parker received his D.Phil in Biochemistry from the
University of Oxford, MBA in Business Administration from City University, London, and B.Sc. in Chemical Sciences from the University
of East Anglia.
Simon Turton, Ph.D.
has served as a non-executive member of our Board of Directors since December 2014. Dr. Turton served as Chairman of Q Chip and OpsiRx
Pharmaceuticals from March 2014 until their acquisition by us in December 2014. Since January 2015, he has served as the Managing Director
of Gensmile Limited. In 2002, Dr. Turton joined Warburg Pincus’, most recently as head of healthcare investing activities in Europe,
until June 2011. Dr. Turton has previously served on the board of Archimedes Pharma, Eurand, ProStrakan Group plc and Tornier, Inc. Dr.
Turton has a Master’s of Business Administration from INSEAD and a Ph.D. in pharmacy from the University of London.
Sijmen de Vries, M.D.
has served as a non-executive member of our Board of Directors since October 2004 (including his service to our predecessor entity). Since
November 2008, Dr. de Vries has served as of the Chief Executive Officer of Pharming Group NV (Euronext: PHARM). Prior to that, Dr. de
Vries served as Chief Executive Officer of 4-Antibody and Morphochem AG. Prior to this he worked at Novartis Pharma, Novartis Ophthalmics
and at SmithKline Beecham Pharmaceuticals Plc, where he held senior business and commercial positions. Dr. de Vries holds an M.D. degree
from the University of Amsterdam and a Masters of Business Administration in General Management from Ashridge Management College (United
Kingdom).
Ann Merchant has served
as a non-executive member of our Board of Directors since December 2023. Ms. Merchant has served as Vice President for MorphoSys AG (NASDAQ:
MOR), a commercial stage biopharmaceutical company headquartered in Munich, Germany, since 2018, and as Head of Global Supply Chain and
External Operations since January 2019. From September 2011 to August 2018, Ms. Merchant served as the President for Schreiner Medipharm,
a business unit of the Schreimer Group Gmbh & Co. KG. Between 1994 and 2011, Ms. Merchant held various roles at Amgen Inc. (NASDAQ:
AMGN), including Vice President, Head of International Supply Chain and Site Head between 2007 and 2011. Ms. Merchant currently serves
on the board of directors of Alvotech S.A. (NASDAQ: ALVO), a biosimilar company. Ms. Merchant holds an MBA from the Henley Business
School and a Bachelor of Science in Languages from Georgetown University.
Compensation of Non-Executive Directors
Our non-executive directors
receive a fee for their services as a director, which is approved by our Board of Directors, giving due consideration to the time commitment
and responsibilities of their roles and of current market rates for comparable organizations and appointments. Non-executive directors
are reimbursed for travelling and other incidental expenses incurred on our business in accordance with our expenses policy.
The following table summarizes
the compensation paid to our non-employee directors during 2024.
| Name |
|
Fees Earned
or
Paid in Cash
(£)(1) |
|
|
Option
Awards
(£)(2) |
|
|
Total
(£) |
|
| Sijmen de Vries |
|
|
40,000 |
|
|
|
76,085 |
|
|
|
116,085 |
|
| Simon Turton |
|
|
40,000 |
|
|
|
76,085 |
|
|
|
116,085 |
|
| Stephen Parker |
|
|
82,000 |
|
|
|
152,170 |
|
|
|
192,170 |
|
| Ann Merchant |
|
|
40,000 |
|
|
|
76,085 |
|
|
|
116,085 |
|
______________
| (1) | Includes annual fees, committee chairpersonship fees and meeting fees. |
| (2) | The amounts shown in this column reflect the grant date fair value
of option awards granted for service during the applicable year and determined without regard to forfeitures. The assumptions used to
determine the grant date fair values of awards granted during the fiscal year ended December 31, 2024 will be disclosed in our Annual
Report on Form 20-F for the year ending December 31, 2024. |
The following table sets forth,
as of December 31, 2024, the aggregate number of option awards, which options are exercisable for Ordinary Shares (issued in the form
of Depositary Shares), held by those individuals who served as non-executive directors during 2024:
| Name |
|
Number of
Options |
|
|
Grant
Date |
|
Exercise Price
per Share
(£) |
|
|
Expiration
Date |
| Sijmen de Vries, M.D. (1) |
|
|
28,800,000 |
|
|
1/23/2024 |
|
£ |
0.004 |
|
|
1/23/2034 |
| Simon Turton, Ph.D. (1) |
|
|
28,800,000 |
|
|
1/23/2024 |
|
£ |
0.004 |
|
|
1/23/2034 |
| Ann Merchant (1) |
|
|
28,800,000 |
|
|
1/23/2024 |
|
£ |
0.004 |
|
|
1/23/2034 |
| Stephen Parker (1) |
|
|
57,600,000 |
|
|
1/23/2024 |
|
£ |
0.004 |
|
|
1/23/2034 |
___________
| (1) | The stock options vest in the following 25% of the options vest 12
months after the grant date, and the remaining options have subsequently vested, or will vest, in 12 equal quarterly tranches over a subsequent
three-year period. |
All stock options were granted
with an exercise price at or above market value on the date of grant.
Deed of Indemnity
Under a deed poll declared
by the Company on August 5, 2015, or a Deed of Indemnity, the Board of Directors and our Company Secretary are indemnified against costs
and liabilities incurred in connection with their office, other than any liability owed by such person to the Company itself (or any of
its associated entities) and other than indemnification for liabilities in certain circumstances, which are prohibited by virtue of the
Companies Act. The Deed of Indemnity provides that a director may also be lent sums to finance any relevant defense costs, provided that,
in the event such proceedings involve criminal or civil matters in which the person is convicted or has a judgment made against him or
her, then such loan must be repaid.
Letters of Appointment
Each non-executive director
(other than Dr. Parker) has been appointed to serve on our Board of Directors pursuant to a letter of appointment. The initial term of
appointment for each director is three years, unless terminated earlier by either party upon one month’s prior notice or in accordance
with the terms of the letters of appointment. The appointment is subject to our articles of association, and is subject to confirmation
at any annual general meeting of the Company.
Each non-executive director
(other than Dr. Parker) was paid an annual fee of £40,000 in 2024, which covers all duties, including committee service or service
on the board of a Biodexa subsidiary, with the exception of committee chairmanships and certain additional responsibilities, such as taking
on the role of senior independent director. This amount may be changed from time to time. In addition, we reimburse each director for
reasonable and properly documented expenses incurred in performing their duties. As noted above, we also grant each director a deed of
indemnity against certain liabilities that may be incurred as a result of their service, to the extent permitted by the Companies Act.
In addition, without our prior
written consent, for a period of six months following a director’s termination from service, such director will not, whether as
a principal or agent and whether alone or jointly with, or as a director, manager, partner, shareholder, employee consultant of, any other
person, carry on or be engaged, concerned or interested in any business which is similar to or which is (or intends to be) in competition
with any business being carried on by Biodexa or any subsidiary, as applicable.
Dr. Parker Letter of Appointment
Pursuant to a term of appointment
dated June 20, 2022, or the Appointment Agreement, Dr. Parker was appointed Non-Executive Chairman of the Board of Directors, effective
as of the date thereof. The initial term of appointment for Dr. Parker expired on June 19, 2023 and was subsequently renewed for one-year.
In addition, his appointment may be terminated:
| • | by either party giving at least three months prior written notice; |
| • | by the Board of Directors reasonably determining that Dr. Parker’s acceptance of any other employment,
engagement, appointment, interest or involvement with any business or person competes or conflicts with his appointment and would result
in a serious conflict of interest or Dr. Parker reasonably determines such interest would result in a serious conflict of interest, and
Dr. Parker accepts such employment, engagement, appointment, interest or involvement; |
| • | in accordance with our articles of association or applicable law; or |
| • | he is not re-elected to the Board of Directors. |
Pursuant to the terms of the
Appointment Agreement, Dr. Parker is paid an annual fee of £82,000, plus an additional fee of £1,750 for every day in excess
of 16 days worked.
We also agreed to reimburse
Dr. Parker for reasonable and documented expenses accrued in the course of performing his duties and provide him with up to £7,500
in professional advice in connection with performing his duties. The Appointment Agreement includes provisions related to the non-disclosure
of information and assignment of inventions. Among other things, these provisions obligate Dr. Parker from disclosing any of our proprietary
and confidential information received during the course of employment and to assign to us any inventions conceived or developed during
the course of their employment.
In the event we terminate
the agreement with Dr. Parker at any time in accordance with the provisions of the articles of association or applicable laws, Dr. Parker
will have no right to damages or compensation if he:
| • | is found guilty of any misconduct, gross negligence or dishonesty or acts in a manner which is materially
adverse to our interests; |
| • | commits any serious or repeated breach or non-observance of his obligations to the Company; |
| • | becomes bankrupt, has an interim order made against him under the United Kingdom Insolvency Act 1986 or
makes any composition or enters into any deed of arrangement with his creditors or the equivalent of any of these under any other jurisdictions; |
| • | becomes of unsound mind, becomes a patient under any statute relating to mental health or is unable, due
to any accident, illness or injury, to undertake his duties for the Company for a period of more than six consecutive months; |
| • | is convicted of a criminal offense (other than a motoring offense for which a non-custodial penalty is
imposed); |
| • | is disqualified by law or an order of a court of competent jurisdiction from holding office; or |
| • | has failed to submit his resignation as Non-Executive Chairman and as a director of the Company when required
to so pursuant to the terms of the Appointment Agreement. |
In the event we terminate the agreement at any
time with immediate effect (other than pursuant to the preceding paragraph), we will pay to Dr. Parker all fees which are due to him for
the following 12 months.
Dr. Parker may resign from
his positions at any time if the Company (i) is guilty of any gross negligence which affects him or any dishonesty towards or concerning
him or (ii) becomes insolvent, makes any composition or enters into any deed of arrangement with its creditors or the equivalent. If Dr.
Parker resigns due to these reasons, we will pay to Dr. Parker all fees which are due to him for the following 12 months. Further, in
the event that Dr. Parker is unable, due to an accident, illness or injury, to undertake his duties for the Company in accordance with
the terms of the Appointment Agreement for a period of more than six consecutive months, he may resign at any time without any
rights to damages or compensation. Dr. Parker is also required to resign in connection with the Board of Directors determination that
his acceptance of any other employment, engagement, appointment, interest or involvement with any business or person competes or conflicts
with his appointment and would result in a serious conflict of interest or Dr. Parker reasonably determines such interest would result
in a serious conflict of interest, and Dr. Parker accepts such employment, engagement, appointment, interest or involvement, without any
rights to damages or compensation. If Dr. Parker resigns for any other reason, he must provide 12 months written notice.
Compensation of Senior Management
The following table summarizes
the compensation earned by our senior management during 2024 (including for any service on any our subsidiaries), including one former
executive officer.
| Name |
|
Salary
(£) |
|
|
Bonus
(£)(1) |
|
|
Option
Awards (£)(2) |
|
|
All Other
Compensation
(3)(£) |
|
|
Total
(£) |
|
| Stephen Stamp |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Chief Executive Officer & Chief Financial Officer |
|
|
249,991 |
|
|
|
- |
|
|
|
157,808 |
|
|
|
3,025 |
|
|
|
410,824 |
|
| Dmitry Zamoryakhin, M.D. (4)(5) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Former Chief Scientific Officer |
|
|
245,240 |
|
|
|
- |
|
|
|
52,602 |
|
|
|
11,597 |
|
|
|
309,440 |
|
| All senior management as a group (2 persons) |
|
|
495,231 |
|
|
|
- |
|
|
|
210,410 |
|
|
|
14,622 |
|
|
|
720,264 |
|
_____________
| (1) | Mr. Stamp has a bonus target of 33 of his annual base salary, which bonus is payable upon attainment of
objectives as determined in the subjective judgment of the Board of Directors or a committee thereof, taking into account various factors
without any preassigned weighting. The bonus for Mr. Stamp has yet to be determined for fiscal 2024. Dr. Zamoryakhin did not earn a bonus
in fiscal 2024. |
| (2) | The amounts shown in this column reflect the grant date fair value
of option awards granted for service during the applicable year and determined without regard to forfeitures. The assumptions used to
determine the grant date fair values of awards granted during the fiscal year ended December 31, 2024 will be disclosed in our Annual
Report on Form 20-F for the year ending December 31, 2024. |
| (3) | The amounts reflect the value of benefits payable for medical benefits (£3,025 and £516 for
Mr. Stamp and Dr. Zamoryakhin, respectively) and £11,081 pursuant to a pension plan for Dr. Zamoryakhin. |
| (4) | Dr Zamoryakhin received an ex-gratia payment of £30,000 for loss of office which is included within
salary. |
| (5) | Dr. Zamoryakhin departed the Company on July 4, 2024. |
The following table sets forth,
as of December 31, 2024, the aggregate number of option awards, which options are exercisable for Ordinary Shares (issued in the form
of Depositary Shares), held by our senior management.
| Name |
|
Number of
Options |
|
|
Grant Date |
|
|
Exercise
Price
per
Share
(£) |
|
|
Expiration
Date |
|
| Stephen Stamp |
|
|
1,500 |
(1) |
|
|
9/9/2019 |
|
|
|
21.00 |
|
|
|
9/9/2029 |
|
| |
|
|
15,000 |
(2) |
|
|
6/17/2020 |
|
|
|
4.04 |
|
|
|
1/17/2030 |
|
| |
|
|
25,000 |
(2) |
|
|
7/15/2021 |
|
|
|
5.55 |
|
|
|
7/14/2031 |
|
| |
|
|
85,922,000 |
(2) |
|
|
7/10/2024 |
|
|
|
0.003 |
|
|
|
7/10/2034 |
|
| All senior management as a group (2 persons) |
|
|
85,958,813 |
(4) |
|
|
(5) |
|
|
|
(6) |
|
|
|
(7) |
|
_________
| (1) | Of these options, 375 previously vested on September 9, 2020, and the remaining 1,125 options have subsequently
vested, or will vest, in 12 equal quarterly tranches, over a subsequent three-year period. |
| (2) | Of these options, 25% of the options vest 12 months after the grant date, and the remaining options have
subsequently vested, or will vest, in 12 equal quarterly tranches over a subsequent three-year period. |
| (3) | All of Dr. Zamoryakhin have expired. |
| (4) | 36,813 stock options are fully vested. |
| (5) | The grant dates range from September 9, 2019 to July 10, 2024. |
| (6) | The exercise price of the options range from £0.003 to £5.55. |
| (7) | The stock options expire between September 9, 2029 and July 10, 2034. |
Agreements with Senior Management
Stephen Stamp. On September
9, 2019, we entered into a service agreement, or the Service Agreement, with Mr. Stamp. The Service Agreement provides for a base salary,
incentive compensation benefits, and, in certain circumstances, severance benefits. The Service Agreement may be terminated, subject to
certain exceptions, upon six months’ prior notice.
The Service Agreement provides
for an initial base salary of £160,000. Mr. Stamp’s base salary is subject to increase each April 1 by the percentage increase,
if any, in the “All Items Index of Retail Prices” published by the United Kingdom Office for National Statistics over the
previous year. The base salary of Mr. Stamp is to be reviewed annually to consider any increase in salary. Mr. Stamp’s base salary
was increased to £230,000 effective as of April 1, 2022.
The Service Agreements also
include a bonus target for Mr. Stamp of 33% of his annual base salary, which bonus is payable upon attainment of objectives as determined
in the subjective judgment of the Board of Directors or a committee thereof, taking into account various factors without any preassigned
weighting. In addition to base salary and bonus, the Service Agreement provides for additional benefits, such as a 10% pension contribution,
life insurance, medical insurance, vacation benefits and any other additional benefits as determined by the Board of Directors from time
to time. In August 2021, we agreed to commute his Company pension contribution of 10% to salary.
Pursuant to the terms of the
Service Agreement, Mr. Stamp has also agreed that, for a period of six months following his termination, he will not directly or indirectly
compete with the Company. The Service Agreement includes provisions related to the non-disclosure of information and assignment of inventions.
Among other things, these provisions prohibit Mr. Stamp from disclosing any of our proprietary and confidential information received during
the course of employment and obligates him to assign to the Company any inventions conceived or developed during the course of his employment.
The Service Agreement also includes customary confidentiality, non-solicitation, non-poaching and non-disparagement provisions.
The Service Agreement also
provides Mr. Stamp with certain payments and/or benefits upon certain terminations of employment. If he is terminated due to his inability
to perform his duties due to illness or other incapacity for a continuous period of three months, or an aggregate period exceeding 100
working days in any period of 12-months, we may, notwithstanding any other provision of the Service Agreement, terminate Mr. Stamp’s
employment upon six months’ written notice. During that period, Mr. Stamp will not be entitled to receive his salary or any bonus
payment, but will be entitled to any benefits owed under the Service Agreement. Further, notwithstanding any notice requirements for termination
set forth in the Service Agreements, we may, at any time and in our absolute discretion, terminate the Service Agreement and provide Mr.
Stamp with a payment in lieu of any required notice. The payment will comprise of his base salary, but will not include any bonus or other
benefits, and shall be subject to any tax or insurance deductions. Notwithstanding the foregoing, we may terminate the Service Agreement
without notice or payment in lieu thereof if Mr. Stamp:
| • | is guilty of serious misconduct or any other misconduct which affects, or is likely to affect, prejudicially
our interests; |
| • | fails or neglects to efficiently and diligently discharge his duties or commits any serious or repeated
breach or non-observance of any of the provisions of the Service Agreement or any share dealing code we have adopted; |
| • | has an interim receiving order made against him, becomes bankrupt or makes any composition or enters into
any deed of arrangement with his creditors; |
| • | is charged with an arrestable criminal offense (other than a road traffic offense in the United Kingdom
or elsewhere for which a fine or non-custodial penalty is imposed); |
| • | is disqualified from holding office in any company by reason of an order of a court of competent jurisdiction; |
| • | becomes of unsound mind or becomes a patient under any statute relating to mental health; |
| • | is convicted of an offense under the United Kingdom’s Criminal Justice Act 1993 in relation to insider
dealings or under any other present or future statutory enactment or regulations relating to insider dealings; |
| • | is in breach of the Model Code on directors’ dealings in listed securities, including securities
trading on AIM, published by the London Stock Exchange (the Model Code has subsequently been replaced by provisions under the MAR, however
the employment agreements have not been updated to reflect this); or |
| • | commits any other act warranting summary termination at common law including, but not limited to, any
act justifying dismissal without notice in the terms of our generally applicable disciplinary rules. |
Dmitry Zamoryakhin. We
previously entered into a contract of employment, or the Contract of Employment, with Dr. Zamoryakhin. The Contract of Employment
was effective as of July 12, 2021 and provided for Dr. Zamoryakhin’s base salary, incentive compensation benefits, and compensation
surrounding a termination of his employment. The Contract of Employment was terminable by either Dr. Zamoryakhin or the Company
with six months’ prior notice.
The Contract of Employment
provided for an initial base salary of £205,000, which was subject to adjustment, and also included an initial bonus target of 30%
of Dr. Zamoryakhin’s annual base salary. Dr. Zamoryakhin’s base salary was increased to £215,000 effective
as of April 1, 2022. In addition to base salary and bonus, the Contract of Employment provided for additional benefits, such as a 10%
pension contribution, medical insurance, vacation benefits and any other additional benefits as determined by the Board of Directors from
time to time.
Dr. Zamoryakhin also agreed
that, for a period of six months following his termination (as reduced by any “garden leave” period), he would not compete
with the Company, directly or indirectly, or solicit any customer, prospective customer or key employee. The Contract of Employment
included provisions related to confidentiality and the non-disclosure of information and assignment of inventions. Among other
things, these provisions prohibit Dr. Zamoryakhin from disclosing any of our proprietary and confidential information received during
the course of employment and require Dr. Zamoryakhin to assign to us any inventions conceived or developed during the course of his employment.
The Contract of Employment
provided that we will pay Dr. Zamoryakhin his normal salary during any notice period prior to termination. We are also permitted
to terminate Dr. Zamoryakhin’s employment effective immediately, without notice or payment, if Dr. Zamoryakhin is found guilty of
any fundamental or repudiatory breach of contract or any breach of the disciplinary rules applicable to Dr. Zamoryakhin.
On July 4, 2024, Dr. Zamoryakhin
departed the Company. In connection with his departure, Dr. Zamoryakhin and the Company entered into a settlement agreement, pursuant
to which, among other things, Dr. Zamoryakhin received (i) £107,000, in lieu of his notice entitlement period, and (ii) a termination
payment of £30,000. Any option awards that had not vested as of the date of departure were forfeited.
Board of Directors
Our Board of Directors is
currently comprised of five directors, one of whom is an executive director and four of whom are non-executive directors, reflecting a
blend of different experience and backgrounds. The roles of Chairman of the Board of Directors (which is a non-executive position) and
Chief Executive Officer have been split and there is a clear division of responsibility between the two positions. With a view towards
maintaining the independence of the Board of Directors, no remuneration is paid to either the Chairman or non-executive directors in the
form of shares.
Effective as of September
28, 2018, all AIM quoted companies were required to formally apply a recognized corporate governance code. While we are no longer traded
on AIM, we have chosen to adopt the principles of the Quoted Companies Alliance Corporate Governance Code for Small and Mid-Sized Quoted
Companies, or the QCA Code. The QCA Code identifies ten principles to be followed in order for companies to deliver growth in long term
shareholder value, encompassing and efficient, effective and dynamic management framework, accompanied by good communication, to promote
confidence and trust.
The Board of Directors is responsible for inter
alia, approving interim and annual financial statements, formulating and monitoring our strategy, approving financial plans and reviewing
performance, as well as complying with legal, regulatory and corporate governance matters. There is a schedule of matters reserved for
the Board of Directors.
The Board of Directors meets
regularly to consider strategy, performance and the framework of internal controls. To enable the Board of Directors to discharge its
duties, all directors receive appropriate and timely information. Briefing papers are distributed to all directors in advance of board
meetings.
Board Committees
We have established audit,
nomination, and remuneration committees of the Board of Directors with formally delegated duties and responsibilities. From time to time,
separate committees may be set up by the Board of Directors to consider specific issues when the need arises.
Audit Committee
The Audit Committee consists
of three members: Dr. Turton (Chairman), Dr. Parker and Ms. Merchant. During 2023, Dr. de Vries served on the Audit Committee until the
appointment of Ms. Merchant on January 22, 2024. The Board of Directors has determined that Dr. Turton, Dr. Parker and Ms. Merchant are
independent under Rule 10A-3 of the Exchange Act and that Dr. Turton qualifies as an “audit committee financial expert” as
defined under in Item 16A of Form 20-F.
The Audit Committee of the
Board of Directors assists the Board of Directors in discharging its responsibilities with regard to financial reporting, external and
internal audits and controls, including reviewing and monitoring the integrity of the Company’s annual and interim financial statements,
advising on the appointment of external auditors, reviewing and monitoring the extent of the non-audit work undertaken by external auditors,
overseeing our relationship with our external auditors, reviewing the effectiveness of the external audit process and reviewing the effectiveness
of our internal control review function. The ultimate responsibility for reviewing and approving the annual report and accounts and the
half-yearly reports remains with the Board of Directors.
In addition, the Audit Committee
is responsible, within agreed terms of reference, for ensuring compliance with the rules and regulations promulgated by the SEC and the
rules of NASDAQ, and disclosure of information.
The Audit Committee meets
not less than twice a year and otherwise as required.
Nomination Committee
The Nomination Committee is
chaired by Dr. Parker and is currently comprised of Dr. Parker, Dr. de Vries and Dr. Turton. The Nomination Committee assists the Board
of Directors in discharging its responsibilities relating to the composition and make-up of the Board of Directors and any committees
of the Board of Directors. It is responsible for periodically reviewing the Board of Director’s structure and identifying potential
candidates to be appointed as directors or committee members as the need may arise. The Nomination Committee is responsible for evaluating
the balance of skills, knowledge and experience and the size, structure and composition of the Board of Directors and committees of the
Board of Directors, retirements and appointments of additional and replacement directors and committee members and will make appropriate
recommendations to the Board of Directors on such matters.
The Nomination Committee meets not less than once
a year and otherwise as required.
Remuneration Committee
The Remuneration Committee
consists of three members: Dr. de Vries (Chairman), Dr. Turton and Ms. Merchant. During 2023, Dr. Parker served on the Remuneration Committee
until the appointment of Ms. Merchant on January 22, 2024. The Board of Directors has determined that Dr. de Vries and Dr. Turton and
Ms. Merchant are independent.
The Remuneration Committee
of the Board of Directors is responsible, within agreed terms of reference, for establishing a formal and transparent procedure for developing
policy on executive remuneration and setting the remuneration packages of individual directors. This includes agreeing with the Board
of Directors on the framework for remuneration of the executive directors, the company secretary and such other members of our executive
management as it is designated to consider. It is also responsible for determining the total individual remuneration packages of each
director including, where appropriate, bonuses, incentive payments and share options. No director may be involved in any decision as to
his/her own remuneration. The Remuneration Committee ensures compliance with the QCA Code in relation to remuneration wherever possible.
The Remuneration Committee meets not less than
twice a year and otherwise as required.
Service Contracts
Except as described herein,
we do not have service contracts with any member of our Board of Directors or our senior management.
Equity Benefit Plans
The Board of Directors has
established the Biodexa Pharmaceuticals PLC Enterprise Management Incentive and Unapproved Share Option Scheme, or Plan, to allow us to
grant options to purchase Ordinary Shares (in the form of Depositary Shares) to employees and directors of the Company or any of its subsidiaries,
or Plan Participants, for the purpose of attracting, rewarding and retaining such persons. The Plan was originally adopted in December
2014 and amended on April 11, 2024 to govern the grant of tax-advantaged enterprise management incentive stock options, or EMI Options,
and unapproved stock options, or Unapproved Options, by the Company.
Administration. The
overall responsibility for the operation and administration of the Plan is vested in the Board of Directors.
Eligibility. Unapproved
Options may be granted to any person who is an employee or director of the Company or any of its subsidiaries. However, in order to be
eligible to be granted EMI Options pursuant to the Plan, a person must be an employee or director of the Company or any of its subsidiaries
whose “committed time” amounts to at least 25 hours a week or, if less, 75% of his or her “working time,” as each
of those terms are defined under the His Majesty’s Revenue and Customs rules set out in Schedule 5 to the Income Tax (Earnings and
Pensions) Act 2003 of the United Kingdom, or Schedule 5. The Board of Directors may exercise its discretion in selecting the Plan Participants
to whom stock options will be granted under the Plan.
Grant of Options. Options may be granted
from time to time by the Board of Directors, other than when grants are not permitted under the applicable law or there are other restrictions
with regards to the Ordinary Shares. No payment will be made for the grant of a stock option.
Form of Options. EMI
Options granted under the Plan may be granted either with an exercise price greater than or equal to the market value of the Ordinary
Share at the date of grant, but not in any event at a price less than the nominal value of such Ordinary Shares subject to such EMI Options.
Unapproved Options granted under the Plan may be granted with an exercise price as determined by the Board of Directors but not in any
event at a price less than the nominal value of the Ordinary Shares subject to such Unapproved Option. The stock options may be stock
options to subscribe for new Ordinary Shares (in the form of Depositary Shares).
A Plan Participant will have
no stockholder rights until such time as he or she is able to exercise the stock option and acquire Ordinary Shares (in the form of Depositary
Shares).
Plan Limits. The Board
of Directors may from time to time specify the maximum number of Ordinary Shares in respect of which options may be granted pursuant to
the Plan.
EMI Options shall be granted
under, and comply with, Schedule 5. This confers tax benefits on EMI Options up to a certain threshold. That threshold is currently such
that when an employee has received and holds EMI Options with a value at grant of £250,000 or more, he or she may not have any further
granted EMI Options for three years. In the event that this threshold is exceeded or the Company ceases to satisfy the qualifying conditions,
unapproved options may instead be granted under the terms of the Plan. The total value of shares subject to unexercised EMI Options at
any time may not exceed £3.0 million. All EMI Options must be exercised within 10 years from the grant date as set out in the rules
of the 2014 Plan, or as set forth in the applicable option agreement.
Vesting of Options.
In the normal course, stock options will become eligible for vesting subject to the satisfaction of time and financial performance targets.
If a Plan Participant leaves
the employment of the Company or its subsidiaries for any reason, his or her stock option will generally lapse unless the Board of Directors
exercises its discretion to allow the exercise of the stock option.
Performance Targets.
Stock options granted under the Plan may be subject to appropriate performance targets determined by the Board of Directors, with stock
options vesting in part on the attainment of each performance target.
Rights Attaching to Ordinary
Shares. Ordinary Shares issued in connection with the exercise of stock options will rank equally with all other Ordinary Shares then
in issue (save as regards any rights attaching to Ordinary Shares by reference to a record date prior to entry of the shares on the register
of stockholders).
Adjustments. If there
is any adjustment of our issued share capital, the Ordinary Shares (in the form of Depositary Shares) subject to a stock option will be
subject to appropriate adjustment. The Board of Directors may adjust stock options in such manner as it determines to be appropriate.
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
The following are our related
party transactions as of December 31, 2023.
Agreement with Chesyl Pharma Limited
In April 2014, Biodexa Ltd
(formerly known as Midatech Ltd) entered into a consultancy agreement, or the Consultancy Agreement, with Chesyl Pharma Limited, or Chesyl.
Chesyl is wholly owned by Mr. Rolf Stahel, our former non-executive Chairman of the Board and director. The term of the Consultancy Agreement
commenced on March 1, 2014, with an initial term of 12 months and continuing thereafter until terminated in accordance with its terms.
Chesyl was engaged to provide management consultancy services, including support and assistance to the board of directors of Biodexa Ltd
in relation to operational issues and the provision of advice in relation to corporate strategy, corporate activities, fund raising and
mergers and acquisition opportunities, collectively the Services.
Pursuant to the terms of the
Consultancy Agreement, Mr. Stahel (or a similarly qualified substitute party, approved by the Biodexa Ltd) was obliged to procure the
Services at such times and at such locations as may be reasonably necessary for 10 full working days per year. Biodexa Ltd agreed to pay
Chesyl £40,000 per annum for Mr. Stahel’s services (reduced from £50,000 with effect from October 1, 2017), and if engaged
for any additional days, a rate of £2,000 would be paid per full working day. For the fiscal year ended December 31, 2022, Biodexa
Ltd paid Chesyl £13,333.
The Consultancy Agreement
was terminated in connection with Mr. Stahel’s resignation from our Board of Directors on June 20, 2022.
Agreements with the CMS Parties
CMS License Agreement
For information regarding
the CMS License Agreement, see “Business—Commercial Agreements, Strategic Partnerships and Collaborations—CMS License
Agreement.”
Relationship Agreement
On January 29, 2019, the Company,
Panmure Gordon (UK) Limited (our former nominated advisor), the CMS Stockholders and certain affiliates of the CMS Stockholders, entered
a Relationship Agreement, or the Relationship Agreement, in order to regulate our relationships with the CMS and its affiliated entities,
collectively the CMS Parties, and to limit their influence over our corporate actions and activities and the outcome of general matters
pertaining to the Company. The Relationship Agreement was effective from February 26, 2019. The Relationship Agreement was subsequently
amended on May 12, 2020 and April 15, 2022.
Pursuant to the terms of the
Relationship Agreement, the CMS Parties have agreed to (amongst other things):
| • | conduct all transactions with us on an arm’s length terms and on a normal commercial basis, including in accordance with the
related party rules set out in the AIM Rules and any other applicable laws, regulations and stock exchange rules, and only with the prior
approval of a majority of independent directors; |
| • | exercise their voting rights or other rights and powers so as to ensure that each member of their respective Groups is capable of
carrying on its business and making decisions independently of each of the CMS Parties (and any of their group companies and associates);
and |
| • | abstain from voting in respect of any resolution concerning any contract, arrangement or transaction with a related party of each
of the CMS Parties (or any of their associates). |
We further agreed to conduct
all transactions, agreements and relationships (whether contractual or otherwise) with the CMS Parties (and any of their group companies
and associates) on arm’s length terms and on a normal commercial basis and in accordance with the related party rules set out in
the AIM Rules.
The Relationship Agreement
provides that any respective dispute between the Company and the CMS Parties and/or any of their respective associates relating to any
existing or proposed transaction, arrangement or agreement between each of CMS Parties (or any of their associates) and the Company shall
be resolved by a decision of the majority of independent directors.
The obligations of the parties
under the Relationship Agreement shall automatically terminate upon:
| • | the CMS Parties (or any of their associates) ceasing to beneficially hold 10%, in aggregate, of our issued Ordinary Shares; or |
| • | the Ordinary Shares ceasing to be admitted to AIM. |
In connection with the closing
of a private placement on February 15, 2023, the CMS Parties beneficially owned less than 10%, in aggregate, of our issued Ordinary Shares,
and accordingly, the Relationship Agreement terminated in accordance with its terms.
Deed of Indemnity
We have entered into a Deed
of Indemnity for the benefit of our Board of Directors and Company Secretary. For more information, see “Management—Compensation
of Non-Executive Directors—Deed of Indemnity.”
Agreements with Directors and Senior Management
We have previously entered
into certain agreements with directors and our senior management related to their service on our Board of Directors or employment with
the Company. For more information, see “Management.”
PRINCIPAL SHAREHOLDERS
The following table sets forth information, to
our knowledge, as of December 31, 2024, regarding the beneficial ownership of Ordinary Shares, including:
| · | each person that is known by us to be a beneficial owner of 5% or more of Ordinary Shares (based on information
in our share register and information provided by such persons); |
| · | each member of our Board of Directors; |
| · | each member of our senior management; and |
| · | all members of our Board of Directors and our senior management, taken as a group. |
Beneficial ownership of shares
is determined under rules of the SEC and generally includes any shares over which a person exercises sole or shared voting or investment
power. Except as noted by footnote, and subject to community property laws where applicable, we believe, based upon the information provided
to us, that the persons and entities named in the table below have sole voting and investment power with respect to all Ordinary Shares
shown as beneficially owned by them. The percentage of beneficial ownership is based upon 6,685,918,922 Ordinary Shares outstanding as
of December 31, 2024. Ordinary Shares subject to options or warrants currently exercisable or exercisable within 60 days of December 31,
2024 are deemed to be outstanding and beneficially owned by the person holding the options for the purposes of computing the percentage
of beneficial ownership of that person and any group of which that person is a member, but are not deemed outstanding for the purpose
of computing the percentage of beneficial ownership for any other person. Unless otherwise indicated, the address for each holder listed
below is Biodexa Pharmaceuticals PLC, Caspian Point, 1 Caspian Way, Cardiff, CF10 4DQ, United Kingdom. All holders of Ordinary Shares,
including those shareholders listed below, have the same voting rights with respect to such shares.
| Name of Beneficial Owner | |
Amount and Nature
Of Ownership | | |
Percent
of Class (%) | |
| Major Shareholders | |
| | | |
| | |
| Entities Affiliated with Bigger Funds (1)** | |
| 742,054,550 | | |
| 9.99 | |
| Brio Capital Master Fund Ltd. (2)** | |
| 742,054,550 | | |
| 9.99 | |
| Entities Affiliated with Cavalry Funds (3)** | |
| 742,054,550 | | |
| 9.99 | |
| Directors and Senior Management: | |
| | | |
| | |
| Ann Merchant (4) | |
| 7,200,000 | | |
| * | |
| Stephen Parker (5) | |
| 14,400,000 | | |
| * | |
| Stephen Stamp (6) | |
| 21,518,875 | | |
| * | |
| Simon Turton, Ph.D. (7) | |
| 7,202,765 | | |
| * | |
| Sijmen de Vries, M.D. (8) | |
| 7,200,000 | | |
| * | |
| Directors and senior management as a group (5 persons) (9) | |
| 57,521,640 | | |
| * | |
__________________
| * | Less than one percent of the outstanding Ordinary Shares. |
| ** | Excludes certain securities subject to a beneficial ownership blocker. See notes (1) to (3) below. |
| (1) | Based primarily on the Schedule 13G filed by Bigger Capital Fund, LP, Bigger Capital Fund GP, LLC, District
2 Capital Fund LP, District 2 Capital LP, District 2 GP LLC, District 2 Holdings LLC and Michael Bigger with the SEC on November 12, 2024,
and our information and belief. Consists of (i) warrants to purchase an aggregate of 843,460,000 Ordinary Shares (in the form of Depositary
Shares) beneficially owned by Bigger Capital Fund, LP and (ii) (x) warrants to purchase an aggregate of 878,570,000 Ordinary Shares (in
the form of Depositary Shares) and (y) 40,320,000 Ordinary Shares (in the form of Depositary Shares) beneficially owned by beneficially
owned by District 2 Capital Fund LP. Bigger Capital Fund GP, LLC is the general partner of, and may be deemed to beneficially own the
securities owned by, Bigger Capital Fund, LP. Each of (i) District 2 Capital LP, as the investment manager of District 2 Capital Fund
LP, (ii) District 2 GP LLC, as the general partner of District 2 Capital Fund LP, and (iii) District 2 Holdings LLC, as the managing member
of District 2 GP LLC, may be deemed to beneficially own securities owned by District 2 Capital Fund LP. Mr. Bigger is the managing member
of Bigger Capital Fund GP, LLC and is the managing member of District 2 Holdings LLC and may be deemed to beneficially own the securities
held by Bigger Capital Fund, LP and District 2 Capital Fund LP. The percentage in this table reflects that the reporting persons may not
exercise the warrants to the extent such exercise would cause the reporting persons to beneficially own a number of Ordinary Shares that
would exceed 9.99% of our then outstanding share capital following such exercise. The principal business address of the reporting person
is 11700 West Charleston Blvd, #170-659, Las Vegas, NV 89135. |
| (2) | Based upon our information and belief. Consists of warrants to purchase an aggregate of 1,160,720,000
Ordinary Shares (in the form of Depositary Shares). Brio Capital Management LLC, is the investment manager of Brio Capital
Master Fund Ltd. and has the voting and investment discretion over securities held by Brio Capital Master Fund Ltd. Shaye Hirsch,
in his capacity as Managing Member of Brio Capital Management LLC, makes voting and investment decisions on behalf of Brio Capital
Management LLC in its capacity as the investment manager of Brio Capital Master Fund Ltd. The percentage in this table reflects
that the reporting persons may not exercise the warrants to the extent such exercise would cause the reporting persons to beneficially
own a number of Ordinary Shares that would exceed 9.99% of our then outstanding share capital following such exercise. The principal business
address of Brio Capital Management LLC is 100 Merrick Rd., Suite 401W, Rockville Centre, NY 11570. |
| (3) | Based primarily on the Schedule 13G/A filed by Cavalry Fund
I LP on September 30, 2024, and our information and belief. Consists of (i) warrants to purchase an aggregate of 1,579,290,000 Ordinary
Shares (in the form of Depositary Shares) beneficially owned by Cavalry Investment Fund I, LP and (ii) warrants to purchase an aggregate
of 90,560,000 Ordinary Shares (in the form of Depositary Shares) beneficially owned by Cavalry Investment Fund LP. Cavalry Fund I
Management LLC, the investment manager of Cavalry Fund I LP and Cavalry Investment Fund LP, has voting and investment power
over these securities. Thomas Walsh is the managing member of Cavalry Fund I Management LLC, which is the general partner of Cavalry Fund
I LP and Cavalry Investment Fund LP. Thomas Walsh disclaims beneficial ownership over these securities. The percentage in this
table reflects that the reporting persons may not exercise the warrants to the extent such exercise would cause the reporting persons
to beneficially own a number of Ordinary Shares that would exceed 9.99% of our then outstanding share capital following such exercise.
The principal business address of the reporting person is 82 E. Allendale Rd., Ste 5B, Saddle River,
NJ 07458. |
| (4) | Shares owed by Ms. Merchant are Ordinary Shares subject to outstanding stock options which are exercisable
at December 31, 2024 or will become exercisable within 60 days after such date. |
| (5) | Shares owed by Dr. Parker are Ordinary Shares subject to outstanding stock options which are exercisable
at December 31, 2024 or will become exercisable within 60 days after such date. |
| (6) | Shares owned by Mr. Stamp are Ordinary Shares subject to outstanding stock options which are exercisable
at December 31, 2024 or will become exercisable within 60 days after such date. |
| (7) | Shares owned by Dr. Turton include 7,200,000 Ordinary Shares subject to outstanding stock options which
are exercisable at December 31, 2024 or will become exercisable within 60 days after such date. |
| (8) | Shares owed by Dr. de Vries are Ordinary Shares subject to outstanding stock options which are exercisable
at December 31, 2024 or will become exercisable within 60 days after such date. |
| (9) | Shares owed by all directors and senior management as a group include 57,518,875 Ordinary Shares subject
to outstanding stock options, which are exercisable at December 31, 2024 or will become exercisable within 60 days after such date. |
As of December 31, 2024, approximately
0.01% of our outstanding Ordinary Shares was held by registered shareholders with addresses in the United Kingdom (excluding shares held
by the custodian under our depositary agreement with JPMorgan Chase Bank, N.A.), and we had 189 holders of record in the United Kingdom.
As of December 31, 2024, JPMorgan Chase Bank, N.A., as depositary for the Depositary Shares, held 6,392,362,427 Ordinary Shares, representing
95.6% of the issued share capital held at that date. As of December 31, 2024, we had five registered holders with an address in the United
States. The number of holders of record or registered holders in the United States or United Kingdom is not representative of the number
of beneficial holders or of the residence of beneficial holders.
Based on our share register,
we believe that we are not directly or indirectly controlled by another corporation or government, or by any other natural or legal persons.
There are no arrangements that may result in a change of control. Our major shareholders do not have different voting rights than other
holders of our Ordinary Shares.
To our knowledge, other than
due to the expiration of unexercised warrants held by our shareholders or as otherwise disclosed elsewhere in this prospectus, there has
been no significant change in the percentage ownership of our Ordinary Shares held by the principal shareholders listed above in the last
three years.
DESCRIPTION OF SHARE CAPITAL
The following describes
our issued share capital, summarizes the material provisions of our Articles of Association and highlights certain differences in corporate
law in the United Kingdom and the United State. This description of our share capital and summary of our Articles of Association is not
complete, and is qualified by reference to our Articles of Association. You should read our Articles of Association, which are filed as
an exhibit to the registration statement of which this prospectus forms a part, for the provisions that are important to you.
The following describes our issued share capital,
summarizes the material provisions of our articles of association and highlights certain differences in corporate law in the United Kingdom
and the United States. Please note that this summary is not intended to be exhaustive. For further information please refer to the full
version of our articles of association, which is included as an exhibit to the registration statement of which this prospectus is part.
General
We are a public limited company
organized under the laws of England and Wales under registered number 09216368. Our registered office is 1 Caspian Point, Caspian Way,
Cardiff, CF10 4DQ, United Kingdom. The principal legislation under which we operate and our shares are issued is the United Kingdom Companies
Act of 2006, or the Companies Act.
Issued Share Capital
Our issued share capital as
of December 31, 2023 and June 30, 2024 was 1,189,577,722 and 6,685,918,922 Ordinary Shares, respectively. Each Ordinary Share has a nominal
value £0.00005 per share. Each issued Ordinary Share is fully paid. We currently have 1,000,001 A Deferred Shares, 4,063,321,420
B Deferred Shares and 126,547,389,518 C Deferred Shares, and no preference shares in our issued share capital.
There is no limit to the number
of Ordinary Shares or preference shares that we are authorized to issue, as the concept of authorized capital is no longer applicable
under the provisions of the Companies Act. There are no conversion rights, redemption provisions or sinking fund provisions relating to
any Ordinary Shares.
We are not permitted under
English law to hold our own Ordinary Shares unless they are repurchased by us and held in treasury. We do not currently hold any of our
own Ordinary Shares.
History of Share Capital
Since January 1, 2022, our
issued share capital has changed as provided below.
On March 22, 2022, we issued
one Ordinary Share upon the exercise of one warrant issued in February 2019 to a certain institutional investor at an exercise price of
£200 per share.
On
May 3, 2022, we issued 1,250 Ordinary Shares to be purchased under the SIP at £0.02 per share to the trust of the Share Incentive
Plan.
On
August 3, 2022, we issued warrants to purchase 16,666 Ordinary Shares to a certain institutional investor at an exercise price of £2.70
per share.
On
September 26, 2022, we effected a ratio change to the Depositary Shares, pursuant to which the ratio of Ordinary Shares to Depositary
Shares was changed such that one Depositary Share represented 25 Ordinary Shares. Our Ordinary Shares were not affected by this change
and no fractional Depositary Shares were issued.
On
December 16, 2022, we sold to an institutional investor 492,400 Ordinary Shares represented by 49 Depositary Shares in a registered direct
offering at $8,000.00 per Depositary Share, resulting in gross proceeds of approximately $0.4 million.
On February 15, 2023, we completed
the closing of a private placement, or the February Private Placement, pursuant to which we sold to certain institutional investors (1)
3,250,000 ordinary shares represented by 325 Depositary Shares at $4,640.00 per Depositary Share, (2) 12,931,020 ordinary shares
represented by 1,293 Depositary Shares, issuable upon the exercise of Series A warrants, or Series A Warrants, issued in the February
Private Placement at an exercise price of $5,360.00 per warrant, (3) 19,396,400 ordinary shares represented by 1,939 Depositary Shares,
issuable upon the exercise of Series B warrants, or Series B Warrants, issued in the February Private Placement at an exercise price
of $5,536.00 per warrant, and (4) 62,184,525 ordinary shares represented by 6,218 Depositary Shares, issuable upon the exercise of pre-funded
warrants issued in the February Private Placement at an exercise price of $0.80 per warrant, for aggregate gross proceeds of approximately
$6.0 million. We also issued unregistered warrants to the placement agent in the offering, or the February Placement Agent Warrants, to
purchase a total of 536,800 ordinary shares represented by 52 Depositary Shares to the placement agent at an exercise price of $10,000.00
per warrant for one warrant and an exercise price of $5,800.00 per warrant for 51 warrants, and Series A Warrants to purchase 625,000
ordinary shares represented by 62 Depositary Shares at an exercise price of $5,360.00 per warrant to an investor pursuant to
a waiver.
On March 27, 2023, following
shareholder approval, we effected a one-for-20 reverse split of our ordinary shares, and our ordinary shares began trading on AIM on a
split-adjusted basis as of such date. No fractional shares were issued in connection with the reverse stock split.
Concurrently with the reverse
split, and in an effort to bring the Depositary Shares price into compliance with NASDAQ’s minimum requirement for 500,000 listed
Depositary Shares, on March 27, 2023, we effected a ratio change in the number of our ordinary shares represented by the Depositary Shares
from 25 ordinary shares per Depositary Share to five ordinary shares per Depositary Share. No fractional Depositary Shares were issued.
Between March 27, 2023 and
December 31, 2024, we have issued 95,137,075 ordinary shares upon the exercise of pre-funded warrants, Series A Warrants and Series B
Warrants issued in the February Private Placement.
On May 26, 2023, we completed
the closing of the a registered direct offering with institutional investors of (1) 166,017,700 ordinary shares represented by 16,601
Depositary Shares, issuable upon the exercise of the Series C warrants, or Series C Warrants, at an exercise price of $400.00 per warrant,
(2) 110,675,600 ordinary shares represented by 11,059 Depositary Shares issuable upon the exercise of the Series D warrants, or Series
D Warrants, at an exercise price of $400.00 per warrant and, (3) 4,426,800 ordinary shares represented by 442 Depositary Shares issuable
upon the exercise of warrants issued to the placement agent in the offering at an exercise price of $375.00 per warrant.
On June 20, 2023, we issued
the Series C Warrants, Series D Warrants and warrants issued to the placement agent after receiving required shareholder approval of the
allotment of, and disapplication of pre-emption rights with respect to the ordinary shares to be issued under the warrants at our June
GM.
Between June 20, 2023, and
December 31, 2024, we have issued 166,017,700 ordinary shares upon the exercise of Series C Warrants issued in the May 2023 registered
direct offering.
On July 5, 2023, we effected
a ratio change to the Depositary Shares, pursuant to which the ratio of ordinary shares to Depositary Shares was changed such that one
Depositary Share represented 400 ordinary shares. Our ordinary shares were not affected by this change and no fractional Depositary Shares
were issued.
On November 22, 2023, we entered
into a series of agreements with (1) Adhera and certain of its secured noteholders, or the Secured Noteholders, and (1) Melior. On
December 21, 2023, in connection with the closing under the agreements, we issued (A) an aggregate of (i) 8,997 Depositary Shares to certain
of the Secured Noteholders and (ii) 90,999 pre-funded warrants to purchase Depositary Shares to certain of the Secured Noteholders, or
the December 2023 Private Placement Pre-Funded Warrants, and (B) 14,177 Depositary Shares to Melior. Between December 21, 2023 and December
31, 2024, we have issued 738,002,400 ordinary shares upon the exercise of December 2024 Private Placement Pre-Funded Warrants issued to
the Secured Noteholders.
On December 21, 2023, we completed
the closing of an underwritten public offering, pursuant to which we issued and sold (i) 43,555 Class A units, or Class A Units, at a
public offering price of $50.00 per Class A Unit, with each Class A Unit consisting of (a) one Depositary Share, (b) one Series E warrant,
or Series E Warrant, and (c) one Series F warrant, or Series F Warrant, and (ii) 76,447 Class B units, or Class B Units, at a public offering
price of $26.9999 per Class B Unit, with each Class B Unit consisting of (a) one pre-funded warrant, exercisable for one Depositary Share,
or the December 2023 Public Offering Pre-Funded Warrants, (b) one Series E Warrant, and (c) one Series F Warrant. The aggregate gross
proceeds to the Company were approximately $6.0 million. Additionally, we issued warrants to purchase 4,800 of our Depositary Shares in
connection with the offering to the underwriter, or the December 2023 Underwriter Warrants.
On February 26, 2024, in connection
with our Company’s obligations under a license agreement with Melior, we issued 14,177 Depositary Shares to Bukwang.
On April 29, 2024, in connection
with the closing of a Emtora License Agreement, we issued 15,136 Depositary Shares to Emtora.
On May 24, 2024, in connection
with the transactions contemplated by the Warrant Agreements, we issued an aggregate of 124,181 Depositary Shares to certain holders of
our Series E Warrants and Series F Warrants, upon the exercise of 62,906 Series E Warrants and 61,275 Series F Warrants, at an exercise
price of $37.50 per share. In addition, we issued to such holders an aggregate of 94,358 Series G warrants, or the Series G Warrants,
and 147,805 Series H warrants, or the Series H Warrants. The aggregate gross proceeds to the Company were approximately $6.05 million,
before deducting agent fees and expenses. Additionally, we issued warrants to purchase 6,456 of our Depositary Shares in connection with
the offering to Ladenburg, as agent, and certain designees of Ladenburg, or Warrant Agent Warrants.
Between December 21, 2023
and December 31, 2024, we have issued 2,477,566,800 Ordinary Shares upon the exercise of the pre-funded warrants, Series E Warrants and
Series F Warrants issued in the December 2023 underwritten public offering and private placement, including warrants exercised pursuant
to the terms of the Warrant Agreements (other than shares held in abeyance).
On
July 22, 2024, we completed the Offerings with the Investors, pursuant to which we sold in the July 2024 Registered Direct Offering an
aggregate of (i) 202,032 Depositary Shares and (ii) 11,157 July 2024 Pre-Funded Warrants, at a price per Depositary Share of $23.50, and
a price per July 2024 Pre-Funded Warrant of $23.4975, and in the concurrent July 2024 Private Placement, we issued and sold to the Investors
(x) Series J Warrants exercisable for 213,188 Depositary Shares, and (y) Series K Warrants to purchase an aggregate of 213,188 Depositary
Shares. The warrants are immediately exercisable at an exercise price of $25.00 per Depositary Share, subject to adjustments for certain
dilutive equity issuances. The aggregate gross proceeds to the Company were approximately $5.0 million. Additionally, we issued July 2024
Placement Agent Warrants to purchase 8,525 of our Depositary Shares in connection with the offering to Ladenburg and certain designees
of Ladenburg.
On October 4, 2024, we effected
a ratio change to the Depositary Shares, pursuant to which the ratio of Ordinary Shares to Depositary Shares was changed such that one
Depositary Share represented 10,000 Ordinary Shares. Our Ordinary Shares were not affected by this change and no fractional Depositary
Shares were issued.
Options
We have established the Plan
to
allow us to grant options to purchase Ordinary Shares (in the form of Depositary Shares) to employees and directors of the Company or
any of its subsidiaries for the purpose of attracting, rewarding and retaining such persons. The Plan was originally adopted in December
2014 and amended on April 11, 2024 to govern the grant of tax-advantaged enterprise management incentive stock options and unapproved
stock options by the Company. As of June 30, 2024, there were options to purchase 274,420,765 Ordinary Shares. The options lapse
after ten years from the date of the grant. As of June 30, 2024, the weighted average remaining life of the options was 9.6 years.
In connection with our acquisition
of DARA Biosciences, Inc. in December 2015, we assumed all of their outstanding options. As of June 30, 2024 there were outstanding options
to purchase 99 Ordinary Shares with a weighted average remaining life of 0.9 years.
Warrants
October 2019 and May 2020 Warrants
In
October 2019, we completed a private placement with certain institutional investors, or the October Private Placement, where we issued
warrants to certain investors, or the October Private Placement Warrants, and the placement agent, Wainwright, or the Wainwright October
Warrants. In May 2020, we completed a private placement with certain institutional investors, or the May Private Placement, where we issued
warrants to certain investors, or the May Private Placement Warrants, the placement agent, Wainwright, or the Wainwright May Warrants
and Armistice, or the May Armistice Warrants. The following is a brief summary of the October Private Placement Warrants, Wainwright October
Warrants, May Private Placement Warrants, Wainwright May Warrants and the May Armistice Warrants issued in connection with the October
Private Placement and May Private Placement, as applicable, and is subject in all respects to the provisions contained in the applicable
warrants, which are filed as exhibits to our Report on Form 6-K dated October 24, 2019, and for the May Private Placement Warrants, May
Armistice Warrants and Wainwright May Warrants, are filed as exhibits to our Report on Form 6-K dated May 20, 2020. On December 13, 2022,
the exercise price of the October Private Placement Warrants granted to Armistice and the May Private Placement Warrants was reduced to
$8,000.00. Unless otherwise stated, references to warrants in this section include the October Private Placement Warrants, May Private
Placement Warrants, Wainwright October Warrants and Wainwright May Warrants.
Exercisability.
The October Private Placement Warrants and Wainwright October Warrants became exercisable on December 23, 2019. The May Private Placement
Warrants, May Armistice Warrants and Wainwright May Warrants became exercisable upon issuance. The October Private Placement Warrants,
May Private Placement Warrants and May Armistice Warrants will expire five and one-half years from the initial exercise date, and the
Wainwright October Warrants and Wainwright May Warrants will expire on October 22, 2024 and May 18, 2025, respectively. The holder shall
deliver the aggregate exercise price for the Depositary Shares specified in the exercise notice within two trading days following the
date of exercise (subject to the ‘cashless exercise’ arrangements described below).
Cashless
Exercise. With respect to the October Private Placement Warrants and Wainwright October Warrants, if, more than six months after
the date of issuance of such warrants, there is no effective registration statement registering, or no current prospectus available for,
the resale of the Depositary Shares underlying such warrants, the holder may exercise the warrant, in whole or in part, on a cashless
basis. With respect to the May Private Placement Warrants and Wainwright May Warrants, if there is no effective registration statement
registering, or no current prospectus available for, the resale of the Depositary Shares underlying such warrants, the holder may exercise
the warrant, in whole or in part, on a cashless basis.
Exercise
Price. The exercise price of (i) each October Private Placement Warrant and Wainwright October Warrant is $8,000.00 and $250,000.00
per Depositary Share, respectively and (ii) each May Private Placement Warrant, May Armistice Warrant and Wainwright May Warrant is $82,000.00,
$8,000.00 and $82,500.00 per Depositary Share, respectively, each subject to the ‘cashless exercise’ arrangements described
above and to adjustment as described below.
Beneficial
Ownership Limitation. A holder shall have no right to exercise any portion of a warrant, to the extent that, after giving effect
to such exercise, such holder, together with such holder’s affiliates, and any persons acting as a group together with such holder
or any such affiliate, would beneficially own in excess of, at the initial option of the holder thereof, 4.99% or 9.99%, as applicable,
of the number of Ordinary Shares outstanding immediately after giving effect to the issuance of the Ordinary Shares underlying the Depositary
Shares upon such exercise. The holder of the warrant, upon notice to us, may increase or decrease the beneficial ownership limitation
to a percentage not to exceed 9.99%, provided that any increase in the beneficial ownership limitation shall not be effective until 61
days following notice to us. Beneficial ownership of the holder and its affiliates will be determined in accordance with Section 13(d)
of the Exchange Act, and the rules and regulations promulgated thereunder.
Stock
dividends and stock splits. If we pay a stock dividend or otherwise make a distribution payable in Depositary Shares or Ordinary
Shares, or any other equity or equivalent securities, subdivide or combine outstanding Depositary Shares or Ordinary Shares, or reclassify
Depositary Shares, Ordinary Shares or any shares of our capital stock, the exercise price of each warrant will be adjusted by multiplying
the then exercise price by a fraction, the numerator of which shall be the number of Depositary Shares (excluding treasury shares, if
any) outstanding immediately before such event, and the denominator of which shall be the number of Depositary Shares outstanding immediately
after such event.
Rights
Offerings; pro rata distributions. If we issue Ordinary Share equivalents or rights to purchase shares, warrants, securities or other
property pro rata to holders of Depositary Shares, a holder of a warrant will be entitled to acquire, subject to the beneficial ownership
limitation described above, such securities or property that such holder could have acquired if such holder had held the number of Depositary
Shares issuable upon complete exercise of the warrant immediately prior to the date a record is taken for such issuance. If we declare
or make any dividend or other distribution of assets or rights to acquire assets to holders of Depositary Shares or Ordinary Shares, a
holder of a warrant will be entitled to participate, subject to the beneficial ownership limitation, in such distribution to the same
extent that the holder would have participated therein if the holder had held the number of Depositary Shares issuable upon full exercise
of the warrant.
Fundamental
Transaction. If we effect a fundamental transaction, including, among other things, a merger, sale of substantially all of our assets,
tender offer, exchange offer and other business combination transactions, then upon any subsequent exercise of a warrant, the holder thereof
shall have the right to receive, for each Ordinary Share represented by the Depositary Shares that would have been issuable upon such
exercise immediately prior to the occurrence of such fundamental transaction, the number of shares of the successor’s or acquiring
corporation’s securities, if it is the surviving corporation, and any additional consideration receivable as a result of such fundamental
transaction by a holder of the number of Ordinary Shares represented by the Depositary Shares for which the warrant is exercisable immediately
prior to such fundamental transaction.
Transferability. Each
warrant and all rights thereunder are transferable, in whole or in part, upon surrender of the warrant, together with a written assignment
of the warrant subject to applicable securities laws; provided, however, that the Wainwright October Warrants and Wainwright May Warrants
are subject to certain FINRA transfer restrictions. We do not intend to apply for listing of the warrants on any securities exchange or
other trading system.
No
Rights as Shareholder Until Exercise. Except as set forth in the warrants, the holders of the warrants do not have any voting
rights, dividends or other rights as a holder of our capital stock until they exercise the warrants.
May 2020 United Kingdom
Placing Warrants
On May
22, 2020, we issued 333,333 units, with each unit comprising one new ordinary share and one warrant. The exercise price of the warrants
is £6.80 per share, and it expires five years and six months from the issuance date. We also issued warrants to purchase a total
of 16,400 ordinary shares to Turner Pope, the placing agent, in connection with the closing of such offering, on the same terms and conditions
as the other investors in the offering.
August 2022 Warrants
On
August 3, 2022, we issued warrants to purchase 16,400 Ordinary Shares to Strand Hanson Limited, in payment for services rendered. The
exercise price of such warrants is £2.70 per share and they expire three years from the issuance date.
February Placement Agent
Warrants
The
following is a brief summary of the February Placement Agent Warrants issued in connection with the February Private Placement and is
subject in all respects to the provisions contained in the warrant, which is filed as an exhibit to our Report on Form 6-K dated February
9, 2023. All pre-funded warrants, Series A Warrants and Series B Warrants issued in connection with the February Private Placement have
been exercised.
Exercisability.
The February Placement Agent Warrants are exercisable and expire three years from the initial exercise date. The holder shall deliver
the aggregate exercise price for the Depositary Shares specified in the exercise notice within two trading days following the date of
exercise (subject to the ‘cashless exercise’ arrangements described below).
Cashless
Exercise. The February Placement Agent Warrants may only be exercised on a cashless basis if, following a date that is six months
from the original issuance date, at the time of exercise, there is no effective registration statement registering with a current prospectus
available for resale of the Depositary Shares underlying the February Placement Agent Warrants.
Exercise
Price. The exercise price of a portion of the February Placement Agent Warrants are $10,000.00 per Depositary Share and another
portion is $5,800.00 per Depositary Share, respectively, each subject to the ‘cashless exercise’ arrangements described above
and to adjustment as described herein.
Beneficial
Ownership Limitation. A holder shall have no right to exercise any portion of a February Placement Agent Warrant, to the extent
that, after giving effect to such exercise, such holder, together with such holder’s affiliates, and any persons acting as a group
together with such holder or any such affiliate, would beneficially own in excess of 4.99% of the number of Ordinary Shares outstanding
immediately after giving effect to the issuance of the Ordinary Shares underlying the Depositary Shares upon such exercise. The holder
of such warrant, upon notice to us, may increase or decrease the beneficial ownership limitation to a percentage not to exceed 9.99%,
provided that any increase in the beneficial ownership limitation shall not be effective until 61 days following notice to us. Beneficial
ownership of the holder and its affiliates will be determined in accordance with Section 13(d) of the Exchange Act, and the rules and
regulations promulgated thereunder.
Stock
dividends and stock splits. If we pay a stock dividend or otherwise make a distribution payable in Depositary Shares or Ordinary
Shares, or any other equity or equivalent securities, subdivide or combine outstanding Depositary Shares or Ordinary Shares, or reclassify
Depositary Shares, Ordinary Shares or any shares of our capital stock, the exercise price of each February Placement Agent Warrant will
be adjusted by multiplying the then exercise price by a fraction, the numerator of which shall be the number of Depositary Shares (excluding
treasury shares, if any) outstanding immediately before such event, and the denominator of which shall be the number of Depositary Shares
outstanding immediately after such event.
Rights
Offerings; pro rata distributions. If we issue Ordinary Share equivalents or rights to purchase shares, warrants, securities or other
property pro rata to holders of Depositary Shares, a holder of a February Placement Agent Warrant will be entitled to acquire, subject
to the beneficial ownership limitation described above, such securities or property that such holder could have acquired if such holder
had held the number of Depositary Shares issuable upon complete exercise of the February Placement Agent Warrant immediately prior to
the date a record is taken for such issuance. If we declare or make any dividend or other distribution of assets or rights to acquire
assets to holders of Depositary Shares or Ordinary Shares, a holder of a February Placement Agent Warrant will be entitled to participate,
subject to the beneficial ownership limitation, in such distribution to the same extent that the holder would have participated therein
if the holder had held the number of Depositary Shares issuable upon full exercise of the February Placement Agent Warrant.
Fundamental
Transaction. If we effect a fundamental transaction, including, among other things, a merger, sale of substantially all of our assets,
tender offer, exchange offer and other business combination transactions, then upon any subsequent exercise of a February Placement Agent
Warrant, the holder thereof shall have the right to receive, for each Ordinary Share represented by the Depositary Shares that would have
been issuable upon such exercise immediately prior to the occurrence of such fundamental transaction, the number of shares of the successor’s
or acquiring corporation’s securities, if it is the surviving corporation, and any additional consideration receivable as a result
of such fundamental transaction by a holder of the number of Ordinary Shares represented by the Depositary Shares for which the February
Placement Agent Warrant is exercisable immediately prior to such fundamental transaction. In addition, in the event of a fundamental transaction
that is (i) an all cash or substantially all cash transaction, (ii) a “Rule 13e-3 transaction” as defined in Rule 13e-3 under
the Exchange Act, or (iii) with certain limited exceptions, a fundamental transaction involving a person or entity not traded on a national
securities exchange or other established trading market, including, but not limited to, the London Stock Exchange, AIM, The New York Stock
Exchange, Inc., The NYSE MKT, The NASDAQ Global Select Market, The NASDAQ Global Market, The NASDAQ Capital Market, the OTC QX, the OTC
QB or the Over-the-Counter Bulletin Board, then the Company or any successor entity will pay at the holder’s option, exercisable
at any time concurrently with or within 30 days after the consummation of the fundamental transaction, an amount of cash equal to the
value of the February Placement Agent Warrant as determined in accordance with the Black Scholes option pricing model.
Transferability. Each
placement agent warrant and all rights thereunder are transferable, in whole or in part, upon surrender of the placement agent warrant,
together with a written assignment of the warrant subject to applicable securities laws; provided, however, that the placement agent warrants
are subject to certain FINRA transfer restrictions. We do not intend to apply for listing of the placement agent warrants on any securities
exchange or other trading system.
No
Rights as Shareholder Until Exercise. Except as set forth in the placement agent warrants, the holders of the placement agent
warrants do not have any voting rights, dividends or other rights as a holder of our capital stock until they exercise the placement agent
warrants.
Series D Warrants and
May 2023 Placement Agent Warrants
The following is a brief summary of the Series D Warrants
and the placement agent warrants, or the May 2023 Placement Agent Warrants, issued in connection with the May 2023 Registered Direct Offering,
and is subject in all respects to the provisions contained in the applicable warrants, which, are filed as exhibits to our Report on Form
6-K dated May 24, 2023. Unless otherwise stated, references to warrants in this subsection include the Series D Warrants and the May 2023
Placement Agent Warrants. All Series D Warrants in the offering have been exercised.
Exercisability.
The warrants became exercisable on June 14, 2023. The Series D Warrants and May 2023 Placement Agent Warrants expire five years and three
years, respectively, from the initial exercise date. The holder shall deliver the aggregate exercise price for the Depositary Shares specified
in the exercise notice within two trading days following the date of exercise (subject to the ‘cashless exercise’ arrangements
described below).
Cashless
Exercise. The Series D Warrants and May 2023 Placement Agent Warrants may be exercised on a cashless basis, if and only if, we
have not filed a registration statement registering the Depositary Shares underlying such warrants within six months of the initial exercise
date.
Exercise
Price. The exercise price of each Series D Warrant is $400.00 per Depositary Share and the exercise price of each May 2023 Placement
Agent Warrant is $375.00 per Depositary Share.
Beneficial
Ownership Limitation. A holder shall have no right to exercise any portion of a warrant, to the extent that, after giving effect
to such exercise, such holder, together with such holder’s affiliates, and any persons acting as a group together with such holder
or any such affiliate, would beneficially own in excess of 9.99% (or in the case of the May 2023 Placement Agent Warrants, 4.99%), of
the number of Ordinary Shares outstanding immediately after giving effect to the issuance of the Ordinary Shares underlying the Depositary
Shares upon such exercise. The holder of the warrant, upon notice to us, may increase or decrease the beneficial ownership limitation
to a percentage not to exceed 9.99%, provided that any increase in the beneficial ownership limitation shall not be effective until 61
days following notice to us. Beneficial ownership of the holder and its affiliates will be determined in accordance with Section 13(d)
of the Exchange Act, and the rules and regulations promulgated thereunder.
Stock
dividends and stock splits. If we pay a stock dividend or otherwise make a distribution payable in Depositary Shares or Ordinary
Shares, or any other equity or equivalent securities, subdivide or combine outstanding Depositary Shares or Ordinary Shares, or reclassify
Depositary Shares, Ordinary Shares or any shares of our capital stock, the exercise price of each warrant will be adjusted by multiplying
the then exercise price by a fraction, the numerator of which shall be the number of Depositary Shares (excluding treasury shares, if
any) outstanding immediately before such event, and the denominator of which shall be the number of Depositary Shares outstanding immediately
after such event.
Rights
Offerings; pro rata distributions. If we issue Ordinary Share equivalents or rights to purchase shares, warrants, securities or other
property pro rata to holders of Depositary Shares, a holder of a warrant will be entitled to acquire, subject to the beneficial ownership
limitation described above, such securities or property that such holder could have acquired if such holder had held the number of Depositary
Shares issuable upon complete exercise of the warrant immediately prior to the date a record is taken for such issuance. If we declare
or make any dividend or other distribution of assets or rights to acquire assets to holders of Depositary Shares or Ordinary Shares, a
holder of a warrant will be entitled to participate, subject to the beneficial ownership limitation, in such distribution to the same
extent that the holder would have participated therein if the holder had held the number of Depositary Shares issuable upon full exercise
of the warrant.
Fundamental
Transaction. If we effect a fundamental transaction, including, among other things, a merger, sale of substantially all of our assets,
tender offer, exchange offer and other business combination transactions, then upon any subsequent exercise of a warrant, the holder thereof
shall have the right to receive, for each Ordinary Share represented by the Depositary Shares that would have been issuable upon such
exercise immediately prior to the occurrence of such fundamental transaction, the number of shares of the successor’s or acquiring
corporation’s securities, if it is the surviving corporation, and any additional consideration receivable as a result of such fundamental
transaction by a holder of the number of Ordinary Shares represented by the Depositary Shares for which the warrant is exercisable immediately
prior to such fundamental transaction. In addition, with respect to the Series C Warrants, Series D Warrants and the May 2023 Placement
Agent Warrants, in the event of a fundamental transaction that is (i) an all cash or substantially all cash transaction, (ii) a “Rule
13e-3 transaction” as defined in Rule 13e-3 under the Exchange Act, or (iii) with certain limited exceptions, a fundamental transaction
involving a person or entity not traded on a national securities exchange or other established trading market, including, but not limited
to, the London Stock Exchange, AIM, The New York Stock Exchange, Inc., The NYSE MKT, The NASDAQ Global Select Market, The NASDAQ Global
Market, The NASDAQ Capital Market, the OTC QX, the OTC QB or the Over-the-Counter Bulletin Board, then the Company or any successor entity
will pay at the holder’s option, exercisable at any time concurrently with or within 30 days after the consummation of the fundamental
transaction, an amount of cash equal to the value of the warrant as determined in accordance with the Black Scholes option pricing model.
Transferability. Each
warrant and all rights thereunder are transferable, in whole or in part, upon surrender of the warrant, together with a written assignment
of the warrant subject to applicable securities laws; provided, however, that the May 2023 Placement Agent Warrants are subject to certain
FINRA transfer restrictions. We do not intend to apply for listing of the warrants on any securities exchange or other trading system.
No
Rights as Shareholder Until Exercise. Except as set forth in the warrants, the holders of the warrants do not have any voting
rights, dividends or other rights as a holder of our capital stock until they exercise the warrants.
Series
E Warrants, December 2023 Private Placement Pre-Funded Warrants, December Public Offering Pre-Funded Warrants and December 2023 Underwriter
Warrants
The
following is a brief summary of the Series E Warrants, December 2023 Private Placement Pre-Funded Warrants, December Public Offering Pre-Funded
Warrants and the December 2023 Underwriter Warrants issued in connection with the December Private Placements and the December Public
Offering, and is subject in all respects to the provisions contained in the applicable warrants, which are filed as exhibits
to our Report on Form 6-K dated December 21, 2023. Unless otherwise stated, references to warrants
in this subsection include the Series E Warrants, the December 2023 Private Placement Pre-Funded Warrants, December Public Offering Pre-Funded
Warrants and the December 2023 Underwriter Warrants. All Series F Warrants in the offering have either been exercised or have expired.
Exercisability.
The warrants became exercisable on December 21, 2023. The Series E Warrants and December 2023 Underwriter
Warrants expire five years and three years, respectively from the initial exercise date. The December
2023 Private Placement Pre-Funded Warrants and December Public Offering Pre-Funded
Warrants are exercisable at any time and do not expire. The holder shall deliver the aggregate exercise price for the Depositary
Shares specified in the exercise notice within two trading days following the date of exercise (subject to the ‘cashless exercise’
arrangements described below).
Cashless
Exercise. If, at the time a holder exercises its Series E Warrants, a registration statement registering the issuance of
the securities underlying the Series E Warrants under the Securities Act is not then effective or available and an exemption from
registration under the Securities Act is not available for the issuance of such shares, then in lieu of making the cash payment otherwise
contemplated to be made to us upon such exercise in payment of the aggregate exercise price, the holder may elect instead to receive upon
such exercise (either in whole or in part) the net number of Depositary Shares determined according to a formula set forth in the Series E
Warrants.
At
the time a holder exercises its December 2023 Private Placement Pre-Funded Warrants
or December Public Offering Pre-Funded Warrants, in lieu of making the cash payment
otherwise contemplated to be made to us upon such exercise in payment of the aggregate exercise price, the holder may elect instead to
receive upon such exercise (either in whole or in part) the net number of Depositary Shares determined according to a formula set forth
in the December 2023 Private Placement Pre-Funded Warrants or December
Public Offering Pre-Funded Warrants, as applicable.
Exercise
Price. The exercise price of each Series E Warrant, December 2023 Underwriter
Warrant, December 2023 Private Placement Pre-Funded Warrant and December
Public Offering Pre-Funded Warrants is $55.00, $62.50, $0.0025 and $0.0025 per Depositary Share.
Beneficial
Ownership Limitation. A holder shall have no right to exercise any portion of a warrant, to the extent that, after giving effect
to such exercise, such holder, together with such holder’s affiliates, and any persons acting as a group together with such holder
or any such affiliate, would beneficially own in excess of 9.99% (or in the case of the December
2023 Underwriter Warrants, 4.99%), of the number of Ordinary Shares outstanding immediately after giving effect to the issuance
of the Ordinary Shares underlying the Depositary Shares upon such exercise. The holder of the warrant, upon notice to us, may increase
or decrease the beneficial ownership limitation to a percentage not to exceed 9.99%, provided that any increase in the beneficial ownership
limitation shall not be effective until 61 days following notice to us. Beneficial ownership of the holder and its affiliates will be
determined in accordance with Section 13(d) of the Exchange Act, and the rules and regulations promulgated thereunder.
Stock
dividends and stock splits. If we pay a stock dividend or otherwise make a distribution payable in Depositary Shares or Ordinary
Shares, or any other equity or equivalent securities, subdivide or combine outstanding Depositary Shares or Ordinary Shares, or reclassify
Depositary Shares, Ordinary Shares or any shares of our capital stock, the exercise price of each warrant will be adjusted by multiplying
the then exercise price by a fraction, the numerator of which shall be the number of Depositary Shares (excluding treasury shares, if
any) outstanding immediately before such event, and the denominator of which shall be the number of Depositary Shares outstanding immediately
after such event.
Rights
Offerings; pro rata distributions. If we issue Ordinary Share equivalents or rights to purchase shares, warrants, securities or other
property pro rata to holders of Depositary Shares, a holder of a warrant will be entitled to acquire, subject to the beneficial ownership
limitation described above, such securities or property that such holder could have acquired if such holder had held the number of Depositary
Shares issuable upon complete exercise of the warrant immediately prior to the date a record is taken for such issuance. If we declare
or make any dividend or other distribution of assets or rights to acquire assets to holders of Depositary Shares or Ordinary Shares, a
holder of a warrant will be entitled to participate, subject to the beneficial ownership limitation, in such distribution to the same
extent that the holder would have participated therein if the holder had held the number of Depositary Shares issuable upon full exercise
of the warrant.
Fundamental
Transaction. If we effect a fundamental transaction, including, among other things, a merger, sale of substantially all of our assets,
tender offer, exchange offer and other business combination transactions, then upon any subsequent exercise of a warrant, the holder thereof
shall have the right to receive, for each Ordinary Share represented by the Depositary Shares that would have been issuable upon such
exercise immediately prior to the occurrence of such fundamental transaction, the number of shares of the successor’s or acquiring
corporation’s securities, if it is the surviving corporation, and any additional consideration receivable as a result of such fundamental
transaction by a holder of the number of Ordinary Shares represented by the Depositary Shares for which the warrant is exercisable immediately
prior to such fundamental transaction. In addition, with respect to the Series E Warrants and the December
2023 Underwriter Warrants, in the event of a fundamental transaction that is (i) an all cash or substantially all cash transaction,
(ii) a “Rule 13e-3 transaction” as defined in Rule 13e-3 under the Exchange Act, or (iii) with certain limited exceptions,
a fundamental transaction involving a person or entity not traded on a national securities exchange or other established trading market,
including, but not limited to, the London Stock Exchange, AIM, The New York Stock Exchange, Inc., The NYSE MKT, The NASDAQ Global Select
Market, The NASDAQ Global Market, The NASDAQ Capital Market, the OTC QX, the OTC QB or the Over-the-Counter Bulletin Board, then the Company
or any successor entity will pay at the holder’s option, exercisable at any time concurrently with or within 30 days after the consummation
of the fundamental transaction, an amount of cash equal to the value of the warrant as determined in accordance with the Black Scholes
option pricing model.
Transferability. Each
warrant and all rights thereunder are transferable, in whole or in part, upon surrender of the warrant, together with a written assignment
of the warrant subject to applicable securities laws; provided, however, that the Underwriter Warrants are subject to certain FINRA transfer
restrictions. We do not intend to apply for listing of the warrants on any securities exchange or other trading system.
No
Rights as Shareholder Until Exercise. Except as set forth in the warrants, the holders of the warrants do not have any voting
rights, dividends or other rights as a holder of our capital stock until they exercise the warrants.
Series
G Warrants, Series H Warrants and Warrant Agent Warrants
The
following is a brief summary of the Series G Warrants, Series H Warrants and Warrant Agent Warrants issued in connection with the Closing
and is subject in all respects to the provisions contained in the applicable warrants, which are filed as exhibits to our
Report on Form 6-K dated May 22, 2024. Unless otherwise stated, references to warrants in this subsection
include the Series G Warrants, Series H Warrants and Warrant Agent Warrants.
Exercisability.
The warrants became exercisable on May 24, 2024. The Series G Warrants, Series H Warrants and Warrant
Agent Warrants expire five years, five years and three years, respectively from the initial exercise date. The holder shall
deliver the aggregate exercise price for the Depositary Shares specified in the exercise notice within two trading days following the
date of exercise (subject to the ‘cashless exercise’ arrangements described below).
Cashless
Exercise. If, at the time a holder exercises its warrants, a registration statement registering the issuance of the securities
underlying the warrants under the Securities Act is not then effective or available and an exemption from registration under the Securities
Act is not available for the issuance of such shares, then in lieu of making the cash payment otherwise contemplated to be made to us
upon such exercise in payment of the aggregate exercise price, the holder may elect instead to receive upon such exercise (either in whole
or in part) the net number of Depositary Shares determined according to a formula set forth in the warrants.
Exercise
Price. The exercise price of each Series G Warrant, Series H Warrant and Warrant Agent
Warrants is $62.50 per Depositary Share.
Beneficial
Ownership Limitation. A holder shall have no right to exercise any portion of a warrant, to the extent that, after giving effect
to such exercise, such holder, together with such holder’s affiliates, and any persons acting as a group together with such holder
or any such affiliate, would beneficially own in excess of 9.99% or 4.99%, at the holders determination, of the number of Ordinary Shares
outstanding immediately after giving effect to the issuance of the Ordinary Shares underlying the Depositary Shares upon such exercise.
The holder of the warrant, upon notice to us, may increase or decrease the beneficial ownership limitation to a percentage not to exceed
9.99%, provided that any increase in the beneficial ownership limitation shall not be effective until 61 days following notice to us.
Beneficial ownership of the holder and its affiliates will be determined in accordance with Section 13(d) of the Exchange Act, and the
rules and regulations promulgated thereunder.
Stock
dividends and stock splits. If we pay a stock dividend or otherwise make a distribution payable in Depositary Shares or Ordinary
Shares, or any other equity or equivalent securities, subdivide or combine outstanding Depositary Shares or Ordinary Shares, or reclassify
Depositary Shares, Ordinary Shares or any shares of our capital stock, the exercise price of each warrant will be adjusted by multiplying
the then exercise price by a fraction, the numerator of which shall be the number of Depositary Shares (excluding treasury shares, if
any) outstanding immediately before such event, and the denominator of which shall be the number of Depositary Shares outstanding immediately
after such event.
Rights
Offerings; pro rata distributions. If we issue Ordinary Share equivalents or rights to purchase shares, warrants, securities or other
property pro rata to holders of Depositary Shares, a holder of a warrant will be entitled to acquire, subject to the beneficial ownership
limitation described above, such securities or property that such holder could have acquired if such holder had held the number of Depositary
Shares issuable upon complete exercise of the warrant immediately prior to the date a record is taken for such issuance. If we declare
or make any dividend or other distribution of assets or rights to acquire assets to holders of Depositary Shares or Ordinary Shares, a
holder of a warrant will be entitled to participate, subject to the beneficial ownership limitation, in such distribution to the same
extent that the holder would have participated therein if the holder had held the number of Depositary Shares issuable upon full exercise
of the warrant.
Fundamental
Transaction. If we effect a fundamental transaction, including, among other things, a merger, sale of substantially all of our assets,
tender offer, exchange offer and other business combination transactions, then upon any subsequent exercise of a warrant, the holder thereof
shall have the right to receive, for each Ordinary Share represented by the Depositary Shares that would have been issuable upon such
exercise immediately prior to the occurrence of such fundamental transaction, the number of shares of the successor’s or acquiring
corporation’s securities, if it is the surviving corporation, and any additional consideration receivable as a result of such fundamental
transaction by a holder of the number of Ordinary Shares represented by the Depositary Shares for which the warrant is exercisable immediately
prior to such fundamental transaction. In addition, in the event of a fundamental transaction that is (i) an all cash or substantially
all cash transaction, (ii) a “Rule 13e-3 transaction” as defined in Rule 13e-3 under the Exchange Act, or (iii) with certain
limited exceptions, a fundamental transaction involving a person or entity not traded on a national securities exchange or other established
trading market, including, but not limited to, the London Stock Exchange, AIM, The New York Stock Exchange, Inc., The NYSE MKT, The NASDAQ
Global Select Market, The NASDAQ Global Market, The NASDAQ Capital Market, the OTC QX, the OTC QB or the Over-the-Counter Bulletin Board,
then the Company or any successor entity will pay at the holder’s option, exercisable at any time concurrently with or within 30
days after the consummation of the fundamental transaction, an amount of cash equal to the value of the warrant as determined in accordance
with the Black Scholes option pricing model.
Transferability. Each
warrant and all rights thereunder are transferable, in whole or in part, upon surrender of the warrant, together with a written assignment
of the warrant subject to applicable securities laws; provided, however, that the Warrant Agent Warrants are subject to certain FINRA
transfer restrictions. We do not intend to apply for listing of the warrants on any securities exchange or other trading system.
No
Rights as Shareholder Until Exercise. Except as set forth in the warrants, the holders of the warrants do not have any voting
rights, dividends or other rights as a holder of our capital stock until they exercise the warrants.
Series
J Warrants, Series K Warrants and July 2024 Placement Agent Warrants
The
following is a brief summary of the Series J Warrants, Series K Warrants and July 2024 Placement Agent Warrants issued in connection with
the July 2024 Private Placement, and is subject in all respects to the provisions contained in the applicable warrants, which
are filed as exhibits to our Report on Form 6-K dated July 19, 2024. Unless otherwise stated, references
to “warrants” in this subsection include the Series J Warrants, Series K Warrants and July 2024 Placement Agent Warrants.
Exercisability.
The warrants became exercisable on July 22, 2024. The Series J Warrants, Series K Warrants and July
2024 Placement Agent Warrants expire five years, five years and three years, respectively from the initial exercise date.
The holder shall deliver the aggregate exercise price for the Depositary Shares specified in the exercise notice within two trading days
following the date of exercise (subject to the ‘cashless exercise’ arrangements described below).
Cashless
Exercise. If, following the date that is six months from the initial issuance date of the warrant, a registration statement registering
the issuance of the securities underlying the warrants under the Securities Act is not then effective, or the prospectus contained therein
is not available for the resale of the securities issuable upon exercise of the applicable warrants, then in lieu of making the cash payment
otherwise contemplated to be made to us upon such exercise in payment of the aggregate exercise price, the holder may elect instead to
receive upon such exercise (either in whole or in part) the net number of Depositary Shares determined according to a formula set forth
in the warrants.
Exercise
Price. The exercise price of each Series J Warrant, Series K Warrant and July 2024
Placement Agent Warrant is $25.00 per Depositary Share, $25.00 per Depositary Share, and $31.25 per Depositary Share,
respectively.
Beneficial
Ownership Limitation. A holder shall have no right to exercise any portion of a warrant, to the extent that, after giving effect
to such exercise, such holder, together with such holder’s affiliates, and any persons acting as a group together with such holder
or any such affiliate, would beneficially own in excess of 9.99% or 4.99%, at the holders determination, of the number of Ordinary Shares
outstanding immediately after giving effect to the issuance of the Ordinary Shares underlying the Depositary Shares upon such exercise.
The holder of the warrant, upon notice to us, may increase or decrease the beneficial ownership limitation to a percentage not to exceed
9.99%, provided that any increase in the beneficial ownership limitation shall not be effective until 61 days following notice to us.
Beneficial ownership of the holder and its affiliates will be determined in accordance with Section 13(d) of the Exchange Act, and the
rules and regulations promulgated thereunder.
Stock
dividends and stock splits. If we pay a stock dividend or otherwise make a distribution payable in Depositary Shares or Ordinary
Shares, or any other equity or equivalent securities, subdivide or combine outstanding Depositary Shares or Ordinary Shares, or reclassify
Depositary Shares, Ordinary Shares or any shares of our capital stock, the exercise price of each warrant will be adjusted by multiplying
the then exercise price by a fraction, the numerator of which shall be the number of Depositary Shares (excluding treasury shares, if
any) outstanding immediately before such event, and the denominator of which shall be the number of Depositary Shares outstanding immediately
after such event.
Rights
Offerings; pro rata distributions. If we issue Ordinary Share equivalents or rights to purchase shares, warrants, securities or other
property pro rata to holders of Depositary Shares, a holder of a warrant will be entitled to acquire, subject to the beneficial ownership
limitation described above, such securities or property that such holder could have acquired if such holder had held the number of Depositary
Shares issuable upon complete exercise of the warrant immediately prior to the date a record is taken for such issuance. If we declare
or make any dividend or other distribution of assets or rights to acquire assets to holders of Depositary Shares or Ordinary Shares, a
holder of a warrant will be entitled to participate, subject to the beneficial ownership limitation, in such distribution to the same
extent that the holder would have participated therein if the holder had held the number of Depositary Shares issuable upon full exercise
of the warrant.
Fundamental
Transaction. If we effect a fundamental transaction, including, among other things, a merger, sale of substantially all of our assets,
tender offer, exchange offer and other business combination transactions, then upon any subsequent exercise of a warrant, the holder thereof
shall have the right to receive, for each Ordinary Share represented by the Depositary Shares that would have been issuable upon such
exercise immediately prior to the occurrence of such fundamental transaction, the number of shares of the successor’s or acquiring
corporation’s securities, if it is the surviving corporation, and any additional consideration receivable as a result of such fundamental
transaction by a holder of the number of Ordinary Shares represented by the Depositary Shares for which the warrant is exercisable immediately
prior to such fundamental transaction. In addition, in the event of a fundamental transaction that is (i) an all cash or substantially
all cash transaction, (ii) a “Rule 13e-3 transaction” as defined in Rule 13e-3 under the Exchange Act, or (iii) with certain
limited exceptions, a fundamental transaction involving a person or entity not traded on a national securities exchange or other established
trading market, including, but not limited to, the London Stock Exchange, AIM, The New York Stock Exchange, Inc., The NYSE MKT, The NASDAQ
Global Select Market, The NASDAQ Global Market, The NASDAQ Capital Market, the OTC QX, the OTC QB or the Over-the-Counter Bulletin Board,
then the Company or any successor entity will pay at the holder’s option, exercisable at any time concurrently with or within 30
days after the consummation of the fundamental transaction, an amount of cash equal to the value of the warrant as determined in accordance
with the Black Scholes option pricing model.
Transferability. Each
warrant and all rights thereunder are transferable, in whole or in part, upon surrender of the warrant, together with a written assignment
of the warrant subject to applicable securities laws; provided, however, that the Warrant Agent Warrants are subject to certain FINRA
transfer restrictions. We do not intend to apply for listing of the warrants on any securities exchange or other trading system.
No
Rights as Shareholder Until Exercise. Except as set forth in the warrants, the holders of the warrants do not have any voting
rights, dividends or other rights as a holder of our capital stock until they exercise the warrants.
Articles of Association
The
following is a summary of certain provisions of our articles of association. Please note that this is only a summary and is not intended
to be exhaustive. For further information please refer to the full version of our articles of association, which is included as an exhibit
to this Registration Statement on Form F-1.
Shares and Rights
Attaching to Them
Objects
The objects of our Company
are unrestricted.
Share Rights
Subject to any special rights
attaching to shares already in issue, our shares may be issued with or have attached to them any preferred, deferred or other special
rights or privileges or be subject to such restrictions as we may resolve by ordinary resolution of the shareholders or decision of our
board.
Voting Rights
Without prejudice to any rights
or restrictions as to voting rights attached to any shares forming part of our share capital from time to time, the voting rights attaching
to shares are as follows:
| · | on a show of hands every shareholder who is present in person and each duly authorized representative
present in person of a shareholder that is a corporation shall have one vote; |
| · | on a show of hands, each proxy present in person has one vote for and one vote against a resolution if
the proxy has been duly appointed by more than one shareholder and the proxy has been instructed by one or more of those shareholders
to vote for the resolution and by one or more other of those shareholders to vote against it; |
| · | on a show of hands, each proxy present in person has one vote for and one vote against a resolution if
the proxy has been duly appointed by more than one shareholder entitled to vote on the resolution and either: (1) the proxy has been instructed
by one or more of those shareholders to vote for the resolution and has been given any discretion by one or more other of those shareholders
to vote and the proxy exercises that discretion to vote against it; or (2) the proxy has been instructed by one or more of those shareholders
to vote against the resolution and has been given any discretion by one or more other of those shareholders to vote and the proxy exercises
that discretion to vote for it; and |
| · | on a poll every shareholder who is present in person or by proxy shall have one vote for each share of
which he is the holder. |
At any general meeting a resolution
put to the vote of the meeting shall be decided on a show of hands unless a poll is demanded. Subject to the provisions of the Companies
Act, as described in “Differences in Corporate Law - Voting Rights” in this prospectus, a poll may be demanded by:
| · | the chairman of the meeting; |
| · | at least five shareholders present in person or by proxy and entitled to vote; |
| · | any shareholder(s) present in person or by proxy and representing in the aggregate not less than 10% of
the total voting rights of all shareholders having the right to vote on the resolution; or |
| · | any shareholder(s) present in person or by proxy and holding shares conferring a right to vote on the
resolution on which there have been paid up sums in the aggregate equal to not less than 10% of the total sums paid up on all shares conferring
that right. |
Restrictions on Voting
No
shareholder shall be entitled to vote at any general meeting or at any separate class meeting in respect of any share held by him unless
all calls or other sums payable by him in respect of that share have been paid.
The
Board of Directors may from time to time make calls upon the shareholders in respect of any money unpaid on their shares and each shareholder
shall (subject to at least 14 days’ notice specifying the time or times and place of payment) pay at the time or times so specified
the amount called on his shares. If a call remains unpaid after it has become due and payable, and the fourteen days’ notice provided
by the Board of Directors has not been complied with, any share in respect of which such notice was given may be forfeited by a resolution
of the Board of Directors.
A
shareholder’s right to attend general or class meetings of the Company or to vote in respect of his shares may be suspended by the
Board of Directors in accordance with our Articles of Association if he fails to comply with a proper request for the disclosure of interests
regarding the shares. See “Other United Kingdom Law Considerations—Disclosure of Interest in Shares” in this
prospectus.
Dividends
We may, by ordinary resolution,
declare a dividend to be paid to the share owners according to their respective rights and interests in profits, and may fix the time
for payment of such dividend. No dividend may be declared in excess of the amount recommended by the directors. The Board of Directors
may from time to time declare and pay to our share owners such interim dividends as appear to the directors to be justified by our profits
available for distribution. There are no fixed dates on which entitlement to dividends arises on our Ordinary Shares.
The share owners may pass,
on the recommendation of the directors, an ordinary resolution to direct that all or any part of a dividend to be paid by distributing
specific assets, in particular paid up shares or debentures of any other body corporate. Our articles of association also permit, with
the prior authority of an ordinary resolution of shareholders, a scrip dividend scheme under which share owners may be given the opportunity
to elect to receive fully paid Ordinary Shares instead of cash, or a combination of shares and cash, with respect to future dividends.
By the way of the exercise
of a lien, if a share owner owes us any money relating in any way to shares, the Board of Directors may deduct any of this money from
any dividend on any shares held by the share owner, or from other money payable by us in respect of the shares. Money deducted in this
way may be used to pay the amount owed to us.
Unclaimed dividends and other
money payable in respect of a share can be invested or otherwise used by directors for our benefit until they are claimed. A dividend
or other money remaining unclaimed 12 years after it first became due for payment will be forfeited and shall revert to the Company.
A shareholder’s right
to receive dividends on his shares may, if they represent more than 0.25% of the issued shares of that class, be suspended by the directors
if he fails to comply with a proper request for the disclosure of interests regarding the shares. See “Other United Kingdom Law
Considerations—Disclosure of Interests in Shares” in this prospectus.
Change of Control
There is no specific provision
in our Articles of Association that would have the effect of delaying, deferring or preventing a change of control. We are, however, subject
to the provisions of the City Code, which contains detailed provisions regulating the timing and manner of any takeover offer for those
of the Company’s shares which confer voting rights. See “Other United Kingdom Law Considerations—City Code on Takeovers
and Mergers” in this prospectus.
Variation of Rights
Whenever our share capital
is divided into different classes of shares, all or any of the rights attached to any class may be varied or abrogated in such manner
(if any) as may be provided by those rights or (in the absence of any such provision) either with the consent in writing of the holders
of at least 75% of the issued shares of that class or with the authority of a special resolution passed at a separate general meeting
of the holders of the shares of that class.
Alteration of Share Capital and Repurchases
Subject to the provisions
of the Companies Act, and without prejudice to any relevant special rights attached to any class of shares, we may, from time to time:
| · | increase our share capital by allotting and issuing new shares in accordance with the our articles of
association and any relevant shareholder resolution; |
| · | consolidate all or any of our share capital into shares of a larger nominal amount (i.e., par value) than
the existing shares; |
| · | subdivide any of our shares into shares of a smaller nominal amount (i.e., par value) than our existing
shares; or |
| · | redenominate our share capital or any class of share capital. |
Preemptive Rights and New Issuance of Shares
Under the Companies Act, the
issuance of equity securities (except shares held under an employees’ share scheme) that are to be paid for wholly in cash must
be offered first to the existing holders of equity securities in proportion to the respective nominal amounts (i.e., par values) of their
holdings on the same or more favorable terms, unless a special resolution to the contrary has been passed or the articles of association
otherwise provide an exclusion from this requirement (which exclusion can be for a maximum of five years after which our shareholders’
approval would be required to renew the exclusion). In this context, “equity securities” means ordinary shares (and would
exclude shares that, with respect to dividends or capital, carry a right to participate only up to a specified amount in a distribution),
and any and all rights to subscribe for or convert securities into such ordinary shares. This differs from U.S. law, under which shareholders
generally do not have pre-emptive rights unless specifically granted in the certificate of incorporation or otherwise.
The
Board seeks general authority to allot shares on a non-pre-emptive basis at each annual general meeting. By way of resolutions passed
at our annual general meeting held on June 14, 2023, authorities were given to the directors to generally allot shares in the Company,
or to grant rights to subscribe for or to convert or exchange any security into shares in the Company, up to an aggregate nominal amount
of £140,000,000, for a period up to the conclusion of our annual general meeting to be held in 2026. At our annual general meeting
held on June 13, 2024, authorities were given to the directors to generally allot shares in the Company, or to grant rights to subscribe
for or to convert or exchange any security into shares in the Company, up to an aggregate nominal amount of £949,426.90 for a period
up to the conclusion of our annual general meeting to be held in 2027. Pre-emptive rights under the Companies Act will not apply in respect
of allotment of shares for cash made pursuant to such authority.
Transfer of Shares
Any certificated shareholder
may transfer all or any of his shares by an instrument of transfer in the usual common form or in any other manner which is permitted
by the Companies Act and approved by the Board of Directors. Any written instrument of transfer shall be signed by or on behalf of the
transferor and (in the case of a partly paid share) the transferee.
All transfers of uncertificated
shares shall be made in accordance with and subject to the provisions of the Uncertificated Securities Regulations 2001 and the facilities
and requirements of its relevant system. The Uncertificated Securities Regulations 2001 permit shares to be issued and held in uncertificated
form and transferred by means of a computer-based system.
The Board of Directors may
decline to register any transfer of any share unless it is:
| · | a share on which the Company has no lien; |
| · | in respect of only one class of shares; |
| · | in favor of a single transferee or not more than four transferees; |
| · | duly stamped or duly certificated or otherwise shown the satisfaction of the Board of Directors to be
exempt from any required stamp duty; or |
| · | delivered for registration at the Company’s registered office or such other place as the Board of
Directors may decide, accompanied by the certificate for the shares to which it relates (other than uncertificated shares) and any other
evidence the Board of Directors may reasonably require to provide the title to such share of the transferor. |
If the Board of Directors
declines to register a transfer it shall, as soon as practicable and in any event within two months after the date on which the transfer
is lodged, send to the transferee notice of the refusal, together with reasons for the refusal.
CREST
CREST is a computerized paperless
share transfer and settlement system which allows securities to be transferred by electronic means, without the need for a written instrument
of transfer. The Articles of Association are consistent with CREST membership and, among other things, allow for the holding and transfer
of shares in uncertificated form.
Shareholder Meetings
Annual General Meetings
In accordance with the Companies
Act, we are required in each year to hold an annual general meeting in addition to any other general meetings in that year and to specify
the meeting as such in the notice convening it. The annual general meeting shall be convened whenever and wherever the board sees fit,
subject to the requirements of the Companies Act, as described in “Differences in Corporate Law—Annual General Meeting”
and “Differences in Corporate Law—Notice of General Meetings” in this prospectus.
Notice of General Meetings
The arrangements for the calling
of general meetings are described in “Differences in Corporate Law—Notice of General Meetings” in this prospectus.
Subject to certain conditions,
holders of Depositary Shares are entitled to receive notices under the terms of the deposit agreement relating to the Depositary Shares.
See “Description of American Depositary Shares—Voting Rights” in this prospectus.
Quorum of General Meetings
No business shall be transacted
at any general meeting unless a quorum is present, but the absence of a quorum shall not preclude the appointment, choice or election
of a chairman which shall not be treated as part of the business of the meeting. At least two shareholders present in person or by proxy
and entitled to vote shall be a quorum for all purposes.
Class Meetings
The provisions in the Articles
of Association relating to general meetings apply to every separate general meeting of the holders of a class of shares except that:
| · | no member, other than a member of the Board of Directors, shall be entitled to notice of it or attend
such meeting unless he is a holder of shares of that class; |
| · | the quorum for such class meeting shall be two holders in person or by proxy representing not less than
one-third in nominal value of the issued shares of the class; |
| · | at the class meeting, a holder of shares of the class present in person or by proxy may demand a poll
and shall on a poll be entitled to one vote for every shares of the class held by him; and |
| · | if at any adjourned meeting of such holders a quorum is not present at the meeting, one holder of shares
of the class present in person or by proxy at an adjourned meeting constitutes a quorum. |
Directors
Number of Directors
We may not have less than
two directors on our Board of Directors. We have no maximum number of directors, though we may fix a maximum number by ordinary resolution
of the shareholders. We may, by ordinary resolution of the shareholders, vary the minimum and any maximum number of directors from time
to time.
Appointment of Directors
Subject to the provisions
of the Articles of Association, we may, by ordinary resolution of the shareholders, elect any person to be a director, either to fill
a casual vacancy or as an addition to the existing board.
Without prejudice to the power
to appoint any person to be a director by shareholder resolution, the Board of Directors has the power to appoint any person to be a director,
either to fill a casual vacancy or as an addition to the existing Board of Directors. Any director appointed by the Board of Directors
will hold office only until the earlier to occur of the close of the next following annual general meeting and someone being appointed
in his stead at that meeting. Such a director is eligible for re-election at that meeting but shall not be taken into account in determining
the directors or the number of directors who are to retire by rotation at such meeting.
Rotation of Directors
At every annual general meeting,
one-third of the directors or, if their number is not a multiple of three, then the number nearest to and not exceeding one-third, shall
retire from office and each director must retire from office at least once every three years. If there are fewer than three directors,
one director shall make himself or herself available for re-election.
The directors to retire on
each occasion shall be those subject to retirement by rotation who have been longest in office since their last election, but as between
persons who became or were re-elected directors on the same day those to retire shall (unless they otherwise agree amongst themselves)
be determined by lot.
A director who retires at
the annual general meeting shall be eligible for re-election.
The shareholders may, at the
meeting at which a director retires, fill the vacated office by electing a person and in default the retiring director shall, if willing
to continue to act, be deemed to have been re-elected, unless at such meeting it is expressly resolved not to fill such vacated office
or unless a resolution for the re-election of such director shall have been put to the meeting and lost or such director has given notice
in writing to us that he is unwilling to be re-elected or such director has attained the retirement age applicable to him as director
pursuant to the Companies Act.
Director’s Interests
The Board of Directors may
authorize, to the fullest extent permitted by law, any matter proposed to them which would otherwise result in a director infringing his
duty to avoid a situation in which he has, or can have, a direct or indirect interest that conflicts, or possibly may conflict, with our
interests and which may reasonably be regarded as likely to give rise to a conflict of interest. A director shall not, save as otherwise
agreed by him, be accountable to us for any benefit which he (or a person connected with him) derives from any matter authorized by the
directors and any contract, transaction or arrangement relating thereto shall not be liable to be avoided on the grounds of any such benefit.
Subject to the requirements
under Sections 175, 177 and 182 of the Companies Act (which require a director to avoid a situation in which he has, or can have, a direct
or indirect interest that conflicts, or possibly conflicts, with our interests, and to declare any interest that he has, whether directly
or indirectly, in a proposed or existing transaction or arrangement with us), and provided that he has disclosed to the Board of Directors
the nature and extent of any interest of his in accordance with the Companies Act and the Articles of Association, a director notwithstanding
his office:
| · | may be a party to, or otherwise interested in, any transaction or arrangement with us or in which we are
otherwise interested; |
| · | may be a director or other officer of, or employed by, or a party to any transaction or arrangement with,
or otherwise interested in, any body corporate promoted by us or in which we are otherwise interested; and |
| · | shall not, by reason of his office, be accountable to us for any benefit which he derives from any such
office or employment or from any such transaction or arrangement or from any interest in any such body corporate and no such transaction
or arrangement shall be liable to be avoided on the ground of any such interest or benefit. |
In the case of interests arising
where a director is in any way, directly or indirectly, interested in (a) a proposed transaction or arrangement with us or (b) a transaction
or arrangement that has been entered into by us and save as otherwise provided by the Articles of Association, such director shall not
vote at a meeting of the Board of Directors or of a committee of the Board of Directors on any resolution concerning such matter in which
he has a material interest (otherwise than by virtue of his interest in shares, debentures or other securities of, or otherwise in or
through, us) unless his interest or duty arises only because the case falls within one or more of the following paragraphs:
| · | the resolution relates to the giving to him or a person connected with him of a guarantee, security or
indemnity in respect of money lent to, or an obligation incurred by him or such a person at the request of or for the benefit of, us or
any of our subsidiaries; |
| · | the resolution relates to the giving of a guarantee, security or indemnity in respect of a debt or obligation
of ours or any of our subsidiaries for which the director or a person connected with him has assumed responsibility in whole or part under
a guarantee or indemnity or by the giving of security; |
| · | the resolution relates in any way to any other company in which he is interested, directly or indirectly
and whether as an officer or shareholder or otherwise howsoever, provided that he and any persons connected with him do not to his knowledge
hold an interest in shares representing one per cent or more of any class of the equity share capital of such company or of the voting
rights available to shareholder of such company; |
| · | the resolution relates in any way to an arrangement for the benefit of our employees or any employees
of our subsidiaries which does not award him as such any privilege or benefit not generally awarded to the employees to whom such arrangement
relates; |
| · | the resolution relates in any way to the purchase or maintenance for the directors of insurance; or |
| · | the resolution is in respect of any matter in which the interest of the director cannot reasonably be
regarded as conflicting. |
A director shall not be counted
in the quorum present at a meeting in relation to a resolution on which he is not entitled to vote.
If a question arises at a
meeting of the Board of Directors or of a committee of the Board of Directors as to the right of a director to vote or be counted in the
quorum, and such question is not resolved by his voluntarily agreeing to abstain from voting or not to be counted in the quorum, the question
may, before the conclusion of the meeting, be referred to the chairman of the meeting and his ruling in relation to any director other
than himself shall be final and conclusive except in a case where the nature or extent of the interest of the director concerned has not
been fairly disclosed.
An interest of a person connected
with a director shall be treated as an interest of the director and Section 252 of the Companies Act shall determine whether a person
is connected with a director.
Directors’ Fees and Remuneration
Each of the directors shall
be paid a fee at such rate as may from time to time be determined by the Board of Directors (or for the avoidance of doubt any duly authorized
committee of the Board of Directors) provided that the aggregate of all such fees so paid to directors shall not exceed £600,000
per annum, or such higher amount as may from time to time be determined by ordinary resolution of shareholders.
Each director may be paid
his reasonable traveling, hotel and other expenses of attending and returning from meetings of the Board of Directors or committees thereof
of or general meetings or separate meetings of the holders class of shares or of debentures and shall be paid all expenses properly and
reasonably incurred by him in the conduct of the Company’s business or in the discharge of his duties as a director. Any director
who, by request, goes or resides abroad for any purposes required by us or who performs services which in the opinion of the Board of
Directors go beyond the ordinary duties of a director may be paid such extra remuneration as the Board of Directors may determine.
An executive director shall
receive such remuneration as the Board of Directors may determine, and either in addition to or in lieu of his remuneration as a director
as detailed above.
Age Limitations and Share Ownership
We do not have any age limitations
for our directors, nor do we have mandatory retirement as a result of reaching a certain age. Our directors are not required to hold any
shares in the Company.
Borrowing Power
Our directors may exercise
all the powers of the Company to borrow or raise money and mortgage or charge all or any part of our undertaking, property and assets
(present and future), and uncalled capital. Subject to the Companies Act, the directors may also create and issue debentures, other loan
stock and other securities, whether outright or as collateral security for any debt, liability or obligation of the Company or of any
third party. Our directors are required to restrict the borrowings of the Company to ensure that the aggregate principal amount of borrowings
at any one time outstanding and all of its subsidiary undertakings (other than intra-Group borrowing) shall not at any time, without the
previous sanction of an ordinary resolution of the Company, exceed two times the gross asset value of the Company and our subsidiaries.
Liability of Biodexa and its Directors and
Officers
Subject to the provisions
on indemnities set out in Companies Act, every director, alternate director or former director (and of any associated company) shall be
entitled to be indemnified out of our assets against all costs and liabilities incurred by him or her in relation to any proceedings or
any regulatory investigation or action which relate to anything done or omitted or alleged to have been done or omitted by him or her
as a director so long as the indemnities do not cover liability for breach of duty to the Company or cover any fine, costs or related
expense in connection with any proceedings for default on the part of the director. Lawful indemnities extend to the provision of funds
to him or her by the Company to meet expenditure incurred or to be incurred by him in defending himself in any proceedings (whether civil
or criminal) or in connection with an application for statutory relief or in an investigation by a regulatory authority which must however
be repaid where such proceedings, application, investigation or action are in connection with any alleged negligence, default, breach
of duty or breach of trust by him or her in relation to the Company (or any associated company of ours) and he or she is convicted or
found in default thereof. Under English law, any provision that purports to exempt a director of a company (to any extent) from any liability
that would otherwise attach to him in connection with any negligence, default, breach of duty or breach of trust in relation to the company
is void.
Under a deed poll declared
by us on August 5, 2015, or a Deed of Indemnity, our Board of Directors and our Company Secretary are indemnified against costs and liabilities
incurred in connection with their office, other than any liability owed by such person to the Company itself (or any of our associated
entities) and other than indemnification for liabilities in certain circumstances, which are prohibited by virtue of the Companies Act.
The Deed of Indemnity provides that a director may also be lent sums to finance any relevant defense costs, provided that, in the event
such proceedings involve criminal or civil matters in which the person is convicted or has a judgment made against him or her, then such
loan must be repaid. Our total aggregate liability of Biodexa under the Deed of Indemnity is £5 million.
Insofar as indemnification
for liabilities arising under the Securities Act may be permitted to our directors, officers and controlling persons pursuant to a charter
provision, by-law, contract, arrangements, statute or otherwise, we acknowledge that in the opinion of the SEC such indemnification is
against public policy as expressed in the Securities Act and is, therefore, unenforceable.
Other United Kingdom Law Considerations
Mandatory Purchases and Acquisitions
Pursuant to Sections 979 to
991 of the Companies Act, where a takeover offer has been made for us and the offeror has acquired or unconditionally contracted to acquire
not less than 90% in value of the shares to which the offer relates and not less than 90% of the voting rights carried by those shares,
the offeror may give notice to the holder of any shares to which the offer relates which the offeror has not acquired or unconditionally
contracted to acquire that he wishes to acquire, and is entitled to so acquire, those shares on the same terms as the general offer. The
offeror would do so by sending a notice to the outstanding minority shareholders telling them that it will compulsorily acquire their
shares. Such notice must be sent within three months of the last day on which the offer can be accepted in the prescribed manner. The
squeeze-out of the minority shareholders can be completed at the end of six weeks from the date the notice has been given, following which
the offeror can execute a transfer of the outstanding shares in its favor and pay the consideration to us, and we would hold the consideration
on trust for the outstanding minority shareholders. The consideration offered to the outstanding minority shareholders whose shares are
compulsorily acquired under the Companies Act must, in general, be the same as the consideration that was available under the takeover
offer.
Sell Out
The Companies Act also gives
our minority shareholders a right to be bought out in certain circumstances by an offeror who has made a takeover offer for all of our
shares. The holder of shares to which the offer relates, and who has not otherwise accepted the offer, may require the offeror to acquire
his shares if, prior to the expiry of the acceptance period for such offer, (i) the offeror has acquired or agreed to acquire not less
than 90% in value of the voting shares, and (ii) not less than 90% of the voting rights carried by those shares. The offeror may impose
a time limit on the rights of minority shareholders to be bought out that is not less than three months after the end of the acceptance
period. If a shareholder exercises his rights to be bought out, the offeror is required to acquire those shares on the terms of this offer
or on such other terms as may be agreed.
Disclosure of Interest in Shares
Pursuant to Part 22 of the
Companies Act, we are empowered by notice in writing to any person whom we know or have reasonable cause to believe to be interested in
our shares, or at any time during the three years immediately preceding the date on which the notice is issued has been so interested,
requiring such person within a reasonable time to disclose to us particulars of that person’s interest and (so far as is within
his knowledge) particulars of any other interest that subsists or subsisted in those shares. The Articles of Association specify that
a response is required from such person within 14 days after service of any such notice.
Under the Articles of Association,
if a person defaults in supplying us with the required particulars in relation to the shares in question, or Default Shares, the directors
may by notice direct that:
| · | in respect of the Default Shares, the relevant member shall not be entitled to attend or vote (either
in person or by proxy) at any general meeting or of a general meeting of the holders of a class of shares or upon any poll or to exercise
any right conferred by the Default Shares; and/or |
| · | where the Default Shares represent at least 0.25% of their class, (a) any dividend (or any part of a dividend)
payable in respect of the Default Shares shall be retained by us without liability to pay interest, (b) the shareholder may not be entitled
to elect to receive shares instead of a dividend, and (c) no transfers by the relevant member of any Default Shares may be registered
(unless the member himself is not in default and the transfer does not relate to Default Shares, the transfer is exempt or that the transfer
is permitted under the U.K. Uncertificated Securities Regulations 2001). |
Purchase of Own Shares
Under English law, a limited
company may only purchase or redeem its own shares out of the distributable profits of the company or the proceeds of a fresh issue of
shares made for the purpose of financing the purchase, provided that they are not restricted from doing so by their articles. A limited
company may not purchase or redeem its own shares if, as a result of the purchase, there would no longer be any issued shares of the company
other than redeemable shares or shares held as treasury shares. Shares must be fully paid in order to be repurchased.
Subject to the above, we may
purchase our own shares in the manner prescribed below. We may make a market purchase of our own fully paid shares pursuant to an ordinary
resolution of shareholders. The resolution authorizing the purchase must:
| · | specify the maximum number of shares authorized to be acquired; |
| · | determine the maximum and minimum prices that may be paid for the shares; and |
| · | specify a date, not being later than five years after the passing of the resolution, on which the authority
to purchase is to expire. |
We may purchase our own fully
paid shares otherwise than on a recognized investment exchange pursuant to a purchase contract authorized by resolution of shareholders
before the purchase takes place. Any authority will not be effective if any shareholder from whom we propose to purchase shares votes
on the resolution and the resolution would not have been passed if he had not done so. The resolution authorizing the purchase must specify
a date, not being later than five years after the passing of the resolution, on which the authority to purchase is to expire.
Distributions and Dividends
Under the Companies Act, before
a company can lawfully make a distribution or dividend, it must ensure that it has sufficient distributable reserves (on a non-consolidated
basis). The basic rule is that a company’s profits available for the purpose of making a distribution are its accumulated, realized
profits, so far as not previously utilized by distribution or capitalization, less its accumulated, realized losses, so far as not previously
written off in a reduction or reorganization of capital duly made. The requirement to have sufficient distributable reserves before a
distribution or dividend can be paid applies to us and to each of our subsidiaries that has been incorporated under English law.
It is not sufficient that
we, as a public company, have made a distributable profit for the purpose of making a distribution. An additional capital maintenance
requirement is imposed on us to ensure that the net worth of the company is at least equal to the amount of its capital. A public company
can only make a distribution:
| · | if, at the time that the distribution is made, the amount of its net assets (that is, the total excess
of assets over liabilities) is not less than the total of its called up share capital and undistributable reserves; and |
| · | if, and to the extent that, the distribution itself, at the time that it is made, does not reduce the
amount of the net assets to less than that total. |
City Code on Takeovers and Mergers
The
Company is a public limited company incorporated in, and with its registered office in, the United Kingdom but its securities are not
admitted to trading on a regulated market or multilateral trading facility in the United Kingdom (or a stock exchange in the Channel Islands
or the Isle of Man). The City Code shall only apply to the Company if it is considered by the Takeover Panel to have its place of central
management and control in the United Kingdom (or the Channel Islands or the Isle of Man). This is known as the “residency test”.
The way in which the test for central management and control is applied for the purposes of the City Code may be different from the way
in which it is applied by the United Kingdom tax authorities, HMRC. Under the City Code, the Takeover Panel typically considers where
the majority of the directors of the Company are resident, amongst other factors, for the purposes of determining where the Company has
its place of central management and control. Three of the five directors of the Company are currently resident in the United Kingdom and
the place of central management and control of the Company is intended, for the time being, to remain in the United Kingdom meaning that
the Company and its shareholders will have the benefit of the protections that the City Code affords, including, but not limited to, under
Rule 9 of the City Code as set out below.
The
City Code is issued and administered by the Takeover Panel. The City Code provides a framework within
which takeovers of companies subject to it are conducted. In particular, the City Code contains certain rules in respect of mandatory
offers. Under Rule 9 of the City Code, if a person:
| · | acquires an interest in our shares which, when taken together with shares in which he or persons acting
in concert with him are interested, carries 30% or more of the voting rights of our shares; or |
| · | who, together with persons acting in concert with him, is interested in shares that in the aggregate carry
not less than 30% and not more than 50% of the voting rights in us, acquires additional interests in shares that increase the percentage
of shares carrying voting rights in which that person is interested, |
the acquirer, and depending on the circumstances,
its concert parties would be required (except with the consent of the Takeover Panel)
to make a cash offer for our outstanding shares at a price not less than the highest price paid for any interests in the shares by the
acquirer or its concert parties during the previous 12 months.
Notwithstanding
the above, the Company may cease to be subject to the City Code in the future if there are any changes that lead to the Company being
deemed to no longer have its place of central management and control in the United Kingdom, Channel Islands or the Isle of Man.
Exchange Controls
There are no governmental
laws, decrees, regulations or other legislation in the United Kingdom that may affect the import or export of capital, including the availability
of cash and cash equivalents for use by us, or that may affect the remittance of dividends, interest, or other payments by us to non-resident
holders of our Ordinary Shares or Depositary Shares, other than withholding tax requirements. There is no limitation imposed by English
law or in the Articles of Association on the right of non-residents to hold or vote shares.
Differences in Corporate
Law
The
applicable provisions of the Companies Act differ from laws applicable to U.S. corporations and their shareholders. Set forth below is
a summary of certain differences between the provisions of the Companies Act applicable to us and the Delaware General Corporation
Law relating to shareholders’ rights and protections. This summary is not intended to be a complete discussion of the respective
rights and it is qualified in its entirety by reference to English law and Delaware law.
| |
|
England and Wales |
|
Delaware |
| Number of Directors |
|
Under the Companies Act, a public limited company must have at least two directors and the number of directors may be fixed by or in the manner provided in a company’s articles of association. |
|
Under Delaware law, a corporation must have at least one director and the number of directors shall be fixed by or in the manner provided in the bylaws. |
| |
|
|
|
|
| Removal of Directors |
|
Under the Companies Act, shareholders may remove a director without cause by an ordinary resolution (which is passed by a simple majority of those voting in person or by proxy at a general meeting) irrespective of any provisions of any service contract the director has with the company, provided 28 clear days’ notice of the resolution has been given to the company and its shareholders. On receipt of notice of an intended resolution to remove a director, the company must forthwith send a copy of the notice to the director concerned. Certain other procedural requirements under the Companies Act must also be followed such as allowing the director to make representations against his or her removal either at the meeting or in writing. |
|
Under Delaware law, any director or the entire board of directors may be removed, with or without cause, by the holders of a majority of the shares then entitled to vote at an election of directors, except (a) unless the certificate of incorporation provides otherwise, in the case of a corporation whose board of directors is classified, shareholders may effect such removal only for cause, or (b) in the case of a corporation having cumulative voting, if less than the entire board of directors is to be removed, no director may be removed without cause if the votes cast against his removal would be sufficient to elect him if then cumulatively voted at an election of the entire board of directors, or, if there are classes of directors, at an election of the class of directors of which he is a part. |
| |
|
|
|
|
Vacancies on Board of
Directors |
|
Under English law, the procedure by which directors, other than a company’s initial directors, are appointed is generally set out in a company’s articles of association, provided that where two or more persons are appointed as directors of a public limited company by resolution of the shareholders, resolutions appointing each director must be voted on individually. |
|
Under Delaware law, vacancies and newly created directorships may be filled by a majority of the directors then in office (even though less than a quorum) or by a sole remaining director unless (a) otherwise provided in the certificate of incorporation or by-laws of the corporation or (b) the certificate of incorporation directs that a particular class of stock is to elect such director, in which case a majority of the other directors elected by such class, or a sole remaining director elected by such class, will fill such vacancy. |
| |
|
|
|
|
| Annual General Meeting |
|
Under the Companies Act, a public limited company must hold an annual general meeting in each six-month period following the company’s annual accounting reference date. |
|
Under Delaware law, the annual meeting of stockholders shall be held at such place, on such date and at such time as may be designated from time to time by the board of directors or as provided in the certificate of incorporation or by the bylaws. |
| |
|
England and Wales |
|
Delaware |
|
General Meeting
|
|
Under the Companies Act, a general meeting of
the shareholders of a public limited company may be called by the directors.
Shareholders holding at least 5% of the paid-up
capital of the company carrying voting rights at general meetings can require the directors to call a general meeting and, if the directors
fail to do so within a certain period, may themselves convene a general meeting. |
|
Under Delaware law, special meetings of the stockholders may be called by the board of directors or by such person or persons as may be authorized by the certificate of incorporation or by the bylaws. |
| |
|
|
|
|
Notice of General
Meetings |
|
Under the Companies Act, 21 clear days’ notice must be given for an annual general meeting and any resolutions to be proposed at the meeting. Subject to a company’s articles of association providing for a longer period, at least 14 clear days’ notice is required for any other general meeting. In addition, certain matters, such as the removal of directors or auditors, require special notice, which is 28 clear days’ notice. The shareholders of a company may in all cases consent to a shorter notice period, the proportion of shareholders’ consent required being 100% of those entitled to attend and vote in the case of an annual general meeting and, in the case of any other general meeting, a majority in number of the members having a right to attend and vote at the meeting, being a majority who together hold not less than 95% in nominal value of the shares giving a right to attend and vote at the meeting. |
|
Under Delaware law, unless otherwise provided in the certificate of incorporation or bylaws, written notice of any meeting of the stockholders must be given to each stockholder entitled to vote at the meeting not less than ten nor more than 60 days before the date of the meeting and shall specify the place, date, hour, and purpose or purposes of the meeting. |
| |
|
|
|
|
| Proxy |
|
Under the Companies Act, at any meeting of shareholders, a shareholder may designate another person to attend, speak and vote at the meeting on their behalf by proxy. |
|
Under Delaware law, at any meeting of stockholders, a stockholder may designate another person to act for such stockholder by proxy, but no such proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period. A director of a Delaware corporation may not issue a proxy representing the director’s voting rights as a director. |
| |
|
|
|
|
| Pre-emptive Rights |
|
Under the Companies Act, “equity securities,” being (i) shares in the company other than shares that, with respect to dividends and capital, carry a right to participate only up to a specified amount in a distribution (“ordinary shares”) or (ii) rights to subscribe for, or to convert securities into, ordinary shares, proposed to be allotted for cash must be offered first to the existing equity shareholders in the company in proportion to the respective nominal value of their holdings, unless an exception applies or a special resolution to the contrary has been passed by shareholders in a general meeting or the articles of association provide otherwise in each case in accordance with the provisions of the Companies Act. |
|
Under Delaware law, shareholders have no preemptive rights to subscribe to additional issues of stock or to any security convertible into such stock unless, and except to the extent that, such rights are expressly provided for in the certificate of incorporation. |
| |
|
England and Wales |
|
Delaware |
| Authority to Allot |
|
Under the Companies Act, the directors of a company must not allot shares or grant of rights to subscribe for or to convert any security into shares unless an exception applies or an ordinary resolution to the contrary has been passed by shareholders in a general meeting or the articles of association provide otherwise in each case in accordance with the provisions of the Companies Act. |
|
Under Delaware law, if the corporation’s charter or certificate of incorporation so provides, the board of directors has the power to authorize the issuance of stock. It may authorize capital stock to be issued for consideration consisting of cash, any tangible or intangible property or any benefit to the corporation or any combination thereof. It may determine the amount of such consideration by approving a formula. In the absence of actual fraud in the transaction, the judgment of the directors as to the value of such consideration is conclusive. |
| |
|
|
|
|
Liability of Officers and
Directors |
|
Under the Companies Act, any provision, whether
contained in a company’s articles of association or any contract or otherwise, that purports to exempt a director of a company,
to any extent, from any liability that would otherwise attach to him in connection with any negligence, default, breach of duty or breach
of trust in relation to the company is void.
Any provision by which a company directly or indirectly
provides an indemnity, to any extent, for a director of the company or of an associated company against any liability attaching to him
in connection with any negligence, default, breach of duty or breach of trust in relation to the company of which he is a director is
also void except as permitted by the Companies Act, which provides exceptions for the company to (a) purchase and maintain insurance against
such liability; (b) provide a “qualifying third party indemnity” (being an indemnity against liability incurred by the director
to a person other than the company or an associated company or criminal proceedings in which he is not convicted); and (c) provide a “qualifying
pension scheme indemnity” (being an indemnity against liability incurred in connection with the company’s activities as trustee
of an occupational pension plan). |
|
Under Delaware law, a corporation’s certificate
of incorporation may include a provision eliminating or limiting the personal liability of a director to the corporation and its stockholders
for damages arising from a breach of fiduciary duty as a director. However, no provision can limit the liability of a director for:
· any
breach of the director’s duty of loyalty to the corporation or its stockholders;
· acts
or omissions not in good faith or that involve intentional misconduct or a knowing violation of law;
· intentional
or negligent payment of unlawful dividends or stock purchases or redemptions; or
· any
transaction from which the director derives an improper personal benefit. |
| |
|
England and Wales |
|
Delaware |
| Voting Rights |
|
Under English law, unless a poll is demanded by
the shareholders of a company or is required by the chairman of the meeting or the company’s articles of association, shareholders
shall vote on all resolutions on a show of hands. Under the Companies Act, a poll may be demanded by (a) not fewer than five shareholders
having the right to vote on the resolution; (b) any shareholder(s) representing not less than 10% of the total voting rights of all the
shareholders having the right to vote on the resolution; or (c) any shareholder(s) holding shares in the company conferring a right to
vote on the resolution being shares on which an aggregate sum has been paid up equal to not less than 10% of the total sum paid up on
all the shares conferring that right. A company’s articles of association may provide more extensive rights for shareholders to
call a poll, and in our case the number in clause (a) above is reduced from five to three.
Under English law, an ordinary resolution is passed
on a show of hands if it is approved by a simple majority (more than 50%) of the votes cast by shareholders present (in person or by proxy)
and entitled to vote. If a poll is demanded, an ordinary resolution is passed if it is approved by holders representing a simple majority
of the total voting rights of shareholders present, in person or by proxy, who, being entitled to vote, vote on the resolution. Special
resolutions require the affirmative vote of not less than 75% of the votes cast by shareholders present, in person or by proxy, at the
meeting. |
|
Delaware law provides that, unless otherwise provided in the certificate of incorporation, each stockholder is entitled to one vote for each share of capital stock held by such stockholder. |
| |
|
|
|
|
Shareholder Vote on
Certain
Transactions |
|
The Companies Act provides for schemes of arrangement,
which are arrangements or compromises between a company and any class of shareholders or creditors and used in certain types of reconstructions,
amalgamations, capital reorganizations or takeovers. These arrangements require:
· the
approval at a shareholders’ or creditors’ meeting convened by order of the court, of a majority in number of shareholders
or creditors representing 75% in value of the capital held by, or debt owed to, the class of shareholders or creditors, or class thereof
present and voting, either in person or by proxy; and
· the
approval of the court. |
|
Generally, under Delaware law, unless the certificate of incorporation
provides for the vote of a larger portion of the stock, completion of a merger, consolidation, sale, lease or exchange of all or substantially
all of a corporation’s assets or dissolution requires:
· the
approval of the board of directors; and
· approval
by the vote of the holders of a majority of the outstanding stock or, if the certificate of incorporation provides for more or less than
one vote per share, a majority of the votes of the outstanding stock of a corporation entitled to vote on the matter. |
| |
|
England and Wales |
|
Delaware |
Standard of Conduct
for Directors |
|
Under English law, a director owes various statutory
and fiduciary duties to the company, including:
· to
act in the way he considers, in good faith, would be most likely to promote the success of the company for the benefit of its members
as a whole;
· to
avoid a situation in which he has, or can have, a direct or indirect interest that conflicts, or possibly conflicts, with the interests
of the company;
· to
act in accordance with the company’s constitution and only exercise his powers for the purposes for which they are conferred;
· to
exercise independent judgment;
· to
exercise reasonable care, skill and diligence;
· not
to accept benefits from a third party conferred by reason of his being a director or doing, or not doing, anything as a director; and
· to
declare any interest that he has, whether directly or indirectly, in a proposed or existing transaction or arrangement with the company. |
|
Delaware law does not contain specific provisions
setting forth the standard of conduct of a director. The scope of the fiduciary duties of directors is generally determined by the courts
of the State of Delaware. In general, directors have a duty to act without self-interest, on a well-informed basis and in a manner they
reasonably believe to be in the best interest of the stockholders.
Directors of a Delaware corporation owe fiduciary
duties of care and loyalty to the corporation and to its shareholders. The duty of care generally requires that a director act in good
faith, with the care that an ordinarily prudent person would exercise under similar circumstances. Under this duty, a director must inform
himself of all material information reasonably available regarding a significant transaction. The duty of loyalty requires that a director
act in a manner he reasonably believes to be in the best interests of the corporation. He must not use his corporate position for personal
gain or advantage. In general, but subject to certain exceptions, actions of a director are presumed to have been made on an informed
basis, in good faith and in the honest belief that the action taken was in the best interests of the corporation. However, this presumption
may be rebutted by evidence of a breach of one of the fiduciary duties. Delaware courts have also imposed a heightened standard of conduct
upon directors of a Delaware corporation who take any action designed to defeat a threatened change in control of the corporation.
In addition, under Delaware law, when the board
of directors of a Delaware corporation approves the sale or break-up of a corporation, the board of directors may, in certain circumstances,
have a duty to obtain the highest value reasonably available to the shareholders. |
| |
|
|
|
|
| Stockholder Suits |
|
Under English law, generally, the company, rather than its shareholders, is the proper claimant in an action in respect of a wrong done to the company or where there is an irregularity in the company’s internal management. Notwithstanding this general position, the Companies Act provides that (i) a court may allow a shareholder to bring a derivative claim (that is, an action in respect of and on behalf of the company) in respect of a cause of action arising from a director’s negligence, default, breach of duty or breach of trust and (ii) a shareholder may bring a claim for a court order where the company’s affairs have been or are being conducted in a manner that is unfairly prejudicial to some of its shareholders. |
|
Under Delaware law, a stockholder may initiate
a derivative action to enforce a right of a corporation if the corporation fails to enforce the right itself. The complaint must:
· state
that the plaintiff was a stockholder at the time of the transaction of which the plaintiff complains or that the plaintiffs shares thereafter
devolved on the plaintiff by operation of law; and
· allege
with particularity the efforts made by the plaintiff to obtain the action the plaintiff desires from the directors and the reasons for
the plaintiff’s failure to obtain the action; or
· state
the reasons for not making the effort.
Additionally, the plaintiff must remain a stockholder
through the duration of the derivative suit. The action will not be dismissed or compromised without the approval of the Delaware Court
of Chancery. |
DESCRIPTION OF AMERICAN DEPOSITARY SHARES
Our Depositary Shares are
deposited pursuant to the Second Amended and Restated Deposit Agreement dated December 18, 2023, among the Company, JPMorgan Chase Bank,
N.A., as depositary, ands holders and beneficial owners of American Depositary Receipts, or the Deposit Agreement. The depositary registers
and delivers the Depositary Shares. Each Depositary Share represents ownership of 400 Ordinary Shares that we will deposit with
the custodian, as agent of the depositary, under the Deposit Agreement.
The depositary's office is
located at 383 Madison Avenue, Floor 11, New York, NY 10179.
The Depositary Share-to-share
ratio is subject to amendment as provided in the form of American Depositary Receipt, or ADR, (which may give rise to fees contemplated
by the form of ADR). In the future, each Depositary Share will also represent any securities, cash or other property deposited with the
depositary but which they have not distributed directly to you.
A beneficial owner is any
person or entity having a beneficial ownership interest in Depositary Shares. A beneficial owner need not be the holder of the ADR evidencing
such Depositary Share. If a beneficial owner is not an ADR holder, it must rely on the holder of the ADR(s) evidencing such Depositary
Shares in order to assert any rights or receive any benefits under the Deposit Agreement. A beneficial owner shall only be able to exercise
any right or receive any benefit under the Deposit Agreement solely through the holder of the ADR(s) evidencing the Depositary Shares
owned by such beneficial owner. The arrangements between a beneficial owner and the holder of the corresponding ADRs may affect the beneficial
owner's ability to exercise any rights it may have.
An ADR holder shall be deemed
to have all requisite authority to act on behalf of any and all beneficial owners of the Depositary Shares evidenced by the ADRs registered
in such ADR holder's name for all purposes under the Deposit Agreement and ADRs. The depositary's only notification obligations under
the Deposit Agreement and the ADRs is to registered ADR holders. Notice to an ADR holder shall be deemed, for all purposes of the Deposit
Agreement and the ADRs, to constitute notice to any and all beneficial owners of the Depositary Shares evidenced by such ADR holder's
ADRs.
Unless certificated ADRs are
specifically requested, all Depositary Shares will be issued on the books of our depositary in book-entry form and periodic statements
will be mailed to you which reflect your ownership interest in such Depositary Shares. In our description, references to American depositary
receipts or ADRs shall include the statements you will receive that reflect your ownership of Depositary Shares.
You may hold Depositary Shares
either directly or indirectly through your broker or other financial institution. If you hold Depositary Shares directly, by having a
Depositary Share registered in your name on the books of the depositary, you are a ADR holder. This description assumes you hold your
Depositary Shares directly. If you hold the Depositary Shares through your broker or financial institution nominee, you must rely on the
procedures of such broker or financial institution to assert the rights of an ADR holder described in this section. You should consult
with your broker or financial institution to find out what those procedures are.
As an ADR holder or beneficial
owner, we will not treat you as a shareholder of ours and you will not have any shareholder rights. The laws of England and Wales govern
shareholder rights. Because the depositary or its nominee will be the shareholder of record for the Ordinary Share represented by all
outstanding Depositary Shares, shareholder rights rest with such record holder. Your rights are those of an ADR holder or of a beneficial
owner. Such rights derive from the terms of the Deposit Agreement to be entered into among us, the depositary and all holders and beneficial
owners from time to time of ADRs issued under the Deposit Agreement and, in the case of a beneficial owner, from the arrangements between
the beneficial owner and the holder of the corresponding ADRs. The obligations of our Company and the depositary and its agents are also
set out in the Deposit Agreement. Because the depositary or its nominee will actually be the registered owner of the Ordinary Shares,
you must rely on it to exercise the rights of a shareholder on your behalf.
The Deposit Agreement, the
ADRs and the Depositary Shares are governed by the internal laws of the State of New York without giving effect to the application of
the conflict of law principles thereof. Under the Deposit Agreement, as an ADR holder or a beneficial owner of Depositary Shares, you
agree that any legal suit, action or proceeding against or involving us or the depositary, arising out of or based upon the Deposit Agreement,
the Depositary Shares, the ADRs or the transactions contemplated thereby, may only be instituted in the United States District Court for
the Southern District of New York (or, in certain cases, the state courts of New York County, New York), and you irrevocably waive any
objection which you may have to the laying of venue of any such proceeding and irrevocably submit to the exclusive jurisdiction of such
courts in any such suit, action or proceeding.
The following is a summary
of what we believe to be the material terms of the Deposit Agreement. Notwithstanding this, because it is a summary, it may not contain
all the information that you may otherwise deem important. For more complete information, you should read the entire form of Deposit Agreement
and the form of ADR that contains the terms of your Depositary Shares. You can read a copy of the form of Deposit Agreement, which is
filed as an exhibit to this Registration Statement on Form F-1 (or amendment thereto) filed with the SEC of which this prospectus forms
a part. You may also obtain a copy of the Deposit Agreement at the SEC's Public Reference Room, which is currently located at 100 F Street,
NE, Washington, DC 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-732-0330.
You may also find the registration statement and the attached Deposit Agreement on the SEC's website at http://www.sec.gov.
Distributions on Deposited Securities, Sales
How will I receive dividends and other distributions
on the Ordinary Shares underlying my Depositary Shares?
We may make various types
of distributions with respect to our securities. The depositary has agreed that, to the extent practicable, it will pay to you the cash
dividends or other distributions it or the custodian receives on Ordinary Shares or other deposited securities, after converting any cash
received into U.S. dollars (if it determines such conversion may be made on a reasonable basis) and, in all cases, making any necessary
deductions provided for in the Deposit Agreement. The depositary may utilize a division, branch or affiliate of JPMorgan Chase Bank, N.A.
to direct, manage and/or execute any public and/or private sale of securities and/or property under the Deposit Agreement. Such division,
branch and/or affiliate may charge the depositary a fee in connection with such sales, which fee is considered an expense of the depositary
chargeable to holders of Depositary Shares. All sales of securities will be handled by the depositary in accordance with its then current
policies. You will receive these distributions in proportion to the number of underlying securities that your Depositary Shares represent.
In all instances where the Deposit Agreement or an ADR refers to a “sale” (or words of similar import) of securities or property,
the depositary may, but shall not be obligated, to effect any such sale unless the securities to be sold are listed and publicly traded
on a securities exchange or there is a public market for the property to be sold. To the extent the securities are not so listed and publicly
traded or there is no public market for the property so distributed by us: (i) the depositary shall, in the event the Deposit Agreement
is terminated and the depositary holds deposited securities that are not listed and publicly traded after the termination date of the
Deposit Agreement, act in accordance with the termination provisions of the Deposit Agreement and form of ADR in respect of such securities
and property; and (ii) in the event the depositary or its custodian receives a distribution other than cash, our Ordinary Shares and/or
rights to acquire our Ordinary Shares, and such distribution consists of securities or property that are not distributed by the depositary
the depositary will be deemed to have sold the aggregate number of securities and/or property so received for nominal value and shall
have no obligation to distribute such securities or any proceeds from the deemed sale thereof to the ADR holders. Furthermore, in the
event the depositary endeavors to make a sale of Ordinary Shares, other securities or property, such securities and/or property may be
sold in a block sale or single lot transaction.
Except as stated below, the
depositary will deliver such distributions to ADR holders in proportion to their interests in the following manner:
| · | Cash. The depositary will distribute any U.S. dollars available to it resulting from a cash dividend
or other cash distribution or the net proceeds of sales of any other distribution or portion thereof (to the extent applicable), on an
averaged or other practicable basis, subject to (i) appropriate adjustments for taxes withheld, (ii) such distribution being permissible
or practicable with respect to certain registered ADR holders, and (iii) deduction of the depositary's and/or its agents' fees and expenses
in (1) converting any foreign currency to U.S. dollars to the extent that it determines that such conversion may be made on a reasonable
basis, (2) transferring foreign currency or U.S. dollars to the United States by such means as the depositary may determine to the extent
that it determines that such transfer may be made on a reasonable basis, (3) obtaining any approval or license of any governmental authority
required for such conversion or transfer, which is obtainable at a reasonable cost and within a reasonable time and (4) making any sale
by public or private means in any commercially reasonable manner. To the extent that any of the deposited securities is not or shall not
be entitled, by reason of its date of issuance, or otherwise, to receive the full amount of such cash dividend, distribution, or net proceeds
of sales, the depositary shall make appropriate adjustments in the amounts distributed to the ADR holders issued in respect of such deposited
securities. To the extent we or the depositary shall be required to withhold and do withhold from any cash dividend, distribution or net
proceeds from sales in respect of any deposited securities an amount on account of taxes, the amount distributed on the Depositary Shares
issued in respect of such deposited securities shall be reduced accordingly. |
To the extent the depositary determines
in its discretion that it would not be permitted by applicable law, rule or regulation, or it would not otherwise be practicable, to convert
foreign currency into U.S. dollars and distribute such U.S. dollars to some or all of the ADR holders entitled thereto, the depositary
may in its discretion distribute some or all of the foreign currency received by the depositary as it deems permissible and practicable
to, or retain and hold such foreign currency uninvested and without liability for interest thereon for the respective accounts of, the
ADR holders entitled to receive the same. To the extent the depositary retains and holds any cash, foreign currency, securities or other
property as permitted under the Deposit Agreement, any and all fees, charges and expenses related to, or arising from, the holding thereof
shall be paid from such cash, foreign currency, securities or other property, or the net proceeds from the sale thereof, thereby reducing
the amount so held. If exchange rates fluctuate during a time when the depositary cannot convert a foreign currency, you may lose some
or all of the value of the distribution.
| · | Shares. In the case of a distribution in Ordinary Shares, the depositary will issue additional
ADRs to evidence the number of Depositary Shares representing such Ordinary Shares. Only whole Depositary Shares will be issued. Any Ordinary
Shares that would result in fractional Depositary Shares will be sold and the net proceeds of the public or private sales of such will
be distributed in the same manner as cash to the ADR holders entitled thereto. |
| · | Rights to receive additional Ordinary Shares. In the case of a distribution of rights to subscribe
for additional Ordinary Shares or other rights, if we timely provide evidence satisfactory to the depositary that it may lawfully distribute
such rights, the depositary will distribute warrants or other instruments in the discretion of the depositary representing such rights.
However, if we do not timely furnish such evidence, the depositary may: |
(i) sell
such rights if practicable and distribute the net proceeds of the public or private sales of such rights in the same manner as cash to
the ADR holders entitled thereto; or
(ii) if
it is not practicable to sell such rights by reason of the non-transferability of the rights, limited markets therefor, their short duration
or otherwise, do nothing and allow such rights to lapse, in which case ADR holders will receive nothing and the rights may lapse.
We have no obligation to file a registration
statement under the Securities Act in order to make any rights available to ADR holders.
| · | Other Distributions. In the case of a distribution of securities or property other than those described
above, the depositary may either (i) distribute such securities or property in any manner it deems equitable and practicable or (ii) to
the extent the depositary deems distribution of such securities or property not to be equitable and practicable, sell such securities
or property and distribute any net proceeds of public or private sales in the same way it distributes cash. |
| · | Elective Distributions. In the case of a dividend payable at the election of our shareholders in
cash or in additional Ordinary Shares, we will notify the depositary at least 30 days prior to the proposed distribution stating whether
or not we wish such elective distribution to be made available to ADR holders. The depositary shall make such elective distribution available
to ADR holders only if (i) we shall have timely requested that the elective distribution is available to ADR holders, (ii) the depositary
shall have determined that such distribution is reasonably practicable and (iii) the depositary shall have received satisfactory documentation
within the terms of the Deposit Agreement including any legal opinions of counsel that the depositary in its reasonable discretion may
request. If the above conditions are not satisfied, the depositary shall, to the extent permitted by law, distribute to the ADR holders,
on the basis of the same determination as is made in the local market in respect of the Ordinary Shares for which no election is made,
either (x) cash or (y) additional Depositary Shares representing such additional Ordinary Shares. If the above conditions are satisfied,
the depositary shall establish procedures to enable ADR holders to elect the receipt of the proposed dividend in cash or in additional
Depositary Shares. There can be no assurance that ADR holders or beneficial owners of Depositary Shares generally, or any ADR holder or
beneficial owner of Depositary Shares in particular, will be given the opportunity to receive elective distributions on the same terms
and conditions as the holders of Ordinary Shares. |
If the depositary determines
in its sole discretion that any distribution described above is not practicable with respect to any or all ADR holders, the depositary
may choose any method of distribution that it deems practicable for such ADR holder, including the distribution of some or all of any
cash, foreign currency, securities or other property (or appropriate documents evidencing the right to receive some or all of any such
cash, foreign currency, security or other property), and/or it may retain some or all of such items, without paying interest on or investing
them, on behalf of the ADR holder as deposited securities, in which case the Depositary Shares will also represent the retained items.
To the extent the depositary does not reasonably believe it will be permitted by applicable law, rule or regulation to convert foreign
currency into U.S. dollars and distribute such U.S. dollars to some or all of the ADR holders, the depositary may in its discretion distribute
the foreign currency received by the depositary to, or hold such foreign currency uninvested and without liability for interest thereon
for the respective accounts of, the ADR holders entitled to receive the same. To the extent the depositary holds such foreign currency,
any and all costs and expenses related to, or arising from, the holding of such foreign currency shall be paid from such foreign currency
thereby reducing the amount so held.
Any U.S. dollars will be paid
via wire transfer and/or distributed by checks drawn on a bank in the United States for whole dollars and cents. Fractional cents will
be withheld without liability and dealt with by the depositary in accordance with its then current practices.
The depositary is not responsible
if it fails to determine that any distribution or action is lawful or reasonably practicable.
There can be no assurance
that the depositary will be able to convert any currency at a specified exchange rate or sell any property, rights, shares or other securities
at a specified price, nor that any of such transactions can be completed within a specified time period. All purchases and sales of securities
will be handled by the depositary in accordance with its then current policies, which are currently set forth on the "Disclosures"
page (or successor page) of www.adr.com (as updated by the depositary from time to time, “ADR.com”).
Deposit, Withdrawal and Cancellation
How does the depositary issue Depositary
Shares?
The depositary will issue
Depositary Shares if you or your broker deposit Ordinary Shares or evidence of rights to receive Ordinary Shares with the custodian and
pay the fees and expenses owing to the depositary in connection with such issuance. In the case of the Depositary Shares to be issued
under this prospectus, we will arrange with the underwriters named herein to deposit such shares.
In connection with the deposit
of Ordinary Shares, the depositary or its custodian may require the following in a form satisfactory to it: (i) a written order directing
the depositary to issue to, or upon the written order of, the person or persons designated in such order Depositary Shares representing
such deposited Shares; (ii) proper endorsements or duly executed instruments of transfer in respect of such deposited Shares; (iii) instruments
assigning to the depositary, its custodian or a nominee of either any distribution on or in respect of such deposited shares or indemnity
therefor; and (iv) proxies entitling the custodian to vote such deposited shares. The deposited Ordinary Shares and any such additional
items are referred to as “deposited securities.” As soon as practicable after the custodian receives deposited securities
pursuant to any such deposit or pursuant to a distribution or change affecting deposited securities, the custodian shall present such
deposited securities for registration of transfer into the name of the depositary, its custodian or a nominee of either, in each case
for the benefit of ADR holders, to the extent such registration is practicable, at the cost and expense of the person making such deposit
(or for whose benefit such deposit is made) and shall obtain evidence satisfactory to it of such registration.
The custodian will hold all
deposited securities (including those being deposited by or on our behalf in connection with the offering to which this prospectus relates)
for the account and to the order of the depositary, in each case for the benefit of ADR holders, to the extent not prohibited by law.
ADR holders and beneficial owners thus have no direct ownership interest in the Ordinary Shares and only have such rights as are contained
in the Deposit Agreement. The custodian will also hold any additional securities, property and cash received on or in substitution for
the deposited securities.
Deposited securities are not
intended to, and shall not, constitute proprietary assets of the depositary, the custodian or their nominees. Beneficial ownership in
deposited securities is intended to be, and shall at all times during the term of the Deposit Agreement continue to be, vested in the
beneficial owners of the Depositary Shares representing such deposited securities. Notwithstanding anything else contained herein, in
the Deposit Agreement, in the form of ADR and/or in any outstanding Depositary Shares, the depositary, the custodian and their respective
nominees are intended to be, and shall at all times during the term of the Deposit Agreement be, the record holder(s) only of the deposited
securities represented by the Depositary Shares for the benefit of the ADR holders. The depositary, on its own behalf and on behalf of
the custodian and their respective nominees, disclaims any beneficial ownership interest in the deposited securities held on behalf of
the ADR holders.
Upon each deposit of Ordinary
Shares, receipt of related delivery documentation and compliance with the other provisions of the Deposit Agreement, including the payment
of the fees and charges of the depositary and any taxes or other fees or charges owing, the depositary will issue an ADR or ADRs in the
name or upon the order of the person entitled thereto evidencing the number of Depositary Shares to which such person is entitled. All
of the Depositary Shares issued will, unless specifically requested to the contrary, be part of the depositary's direct registration system,
and a registered holder will receive periodic statements from the depositary which will show the number of Depositary Shares registered
in such ADR holder's name. An ADR holder can request that the Depositary Shares not be held through the depositary's direct registration
system and that a certificated ADR be issued.
How do ADR holders cancel a Depositary Share
and obtain deposited securities?
When you turn in your ADR
certificate at the depositary's office, or when you provide proper instructions and documentation in the case of direct registration Depositary
Shares, subject to the provisions of or governing our Ordinary Shares (including, without limitation, our governing documents and all
applicable laws, rules and regulations), the depositary will, upon payment of certain applicable fees, charges and taxes, deliver the
underlying Ordinary Shares to you or upon your written order. Delivery of deposited securities in certificated form will be made at the
custodian's office (or from the custodian to the extent dematerialized). At your risk, expense and request, the depositary may deliver
deposited securities (including any certificates therefor) at such other place as you may request.
The depositary may only restrict
the withdrawal of deposited securities in connection with:
| · | temporary delays caused by closing our transfer books or those of the depositary or the deposit of Ordinary
Shares in connection with voting at a shareholders' meeting, or the payment of dividends; |
| · | the payment of fees, taxes and similar charges; or |
| · | compliance with any U.S. or foreign laws or governmental regulations relating to the ADRs or to the withdrawal
of deposited securities. |
This right of withdrawal may
not be limited by any other provision of the Deposit Agreement.
Record Dates
The depositary may, after
consultation with us if practicable, fix record dates (which, to the extent applicable, shall be as near as practicable to any corresponding
record dates set by us) for the determination of the registered ADR holders who will be entitled (or obligated, as the case may be):
| · | to receive any distribution on or in respect of deposited securities, |
| · | to give instructions for the exercise of voting rights, |
| · | to pay any fees assessed by, or owing to, the depositary for administration of the ADR program and for
any expenses as provided for in the ADR, or |
| · | to receive any notice or to act or be obligated in respect of other matters, |
all subject to
the provisions of the Deposit Agreement.
Voting Rights
How do I vote?
If you are an ADR holder and
the depositary asks you to provide it with voting instructions, you may instruct the depositary how to exercise the voting rights for
the Ordinary Shares which underlie your Depositary Shares. As soon as practicable after receipt from us of notice of any meeting at which
the holders of Ordinary Shares are entitled to vote, or of our solicitation of consents or proxies from holders of Ordinary Shares, the
depositary shall fix the Depositary Share record date in accordance with the provisions of the Deposit Agreement, provided that if the
depositary receives a written request from us in a timely manner and at least thirty (30) days prior to the date of such vote or meeting,
the depositary shall, at our expense, distribute to the registered ADR holders a “voting notice” stating (i) final information
particular to such vote and meeting and any solicitation materials, (ii) that each ADR holder on the record date set by the depositary
will, subject to any applicable provisions of the laws of England and Wales, be entitled to instruct the depositary as to the exercise
of the voting rights, if any, pertaining to the deposited securities represented by the Depositary Shares evidenced by such ADR holder's
ADRs and (iii) the manner in which such instructions may be given, including instructions for giving a discretionary proxy to a person
designated by us. Each ADR holder shall be solely responsible for the forwarding of voting notices to the beneficial owners of Depositary
Shares registered in such ADR holder's name. There is no guarantee that ADR holders and beneficial owners generally or any holder or beneficial
owner in particular will receive the notice described above with sufficient time to enable such ADR holder or beneficial owner to return
any voting instructions to the depositary in a timely manner.
Following actual receipt by
the ADR department responsible for proxies and voting of ADR holders' instructions (including, without limitation, instructions of any
entity or entities acting on behalf of the nominee for The Depositary Trust Company, or DTC), the depositary shall, in the manner and
on or before the time established by the depositary for such purpose, endeavor to vote or cause to be voted the deposited securities represented
by the Depositary Shares evidenced by such ADR holders' ADRs in accordance with such instructions insofar as practicable and permitted
under the provisions of or governing deposited securities.
ADR holders are strongly encouraged
to forward their voting instructions to the depositary as soon as possible. For instructions to be valid, the ADR department of the depositary
that is responsible for proxies and voting must receive them in the manner and on or before the time specified, notwithstanding that such
instructions may have been physically received by the depositary prior to such time. The depositary will not itself exercise any voting
discretion in respect of deposited securities. The depositary and its agents will not be responsible for any failure to carry out any
instructions to vote any of the deposited securities, for the manner in which any voting instructions are given, including instructions
to give a discretionary proxy to a person designated by us, for the manner in which any vote is cast, including, without limitation, any
vote cast by a person to whom the depositary is instructed to grant a discretionary proxy pursuant to the terms of the Deposit Agreement,
or for the effect of any such vote. Notwithstanding anything contained in the Deposit Agreement or any ADR, the depositary may, to the
extent not prohibited by any law, rule or regulation, or by the rules, regulations or requirements of any stock exchange on which the
Depositary Shares are listed, in lieu of distribution of the materials provided to the depositary in connection with any meeting of or
solicitation of consents or proxies from holders of deposited securities, distribute to the registered holders of ADRs a notice that provides
such ADR holders with or otherwise publicizes to such ADR holders instructions on how to retrieve such materials or receive such materials
upon request (i.e., by reference to a website containing the materials for retrieval or a contact for requesting copies of the
materials).
There is no guarantee that
you will receive voting materials in time to instruct the depositary to vote and it is possible that you, or persons who hold their Depositary
Shares through brokers, dealers or other third parties, will not have the opportunity to exercise a right to vote.
Reports and Other Communications
Will ADR holders be able to view our reports?
The Deposit Agreement, the
provisions of or governing deposited securities, and any written communications from us which are both received by the custodian or its
nominee as a holder of deposited securities and made generally available to the holders of deposited securities, are available for inspection
by ADR holders at the offices of the depositary in the United States, on the SEC's internet website or upon request to the depositary
(which request may be refused by the depositary at its discretion).
Additionally, if we make any
written communications generally available to holders of our Ordinary Shares, and we furnish copies thereof (or English translations or
summaries) to the depositary, it will distribute the same to registered ADR holders.
Fees and Expenses
What fees and expenses will I be responsible for paying?
The depositary may charge
each person to whom Depositary Shares are issued, including, without limitation, issuances against deposits of Ordinary Shares, issuances
in respect of share distributions, rights and other distributions, issuances pursuant to a stock dividend or stock split declared by us
or issuances pursuant to a merger, exchange of securities or any other transaction or event affecting the Depositary Shares or deposited
securities, and each person surrendering Depositary Shares for withdrawal of deposited securities or whose Depositary Shares are cancelled
or reduced for any other reason, a fee of up to $5.00 for each 100 Depositary Shares (or any portion thereof) issued, delivered, reduced,
cancelled or surrendered, or upon which a share distribution or elective distribution is made or offered, as the case may be. The depositary
may sell (by public or private sale) sufficient securities and property received in respect of a share distribution, rights and/or other
distribution prior to such deposit to pay such charge.
The
following additional fees, charges and expenses shall also be incurred by the ADR holders, the beneficial owners, by any party depositing
or withdrawing Ordinary Shares or by any party surrendering Depositary Shares and/or to whom Depositary Shares are issued (including,
without limitation, issuance pursuant to a stock dividend or stock split declared by us or an exchange of stock regarding the Depositary
Shares or the deposited securities or a distribution of Depositary Shares), whichever is applicable:
| · | a fee of up to U.S.$0.05 per Depositary Share held for any cash distribution made, or for any elective
cash/stock dividend offered, pursuant to the Deposit Agreement; |
| · | an aggregate fee of up to US$0.05 per Depositary Share per calendar year (or portion thereof) for services
performed by the depositary in administering the ADRs (which fee may be charged on a periodic basis during each calendar year and shall
be assessed against holders of ADRs as of the record date or record dates set by the depositary during each calendar year and shall be
payable in the manner described in the next succeeding provision); |
| · | an amount for the reimbursement of such fees, charges and expenses as are incurred by the depositary and/or
any of its agents (including, without limitation, the custodian, as well as charges and expenses incurred on behalf of ADR holders in
connection with compliance with foreign exchange control regulations or any law, rule or regulation relating to foreign investment) in
connection with the servicing of the Ordinary Shares or other deposited securities, the sale of securities (including, without limitation,
deposited securities), the delivery of deposited securities or otherwise in connection with the depositary's or its custodian's compliance
with applicable law, rule or regulation (which fees and charges shall be assessed on a proportionate basis against ADR holders as of the
record date or dates set by the depositary and shall be payable at the sole discretion of the depositary by billing such ADR holders or
by deducting such charge from one or more cash dividends or other cash distributions); |
| · | a fee of up to $0.05 per Depositary Share held for the direct or indirect distribution of securities (other
than Depositary Shares or rights to purchase additional Depositary Shares) or the net cash proceeds from the public or private sale of
such securities, regardless of whether any such distribution and/or sale is made by, for, or received from, or (in each case) on behalf
of, the depositary, us and/or any third party (which fee may be assessed against ADR holders as of a record date set by the depositary); |
| · | stock transfer or other taxes and other governmental charges; |
| · | a transaction fee per cancellation request (including any cancellation request made through SWIFT, facsimile
transmission or any other method of communication) as disclosed on the “Disclosures” page (or successor page) of www.adr.com
(as updated by the depositary from time to time, "ADR.com") and any applicable delivery expenses (which are payable by such
persons or ADR holders); |
| · | transfer or registration fees for the registration of transfer of deposited securities on any applicable
register in connection with the deposit or withdrawal of deposited securities; and |
| · | fees of any division, branch or affiliate of the depositary utilized by the depositary to direct, manage
and/or execute any public and/or private sale of securities under the Deposit Agreement. |
To facilitate the administration
of various depositary receipt transactions, including disbursement of dividends or other cash distributions and other corporate actions,
the depositary may engage the foreign exchange desk within the banking division of JPMorgan Chase Bank, N.A., or the Bank, and/or its
affiliates in order to enter into spot foreign exchange transactions to convert foreign currency into U.S. dollars. For certain currencies,
foreign exchange transactions are entered into with the Bank or an affiliate, as the case may be, acting in a principal capacity. For
other currencies, foreign exchange transactions are routed directly to and managed by an unaffiliated local custodian (or other third
party local liquidity provider), and neither the Bank nor any of its affiliates is a party to such foreign exchange transactions.
The foreign exchange rate
applied to a foreign exchange transaction will be either (a) a published benchmark rate, or (b) a rate determined by a third party local
liquidity provider, in each case plus or minus a spread, as applicable. The depositary will disclose which foreign exchange rate and spread,
if any, apply to such currency on the “Disclosures” page (or successor page) of ADR.com. Such applicable foreign exchange
rate and spread may (and neither the depositary, the Bank nor any of their affiliates is under any obligation to ensure that such rate
does not) differ from rates and spreads at which comparable transactions are entered into with other customers or the range of foreign
exchange rates and spreads at which the Bank or any of its affiliates enters into foreign exchange transactions in the relevant currency
pair on the date of the foreign exchange transaction. Additionally, the timing of execution of a foreign exchange transaction varies according
to local market dynamics, which may include regulatory requirements, market hours and liquidity in the foreign exchange market or other
factors. Furthermore, the Bank and its affiliates may manage the associated risks of their position in the market in a manner they deem
appropriate without regard to the impact of such activities on the depositary, us, ADR holders or beneficial owners. The spread applied
does not reflect any gains or losses that may be earned or incurred by the Bank and its affiliates as a result of risk management or other
hedging related activity.
Notwithstanding the foregoing,
to the extent we provide U.S. dollars to the depositary, neither the Bank nor any of its affiliates will execute a foreign exchange transaction
as set forth herein. In such case, the depositary will distribute the U.S. dollars received from us.
Further details relating
to the applicable foreign exchange rate, the applicable spread and the execution of foreign exchange transactions will be provided by
the depositary on ADR.com. Each holder and beneficial owner by holding or owning an ADR or Depositary Share or an interest therein, and
we, each acknowledge and agree that the terms applicable to foreign exchange transactions disclosed from time to time on ADR.com will
apply to any foreign exchange transaction executed pursuant to the Deposit Agreement.
We will pay all other fees,
charges and expenses of the depositary and any agent of the depositary (except the custodian) pursuant to agreements from time to time
between us and the depositary.
The right of the depositary
to charge and receive payment of fees, charges and expenses survives the termination of the Deposit Agreement, and shall extend for those
fees, charges and expenses incurred prior to the effectiveness of any resignation or removal of the depositary.
The fees and charges described
above may be amended from time to time by agreement between us and the depositary.
The depositary anticipates
reimbursing us for certain expenses incurred by us that are related to the establishment and maintenance of the ADR program upon such
terms and conditions as we and the depositary may agree from time to time. The depositary may make available to us a set amount or a portion
of the depositary fees charged in respect of the ADR program or otherwise upon such terms and conditions as we and the depositary may
agree from time to time. The depositary may also agree to reduce or waive certain fees that would normally be charged on Depositary Shares
issued to or at the direction of, or otherwise held by, us and/or certain holders and beneficial owners and holders and beneficial owners
of Ordinary Shares of ours. The depositary collects its fees for issuance and cancellation of Depositary Shares directly from investors
depositing Ordinary Shares or surrendering Depositary Shares for the purpose of withdrawal or from intermediaries acting for them. The
depositary collects fees for making distributions to investors by deducting those fees from the amounts distributed or by selling a portion
of distributable property to pay the fees. The depositary may collect its annual fee for depositary services by deduction from cash distributions,
or by directly billing investors, or by charging the book-entry system accounts of participants acting for them. The depositary will generally
set off the amounts owing from distributions made to holders of Depositary Shares. If, however, no distribution exists and payment owing
is not timely received by the depositary, the depositary may refuse to provide any further services to ADR holders that have not paid
those fees and expenses owing until such fees and expenses have been paid. At the discretion of the depositary, all fees and charges owing
under the Deposit Agreement are due in advance and/or when declared owing by the depositary.
Payment of Taxes
ADR holders and/or beneficial
owners must pay any tax or other governmental charge payable by the custodian or the depositary on any Depositary Share or ADR, deposited
security or distribution. If any taxes or other governmental charges (including any penalties and/or interest) shall become payable by
or on behalf of the custodian or the depositary with respect to any ADR, any deposited securities represented by the Depositary Shares
evidenced thereby or any distribution thereon such tax or other governmental charge shall be paid by the ADR holder thereof to the depositary
and by holding or owning, or having held or owned, an ADR or any Depositary Shares evidenced thereby, the ADR holder and all beneficial
owners thereof, and all prior ADR holders and beneficial owners thereof, jointly and severally, agree to indemnify, defend and save harmless
each of the depositary and its agents in respect of such tax or other governmental charge. Notwithstanding the depositary’s right
to seek payment from current or former ADR holders and beneficial owners, each ADR holder and beneficial owner, and each prior ADR holder
and beneficial owner, by holding or owning, or having held or owned, an ADR or an interest in Depositary Shares acknowledges and agrees
that the depositary has no obligation to seek payment of amounts owing from any current or prior beneficial owner. If an ADR holder owes
any tax or other governmental charge, the depositary may (i) deduct the amount thereof from any cash distributions, or (ii) sell deposited
securities (by public or private sale) and deduct the amount owing from the net proceeds of such sale. In either case, the ADR holder
remains liable for any shortfall. If any tax or governmental charge is unpaid, the depositary may also refuse to effect any registration,
registration of transfer, split-up or combination of ADRs or withdrawal of deposited securities until such payment is made. If any tax
or governmental charge is required to be withheld on any cash distribution, the depositary may deduct the amount required to be withheld
from any cash distribution or, in the case of a non-cash distribution, sell the distributed property or securities (by public or private
sale) in such amounts and in such manner as the depositary deems necessary and practicable to pay such taxes and distribute any remaining
net proceeds or the balance of any such property after deduction of such taxes to the ADR holders entitled thereto. Neither we nor the
depositary nor any of our or its respective agents, shall be liable to ADR holders or beneficial owners of the Depositary Shares for failure
of any of them to comply with applicable tax laws, rules and/or regulations.
As an ADR holder or beneficial
owner, you will be agreeing to indemnify us, the depositary, its custodian and any of our or their respective officers, directors, employees,
agents and affiliates against, and hold each of them harmless from, any claims by any governmental authority with respect to taxes, additions
to tax, penalties or interest arising out of any refund of taxes, reduced rate of withholding at source or other tax benefit obtained,
which obligations shall survive any transfer or surrender of Depositary Shares or the termination of the Deposit Agreement.
Reclassifications, Recapitalizations and Mergers
If we take certain actions
that affect the deposited securities, including (i) any change in par value, split-up, consolidation, cancellation or other reclassification
of deposited securities or (ii) any distributions of Ordinary Shares or other property not made to holders of ADRs or (iii) any recapitalization,
reorganization, merger, consolidation, liquidation, receivership, bankruptcy or sale of all or substantially all of our assets, then the
depositary may choose to, and shall if reasonably requested by us:
| · | distribute additional or amended ADRs; |
| · | distribute cash, securities or other property it has received in connection with such actions; |
| · | sell by public or private sale any securities or property received and distribute the proceeds as cash;
or |
If the depositary does not choose any of the above
options, any of the cash, securities or other property it receives will constitute part of the deposited securities and each Depositary
Share will then represent a proportionate interest in such property.
Amendment and Termination
How may the Deposit Agreement be amended?
We
may agree with the depositary to amend the Deposit Agreement and the Depositary Shares without your consent for any reason. ADR holders
must be given at least thirty (30) days' notice of any amendment that imposes or increases any fees on a per Depositary Share basis, charges
or expenses (other than stock transfer or other taxes and other governmental charges, transfer or registration fees, a transaction fee
per cancellation request (including any cancellation request made through SWIFT, facsimile transmission or any other method of communication),
applicable delivery expenses or other such fees, charges or expenses), or otherwise prejudices any substantial existing right of ADR holders
or beneficial owners. Such notice need not describe in detail the specific amendments effectuated thereby, but must identify to ADR holders
and beneficial owners a means to access the text of such amendment. If an ADR holder or beneficial owner continues to hold an ADR or ADRs,
or an interest therein, after being so notified, such ADR holder and any beneficial owner are deemed to agree to such amendment and to
be bound by the Deposit Agreement as so amended. No amendment, however, will impair your right to surrender your Depositary Shares and
receive the underlying securities, except in order to comply with mandatory provisions of applicable law.
Any
amendments or supplements that (i) are reasonably necessary (as agreed by us and the depositary) in order for (a) the Depositary Shares
to be registered on Form F-6 under the Securities Act or (b) the Depositary Shares or Ordinary Shares to be traded solely in electronic
book-entry form and (ii) do not in either such case impose or increase any fees or charges to be borne by ADR holders, shall be deemed
not to prejudice any substantial rights of ADR holders or beneficial owners. Notwithstanding the foregoing, if any governmental body or
regulatory body should adopt new laws, rules or regulations that would require amendment or supplement of the Deposit Agreement or the
form of ADR to ensure compliance therewith, we and the depositary may amend or supplement the Deposit Agreement and the form of ADR (and
all outstanding ADRs) at any time in accordance with such changed laws, rules or regulations. Such amendment or supplement to the Deposit
Agreement in such circumstances may become effective before a notice of such amendment or supplement is given to ADR holders or within
any other period of time as required for compliance.
Notice of any amendment to
the Deposit Agreement or form of ADRs shall not need to describe in detail the specific amendments effectuated thereby, and failure to
describe the specific amendments in any such notice shall not render such notice invalid, provided, however, that, in each such case,
the notice given to the ADR holders identifies a means for ADR holders and beneficial owners to retrieve or receive the text of such amendment
(i.e., upon retrieval from the SEC's, the depositary's or our website or upon request from the depositary).
How may the Deposit Agreement be terminated?
The
depositary may at any time, and shall at our written direction, terminate the Deposit Agreement and the ADRs by mailing notice of such
termination to the registered holders of ADRs at least thirty (30) days prior to the date fixed in such notice for such termination; provided,
however, if the depositary shall have (i) resigned as depositary under the Deposit Agreement, notice of such termination by the depositary
shall not be provided to registered ADR holders unless a successor depositary shall not be operating under the Deposit Agreement within
sixty (60) days of the date of such resignation, and (ii) been removed as depositary under the Deposit Agreement, notice of such termination
by the depositary shall not be provided to registered holders of ADRs unless a successor depositary shall not be operating under the Deposit
Agreement on the 60th day after our notice of removal was first provided to the depositary. Notwithstanding anything to the contrary in
the Deposit Agreement, the depositary may terminate the Deposit Agreement (a) without notifying us, but subject to giving thirty (30)
days' notice to the ADR holders, under the following circumstances: (i) in the event of our bankruptcy, liquidation proceedings or insolvency,
(ii) if our Depositary Shares are delisted from a “national securities exchange” (that has registered with the Commission
under Section 6 of the Securities Exchange Act of 1934, as amended), (iii) if we effect (or will effect) a redemption of all or substantially
all of the deposited securities, or a cash or share distribution representing a return of all or substantially all of the value of the
deposited securities, (iv) there are no deposited securities with respect to Depositary Shares remaining, including if the deposited securities
are cancelled, or the deposit securities have been deemed to have no value, or (v) there occurs a merger, consolidation, sale of assets
or other transaction as a result of which securities or other property are delivered in exchange for or in lieu of deposited securities,
and (b) immediately without prior notice to the Company, any ADR holder or beneficial owner or any other person if (i) required by any
law, rule or regulation relating to sanctions by any governmental authority or body, (ii) the depositary would be subject to liability
under or pursuant to any law, rule or regulation, or (iii) required by any governmental authority or body, in each case under (b) as determined
by the depositary in its reasonable discretion.
If our Ordinary Shares are
not listed and publicly traded on a stock exchange or in a securities market as of the date so fixed for termination or if, for any reason,
the depositary does not sell the deposited securities, then after such date fixed for termination, the depositary shall use its reasonable
efforts to ensure that the Depositary Shares cease to be eligible for settlement within DTC and that neither DTC nor any of its nominees
shall thereafter be an ADR holder. At such time as the Depositary Shares cease to be DTC eligible and/or neither DTC nor any of its nominees
is an ADR holder, to the extent we are not, to the depositary’s knowledge, insolvent or in bankruptcy or liquidation, the depositary
shall (A) cancel all outstanding ADRs; (B) request DTC to provide the depositary with information on those holding Depositary Shares through
DTC and, upon receipt thereof, revise the ADR register to reflect the information provided by DTC; (C) instruct its custodian to deliver
all deposited securities to us, a subsidiary or affiliate of ours (the company representative) or an independent trust company engaged
by us (the trustee) to hold those deposited securities in trust for the beneficial owners of the ADRs if we are not permitted to hold
any of the deposited securities under applicable law and/or we have directed the depositary to deliver such deposited securities to the
company representative or trustee along with a stock transfer form and/or such other instruments of transfer covering such deposited securities
as are needed under applicable law, in either case referring to the names set forth on the ADR register and (D) provide us with a copy
of the ADR register.
Upon receipt of any instrument
of transfer covering such deposited securities and the ADR Register, we have agreed that we will, depending on what is legally required
under local law, either deliver to each person reflected on such ADR register appropriate documentation to effect the transfer to such
persons of the deposited securities previously represented by the Depositary Shares evidenced by their ADRs, approve the transfer of the
deposited securities previously represented by their ADRs to the persons listed on the ADR register (as applicable), procure the relevant
updates to the register of members of the Company to reflect the transfer of the deposited securities previously represented by their
ADRs to the persons listed on the ADR register (as applicable) and provide the depositary with a certified copy of the updated register
of our shareholders.
To the extent the depositary
reasonably believes that we are insolvent, or if we are in receivership, have filed for bankruptcy and/or are otherwise in restructuring,
administration or liquidation, and in any such case the deposited securities are not listed and publicly traded on a securities exchange
after the termination date, or if, for any reason, the depositary believes it is not able to or cannot practicably sell the deposited
securities promptly and without undue effort, the deposited securities shall be deemed to have no value (and such holder shall be deemed
to have instructed the depositary that the deposited securities have no value). The depositary may (and, by holding an ADR or an interest
therein, all holders irrevocably consent and agree that the depositary may) instruct its custodian to deliver all deposited securities
to us (acting, as applicable by an administrator, receiver, administrative receiver, liquidator, provisional liquidator, restructuring
officer, interim restructuring officer, trustee, controller or other entity overseeing the bankruptcy, insolvency, administration, restructuring
or liquidation process) and notify us that the deposited securities are surrendered for no consideration. The Deposit Agreement requires
us, subject to applicable law, to promptly accept the surrender of the deposited securities for no consideration and deliver to the depositary
a written notice confirming (A) the acceptance of the surrender of the deposited securities for no consideration and (B) the cancellation
of such deposited securities. Promptly after notifying us that the deposited securities are surrendered for no consideration and irrespective
of whether we haves complied with the immediately preceding sentence, the depositary shall notify ADR holders that their Depositary Shares
have been cancelled with no consideration being payable to such ADR holders.
Upon the depositary's compliance
with the provisions of any of the above three paragraphs, the depositary and its agents shall be discharged from all, and cease to have
any, obligations under the Deposit Agreement and the ADRs.
If our Ordinary Shares are
listed and publicly traded on a securities exchange and the depositary believes that it is able, permissible and practicable to sell the
deposited securities without undue effort, then the depositary may endeavor to publicly or privately sell (as long as it may lawfully
do so) the deposited securities, which sale may be effected in a block sale/single lot transaction and, after the settlement of such sale(s),
to the extent legally permissible and practicable, distribute or hold in an account (which may be a segregated or unsegregated account)
the net proceeds of such sale(s), less any amounts owing to the depositary (including, without limitation, cancellation fees), together
with any other cash then held by it under the Deposit Agreement, in trust, without liability for interest, for the pro rata benefit of
the holders entitled thereto. After making such sale, the depositary shall be discharged from all obligations in respect of the Deposit
Agreement and the ADRs, except to account for such net proceeds and other cash.
Limitations on Obligations and Liability
Limits on our obligations and the obligations
of the depositary; limits on liability to ADR holders, beneficial owners and others
Prior to the issue, registration,
registration of transfer, split-up, combination, or cancellation of any ADRs, or the delivery of any distribution in respect thereof,
and from time to time in the case of the production of proofs as described below, we or the depositary or its custodian may require:
| · | payment with respect thereto of (i) any stock transfer or other tax or other governmental charge, (ii)
any stock transfer or registration fees in effect for the registration of transfers of Ordinary Shares or other deposited securities upon
any applicable register and (iii) any applicable fees and expenses described in the Deposit Agreement; |
| · | the production of proof satisfactory to it of (i) the identity of any signatory and genuineness of any
signature and (ii) such other information, including without limitation, information as to citizenship, residence, exchange control approval,
beneficial or other ownership of, or interest in, any securities, compliance with applicable law, regulations, provisions of or governing
deposited securities and terms of the Deposit Agreement and the ADRs, as it may deem necessary or proper; and |
| · | compliance with such regulations as the depositary may establish consistent with the Deposit Agreement
or as the depositary believes are required, necessary or advisable in order to comply with applicable laws, rules and regulations. |
The issuance of ADRs, the
acceptance of deposits of Ordinary Shares, the registration, registration of transfer, split-up or combination of ADRs or the withdrawal
of Ordinary Shares, may be suspended, generally or in particular instances, when the ADR register or any register for deposited securities
is closed or when any such action is deemed required, necessary or advisable by the depositary for any reason provided that the ability
to withdraw Ordinary Shares may only be limited under the following circumstances: (i) temporary delays caused by closing transfer
books of the depositary or our transfer books or the deposit of Ordinary Shares in connection with voting at a shareholders' meeting,
or the payment of dividends, (ii) the payment of fees, taxes, and similar charges, and (iii) compliance with any laws or governmental
regulations relating to ADRs or to the withdrawal of deposited securities. The depositary may close the ADR register (and/or any portion
thereof) at any time or from time to time when deemed expedient by it.
The Deposit Agreement expressly
limits the obligations and liability of the depositary, the depositary’s custodian or ourselves and each of our and their respective
directors, officers, employees, agents and affiliates, provided, however, that no provision of the Deposit Agreement is intended to constitute
a waiver or limitation of any rights that ADR holders or beneficial owners may have under the Securities Act or the Securities Exchange
Act of 1934, to the extent applicable. The Deposit Agreement provides that each of us, the depositary and our respective directors, officers,
employees, agents and affiliates will:
| · | incur or assume no liability (including, without limitation, to ADR holders or beneficial owners) if any
present or future law, rule, regulation, fiat, order or decree of the United States, England, Wales or any other country or jurisdiction,
or of any governmental or regulatory authority or any securities exchange or market or automated quotation system, the provisions of or
governing any Deposited Securities, any present or future provision of the Company's charter, any act of God, war, terrorism, epidemic,
pandemic, nationalization, expropriation, currency restrictions, extraordinary market conditions, work stoppage, strike, civil unrest,
revolutions, rebellions, explosions, cyber, ransomware or malware attack, computer failure or circumstance our, the depositary's or our
respective directors’, officers’, employees’, agents' or affiliates’ direct and immediate control shall prevent
or delay, or shall cause any of them to be subject to any civil or criminal penalty in connection with, any act which the Deposit Agreement
or the ADRs provide shall be done or performed by any such party (including, without limitation, voting); |
| · | incur or assume no liability (including, without limitation, to ADR holders or beneficial owners) by reason
of any non-performance or delay, caused as aforesaid, in the performance of any act or things which by the terms of the Deposit
Agreement it is provided shall or may be done or performed or any exercise or failure to exercise discretion under the Deposit Agreement
or the ADRs including, without limitation, any failure to determine that any distribution or action may be lawful or reasonably practicable; |
| · | incur or assume no liability (including, without limitation, to holders or beneficial owners) if it performs
its obligations specifically set forth in the Deposit Agreement and ADRs without gross negligence or willful misconduct; |
| · | in the case of the depositary and its agents, be under no obligation to appear in, prosecute or defend
any action, suit or other proceeding in respect of any deposited securities the Depositary Shares or the ADRs; |
| · | in the case of us and our agents, be under no obligation to appear in, prosecute or defend any action,
suit or other proceeding in respect of any deposited securities the Depositary Shares or the ADRs, which in our or our agents’ opinion,
as the case may be, may involve us in expense or liability, unless indemnity satisfactory to us or our agent, as the case may be against
all expense (including fees and disbursements of counsel) and liability is furnished as often as may be requested; |
| · | not be liable (including, without limitation, to ADR holders or beneficial owners) for any action or inaction
by it in reliance upon the advice of or information from any legal counsel, any accountant, any person presenting Ordinary Shares for
deposit, any registered holder of ADRs, or any other person believed by it to be competent to give such advice or information and/or,
in the case of the depositary, from us; or |
| · | may rely and shall be protected in acting upon any written notice, request, direction, instruction or
document believed by it to be genuine and to have been signed, presented or given by the proper party or parties. |
The depositary shall not be
a fiduciary or have any fiduciary duty to ADR holders or beneficial owners.
The depositary and its agents
may fully respond to any and all demands or requests for information maintained by or on its behalf in connection with the Deposit Agreement,
any registered holder or holders of ADRs, any ADRs or otherwise related to the Deposit Agreement or ADRs to the extent such information
is requested or required by or pursuant to any lawful authority, including without limitation laws, rules, regulations, administrative
or judicial process, banking, securities or other regulators. The depositary shall not be liable for the acts or omissions made by, or
the insolvency of, any securities depository, clearing agency or settlement system. Furthermore, the depositary shall not be responsible
for, and shall incur no liability in connection with or arising from, the insolvency of any custodian that is not a branch or affiliate
of JP Morgan. Notwithstanding anything to the contrary contained in the Deposit Agreement or any ADRs, the depositary shall not be responsible
for, and shall incur no liability in connection with or arising from, any act or omission to act on the part of the custodian except to
the extent that any registered ADR holder has incurred liability directly as a result of the custodian having (i) committed fraud or willful
misconduct in the provision of custodial services to the depositary or (ii) failed to use reasonable care in the provision of custodial
services to the depositary as determined in accordance with the standards prevailing in the jurisdiction in which the custodian is located.
The depositary and the custodian(s) may use third party delivery services and providers of information regarding matters such as, but
not limited to, pricing, proxy voting, corporate actions, class action litigation and other services in connection with the ADRs and the
Deposit Agreement, and use local agents to provide services such as, but not limited to, attendance at any meetings of security holders
of issuers. Although the depositary and the custodian will use reasonable care (and cause their agents to use reasonable care) in the
selection and retention of such third-party providers and local agents, they will not be responsible for any errors or omissions made
by them in providing the relevant information or services.
The
depositary has no obligation to inform ADR holders or beneficial owners about the requirements of the laws, rules or regulations or any
changes therein or thereto of England, Wales, the United States or any other country or jurisdiction or of any governmental or regulatory
authority or any securities exchange or market or automated quotation system.
Additionally,
none of the depositary, the custodian or us, or any of their or our respective directors, officers, employees, agents or affiliates shall
be liable for the failure by any registered holder of ADRs or beneficial owner to obtain the benefits of credits or refunds of non-U.S.
tax paid against such ADR holder's or beneficial owner's income tax liability. The depositary is under no obligation to provide the ADR
holders and beneficial owners, or any of them, with any information about our tax status. None of us, the depositary, the custodian or
any of our or their respective directors, officers, employees, agents or affiliates shall incur any liability for any tax or tax consequences
that may be incurred by registered ADR holders or beneficial owners on account of their ownership or disposition of ADRs or Depositary
Shares.
Neither the depositary nor
its agents will be responsible for any failure to carry out any instructions to vote any of the deposited securities, for the manner in
which any voting instructions are given, including instructions to give a discretionary proxy to a person designated by us, for the manner
in which any vote is cast, including, without limitation, any vote cast by a person to whom the depositary is instructed to grant a discretionary
proxy pursuant to the terms of the Deposit Agreement, or for the effect of any such vote. The depositary shall endeavor to effect any
sale of securities or other property and any conversion of currency, securities or other property, in each case as is referred to or contemplated
in the Deposit Agreement or the form of ADR, in accordance with the depositary's normal practices and procedures under the circumstances
applicable to such sale or conversion, but shall have no liability (in the absence of its own willful default or gross negligence or that
of its agents, officers, directors or employees) with respect to the terms of any such sale or conversion, including the price at which
such sale or conversion is effected, or if such sale or conversion shall not be practicable, or shall not be believed, deemed or determined
to be practicable by the depositary. Specifically, the depositary shall not have any liability for the price received in connection with
any public or private sale of securities (including, without limitation, for any sale made at a nominal price), the timing thereof or
any delay in action or omission to act nor shall it be responsible for any error or delay in action, omission to act, default or negligence
on the part of the party so retained in connection with any such sale or proposed sale. The depositary shall not incur any liability in
connection with or arising from any failure, inability or refusal by us or any other party, including any share registrar, transfer agent
or other agent appointed by us, the depositary or any other party, to process any transfer, delivery or distribution of cash, shares,
other securities or other property, including without limitation upon the termination of the Deposit Agreement, or otherwise to comply
with any provisions of the Deposit Agreement that are applicable to it. The depositary may rely upon instructions from us or our counsel
in respect of any approval or license required for any currency conversion, transfer or distribution. The depositary shall not incur any
liability for the content of any information submitted to it by us or on our behalf for distribution to ADR holders or for any inaccuracy
of any translation thereof, for any investment risk associated with acquiring an interest in the deposited securities, for the validity
or worth of the deposited securities, for the credit-worthiness of any third party, for allowing any rights to lapse upon the terms of
the Deposit Agreement or for the failure or timeliness of any notice from us. The depositary shall not be liable for any acts or omissions
made by a successor depositary whether in connection with a previous act or omission of the depositary or in connection with any matter
arising wholly after the removal or resignation of the depositary.
We have agreed to indemnify
the depositary under certain circumstances and the depositary has agreed to indemnify us under certain circumstances.
Notwithstanding any other
provision of the Deposit Agreement or the ADRs to the contrary, neither we nor the depositary, nor any of their respective agents shall
be liable to the other for any indirect, special, punitive or consequential damages or lost profits, in each case of any form incurred
by any of them or any other person or entity (including, without limitation, holders and beneficial owners), whether or not foreseeable
and regardless of the type of action in which such a claim may be brought, collectively Special Damages, except (i) to the extent
such Special Damages arise from the gross negligence or willful misconduct of the party from whom indemnification is sought or (ii) to
the extent Special Damages arise from or out of a claim brought by a third party (including, without limitation, holders and beneficial
owners) against the depositary or its agents acting under the Deposit Agreement, except to the extent such Special Damages arise out of
the gross negligence or willful misconduct of the party seeking indemnification hereunder.
In the Deposit Agreement each
party thereto (including, for avoidance of doubt, each ADR holder and beneficial owner) irrevocably waives, to the fullest extent permitted
by applicable law, any right it may have to a trial by jury in any suit, action or proceeding against the depositary and/or us directly
or indirectly arising out of or relating to the Ordinary Shares or other deposited securities, the Depositary Shares or the ADRs, the
Deposit Agreement or any transaction contemplated therein, or the breach thereof (whether based on contract, tort, common law or any other
theory).
No provision of the Deposit
Agreement or the ADRs is intended to constitute a waiver or limitation of any rights which an ADR holder or any beneficial owner may have
under the Securities Act or the Securities Exchange Act of 1934, as amended, to the extent applicable.
The depositary and its agents
may own and deal in any class of securities of our Company and our affiliates and in Depositary Shares.
Disclosure of Interest in Depositary Shares
To the extent that the provisions
of or governing any deposited securities may require disclosure of or impose limits on beneficial or other ownership of, or interest in,
deposited securities, other Ordinary Shares and other securities and may provide for blocking transfer, voting or other rights to enforce
such disclosure or limits, you as ADR holders or beneficial owners agree to comply with all such disclosure requirements and ownership
limitations and to comply with any reasonable instructions we may provide in respect thereof. We reserve the right to instruct ADR holders
(and through any such ADR holder, the beneficial owners of Depositary Shares evidenced by the ADRs registered in such ADR holder’s
name) to deliver their Depositary Shares for cancellation and withdrawal of the deposited securities so as to permit us to deal directly
with the ADR holder and/or beneficial owner of Depositary Shares as a holder of shares and, by holding a Depositary Share or an interest
therein, ADR holders and beneficial owners of Depositary Shares will be agreeing to comply with such instructions.
Each ADR holder agrees to
provide such information as the Company may request in a disclosure notice, or a Disclosure Notice, given pursuant to the Companies Act
or the Articles of Association of the Company. Each ADR holder acknowledges that it understands that failure to comply with a Disclosure
Notice may result in the imposition of sanctions against the holder of the underlying Ordinary Shares in respect of which the non-complying
person is or was, or appears to be or has been, interested as provided in the Companies Act and the Articles of Association which currently
may include, subject to the granting of an appropriate order by the court, the withdrawal of the voting rights of such Ordinary Shares
and the imposition of restrictions on the rights to receive dividends on and to transfer such Ordinary Shares. In addition, each ADR holder
agrees to comply with the provisions of the Disclosure Guidance and Transparency Rules published by the United Kingdom Financial Conduct
Authority (as amended from time to time) with regard to the notification to the Company of interests in Ordinary Shares underlying Depositary
Shares and certain financial instruments, which currently provide, inter alia, that an ADR holder must notify the Company
of the percentage of its voting rights he holds as a shareholder or holds or is deemed to hold through his direct or indirect holding
of certain financial instruments (or a combination of such holdings) if the percentage of those voting rights reaches, exceeds or falls
below specified thresholds.
Books of Depositary
The depositary or its agent
will maintain a register for the registration, registration of transfer, combination and split-up of ADRs, which register shall include
the depositary's direct registration system. Registered holders of ADRs may inspect such records at the depositary's office at all reasonable
times, but solely for the purpose of communicating with other ADR holders in the interest of the business of our Company or a matter relating
to the Deposit Agreement. Such register (and/or any portion thereof) may be closed at any time or from time to time, when deemed expedient
by the depositary.
The depositary will maintain
facilities for the delivery and receipt of ADRs.
Appointment
In the Deposit Agreement,
each registered holder of ADRs and each beneficial owner, upon acceptance of any Depositary Shares or ADRs (or any interest in any of
them) issued in accordance with the terms and conditions of the Deposit Agreement will be deemed for all purposes to:
| · | be a party to and bound by the terms of the Deposit Agreement and the applicable ADR or ADRs, |
| · | appoint the depositary its attorney-in-fact, with full power to delegate, to act on its behalf and to
take any and all actions contemplated in the Deposit Agreement and the applicable ADR or ADRs, to adopt any and all procedures necessary
to comply with applicable laws and to take such action as the depositary in its sole discretion may deem necessary or appropriate to carry
out the purposes of the Deposit Agreement and the applicable ADR and ADRs, the taking of such actions to be the conclusive determinant
of the necessity and appropriateness thereof; and |
| · | acknowledge and agree that (i) nothing in the Deposit Agreement or any ADR shall give rise to a partnership
or joint venture among the parties thereto, nor establish a fiduciary or similar relationship among such parties, (ii) the depositary,
its divisions, branches and affiliates, and their respective agents, may from time to time be in the possession of non-public information
about us, ADR holders, beneficial owners and/or their respective affiliates, (iii) the depositary and its divisions, branches and affiliates
may at any time have multiple banking relationships with us, ADR holders, beneficial owners and/or the affiliates of any of them, (iv)
the depositary and its divisions, branches and affiliates may, from time to time, be engaged in transactions in which parties adverse
to us, ADR holders, or beneficial owners may have interests, (v) nothing contained in the Deposit Agreement or any ADR(s) shall (A) preclude
the depositary or any of its divisions, branches or affiliates from engaging in any such transactions or establishing or maintaining any
such relationships, or (B) obligate the depositary or any of its divisions, branches or affiliates to disclose any such transactions or
relationships or to account for any profit made or payment received in any such transactions or relationships, (vi) the depositary shall
not be deemed to have knowledge of any information held by any branch, division or affiliate of the depositary and (vii) notice to an
ADR holder shall be deemed, for all purposes of the Deposit Agreement and the ADRs, to constitute notice to any and all beneficial owners
of the Depositary Shares evidenced by such ADR holder's ADRs. For all purposes under the Deposit Agreement and the ADRs, the ADR holders
thereof shall be deemed to have all requisite authority to act on behalf of any and all beneficial owners of the Depositary Shares evidenced
by such ADRs. |
Consent to Jurisdiction
In the Deposit Agreement,
we have submitted to the non-exclusive jurisdiction of the state and federal courts in New York, New York and appointed an agent for service
of process on our behalf. Any action based on the Deposit Agreement, the Depositary Shares, the ADRs or the transactions contemplated
therein or thereby may also be instituted by the depositary against us in any competent court in England and/or Wales, the United States
and/or any other court of competent jurisdiction.
Under the Deposit Agreement,
by holding or owning an ADR or Depositary Share or an interest therein, holders and beneficial owners each irrevocably agree that (i)
any legal suit, action or proceeding against or involving holders or beneficial owners brought by us or the depositary, arising out of
or based upon the Deposit Agreement, the Depositary Shares, the ADRs or the transactions contemplated therein or thereby, may be instituted
in a state or federal court in New York, New York, and by holding or owning an ADR or Depositary Share or an interest therein each irrevocably
waives any objection that it may now or hereafter have to the laying of venue of any such proceeding, and irrevocably submits to the non-exclusive
jurisdiction of such courts in any such suit, action or proceeding and (ii) any legal suit, action or proceeding against or involving
us and/or the depositary brought by holders or beneficial owners, arising out of or based upon the Deposit Agreement, the Depositary Shares,
the ADRs or the transactions contemplated therein or thereby, including, without limitation, claims under the Securities Act may be instituted
only in the United States District Court for the Southern District of New York (or in the state courts of New York County in New York
if either (a) the United States District Court for the Southern District of New York lacks subject matter jurisdiction over a particular
dispute or (b) the designation of the United States District Court for the Southern District of New York as the exclusive forum for any
particular dispute is, or becomes, invalid, illegal or unenforceable). In the Deposit Agreement each holder and beneficial owner irrevocably
waives any objection which it may at any time have to the laying of venue of any such proceeding, and irrevocably submits to the jurisdiction
of such courts in any such suit, action or proceeding.
Jury Trial Waiver
In the Deposit Agreement,
each party thereto (including, for the avoidance of doubt, each holder and beneficial owner of, and/or holder of interests in, Depositary
Shares or ADRs) irrevocably waives, to the fullest extent permitted by applicable law, any right it may have to a trial by jury in any
suit, action or proceeding against the depositary and/or us directly or indirectly arising out of, based on or relating in any way to
the Ordinary Shares or other deposited securities, the Depositary Shares or the ADRs, the Deposit Agreement or any transaction contemplated
therein, or the breach thereof (whether based on contract, tort, common law or any other theory), including any claim under the U.S. federal
securities laws.
If we or the depositary were
to oppose a jury trial demand based on such waiver, the court would determine whether the waiver was enforceable in the facts and circumstances
of that case in accordance with applicable state and federal law, including whether a party knowingly, intelligently and voluntarily waived
the right to a jury trial. The waiver to right to a jury trial in the Deposit Agreement is not intended to be deemed a waiver by any holder
or beneficial owner of our or the depositary’s compliance with the U.S. federal securities laws and the rules and regulations promulgated
thereunder.
TAXATION
The
following summary contains a description of the material U.S. federal income tax and United Kingdom tax consequences of the acquisition,
ownership and disposition of Ordinary Shares and Depositary Shares, but it does not purport to be a comprehensive description of all the
tax considerations that may be relevant to a decision to purchase Ordinary Shares or Depositary Shares. The summary is based upon the
on the tax laws of the United States and regulations thereunder and the tax laws of the United Kingdom and regulations thereunder as of
the date hereof, which are subject to change.
Certain United Kingdom
Tax Considerations
The following is a general
summary of certain United Kingdom tax considerations relating to the ownership and disposal of our Ordinary Shares or Depositary Shares
and does not address all possible tax consequences relating to an investment in our Ordinary Shares or Depositary Shares. It is based
on United Kingdom tax law and generally published His Majesty’s Revenue & Customs, or HMRC, practice as of the date of
this prospectus, both of which are subject to change, possibly with retrospective effect. A United Kingdom tax year runs from April 6th
in any year to April 5th in the following year.
Save as provided otherwise,
this summary applies only to a person who is the absolute beneficial owner of our Ordinary Shares or Depositary Shares and who is resident
(and, in the case of an individual, domiciled) in the United Kingdom for tax purposes and who is not resident for tax purposes in any
other jurisdiction and does not have a permanent establishment or fixed base in any other jurisdiction with which the holding of our Ordinary
Shares or Depositary Shares is connected, or a U.K. Holder. A person who is not a U.K. Holder, including a person (a) who is not
resident (or, if resident, is not domiciled) in the United Kingdom for tax purposes, including an individual and company who trades
in the United Kingdom through a branch, agency or permanent establishment in the United Kingdom to which an Ordinary Share or Depositary
Share is attributable, or (b) who is resident or otherwise subject to tax in a jurisdiction outside the United Kingdom, is recommended
to seek the advice of professional advisors in relation to their taxation obligations.
This summary is for general
information only and is not intended to be, nor should it be considered to be, legal or tax advice to any particular investor. It does
not address all of the tax considerations that may be relevant to specific investors in light of their particular circumstances or to
investors subject to special treatment under United Kingdom tax law. In particular this summary:
| · | only applies to an absolute beneficial owner of Ordinary Shares or Depositary Shares and any dividend paid in respect of that Ordinary
Share where the dividend is regarded for United Kingdom tax purposes as that person’s own income (and not the income of some other
person); and |
| · | (a) only addresses the principal United Kingdom tax consequences for an investor who holds Ordinary
Shares or Depositary Shares as a capital asset, (b) does not address the tax consequences that may be relevant to certain special
classes of investor such as a dealer, broker or trader in shares or securities and any other person who holds Ordinary Shares or Depositary
Shares otherwise than as an investment, (c) does not address the tax consequences for a holder that is a financial institution, insurance
company, collective investment scheme, pension scheme, charity or tax-exempt organization, (d) assumes that a holder is not an officer
or employee of the company (nor of any related company) and has not (and is not deemed to have) acquired the Ordinary Shares or Depositary
Shares by virtue of an office or employment, and (e) assumes that a holder does not control or hold (and is not deemed to control
or hold), either alone or together with one or more associated or connected persons, directly or indirectly (including through the holding
of Depositary Shares), an interest of 10% or more in the issued share capital (or in any class thereof), voting power, rights to profits
or capital of the company, and is not otherwise connected with the company. |
This summary further assumes
that a holder of Depositary Shares is the beneficial owner of the underlying Ordinary Shares for United Kingdom direct tax purposes.
POTENTIAL INVESTORS IN
THE DEPOSITARY SHARES SHOULD SATISFY THEMSELVES PRIOR TO INVESTING AS TO THE OVERALL TAX CONSEQUENCES, INCLUDING, SPECIFICALLY, THE CONSEQUENCES
UNDER UNITED KINGDOM TAX LAW AND HMRC PRACTICE OF THE ACQUISITION, OWNERSHIP AND DISPOSAL OF THE ORDINARY SHARES OR DEPOSITARY SHARES,
IN THEIR OWN PARTICULAR CIRCUMSTANCES BY CONSULTING THEIR OWN TAX ADVISERS.
Taxation of Dividends
Withholding Tax. An
individual holder of Ordinary Shares or Depositary Shares who is not a U.K. Holder will not be chargeable to United Kingdom income tax
on a dividend paid by the Company, unless such holder carries on (whether solely or in partnership) a trade, profession or vocation in
the United Kingdom through a branch or agency in the United Kingdom to which the Ordinary Shares or Depositary Shares are attributable.
In these circumstances, such holder may, depending on his or her individual circumstances, be chargeable to United Kingdom income tax
on a dividend received from the Company.
A dividend received by individual U.K. Holders
will be subject to United Kingdom income tax. The rate of United Kingdom income tax that is chargeable on dividends received in either
the tax year 2024/2025 or the tax year 2025/2026 by an individual U.K. Holder who is (i) an additional rate taxpayer is 39.35%, (ii) a
higher rate taxpayer is 33.75%, and (iii) a basic rate taxpayer is 8.75%. An individual U.K. Holder may be entitled to a tax-free
dividend allowance (in addition to their personal allowance) of £500 for the tax year 2024/2025 and/or for the tax year 2025/2026,
being the amount of dividend income that the relevant individual can receive before United Kingdom income tax is payable. Dividends within
the dividend allowance will still count towards the relevant individual's basic, higher or additional rate bands, however. An individual’s
dividend income is treated as the top slice of their total income that is chargeable to United Kingdom income tax. Dividends which are
covered by an individual’s personal income tax allowance do not count towards and are ignored for the dividend allowance.
Corporation Tax. A U.K. Holder within
the charge to United Kingdom corporation tax may be entitled to exemption from United Kingdom corporation tax in respect of dividend payments
in respect of an Ordinary Share. If the conditions for the exemption are not satisfied or such U.K. Holder elects for an otherwise exempt
dividend to be taxable, United Kingdom corporation tax will be chargeable on the dividend. The main rate of corporation tax of 25% applies
to companies with profits in excess of £250,000, with a lower rate of corporation tax of 19% applying to companies with profits
of up to £50,000, and a marginal scaled rate between 19% and 25% applying to companies with profits between £50,000 and £250,000.
If potential investors are in any doubt as to their position, they should consult their own professional advisers.
A corporate holder of Ordinary
Shares or Depositary Shares that is not a U.K. Holder will not be subject to United Kingdom corporation tax on a dividend received from
the company, unless it carries on a trade in the United Kingdom through a permanent establishment to which the Ordinary Shares or Depositary
Shares are attributable. In these circumstances, such holder may, depending on its individual circumstances and if the exemption from
United Kingdom corporation tax discussed above does not apply, be chargeable to United Kingdom corporation tax on dividends received from
the Company.
U.K.
Holders. A disposal or deemed disposal of Ordinary Shares or Depositary Shares by an individual U.K. Holder may, depending on his
or her individual circumstances, give rise to a chargeable gain or to an allowable loss for the purpose of United Kingdom capital gains
tax. The principal factors that will determine the capital gains tax position on a disposal of Ordinary Shares or Depositary Shares are
the extent to which the holder realizes any other capital gains in the tax year in which the disposal is made, the extent to which the
holder has incurred capital losses in that or any earlier tax year and the level at which the annual exempt amount for United Kingdom
capital gains tax (the “annual exempt amount”) is set by the United Kingdom government for that tax year. The annual exempt
amount for each of the 2024/2025 and 2025/2026 tax years is £3,000. If, after all allowable deductions, an individual U.K. Holder’s
total taxable income for the relevant tax year exceeds the basic rate income tax band, any taxable capital gain accruing on a disposal
of an Ordinary Share or a Depositary Shares on or after October 30, 2024 is taxed at the rate of 24%. Where a U.K. Holder’s total
taxable income is within or less than the basic rate income tax band, any taxable capital gain accruing on a disposal of our Ordinary
Shares or Depositary Shares on or after October 30, 2024 after may be taxed at the rate of 18% or the rate of 24% or at a combination
of both rates.
An
individual U.K. Holder who ceases to be resident in the United Kingdom (or who fails to be regarded as resident in a territory outside
the United Kingdom for the purposes of double taxation relief) for a period of less than five calendar years and who disposes of Ordinary
Shares or Depositary Shares during that period of temporary non-United Kingdom residence may be liable to United Kingdom capital gains
tax on a chargeable gain accruing on such disposal on his or her return to the United Kingdom (or upon ceasing to be regarded as resident
outside the United Kingdom for the purposes of double taxation relief) (subject to available exemptions or reliefs).
A
disposal (or deemed disposal) of Ordinary Shares or Depositary Shares by a corporate U.K. Holder may give rise to a chargeable gain or
an allowable loss for such holder for the purpose of United Kingdom corporation tax.
Any
gain or loss in respect of currency fluctuations over the period of holding Ordinary Shares or Depositary Shares is also brought into
account on a disposal.
Non-U.K.
Holders. An individual holder who is not a U.K. Holder will not be liable to United Kingdom capital gains tax on capital gains realized
on the disposal of Ordinary Shares or Depositary Shares unless such holder carries on (whether solely or in partnership) a trade, profession
or vocation in the U.K. through a branch or agency in the United Kingdom to which the Ordinary Shares or Depositary Shares are attributable.
In these circumstances, such holder may, depending on his or her individual circumstances, be chargeable to United Kingdom capital gains
tax on chargeable gains arising from a disposal of his or her Ordinary Shares or Depositary Shares.
A
corporate holder of Ordinary Shares or Depositary Shares that is not a U.K. Holder will not be liable for United Kingdom corporation tax
on chargeable gains realized on the disposal of Ordinary Shares or Depositary Shares unless it carries on a trade in the United Kingdom
through a permanent establishment to which the Ordinary Shares or Depositary Shares are attributable. In these circumstances, a disposal
(or deemed disposal) of Ordinary Shares or Depositary Shares by such holder may give rise to a chargeable gain or an allowable loss for
the purposes of United Kingdom corporation tax.
Inheritance Tax
If
for the purposes of the Double Taxation Relief (Taxes on Estates of Deceased Persons and on Gifts) Treaty United States of America Order
1979 (SI 1979/1454) between the United States and the United Kingdom an individual holder is at the time of their death or a transfer
made during their lifetime, domiciled in the United States and is not a national of the United Kingdom, any Ordinary Shares or Depositary
Shares beneficially owned by that holder should not generally be subject to United Kingdom inheritance tax, provided that any applicable
United States federal gift or estate tax liability is paid, except where (i) the Ordinary Shares or Depositary Shares are part of
the business property of a United Kingdom permanent establishment or pertains to a United Kingdom fixed base used for the performance
of independent personal services; or (ii) the Ordinary Shares or Depositary Shares are comprised in a settlement unless, at the time
the settlement was made, the settlor was domiciled in the United States and not a national of the United Kingdom (in which case no charge
to United Kingdom inheritance tax should apply).
Stamp Duty and Stamp Duty Reserve Tax
The United Kingdom stamp duty,
or stamp duty, and United Kingdom stamp duty reserve tax, or SDRT, treatment of the issue and transfer of, and the agreement to transfer,
an ordinary share outside a depositary receipt system or a clearance service is discussed in the paragraphs under “General”
below. The stamp duty and SDRT treatment of such transactions in relation to such systems is discussed in the paragraphs under “Depositary
Receipt Systems and Clearance Services” below.
General
An
agreement to transfer an ordinary share will normally give rise to a charge to SDRT at the rate of 0.5% of the amount or value of the
consideration payable for the transfer. SDRT is, in general, payable by the purchaser.
The
transfer of an Ordinary Share would be subject to stamp duty at the rate of 0.5% of the consideration given for the transfer (rounded
up to the next £5). The purchaser is liable to HMRC for the payment of the stamp duty (if any). Under current HMRC guidance, no
stamp duty should be payable on a written instrument transferring a Depositary Share or on a written agreement to transfer a Depositary
Share, on the basis that the Depositary Share is not regarded as either “stock” or a “marketable security” for
United Kingdom stamp duty purposes.
If
a duly stamped transfer completing an agreement to transfer is produced within six years of the date on which the agreement is made (or,
if the agreement is conditional, the date on which the agreement becomes unconditional) any SDRT already paid is generally repayable,
normally with interest, and any SDRT charge yet to be paid is canceled to avoid a double charge as the stamp duty has been paid.
No
SDRT or stamp duty is chargeable in respect of shares that are admitted to trading on a “recognized growth market” and not
listed on any “recognized stock exchange,” or the AIM Exemption. Following the cancellation of admission of the Ordinary Shares
on AIM, the AIM Exemption no longer applies.
Depositary Receipt Systems and Clearance
Services
The
Court of Justice of the European Union in C-569/07 HSBC Holdings Plc, Vidacos Nominees Limited v The Commissioners of Her Majesty’s
Revenue & Customs and the First-tier Tax Tribunal decision in HSBC Holdings Plc and the Bank of New York Mellon
Corporation v The Commissioners of Her Majesty’s Revenue & Customs, have considered the provisions of the European
Union Council Directive 69/335/EEC, which was subsequently substituted by the European Union Council Directive 2008/7/EEC, or the E.U.
Directives. Following these decisions HMRC has publicly confirmed that issues or transfers of shares of United Kingdom incorporated companies,
such as us, to a clearance service (such as, in our understanding, DTC) or a depositary receipt system will not be charged to United Kingdom
SDRT at 1.5% where that issue or transfer is an integral part of a raising of new capital.
It
was announced as part of the United Kingdom Budget 2017 by the United Kingdom government that the 1.5% stamp duty and SDRT charge will
not be enforced on the issue of shares by United Kingdom incorporated companies (and transfers of such shares where the transfer is integral
to new capital raising) into clearance services and depositary receipt systems following Brexit. However, the United Kingdom government
could potentially introduce new United Kingdom legislation with the effect that a future issue or transfer of our Ordinary Shares into
a clearance service or depositary receipt system (even where such an issue or transfer is an integral part of the raising of new capital
by the company) may potentially become chargeable to 1.5% stamp duty or SDRT.
Where
an ordinary share is transferred (i) to, or to a nominee for, a person whose business is or includes the provision of clearance services
or (ii) to, or to a nominee for a person whose business is or includes issuing depositary receipts and that transfer is not integral
to the raising of new capital by the company, stamp duty or SDRT would generally be chargeable at the rate of 1.5% of the amount or value
of the consideration given or, in certain circumstances, the value of the shares.
There
is an exception from the 1.5% charge on the transfer to, or to a nominee, a clearance service where the clearance service has made and
maintained an election under section 97A(1) of the Finance Act 1986, which has been approved by HMRC. If such an election were made by
a clearance service, SDRT at the rate of 0.5% of the amount or value of the consideration payable for the transfer would arise on any
transfer of an ordinary share into such a clearance service and on subsequent agreements to transfer such share within such clearance
service. It is our understanding that DTC has not to date made an election under section 97A(1) of the Finance Act of 1986.
Any
liability for stamp duty or SDRT in respect of a transfer into a clearance service or depositary receipt system, or in respect of a transfer
within such a service, which does arise, will strictly be accountable to HMRC by the clearance service or depositary receipt system operator
or their nominee, as the case may be, but will, in practice, be payable by the participants in the clearance service or depositary receipt
system.
Certain United States
Taxation Matters
The following is a summary
of material United States federal income tax consequences of the ownership and disposition of Depositary Shares by United States holders
(as defined below). This summary is for general information only and is not tax advice. Each investor should consult its tax advisor with
respect to the tax consequences of the ownership and disposition of our securities.
This summary is based on provisions
of the Internal Revenue Code of 1986, as amended, or the Code, United States Treasury regulations promulgated thereunder (whether final,
temporary, or proposed), administrative rulings, and judicial interpretations thereof, and the Convention Between the Government of the
United Kingdom of Great Britain and Northern Ireland and the Government of the United States of America for the Avoidance of Double Taxation
and the Prevention of Fiscal Evasion with Respect to Taxes on Income and on Capital Gains of 2001, as amended (referred to below as the
United States-U.K. Treaty), all as in effect on the date hereof, and all of which are subject to change, possibly with retroactive effect.
For purposes of this discussion,
the term “United States holder” means a holder of our Ordinary Shares or Depositary Shares that is, for United States federal
income tax purposes:
| · | an individual who is a citizen or resident of the United States; |
| · | a corporation or other entity taxable as a corporation that is created or organized in the United States
or under the laws of the United States or any state thereof or the District of Columbia; |
| · | an estate the income of which is subject to United States federal income taxation regardless of its source;
or |
| · | any trust if (a) a court within the United States is able to exercise primary supervision over the administration
of the trust and one or more United States persons have the authority to control all substantial decisions of the trust, or (b) such trust
has a valid election in effect under applicable United States Treasury regulations to be treated as a United States person. |
This summary addresses only
the United States federal income tax considerations for United States holders that acquire and hold the Depositary Shares as capital assets
within the meaning of Section 1221 of the Code (generally, property held for investment). This discussion does not address all aspects
of United States federal income taxation that may be relevant to a holder in light of its particular circumstances, or that may apply
to holders that are subject to special treatment under the United States federal income tax laws (including, for example, banks, financial
institutions, underwriters, insurance companies, dealers in securities or foreign currencies, traders in securities who elect the mark-to-market
method of accounting for their securities, persons subject to the alternative minimum tax, persons that have a functional currency other
than the United States dollar, tax-exempt organizations (including private foundations), mutual funds, subchapter S corporations, partnerships
or other pass-through entities for United States federal income tax purposes, certain expatriates, corporations that accumulate earnings
to avoid United States federal income tax, persons who hold Depositary Shares as part of a hedge, straddle, constructive sale, conversion
or other integrated transaction, persons who acquire Depositary Shares through the exercise of options or other compensation arrangements,
persons who own (or are treated as owning) 10% or more of our outstanding voting stock, or persons who are not United States holders).
In addition, this discussion does not address any aspect of state, local, foreign, estate, gift or other tax law that may apply to holders
of Depositary Shares.
The United States federal
income tax treatment of a partner in a partnership (including any entity or arrangement treated as a partnership for United States federal
income tax purposes) generally will depend on the status of the partner and the activities of the partnership. A partner in such a partnership
should consult its tax advisor regarding the associated tax consequences.
Consequences Relating to Ownership and Disposition
of Depositary Shares
Ownership of Depositary
Shares. For United States federal income tax purposes, a holder of Depositary Shares will generally be treated as if such holder directly
owned the ordinary shares represented by such Depositary Shares.
Distributions on Depositary
Shares. Subject to the discussion below under “—Passive Foreign Investment Company Rules,” the gross
amount of any distribution on Depositary Shares (including withheld taxes, if any) made out of our current or accumulated earnings and
profits (as determined for United States federal income tax purposes) will generally be taxable to a United States holder as dividend
income on the date such distribution is actually or constructively received. Any such dividends paid to corporate United States holders
generally will not qualify for the dividends received deduction that may otherwise be allowed under the Code. Distributions in excess
of our current and accumulated earnings and profits would generally be treated first as a non-taxable return of capital to the extent
of the United States holder’s basis in the Depositary Shares, and thereafter as capital gain. However, since we do not calculate
our earnings and profits under United States federal income tax principles, it is expected that any distribution on Depositary Shares
will be reported as a dividend even if that distribution would otherwise be treated as a non-taxable return of capital or as capital gain
under the rules described above.
Dividends paid in currencies
other than the United States dollar, if any, will generally be taxable to a United States holder as ordinary dividend income in an amount
equal to the United States dollar value of the currency received on the date such distribution is actually or constructively received.
Such United States dollar value must be determined using the spot rate of exchange on such date, regardless of whether the non-United
States currency is actually converted into United States dollars on such date. The United States holder may realize exchange gain or loss
if the currency received is converted into United States dollars after the date on which it is actually or constructively received. In
general, any such gain or loss will be ordinary and will be treated as from sources within the United States for United States foreign
tax credit purposes.
Subject to the discussion
below under “—3.8% Medicare Tax on Net Investment Income,” dividends received by certain non-corporate
United States holders (including individuals) from a “qualified foreign corporation” may be eligible for reduced rates of
taxation, currently at a maximum rate of 20%, provided that certain holding period requirements and other conditions are satisfied. For
these purposes, a foreign corporation will generally be treated as a qualified foreign corporation with respect to dividends paid by that
corporation on shares that are readily tradable on an established securities market in the United States. United States Treasury Department
guidance indicates that the Depositary Shares, which are listed on the NASDAQ Capital Market, would be considered readily tradable on
an established securities market in the United States. However, there can be no assurance that the Depositary Shares will be considered
readily tradable on an established securities market in future years. A foreign corporation is also treated as a qualified foreign corporation
if it is eligible for the benefits of a comprehensive income tax treaty with the United States which is determined by the United States
Treasury Department to be satisfactory for purposes of these rules and which includes an exchange of information provision. The United
States Treasury Department has determined that the United States-U.K. Treaty meets these requirements. We would not constitute a qualified
foreign corporation for purposes of these rules if we are a passive foreign investment company for the taxable year in which we pay a
dividend or for the preceding taxable year, as discussed below under “—Passive Foreign Investment Company Rules.”
Subject to certain conditions
and limitations, non-United States taxes, if any, withheld on dividends paid by the Company may be treated as foreign taxes eligible for
a credit against a United States holder’s United States federal income tax liability under the United States foreign tax credit
rules. The rules governing the United States foreign tax credit are complex, and United States holders should consult their tax advisors
regarding the availability of the United States foreign tax credit under their particular circumstances.
Sale of Depositary Shares
A United States holder will
generally recognize gain or loss on any sale, exchange, redemption, or other taxable disposition of Depositary Shares in an amount equal
to the difference between the amount realized on the disposition and such holder’s tax basis in such securities. Subject to the
discussion below under “—Passive Foreign Investment Company Rules,” any gain or loss recognized by a United States
holder on a taxable disposition of Depositary Shares will generally be capital gain or loss and will be long-term capital gain or loss
if the holder’s holding period in such share exceeds one year at the time of the disposition. The deductibility of capital losses
is subject to limitations.
For a cash basis taxpayer,
units of foreign currency received will generally be translated into United States dollars at the spot rate on the settlement date of
the sale. In that case, no foreign currency exchange gain or loss will result from currency fluctuations between the trade date and the
settlement date of such sale. An accrual basis taxpayer may elect to apply the same rules applicable to cash basis taxpayers with respect
to the sale of ADRs that are traded on an established securities market, provided that the election must be applied consistently from
year to year and cannot be changed without the consent of the IRS. For an accrual method taxpayer who does not make such an election,
units of foreign currency received will generally be translated into United States dollars at the spot rate on the trade date of the sale.
Such an accrual basis taxpayer may recognize foreign currency exchange gain or loss based on currency fluctuations between the trade date
and the settlement date of such sale. In general, any such gain or loss will be ordinary and will be treated as from sources within the
United States for United States foreign tax credit purposes.
Passive Foreign Investment Company Rules
A foreign corporation is a
PFIC if either (1) 75% or more of its gross income for the taxable year is passive income or (2) the average percentage of assets held
by such corporation during the taxable year that produce passive income or that are held for the production of passive income is at least
50%. For purposes of applying the tests in the preceding sentence, the foreign corporation is deemed to own its proportionate share of
the assets, and to receive directly its proportionate share of the income, of any other corporation of which the foreign corporation owns,
directly or indirectly, at least 25% by value of the stock.
Based
upon estimates with respect to its income, assets, and operations, it is expected that we will not be a PFIC for the current taxable year.
However, because the determination of PFIC status must be made on an annual basis after the end of the taxable year and will depend on
the composition of the income and assets, as well as the nature of the activities, of our activities and those of our subsidiaries from
time to time, there can be no assurance that we will not be considered a PFIC for any taxable year.
If
we were to be classified as a PFIC for any taxable year in which a United States holder held the Depositary Shares, various adverse United
States tax consequences could result to such United States holders, including taxation of gain on a sale or other disposition of the shares
of the corporation, Depositary Shares at ordinary income rates and imposition of an interest charge on gain or on distributions with respect
to the shares, Depositary Shares. Unless a United States holder of PFIC shares elects, in either case if eligible, to be taxed annually
on a mark-to-market basis or makes a QEF election and certain other requirements are met, gain realized on the sale or other disposition
of PFIC shares would generally not be treated as capital gain. Instead, the United States holder would be treated as if the United States
holder had realized such gain ratably over the holder’s holding period for such securities. The amounts allocated to the taxable
year of sale or other disposition and to any year before the foreign corporation became a PFIC would be taxed as ordinary income. The
amount allocated to each other taxable year would be subject to tax at the highest rate in effect for such year, together with an interest
charge in respect of the tax attributable to each such year. Similar rules apply to the extent any distribution in respect of PFIC shares
exceeds 125% of the average annual distribution on such PFIC securities received by the shareholder during the preceding three years or
holding period, whichever is shorter. With certain exceptions, a foreign corporation is treated as a PFIC with respect to a shareholder
(or warrant holder, as applicable) if the corporation was a PFIC with respect to such holder at any time during the holder’s holding
period of the foreign corporation’s stock or warrants. Dividends paid to with respect to shares of a PFIC are not eligible for the
special tax rates applicable to qualified dividend income of certain non-corporate holders. Instead, such dividend income is taxable at
rates applicable to ordinary income.
If
we were to be treated as a PFIC, the tax consequences described above could be avoided by a “mark-to-market” election with
respect to the Depositary Shares. A United States holder making a “mark-to-market” election (assuming the requirements for
such an election are satisfied) generally would (i) be required to include as ordinary income the excess of the fair market value of the
Depositary Shares on the last day of the United States holder’s taxable year over the United States holder’s adjusted tax
basis in such Depositary Shares and (ii) be allowed a deduction in an amount equal to the lesser of (A) the excess, if any, of the United
States holder’s adjusted tax basis in the Depositary Shares over the fair market value of such Depositary Shares on the last day
of the United States holder’s taxable year or (B) the excess, if any, of the amount included in income because of the election for
prior taxable years over the amount allowed as a deduction because of the election for prior taxable years. In addition, upon a sale or
other taxable disposition of Depositary Shares, a United States holder would recognize ordinary income or loss (which loss could not be
in excess of the amount included in income because of the election for prior taxable years over the amount allowed as a deduction because
of the election for prior taxable years). If we were to be treated as a PFIC, different rules would apply to a United States holder making
a QEF election with respect to Depositary Shares. However, we do not intend to prepare or provide the information necessary for United
States shareholders to make a QEF election.
United
States holders are urged to consult their own tax advisors about the PFIC rules, including the availability of the “mark-to-market”
election.
3.8% Medicare Tax on “Net Investment
Income”
A 3.8% tax, or “Medicare
Tax,” is imposed on all or a portion of “net investment income,” which may include any gain realized or amounts received
with respect to Depositary Shares received by (i) United States holders that are individuals with modified adjusted gross income in excess
of certain thresholds, and (ii) certain estates and trusts. United States holders should consult their own tax advisors with respect to
the applicability of the Medicare Tax resulting from ownership or disposition of Depositary Shares.
Information Reporting and Backup Withholding
United States holders may
be subject to information reporting requirements and may be subject to backup withholding with respect to dividends on Depositary Shares
and on the proceeds from the sale, exchange, or disposition of Depositary Shares, currently at a rate of 24%, unless the United States
holder provides an accurate taxpayer identification number and complies with certain certification procedures or otherwise establishes
an exemption from backup withholding. Backup withholding is not an additional tax and amounts withheld may be allowed as a credit against
the United States holder’s United States federal income tax liability and may entitle the United States holder to a refund, provided
that certain required information is timely furnished to the IRS.
Sale of Depositary Shares, Warrants, or Pre-funded Warrants
A United States holder will
generally recognize gain or loss on any sale, exchange, redemption, or other taxable disposition of Depositary Shares in an amount equal
to the difference between the amount realized on the disposition and such holder’s tax basis in such securities. Subject to the
discussion below under “—Passive Foreign Investment Company Rules,” any gain or loss recognized by a United States
holder on a taxable disposition of Depositary Shares will generally be capital gain or loss and will be long-term capital gain or loss
if the holder’s holding period in such share exceeds one year at the time of the disposition. The deductibility of capital losses
is subject to limitations.
For a cash basis taxpayer,
units of foreign currency received will generally be translated into United States dollars at the spot rate on the settlement date of
the sale. In that case, no foreign currency exchange gain or loss will result from currency fluctuations between the trade date and the
settlement date of such sale. An accrual basis taxpayer may elect to apply the same rules applicable to cash basis taxpayers with respect
to the sale of ADRs that are traded on an established securities market, provided that the election must be applied consistently from
year to year and cannot be changed without the consent of the IRS. For an accrual method taxpayer who does not make such an election,
units of foreign currency received will generally be translated into United States dollars at the spot rate on the trade date of the sale.
Such an accrual basis taxpayer may recognize foreign currency exchange gain or loss based on currency fluctuations between the trade date
and the settlement date of such sale. In general, any such gain or loss will be ordinary and will be treated as from sources within the
United States for United States foreign tax credit purposes.
SELLING SHAREHOLDER
This prospectus relates to
the possible resale from time to time by the Selling Shareholder of any or all of the Ordinary Shares (represented by Depositary Shares)
that may be issued by us to the Selling Shareholder under the Purchase Agreement. Such shares of include (i) up to 35,000,000 Purchase
Shares that we may elect, in our sole discretion, to issue and sell to the Selling Shareholder, from time to time from and after the Commencement
Date under the Purchase Agreement; and (ii) up to 875,000 Commitment Shares that may be issued to the Selling Shareholder in connection
with related issuances and sales of Purchase Shares to release the Company of its liability to pay the Commitment Fee as consideration
for the Selling Shareholder’s execution and delivery of the Purchase Agreement.
As used in this prospectus,
the term “Selling Shareholder” includes the Selling Shareholder listed in the table below, and its permitted pledgees,
donees, transferees, assignees, successors, designees, successors-in-interest and others who later come to hold any of the Selling Shareholder’s
interest in the securities in accordance with the terms of the applicable agreements governing their respective registration rights, other
than through a public sale. This prospectus also covers any additional securities that may become issuable by reason of stock splits,
stock dividends or other similar transactions.
For additional information
regarding the issuance of the securities covered by this prospectus, see the section entitled “Committed Equity Financing”
above. We are registering the securities pursuant to the provisions of the Purchase Agreement and the Registration Rights Agreement in
order to permit the Selling Shareholder to offer the shares for resale from time to time. Except for the transactions contemplated by
the Purchase Agreement and the Registration Rights Agreement or as otherwise set forth in this prospectus, the Selling Shareholder has
not had any material relationship with us within the past three years.
The table below presents information
regarding the Selling Shareholder and the securities that it may offer from time to time under this prospectus. This table is prepared
based on information supplied to us by the Selling Shareholder, and reflects holdings as of January 14, 2025. The number of shares in
the column “Maximum Number of Ordinary Shares to be Offered Pursuant to this Prospectus” represents all of the Ordinary Shares
(represented by Depositary Shares) that the Selling Shareholder may offer under this prospectus. The Selling Shareholder may sell some,
all or none of its shares in this offering. We do not know how long the Selling Shareholder will hold the shares before selling them,
and we currently have no agreements, arrangements or understandings with the Selling Shareholder regarding the sale of any of the shares.
Beneficial ownership is determined
in accordance with Rule 13d-3(d) promulgated by the SEC under the Exchange Act, and includes shares of common stock with respect to which
the Selling Shareholder have voting and investment power. The percentage of Ordinary Shares beneficially owned by the Selling Shareholder
following the offering shown in the table below is based on an aggregate of 6,685,918,922 Ordinary Shares outstanding on January 15, 2025.
Because the purchase price of the Depositary Shares issuable under the Purchase Agreement is determined on each Fixed Purchase Date, with
respect to a Fixed Purchase, on the applicable VWAP Purchase Date, with respect to a VWAP Purchase, and on the applicable Additional VWAP
Purchase Date, with respect to an Additional VWAP Purchase, the number of shares that may actually be sold by us to the Selling Shareholder
under the Purchase Agreement may be fewer than the number of shares being offered by this prospectus. The fourth column assumes the sale
of all of the shares offered by the Selling Shareholder pursuant to this prospectus.
We may amend or supplement
this prospectus from time to time in the future to update or change the Selling Shareholder list and the securities that may be resold.
Please see the section titled
“Plan of Distribution” for further information regarding the Selling Shareholder’s method of distributing these
securities.
| Name of Selling Shareholder | |
Number of Ordinary
Shares Owned Prior
to
Offering (1) | |
Maximum Number of
Ordinary Shares to
be Sold
Pursuant to this
Prospectus | |
Number of
Ordinary
Shares Owned After
Offering (2) | |
Percentage
of
Ordinary
Shares
Owned
after the
Offering (3) |
|
| C/M Capital Master Fund, LP (4) | |
-- | |
| 358,750,000,000 | |
-- | |
-- |
|
__________________
| (1) | In accordance with Rule 13d-3(d) under the Exchange Act, we have excluded from the number of shares beneficially
owned prior to the offering all of the shares that the Selling Shareholder may be required to purchase under the Purchase Agreement, because
the issuance of such shares is solely at our discretion and is subject to conditions contained in the Purchase Agreement, the satisfaction
of which are entirely outside of the Selling Shareholder’s control, including the registration statement that includes this prospectus
becoming and remaining effective. Furthermore, the Fixed Purchases, VWAP Purchase, or Additional VWAP Purchase, as applicable, of Depositary
Shares is subject to certain agreed upon maximum amount limitations set forth in the Purchase Agreement. Also, the Purchase Agreement
prohibits us from issuing and selling any of our Depositary Shares to the Selling Shareholder to the extent such shares, when aggregated
with all other securities then beneficially owned by the Selling Shareholder, would cause the Selling Shareholder beneficial ownership
of our Ordinary Shares to exceed the Beneficial Ownership Limitation. |
| (2) | Assumes that all Ordinary Shares being registered under the registration
statement of which this prospectus forms a part are sold in this offering, and that none of the Selling Shareholders acquire additional
Ordinary Shares after the date of this prospectus and prior to completion of this offering. |
| (3) | Applicable percentage ownership is based on 6,685,918,922 of our
Ordinary Shares outstanding as of January 15, 2024. |
| (4) | The business address of C/M Capital Master Fund, LP is 1111 Brickell Avenue, Suite 2920, Miami, Florida
33131. As of the date of the Purchase Agreement, C/M Capital Master Fund, LP did not beneficially own any shares of our common stock.
Thomas Walsh and Jonathan Juchno, the Managing Partners of C/M Capital Master Fund, LP, are deemed to be beneficial owners of all of the
shares of common stock owned by C/M Capital Master Fund, LP. Messrs. Walsh and Juchno have shared voting and investment power over the
shares being offered hereunder in connection with the transactions contemplated under the Purchase Agreement. C/M Capital Master Fund,
LP is not a registered broker-dealer or an affiliate of a registered broker-dealer. |
PLAN OF DISTRIBUTION
The securities offered by this prospectus are being
offered by the Selling Shareholder. The shares may be sold or distributed from time to time by the Selling Shareholder directly to one
or more purchasers or through brokers, dealers, or underwriters who may act solely as agents at market prices prevailing at the time of
sale, at prices related to the prevailing market prices, at negotiated prices, or at fixed prices, which may be changed. The sale of our
common stock offered by this prospectus could be effected in one or more of the following methods:
| · | ordinary brokerage transactions; |
| · | transactions involving cross or block trades; |
| · | through brokers, dealers, or underwriters who may act solely as agents; |
| · | “at the market” into an existing market for our securities; |
| · | in other ways not involving market makers or established business markets, including direct sales to purchasers or sales effected
through agents; |
| · | in privately negotiated transactions; or |
| · | any combination of the foregoing. |
In order to comply with the
securities laws of certain states, if applicable, the shares may be sold only through registered or licensed brokers or dealers. In addition,
in certain states, the shares may not be sold unless they have been registered or qualified for sale in the state or an exemption from
the state’s registration or qualification requirement is available and complied with.
The Selling Shareholder is
an “underwriter” within the meaning of Section 2(a)(11) of the Securities Act.
The Selling Shareholder has
informed us that it intends to use one or more registered broker-dealers to effectuate all sales, if any, of our Depositary Shares that
it has acquired and may in the future acquire from us pursuant to the Purchase Agreement. Such sales will be made at prices and at terms
then prevailing or at prices related to the then current market price. Each such registered broker-dealer will be an underwriter within
the meaning of Section 2(a)(11) of the Securities Act. The Selling Shareholder has informed us that each such broker-dealer will receive
commissions from the Selling Shareholder that will not exceed customary brokerage commissions.
Brokers, dealers, underwriters
or agents participating in the distribution of our Depositary Shares offered by this prospectus may receive compensation in the form of
commissions, discounts, or concessions from the purchasers, for whom the broker-dealers may act as agent, of the shares sold by the Selling
Shareholder through this prospectus. The compensation paid to any such particular broker-dealer by any such purchasers of our Depositary
Shares sold by the Selling Shareholder may be less than or in excess of customary commissions. Neither we nor the Selling Shareholder
can presently estimate the amount of compensation that any agent will receive from any purchasers of our common stock sold by the Selling
Shareholder.
We know of no existing arrangements
between the Selling Shareholder or any other stockholder, broker, dealer, underwriter or agent relating to the sale or distribution of
our Depositary Shares offered by this prospectus.
We may from time to time file
with the SEC one or more supplements to this prospectus or amendments to the registration statement of which this prospectus forms a part
to amend, supplement or update information contained in this prospectus, including, if and when required under the Securities Act, to
disclose certain information relating to a particular sale of shares offered by this prospectus by the Selling Shareholder, including
the names of any brokers, dealers, underwriters or agents participating in the distribution of such shares by the Selling Shareholder,
any compensation paid by the Selling Shareholder to any such brokers, dealers, underwriters or agents, and any other required information.
We will pay the expenses incident
to the registration under the Securities Act of the offer and sale of our Depositary Shares covered by this prospectus by the Selling
Shareholder. As consideration for its irrevocable commitment to purchase our Depositary Shares under the Purchase Agreement, we have agreed
to issue to the Selling Shareholder 2.5% of the Commitment Amount in Depositary Shares, with 1.75% of such shares paid up front and the
balance pro-rated with each Fixed Purchase, VWAP Purchase or Additional VWAP Purchase, as the case may be. We have also agreed to pay
to the Selling Shareholder $35,000 in cash as reimbursement for the reasonable, out-of-pocket expenses incurred by the Selling Shareholder,
including the legal fees and disbursements of the Selling Shareholder’s legal counsel, in connection with its due diligence investigation
of the Company and in connection with the preparation, negotiation and execution of the Purchase Agreement. See “The Committed
Equity Financing” for more information.
We also have agreed to indemnify
the Selling Shareholder and certain other persons against certain liabilities in connection with the offering of our Depositary Shares
offered hereby, including liabilities arising under the Securities Act or, if such indemnity is unavailable, to contribute amounts required
to be paid in respect of such liabilities. The Selling Shareholder has agreed to indemnify us against liabilities under the Securities
Act that may arise from certain written information furnished to us by the Selling Shareholder specifically for use in this prospectus
or, if such indemnity is unavailable, to contribute amounts required to be paid in respect of such liabilities. Insofar as indemnification
for liabilities arising under the Securities Act may be permitted to our directors, officers, and controlling persons, we have been advised
that in the opinion of the SEC this indemnification is against public policy as expressed in the Securities Act and is therefore, unenforceable.
We estimate that the total
expenses, including the Commitment Fee, for the offering will be approximately $1.7 million.
The Selling Shareholder has
represented to us that at no time prior to the date of the Purchase Agreement has the Selling Shareholder or its agents, representatives
or affiliates engaged in or effected, in any manner whatsoever, directly or indirectly, any short sale (as such term is defined in Rule
200 of Regulation SHO of the Exchange Act) of our Depositary Shares or any hedging transaction, which establishes a net short position
with respect to our Depositary Shares. The Selling Shareholder has agreed that during the term of the Purchase Agreement, neither the
Selling Shareholder, nor any of its agents, representatives or affiliates will enter into or effect, directly or indirectly, any of the
foregoing transactions.
We have advised the Selling
Shareholder that it is required to comply with Regulation M promulgated under the Exchange Act. With certain exceptions, Regulation M
precludes the Selling Shareholder, any affiliated purchasers, and any broker-dealer or other person who participates in the distribution
from bidding for or purchasing, or attempting to induce any person to bid for or purchase any security which is the subject of the distribution
until the entire distribution is complete. Regulation M also prohibits any bids or purchases made in order to stabilize the price of a
security in connection with the distribution of that security. All of the foregoing may affect the marketability of the securities offered
by this prospectus.
This offering will terminate
on the date that all of our Depositary Shares offered by this prospectus have been sold by the Selling Shareholder.
Our Depositary Shares are
currently listed on The NASDAQ Capital Market under the symbol “BDRX.”
EXPENSES OF THE OFFERING
The following table sets
forth the expenses payable by us in connection with the sale and distribution of the securities being registered hereby. All amounts shown,
other than the SEC registration fee, are estimates:
| SEC registration fee |
$ |
23,304 |
| Depositary fees and expenses |
|
* |
| Printing and engraving |
|
* |
| Accounting services |
|
* |
| Legal fees and expenses |
|
* |
| Miscellaneous |
|
* |
| Total |
$ |
* |
_______________
*These fees are calculated based on the securities offered and number
of issuances and accordingly cannot be defined at this time.
LEGAL MATTERS
Certain legal matters in connection
with the validity of the securities offered hereby will passed upon for us by Brown Rudnick LLP, London, United Kingdom. Certain
other matters of U.S. federal law will be passed upon for us by Mintz, Levin, Cohn, Ferris, Glovsky & Popeo, P.C., Boston, Massachusetts.
EXPERTS
The
financial statements of Biodexa Pharmaceuticals PLC as of December 31, 2023, and for the each of the three years in the period then ended,
included in this prospectus and in the registration statement have been so included in reliance on a report of Forvis Mazars LLP (then-named
Mazars LLP), an independent registered public accounting firm, given on authority of said firm as experts in auditing and accounting.
The report on the financial statements for the year ended December 31, 2023, contains
an explanatory paragraph in Note 2 regarding our ability to continue as a going concern.
Forvis
Mazars LLP, London, United Kingdom, is a member of the Institute of Chartered Accountants in England and Wales.
ENFORCEMENT OF CIVIL LIABILITIES
We are incorporated under
the laws of England and Wales. All of our directors and officers of are residents of jurisdictions outside the United States. Our corporate
headquarters is located in the United Kingdom and all or a substantial portion of our assets, and all or a substantial portion of the
assets of our directors and officers, are located outside of the United States. As a result, it may be difficult for you to serve legal
process on us or our directors or have any of them appear in a U.S. court.
We
have appointed Donald J. Puglisi of Puglisi & Associates as our authorized agent upon whom process may be served in any action instituted
in any U.S. federal or state court having subject matter jurisdiction arising out of or based upon the securities offered by this prospectus.
We
understand that in England it may not be possible to bring proceedings or enforce a judgment of a U.S. court in respect of civil liabilities
based solely on the federal securities laws of the United States. In addition, awards of punitive damages in actions brought in the United
States or elsewhere may be unenforceable in England. An award of damages is usually considered to be punitive if it does not seek to compensate
the claimant for loss or damage suffered and is instead intended to punish the defendant. In addition to public policy aspects of enforcement,
such as the aforementioned, the enforceability of any judgment in England will depend on the particular facts of the case and the relevant
circumstances, for example (and expressly without limitation), whether there are any relevant insolvency proceedings which may affect
the ability to enforce a judgment. In addition, the United States and the United Kingdom have not currently entered into a treaty (or
convention) providing for the reciprocal recognition and enforcement of judgments (although both are contracting states to the New York
Convention on the Recognition and Enforcement of Foreign Arbitral Awards).
WHERE YOU CAN FIND MORE INFORMATION
We are subject to periodic
reporting and other informational requirements of the Exchange Act as applicable to foreign private issuers. Accordingly, we are required
to file reports, including annual reports on Form 20-F, and other information with the SEC. As a foreign private issuer, we are exempt
from the rules of the Exchange Act prescribing the furnishing and content of proxy statements to shareholders under the federal proxy
rules contained in Sections 14(a), (b) and (c) of the Exchange Act, and our “insiders” are exempt from the reporting
and short-swing profit recovery provisions contained in Section 16 of the Exchange Act. The SEC maintains an Internet site that contains
reports, proxy, information statements and other information regarding issuers at http://www.sec.gov. Copies of certain information filed
by us with the SEC are also available on our website at http://www.biodexapharma.com. Our website is not a part of this prospectus and
is not incorporated by reference in this prospectus.
This prospectus is part of
a registration statement we filed with the SEC. This prospectus omits some information contained in the registration statement in accordance
with SEC rules and regulations. You should review the information and exhibits in the registration statement for further information
on us and our consolidated subsidiaries and the securities we are offering. Statements in this prospectus concerning any document we filed
as an exhibit to the registration statement or that we otherwise filed with the SEC are not intended to be comprehensive and are qualified
by reference to these filings. You should review the complete document to evaluate these statements. You can obtain a copy of the registration
statement from the SEC at the address listed above or from the SEC’s website.
BIODEXA PHARMACEUTICALS
PLC
Index to Unaudited
Condensed Consolidated Financial Statements for the Six-Month Periods Ended June 30, 2024 and 2023
BIODEXA PHARMACEUTICALS
PLC
INDEX TO CONSOLIDATED
FINANCIAL STATEMENTS
Consolidated
Statements of Comprehensive Income
For the year
six month period ended June 30
| | |
| |
| | |
| |
| | |
Note | |
2024 unaudited £’000 | | |
2023 unaudited £’000 | |
| Revenue | |
| |
| - | | |
| 298 | |
| Research and development costs | |
| |
| (2,189 | ) | |
| (2,251 | ) |
| Administrative costs | |
| |
| (2,034 | ) | |
| (2,291 | ) |
| Loss from operations | |
| |
| (4,223 | ) | |
| (4,244 | ) |
| Finance income | |
3 | |
| 839 | | |
| 410 | |
| Finance expense | |
3 | |
| (49 | ) | |
| (22 | ) |
| Loss before tax | |
| |
| (3,433 | ) | |
| (3,856 | ) |
| Taxation | |
4 | |
| 125 | | |
| 288 | |
| Loss for the period attributable to the owners of the parent | |
| |
| (3,308 | ) | |
| (3,568 | ) |
| Total comprehensive loss attributable to the owners of the parent | |
| |
| (3,308 | ) | |
| (3,568 | ) |
| Loss per share | |
| |
| | | |
| | |
| Basic and diluted loss per ordinary share – pence | |
5 | |
| (0.1 | p) | |
| (3.6 | )p |
The accompanying notes
form part of these financial statements
Consolidated
Statements of Financial Position
| | |
| |
| | |
| |
| | |
Note | |
As at June 30, 2024
unaudited £’000 | | |
As at December 31,
2023 £’000 | |
| Assets | |
| |
| | |
| |
| Non-current assets | |
| |
| | |
| |
| Property, plant and equipment | |
| |
| 436 | | |
| 571 | |
| Intangible assets | |
6 | |
| 6,008 | | |
| 2,941 | |
| Total Non-Current Assets | |
| |
| 6,444 | | |
| 3,512 | |
| Current assets | |
| |
| | | |
| | |
| Trade and other receivables | |
| |
| 1,922 | | |
| 637 | |
| Taxation | |
| |
| 547 | | |
| 422 | |
| Cash and cash equivalents | |
| |
| 5,055 | | |
| 5,971 | |
| Total Current Assets | |
| |
| 7,524 | | |
| 7,030 | |
| Total assets | |
| |
| 13,968 | | |
| 10,542 | |
| Liabilities | |
| |
| | | |
| | |
| Non-current liabilities | |
| |
| | | |
| | |
| Deferred consideration | |
7 | |
| 1,552 | | |
| - | |
| Borrowings | |
| |
| 208 | | |
| 295 | |
| Total Non-Current Liabilities | |
| |
| 1,760 | | |
| 295 | |
| Current liabilities | |
| |
| | | |
| | |
| Trade and other payables | |
| |
| 1,689 | | |
| 1,240 | |
| Deferred consideration | |
7 | |
| 459 | | |
| - | |
| Borrowings | |
| |
| 174 | | |
| 169 | |
| Derivative financial liability | |
8 | |
| 1,159 | | |
| 4,160 | |
| Total current Liabilities | |
| |
| 3,481 | | |
| 5,569 | |
| Total liabilities | |
| |
| 5,241 | | |
| 5,864 | |
| Issued capital and reserves attributable to owners of the parent | |
| |
| | | |
| | |
| Share capital | |
9 | |
| 8,689 | | |
| 6,253 | |
| Share premium | |
| |
| 91,242 | | |
| 86,732 | |
| Merger reserve | |
| |
| 53,003 | | |
| 53,003 | |
| Warrant reserve | |
| |
| 3,674 | | |
| 3,457 | |
| Accumulated deficit | |
| |
| (147,881 | ) | |
| (144,767 | ) |
| Total equity | |
| |
| 8,727 | | |
| 4,678 | |
| Total equity and liabilities | |
| |
| 13,968 | | |
| 10,542 | |
The accompanying notes
form part of these financial statements
Consolidated
Statements of Cash Flows
For the six
month period ended June 30
| | |
| |
| | | |
| | |
| | |
Note | |
2024 unaudited £’000 | | |
2023 unaudited £’000 | |
| Cash flows from operating activities | |
| |
| | |
| |
| Loss for the period | |
| |
| (3,308 | ) | |
| (3,568 | ) |
| Adjustments for: | |
| |
| | | |
| | |
| Depreciation of property, plant and equipment | |
| |
| 67 | | |
| 72 | |
| Depreciation of right of use asset | |
| |
| 68 | | |
| 70 | |
| Amortisation of intangible fixed asset | |
| |
| 1 | | |
| 1 | |
| Finance income | |
3 | |
| (839 | ) | |
| (410 | ) |
| Finance expense | |
3 | |
| 49 | | |
| 22 | |
| Share-based payment expense | |
| |
| 150 | | |
| 15 | |
| Taxation | |
4 | |
| (125 | ) | |
| (288 | ) |
| Foreign exchange losses | |
| |
| 2 | | |
| - | |
| Cash flows from operating activities before changes in working capital | |
| |
| (3,935 | ) | |
| (4,086 | ) |
| (Increase)/Decrease in trade and other receivables | |
| |
| (1,298 | ) | |
| 103 | |
| Increase in trade and other payables | |
| |
| 426 | | |
| 309 | |
| Decrease in provisions | |
| |
| - | | |
| (207 | ) |
| Cash used in operations | |
| |
| (4,807 | ) | |
| (3,881 | ) |
| Taxes payments | |
| |
| - | | |
| - | |
| Net cash used in operating activities | |
| |
| (4,807 | ) | |
| (3,881 | ) |
Consolidated
Statements of Cash Flows (continued)
For the six
month period ended June 30
| | |
Note | |
2024 unaudited £’000 | | |
2023 unaudited £’000 | |
| Investing activities | |
| |
| | |
| |
| Purchases of property, plant and equipment | |
| |
| - | | |
| (4 | ) |
| Proceeds from disposal of fixed assets | |
| |
| - | | |
| - | |
| Purchase intangible asset | |
| |
| (852 | ) | |
| - | |
| Interest received | |
| |
| 98 | | |
| 24 | |
| Net cash generated from/(used in) investing activities | |
| |
| (754 | ) | |
| 20 | |
| Financing activities | |
| |
| | | |
| | |
| Interest paid | |
| |
| - | | |
| (7 | ) |
| Amounts paid on lease liabilities | |
| |
| (93 | ) | |
| (95 | ) |
| Share issues including warrants, net of costs | |
9 | |
| 4,738 | | |
| 6,354 | |
| Net cash generated from/(used in) financing activities | |
| |
| 4,645 | | |
| 6,252 | |
| Net increase/(decrease) in cash and cash equivalents | |
| |
| (916 | ) | |
| 2,391 | |
| Cash and cash equivalents at beginning of period | |
| |
| 5,971 | | |
| 2,836 | |
| Cash and cash equivalents at end of period | |
| |
| 5,055 | | |
| 5,227 | |
The accompanying notes
form part of these financial statements
Consolidated
Statements of Changes in Equity (unaudited)
| | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| | |
Note | | |
Share capital £’000 | | |
Share premium £’000 | | |
Merger
reserve £’000 | | |
Warrant
reserve
£’000 | | |
Accumulated deficit £’000 | | |
Total equity £’000 | |
| At January 1, 2024 | |
| | |
| 6,253 | | |
| 86,732 | | |
| 53,003 | | |
| 3,457 | | |
| (144,767 | ) | |
| 4,678 | |
| Loss for the period | |
| | |
| - | | |
| - | | |
| - | | |
| - | | |
| (3,308 | ) | |
| (3,308 | ) |
| Total comprehensive loss | |
| | |
| - | | |
| - | | |
| - | | |
| - | | |
| (3,308 | ) | |
| (3,308 | ) |
| Transactions with owners: | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Shares issued on May 22, 2024 | |
9 | | |
| 1,242 | | |
| 3,730 | | |
| - | | |
| 1,690 | | |
| - | | |
| 6,662 | |
| Costs associated with share issue on May 22, 2024 | |
| | |
| - | | |
| (369 | ) | |
| - | | |
| (125 | ) | |
| - | | |
| (494 | ) |
| Exercise of warrants during period | |
9 | | |
| 1,043 | | |
| 1,081 | | |
| - | | |
| (1,348 | ) | |
| - | | |
| 776 | |
| Issue of shares to purchase intangible asset | |
9 | | |
| 151 | | |
| 68 | | |
| - | | |
| - | | |
| - | | |
| 219 | |
| Share-based payment charge | |
| | |
| - | | |
| - | | |
| - | | |
| - | | |
| 195 | | |
| 195 | |
| Total contribution by and distributions to owners | |
| | |
| 2,436 | | |
| 4,510 | | |
| - | | |
| 217 | | |
| 195 | | |
| 7,357 | |
| At June 30, 2024 | |
| | |
| 8,689 | | |
| 91,242 | | |
| 53,003 | | |
| 3,674 | | |
| (147,881 | ) | |
| 8,727 | |
| | |
Note | | |
Share capital £’000 | | |
Share premium £’000 | | |
Merger
reserve £’000 | | |
Warrant
reserve
£’000 | | |
Accumulated deficit £’000 | | |
Total equity £’000 | |
| At January 1, 2023 | |
| | |
| 1,108 | | |
| 83,667 | | |
| 53,003 | | |
| 720 | | |
| (135,336 | ) | |
| 3,162 | |
| Loss for the period | |
| | |
| - | | |
| - | | |
| - | | |
| - | | |
| (3,568 | ) | |
| (3,568 | ) |
| Total comprehensive loss | |
| | |
| - | | |
| - | | |
| - | | |
| - | | |
| (3,568 | ) | |
| (3,568 | ) |
| Transactions with owners: | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Shares issued on February 15, 2023 | |
9 | | |
| 1,956 | | |
| 3,013 | | |
| - | | |
| - | | |
| - | | |
| 4,969 | |
| Costs associated with share issue on February 15, 2023 | |
| | |
| - | | |
| (903 | ) | |
| - | | |
| - | | |
| - | | |
| (903 | ) |
| Shares issued on May 26, 2023 | |
9 | | |
| 2,277 | | |
| - | | |
| - | | |
| 103 | | |
| (355 | ) | |
| 2,025 | |
| Costs associated with share issue on May 26, 2023 | |
| | |
| - | | |
| - | | |
| - | | |
| - | | |
| (527 | ) | |
| (527 | ) |
| Share-based payment charge | |
| | |
| - | | |
| - | | |
| - | | |
| - | | |
| 141 | | |
| 141 | |
| Total contribution by and distributions to owners | |
| | |
| 4,233 | | |
| 2,110 | | |
| - | | |
| 103 | | |
| (741 | ) | |
| 5,705 | |
| At June 30, 2023 | |
| | |
| 5,341 | | |
| 85,777 | | |
| 53,003 | | |
| 823 | | |
| (139,645 | ) | |
| 5,299 | |
The accompanying notes
form part of these financial statements
Notes Forming
Part of The Consolidated Unaudited Interim Financial Information
For the six
month period ended June 30, 2024
The unaudited interim
consolidated financial information for the six months ended June 30, 2024 has been prepared following the recognition and measurement
principles of the International Financial Reporting Standards, International Accounting Standards and Interpretations (collectively IFRS)
issued by the International Accounting Standards Board (IASB), and as adopted by the UK and in accordance with International Accounting
Standard 34 Interim Financial Reporting (‘IAS 34’). The interim consolidated financial information does not include all the
information and disclosures required in the annual financial information and should be read in conjunction with the audited financial
statements for the year ended December 31, 2023.
The accounting
policies adopted are consistent with those of the previous financial year and corresponding interim reporting periods.
Book values approximate
to fair value at 30 June 2024, 30 June 2023 and 31 December 2023.
The condensed interim
financial information contained in this interim statement does not constitute statutory financial statements as defined by section 434(3)
of the Companies Act 2006. The condensed interim financial information has not been audited. The comparative financial information for
the six months ended June 30, 2023 and the year ended December 31, 2023 in this interim financial information does not constitute statutory
financial statements for that period or year. The statutory financial statements for December 31, 2023 have been delivered to the UK Registrar
of Companies. The auditor’s report on those accounts was unqualified and did not contain a statement under section 498(2) or 498(3)
of the Companies Act 2006. The auditor’s report did draw attention to a material uncertainty related to going concern and the requirement,
as of the date of the report, for additional funding to be raised by the Company by the fourth quarter of 2024.
Biodexa Pharmaceutical’s
annual reports may be downloaded from the Company’s website at https://biodexapharma.com/investors/financial-reports-and-presentations/#financial-reports
or a copy may be obtained from 1 Caspian Point, Caspian Way, Cardiff CF10 4DQ.
Going Concern
– material uncertainty
Biodexa has experienced
net losses and significant cash outflows from cash used in operating activities over the past years as it develops its portfolio. For
the six months to June 30, 2024, the Group incurred a consolidated loss from operations of £3.31 million (1H23: loss £3.56
million) and negative cash flows from operating activities of £4.81 million (1H23 £3.88 million). As of June 30, 2024, the
Group had accumulated deficit of £147.88 million.
The Group’s
future viability is dependent on its ability to raise cash from financing activities to finance its development plans until commercialisation,
generate cash from operating activities and to successfully obtain regulatory approval to allow marketing of its development products.
The Group’s failure to raise capital as and when needed could have a negative impact on its financial condition and ability to pursue
its business strategies.
The Group's consolidated
financial statements have been presented on a going concern basis, which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business.
As at June 30,
2024, the Group had cash and cash equivalents of £5.06 million. The Directors forecast that the Group currently has enough cash
to fund its planned operations into the first quarter of 2025. If the Company does not secure additional funding before the first quarter
of 2025, it will no longer be a going concern and would likely be placed in Administration.
The Directors have
prepared cash flow forecasts and considered the cash flow requirement for the Group for the next three years including the period 12 months
from the date of approval of this interim financial information. These forecasts show that further financing will be required before the
first quarter of 2025 assuming, inter alia, that certain development programs and other operating activities continue as currently planned.
If we raise additional funds through the issuance of debt securities or additional equity securities, it could result in dilution to our
existing shareholders, increased fixed payment obligations and these securities may have rights senior to those of our ordinary shares
(including the ADSs) and could contain covenants that would restrict our operations and potentially impair our competitiveness, such as
limitations on our ability to incur additional debt, limitations on our ability to acquire, sell or license intellectual property rights
and other operating restrictions that could adversely impact our ability to conduct our business. Any of these events could significantly
harm our business, financial condition and prospects.
On August 27, 2024,
the Company received notification from the Listing Qualifications Department of The Nasdaq Stock Market LLC advising that the Company
was not in compliance with the minimum bid requirement set forth in NASDAQ’s rules for continued listing of its securities. The
Company has requested a Hearing Panel which has paused any suspension or delisting action pending the hearing. If the Company's ADSs are
delisted, it could be more difficult to buy or sell the Company's ADSs or to obtain accurate quotations, and the price of the Company's
ADSs could suffer a material decline. Delisting may impair the Company's ability to raise capital.
In the Directors’
opinion, the environment for financing of small and micro-cap biotech companies continues to be challenging. While this may present acquisition
and/or merger opportunities with other companies with limited or no access to financing, as noted above, any attendant financings by Biodexa
are likely to be dilutive. The Directors continue to evaluate financing options, including those connected to acquisitions and/or mergers,
potentially available to the Group. Any alternatives considered are contingent upon the agreement of counterparties and accordingly, there
can be no assurance that any of alternative courses of action to finance the Group would be successful. This requirement for additional
financing in the short term represents a material uncertainty that may cast significant doubt upon the Group’s ability to continue
as a going concern. Should it become evident in the future that there are no realistic financing options available to the Group which
are actionable before its cash resources run out then the Group will no longer be a going concern. In such circumstances, we would no
longer be able to prepare financial statements under paragraph 25 of IAS 1. Instead, the financial statements would be prepared on a liquidation
basis and assets would be stated at net realizable value and all liabilities would be accelerated to current liabilities.
The Directors believe
there are adequate options and time available to secure additional financing for the Group and after considering the uncertainties, the
Directors consider it is appropriate to continue to adopt the going concern basis in preparing these financial statements.
Our forecast of
the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement and
involves risks and uncertainties, and actual results could vary as a result of a number of factors, including the timing of clinical trials.
We have based this estimate on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than
we currently expect. If we lack sufficient capital to expand our operations or otherwise capitalize on our business opportunities, our
business, financial condition and results of operations could be materially adversely affected.
| 2. | Accounting for eRapa and CPRIT grant |
The LCA entered
into with Emtora meets the definition of a Joint Arrangement under IFRS 11, specifically related to the FAP program.
A jointly controlled escrow account was established
on completion of the LCA. All FAP program transactions are processed through the escrow account, including the Company’s deposits
of matching funds, as set out in the agreement, the receipt of grant funding from CPRIT and the payment of eligible R&D expenses.
Although the CPRIT grant and R&D supplier contracts are with Emtora, the joint arrangement nature of the LCA results in Emtora being
deemed to be acting as the Company’s agent. Accordingly, the Company recognises 100% of the grant and 100% of the R&D expenditure.
The CPRIT grant recognized is on a 1 for 2 match. In accordance with the Company’s accounting policy, the grant, as it is the re-imbursement
of directly related costs, is credited to R&D costs in the same period in The Statements of Comprehensive Income. The escrow account
is recognised within prepayments, CPRIT grant received in advance is recognised within deferred revenue and any grant not yet received
is recognised in accrued income.
In 1H24 the company
recognised R&D costs of £0.2 million on the FAP project, this was made up of expenditure of £0.5 million netted against
CPRIT grant of £0.3 million.
The balances as
at June 30, 2024 were as follows in relation to the FAP project:
| Schedule of relation the FAP |
|
| Prepayments |
£1.2 million |
| Deferred revenue |
£0.1 million |
| 3. | Finance income and expense |
The gain on the
equity settled derivative financial liability in 1H24 and 1H23 arose as a result of the fall in the Biodexa share price.
| | |
Six months
ended June
30, 2024 unaudited £’000 | | |
Six months
ended June
30, 2023 unaudited £’000 | |
| Finance expense | |
| | | |
| | |
| Interest expense on lease liabilities | |
| 11 | | |
| 15 | |
| Interest expense on deferred consideration | |
| 38 | | |
| - | |
| Other loans | |
| - | | |
| 7 | |
| Total finance expense | |
| 49 | | |
| 22 | |
Income tax is recognised
or provided at amounts expected to be recovered or to be paid using the tax rates and tax laws that have been enacted or substantively
enacted at the Group Statement of Financial Position date. Research and development tax credits are recognised on an accruals basis and
are included as an income tax credit under current assets. The research and development tax credit recognised is based on management’s
estimate of the expected tax claim for the period and is recorded within taxation under the Small and Medium-sized Enterprise Scheme.
Basic loss per
share amounts are calculated by dividing the net loss for the period from continuing operations, attributable to ordinary equity holders
of the parent company, by the weighted average number of ordinary shares outstanding during the period. As the Group made a loss for the
period the diluted loss per share is equal to the basic loss per share.
The Company has
considered the guidance set out in IAS 33 in calculating the denominator in connection with the issuance of Pre-Funded, Abeyance Shares,
Series A, Series B and Series C warrants as disclosed in note 8. Management have recognised the warrants from the date of grant rather
than the date of issue of the corresponding Ordinary Shares when calculating the denominator.
The Group has made
a loss in the current and previous periods presented, and therefore the options and warrants are anti-dilutive. As a result, diluted earnings
per share is presented on the same basis as basic earnings per share.
| Schedule of intangible assets | |
| | | |
| | | |
| | | |
| | |
| | |
In-process
research and
development £’000 | | |
Goodwill £’000 | | |
IT/Website costs £’000 | | |
Total £’000 | |
| Cost | |
| | |
| | |
| | |
| |
| At January 1, 2023 | |
| 13,378 | | |
| 2,291 | | |
| 110 | | |
| 15,779 | |
| Acquisition | |
| 2,938 | | |
| – | | |
| – | | |
| 2,938 | |
| At December 31, 2023 | |
| 16,316 | | |
| 2,291 | | |
| 110 | | |
| 18,717 | |
| Acquisition | |
| 3,068 | | |
| – | | |
| – | | |
| 3,068 | |
| At June 30, 2024 (unaudited) | |
| 19,384 | | |
| 2,291 | | |
| 110 | | |
| 21,785 | |
| | |
In-process research and development £’000 | | |
Goodwill £’000 | | |
IT/Website Costs £’000 | | |
Total £’000 | |
| Accumulated amortisation and impairment | |
| | |
| | |
| | |
| |
| At January 1, 2023 | |
| 13,378 | | |
| 2,291 | | |
| 104 | | |
| 15,773 | |
| Amortisation charge for the year | |
| – | | |
| – | | |
| 3 | | |
| 3 | |
| At December 31, 2023 | |
| 13,378 | | |
| 2,291 | | |
| 107 | | |
| 15,776 | |
| Amortisation charge for the period | |
| – | | |
| – | | |
| 1 | | |
| 1 | |
| At June 30, 2024 (unaudited) | |
| 13,378 | | |
| 2,291 | | |
| 108 | | |
| 15,777 | |
| Net book value | |
| | | |
| | | |
| | | |
| | |
| At June 30, 2024 (unaudited) | |
| 6,006 | | |
| – | | |
| 2 | | |
| 6,008 | |
| At December 31,2023 | |
| 2,938 | | |
| – | | |
| 3 | | |
| 2,941 | |
The individual intangible assets which
are material to the financial statements are as follows:
| Schedule of individual intangible assets | |
| | |
| | |
| |
|
| | |
Carrying amount | | |
Remaining amortisation
period |
| | |
June 30,
2024 unaudited £’000 | | |
December
31, 2023 £’000 | | |
June 30,
2024 unaudited £’000 | |
December
31, 2023 £’000 |
| MTX228 tolimidone acquired IPRD* | |
| 2,938 | | |
| 2,938 | | |
n/a | |
n/a |
| MTX230 eRapa acquired IPRD* | |
| 3,068 | | |
| – | | |
n/a | |
n/a |
*asset is not yet in
use and has not started amortising
On April 25, 2024 the
Company entered into a License and Collaboration Agreement (LCA) with Rapamycin Holdings, Inc. (d/b/a Emtora Biosciences), relating to
the license of eRapa. In consideration for the License, the Company made an upfront payment of 378,163 ADSs (equal to five percent of
our then outstanding Ordinary Shares, calculated on a fully-diluted basis). In addition, a promissory note previously issued by Emtora
in favor of the Company in the amount of $0.25 million was forgiven and certain historical liabilities relating to their on-going FAP
and NMIBC programs were settled. The Company is also obligated to make quarterly payments to Emtora of $0.25 million less 75% of any research
sales by Emtora until the handover trigger event occurs. The obligation meets the definition of a financial liability in accordance with
IAS32 and is measured at fair value in accordance with IFRS9. Management have estimated the expected liability to be $3.1 million and
the present value as $2.5 million.
| Schedule of purchase on intangible assets | |
| | | |
| | |
| | |
$’000 | | |
£’000 | |
| 378,163 ADSs issued at market value | |
| 274 | | |
| 219 | |
| Promissory note forgiven | |
| 250 | | |
| 197 | |
| Historical liabilities settled | |
| 820 | | |
| 655 | |
| Quarterly payment obligation | |
| 2,494 | | |
| 1,997 | |
| Recognised as intangible asset purchase (unaudited) | |
| 3,838 | | |
| 3,068 | |
In addition, the Company
is also responsible for up to $31.5 million in sales milestones within the first six months of commercial sale of a first-approved indication
of eRapa in certain markets, with decreasing milestones for subsequent approvals for additional indications. There is also a one-time
$10.0 million milestone payable upon cumulative net sales of $1.0 billion. Further, the Company is also obligated to pay Emtora single
digit tiered royalties on net sales of eRapa, in addition to honouring Emtora’s legacy royalty obligations and paying Emtora fees
related to income derived from sublicensing and partnering of eRapa.
The LCA also provides the Company with the exclusive
option to acquire all of the capital stock of Emtora on commercially reasonable terms in the 90 days after acceptance of the filing of
an NDA by the U.S. Food and Drug Administration (the “FDA”). If the Company does not exercise the option, it would be required
to make additional quarterly payments, as disclosed in note 7, until the first commercial sale of the product.
| Schedule of deferred consideration | |
| | | |
| | |
| | |
As at June 30,
2024
unaudited £’000 | | |
As at
December 31,
2023 £’000 | |
| Opening provision at January 1, | |
| - | | |
| - | |
| On acquisition of licence | |
| 1,997 | | |
| - | |
| Interest expense | |
| 38 | | |
| - | |
| Foreign exchange | |
| (24 | ) | |
| - | |
| Deferred consideration | |
| 2,011 | | |
| - | |
| Less: non-current portion | |
| (1,552 | ) | |
| - | |
| Current portion | |
| 459 | | |
| - | |
The Company is obligated
to make quarterly payments to Emtora of $0.25 million less 75% of any research sales by Emtora until the handover trigger event occurs.
The obligation meets the definition of a financial liability in accordance with IAS32 and is measured at fair value in accordance with
IFRS9. Management have estimated the expected liability to be $3.1 million and the present value as $2.5 million.
This financial liability
is measured on Level 3, the fair value is derived using a discounted cash flow approach. The discount rate applied to the obligation was
11.64% (2023: n/a).
A 1% increase or decrease
in the discount rate would decrease or increase the liability by approximately £0.03 million (2023: n/a) and £0.03 million
(2023: n/a), respectively. An increase in the liability would result in a loss in the revaluation of financial instruments, while a decrease
would result in a gain.
There were no transfers
between Level 1 and 2 in the period.
| 8. | Derivative financial liability – current |
| Schedule of derivative financial liability | |
| | |
| |
| | |
As at June 30,
2024
unaudited £’000 | | |
As at
December 31,
2023 £’000 | |
| At January 1 | |
| 4,160 | | |
| 85 | |
| Warrants issued | |
| 1,368 | | |
| 4,562 | |
| Transfer to share premium on exercise of warrants | |
| (3,618 | ) | |
| - | |
| Gain recognised in finance income within the consolidated statement of comprehensive income | |
| (751 | ) | |
| (487 | ) |
| | |
| 1,159 | | |
| 4,160 | |
Equity settled
derivative financial liability is a liability that is not to be settled for cash.
No warrants recognised
as equity settled derivatives were exercised in 2023.
The Company issues
warrants exercisable into ADSs of the Company as part of registered direct offerings and private placements in the US. The number of ADSs
to be issued when exercised is fixed, however the exercise price is denominated in US Dollars being different to the functional currency
of the Company. Therefore, the warrants are classified as equity settled derivative financial liabilities recognised at fair value through
the profit and loss account (‘FVTPL’). The financial liability is valued using the Black-Scholes model. Financial liabilities
at FVTPL are stated at fair value, with any gains or losses arising on re-measurement recognised in profit or loss. The net gain or loss
recognised in profit or loss incorporates any interest paid on the financial liability and is included in the ‘finance income’
or ‘finance expense’ lines item in the income statement. A key input in the valuation of the instrument is the Company share
price.
Details of the
warrants are as follows:
May 2024
warrants
In May 2024 the
Company issued 2,359,012 Series G ADS Warrants and 3,695,218 Series H ADS Warrants as part of the Warrant Inducement Transaction. The
exercise price per ADS is $2.50.
December
2023 warrants
In December 2023
the Company issued 3,000,063 Series E ADS Warrants and 3,000,063 Series F ADS Warrants as part of the Registered Offering in the US. The
exercise price per ADS is $2.20.
May 2023
warrants
In June 2023 the
Company issued 276,689 Series D ADS Warrants as part of a registered direct offering and private placement in the US after securing shareholder
approval. The exercise price per ADS was $16.00.
May 2020
warrants
In May 2020 the
Company issued 838 ADS warrants as part of a registered direct offering in the US.
October 2019
warrants
In October 2019
the Company issued 392 ADS warrants as part of a registered direct offering in the US.
Warrant re-price
On May 22, 2024 the Company entered
into agreements with several accredited investors to exercise existing Series E warrants and Series F warrants, issued in December 2023,
to purchase up to an aggregate of 4,358,322 ADSs. The warrant holders agreed to exercise the Series E and/or Series F warrants at an exercise
price of $1.50 (reduced from $2.20) per ADS.
| Schedule of warrant exercise price | |
| | |
| | |
| | |
| |
| | |
ADS Warrants Number | | |
Original price per
ADS | | |
New price per ADS | | |
Equivalent Ordinary
Shares (400 Ordinary
Shares per ADS) Number | |
| Series E warrants | |
| 1,572,674 | | |
$ | 2.20 | | |
$ | 1.50 | | |
| 629,069,600 | |
| Series F warrants | |
| 2,463,477 | | |
$ | 2.20 | | |
$ | 1.50 | | |
| 985,390,800 | |
Warrants
and Dara share options
The Group also
assumed fully vested warrants and share options on the acquisition of DARA Biosciences, Inc. (which took place in 2015). The number of
ordinary shares to be issued when exercised is fixed, however the exercise prices are denominated in US Dollars. The warrants are classified
equity settled derivative financial liabilities and accounted for in the same way as those detailed above. The financial liability is
valued using the Black-Scholes option pricing model. The exercise price of the outstanding options is $1,903.40.
The following table
details the outstanding warrants and options over ADSs and ordinary shares recognised as equity settled derivative financial liabilities
as at June 30, 2024, December 31, 2023 and also the movement in the year:
| Schedule of warrants outstanding | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| | |
At December
31, 2022 | | |
Lapsed | | |
Granted | | |
At
December
31, 2023 | | |
Lapsed | | |
Granted | | |
Exercised | | |
At June 30,
2024 unaudited | |
| ADSs warrants | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| May 2024 grant | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| 6,054,230 | | |
| – | | |
| 6,054,230 | |
| December 2023 grant | |
| – | | |
| | | |
| 6,000,126 | | |
| 6,000,126 | | |
| – | | |
| – | | |
| (4,282,895 | ) | |
| 1,717,231 | |
| May 2023 grant | |
| – | | |
| | | |
| 276,689 | | |
| 276,689 | | |
| – | | |
| – | | |
| – | | |
| 276,689 | |
| May 2020 grant | |
| 838 | | |
| – | | |
| – | | |
| 838 | | |
| – | | |
| – | | |
| – | | |
| 838 | |
| October 19 grant | |
| 392 | | |
| – | | |
| – | | |
| 392 | | |
| – | | |
| – | | |
| – | | |
| 392 | |
| Ordinary Shares | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| DARA Options | |
| 138 | | |
| (10 | ) | |
| – | | |
| 128 | | |
| (29 | ) | |
| – | | |
| – | | |
| 99 | |
Fair value hierarchy
The Group uses
the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:
Level 1: quoted
(unadjusted) prices in active markets for identical assets and liabilities;
Level 2: other
techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly;
and
Level 3: techniques
which use inputs that have a significant effect on the recorded fair value that are not based on observable market data.
The fair value
of the Group’s derivative financial liability is measured at fair value on a recurring basis. The following table gives information
about how the fair value of this financial liability is determined.
| Schedule of fair value of this financial liability |
| |
| | | |
| | | |
|
| |
|
| |
|
| |
|
Financial
liabilities |
| |
Fair value as at June 30, 2024 | | |
Fair value as
at December 31, 2023 | | |
Fair value
hierarchy |
| |
Valuation
technique(s)
and key input(s) |
| |
Significant unobservable input(s) |
| |
Relationship of unobservable
inputs to fair value |
| Equity settled financial derivative liability – Series H warrants |
| |
£ | 179,000 | | |
| – | | |
Level 3 |
| |
Black-Scholes Model |
| |
Volatility rate of 100% determined using historical volatility of comparable companies. |
| |
The higher the volatility the higher the fair value. |
| |
| |
| | | |
| | | |
|
| |
|
| |
|
| |
|
| |
| |
| | | |
| | | |
|
| |
|
| |
Expected life between a range of 0.1 and 0.89 years determined using the remaining life of the share options. |
| |
The shorter the expected life the lower the fair value. |
| |
| |
| | | |
| | | |
|
| |
|
| |
|
| |
|
| |
| |
| | | |
| | | |
|
| |
|
| |
Risk-free rate of 5.09% determined using the expected life assumptions. |
| |
The higher the risk-free rate the higher the fair value. |
| |
| |
| | | |
| | | |
|
| |
|
| |
|
| |
|
| |
| |
| | | |
| | | |
|
| |
|
| |
|
| |
|
| Equity settled financial derivative liability – Series G warrants |
| |
£ | 591,000 | | |
| – | | |
Level 3 |
| |
Black-Scholes Model |
| |
Volatility rate of 95% determined using historical volatility of comparable companies. |
| |
The higher the volatility the higher the fair value. |
| |
| |
| | | |
| | | |
|
| |
|
| |
|
| |
|
| |
| |
| | | |
| | | |
|
| |
|
| |
Expected life between a range of 0.1 and 4.33 years determined using the remaining life of the share options. |
| |
The shorter the expected life the lower the fair value. |
| |
| |
| | | |
| | | |
|
| |
|
| |
|
| |
|
| |
| |
| | | |
| | | |
|
| |
|
| |
Risk-free rate of 4.33% determined using the expected life assumptions. |
| |
The higher the risk-free rate the higher the fair value. |
| |
| |
| | | |
| | | |
|
| |
|
| |
|
| |
|
| |
| |
| | | |
| | | |
|
| |
|
| |
|
| |
|
| Equity settled financial derivative liability - Series F warrants |
| |
£ | 16,000 | | |
£ | 2,592,000 | | |
Level 3 |
| |
Black-Scholes Model |
| |
Volatility rate of 120% determined using historical volatility of comparable companies. |
| |
The higher the volatility the higher the fair value. |
| |
| |
| | | |
| | | |
|
| |
|
| |
|
| |
|
| |
| |
| | | |
| | | |
|
| |
|
| |
Expected life between a range of 0.1 and 0.48 years determined using the remaining life of the share options. |
| |
The shorter the expected life the lower the fair value. |
| |
| |
| | | |
| | | |
|
| |
|
| |
|
| |
|
| |
| |
| | | |
| | | |
|
| |
|
| |
Risk-free rate of 5.33% determined using the expected life assumptions. |
| |
The higher the risk-free rate the higher the fair value. |
| |
| |
| | | |
| | | |
|
| |
|
| |
|
| |
|
| Equity settled financial derivative liability – Series E warrants |
| |
£ | 343,000 | | |
£ | 1,444,000 | | |
Level 3 |
| |
Black- Scholes Model |
| |
Volatility rate of 100% determined using historical volatility of comparable companies. |
| |
The higher the volatility the higher the fair value. |
| |
| |
| | | |
| | | |
|
| |
|
| |
|
| |
|
| |
| |
| | | |
| | | |
|
| |
|
| |
Expected life between a range of 0.1 and 4.48 years determined using the remaining life of the share options. |
| |
The shorter the expected life the lower the fair value. |
| |
| |
| | | |
| | | |
|
| |
|
| |
|
| |
|
| |
| |
| | | |
| | | |
|
| |
|
| |
Risk-free rate of 4.33% determined using the expected life assumptions. |
| |
The higher the risk-free rate the higher the fair value. |
| |
| |
| | | |
| | | |
|
| |
|
| |
|
| |
|
| |
| |
| | | |
| | | |
|
| |
|
| |
|
| |
|
| Equity settled financial derivative liability – Series D warrants |
| |
£ | 30,000 | | |
£ | 124,000 | | |
Level 3 |
| |
Black- Scholes Model |
| |
Volatility rate of 105% determined using historical volatility of comparable companies. |
| |
The higher the volatility the higher the fair value. |
| |
| |
| | | |
| | | |
|
| |
|
| |
|
| |
|
| |
| |
| | | |
| | | |
|
| |
|
| |
|
| |
|
| |
| |
| | | |
| | | |
|
| |
|
| |
Expected life between a range of 0.1 and 4.43 years determined using the remaining life of the share options. |
| |
The shorter the expected life the lower the fair value. |
| |
| |
| | | |
| | | |
|
| |
|
| |
|
| |
|
| |
| |
| | | |
| | | |
|
| |
|
| |
|
| |
|
| |
| |
| | | |
| | | |
|
| |
|
| |
Risk-free rate of 4.53% determined using the expected life assumptions. |
| |
The higher the risk-free rate the higher the fair value. |
| |
| |
| | | |
| | | |
|
| |
|
| |
|
| |
|
| |
| |
| | | |
| | | |
|
| |
|
| |
|
| |
|
| Equity settled financial derivative liability – May 2020 warrants |
| |
| – | | |
| – | | |
Level 3 |
| |
Black- Scholes Model |
| |
Volatility rate of 100% determined using historical volatility of comparable companies. |
| |
The higher the volatility the higher the fair value. |
| |
| |
| | | |
| | | |
|
| |
|
| |
|
| |
|
| |
| |
| | | |
| | | |
|
| |
|
| |
Expected life between a range of 0.1 and 1.38 years determined using the remaining life of the share options. |
| |
The shorter the expected life the lower the fair value. |
| |
| |
| | | |
| | | |
|
| |
|
| |
|
| |
|
| |
| |
| | | |
| | | |
|
| |
|
| |
Risk-free rate of 4.90% determined using the expected life assumptions. |
| |
The higher the risk-free rate the higher the fair value. |
| |
| |
| | | |
| | | |
|
| |
|
| |
|
| |
|
| Equity settled financial derivative liability – October 2019 Warrants |
| |
| – | | |
| – | | |
Level 3 |
| |
2023 – Black- Scholes Model |
| |
Volatility rate of 100% determined using historical volatility of comparable companies. |
| |
The higher the volatility the higher the fair value. |
| |
| |
| | | |
| | | |
|
| |
|
| |
|
| |
|
| |
| |
| | | |
| | | |
|
| |
|
| |
Expected life between a range of 0.1 and 1.00 years determined using the remaining life of the share options. |
| |
The shorter the expected life the lower the fair value. |
| |
| |
| | | |
| | | |
|
| |
|
| |
|
| |
|
| |
| |
| | | |
| | | |
|
| |
|
| |
Risk-free rate of 5.09% determined using the expected life assumptions. |
| |
The higher the risk-free rate the higher the fair value. |
| |
| |
| | | |
| | | |
|
| |
|
| |
|
| |
|
| Total |
| |
£ | 1,159,000 | | |
£ | 4,160,000 | | |
|
| |
|
| |
|
| |
|
Changing the unobservable
risk-free rate input to the valuation model by 10% higher while all other variables were held constant, would not impact the carrying
amount of shares (2023: nil).
There were no transfers
between Level 1 and 2 in the period.
The financial liability
measured at fair value on Level 3 fair value measurement represents consideration relating to warrants issued in May 2024, December 2023,
June 2023, May 2020 and October 2019 as part of Private Placements, Registered Direct offerings and the Warrant Inducement Transaction.
| 9. | Share capital and reserves |
| Schedule of detailed information about share capital | |
| | | |
| | | |
| | | |
| | |
Authorised, allotted and fully
paid – classified as equity | |
As at June 30, 2024
unaudited Number | | |
As at June 30, 2024
unaudited £ | | |
As at December 31, 2023 Number | | |
As at December
31, 2023 £ | |
Ordinary shares of
£0.001 each | |
| 3,626,112,922 | | |
| 3,626,113 | | |
| 1,189,577,722 | | |
| 1,189,578 | |
| ‘A’ Deferred shares of £1 each | |
| 1,000,001 | | |
| 1,000,001 | | |
| 1,000,001 | | |
| 1,000,001 | |
| ‘B’ Deferred shares of £0.001 | |
| 4,063,321,418 | | |
| 4,063,321 | | |
| 4,063,321,418 | | |
| 4,063,321 | |
| Total | |
| | | |
| 8,689,435 | | |
| | | |
| 6,252,900 | |
During the period the Company issued
the following warrants over ADSs, and these were recognised in the warrant reserve until exercise:
| Schedule of warrant reserve recognize | |
| | | |
| | | |
| | | |
| | | |
| | |
| | |
Pre-Funded
Warrants | | |
Abeyance
Shares | | |
Series A
Warrants | | |
Series B
Warrants | | |
Series C
Warrants | |
| Exercise price | |
£ | 0.0001 | | |
£ | Nil | | |
$ | 214.40 | | |
$ | 214.40 | | |
$ | 16.00 | |
| As at January 1, 2023 | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | |
| Issued: | |
| | | |
| – | | |
| | | |
| | | |
| | |
| Private Placement February 2023 | |
| 155,461 | | |
| – | | |
| 32,327 | | |
| 48,491 | | |
| – | |
| Registered Direct Offering May 2023 | |
| – | | |
| – | | |
| – | | |
| – | | |
| 415,043 | |
| Registered Offering December 2023 | |
| 1,911,176 | | |
| – | | |
| – | | |
| – | | |
| – | |
| Adhera Assignment and Exchange Agreement | |
| 2,275,050 | | |
| – | | |
| – | | |
| – | | |
| – | |
| Exercised | |
| (155,461 | ) | |
| – | | |
| (32,327 | ) | |
| (48,491 | ) | |
| (415,043 | ) |
| As at December 31, 2023 | |
| 4,186,226 | | |
| – | | |
| – | | |
| – | | |
| – | |
| Exercised | |
| (2,361,865 | ) | |
| – | | |
| – | | |
| – | | |
| – | |
| Lapsed | |
| (163 | ) | |
| – | | |
| – | | |
| – | | |
| – | |
| Warrant inducement May 2024 | |
| – | | |
| 931,585 | | |
| – | | |
| – | | |
| – | |
| As at June 30, 2024 (unaudited) | |
| 1,824,198 | | |
| 931,585 | | |
| – | | |
| – | | |
| – | |
The Series A, Series
B and Series C warrants are exercisable on an ‘alternative cashless basis’ effectively allowing the holders to exercise for
nil consideration.
Ordinary and deferred
shares were recorded as equity.
| Schedule of ordinary and deferred
shares | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
| 2024 | |
| |
Ordinary
Shares Number | | |
‘A’ Deferred
Shares Number | | |
‘B’ Deferred
Shares
Number | | |
Share
Price £ | | |
Total
consideration £’000 | |
| At January 1, 2024 | |
| 1,189,577,722 | | |
| 1,000,001 | | |
| 4,063,321,418 | | |
| | | |
| | |
| February to May 2024 | |
Exercise pre-funded warrants | |
| 944,746,000 | | |
| – | | |
| – | | |
| 0.0040 | | |
| 3,732 | |
| February to May 2024 | |
Exercise Series E & F warrants | |
| 98,697,600 | | |
| – | | |
| – | | |
| 0.0043 – 0.0044 | | |
| 427 | |
| 25 April 2024 | |
Intangible asset (see note 5) | |
| 151,265,200 | | |
| – | | |
| – | | |
| 0.0015 | | |
| 219 | |
| 22 May 2024 | |
Warrant inducement | |
| 1,241,826,400 | | |
| – | | |
| – | | |
| 0.0030 | | |
| 3,663 | |
| At June 30, 2024 (unaudited) | |
| 277,971,722 | | |
| 1,000,001 | | |
| 4,063,321,418 | | |
| | | |
| | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
| 2023 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
| At January 1, 2023 | |
| 5,417,137 | | |
| 1,000,001 | | |
| – | | |
| | | |
| | |
| February 15, 2023 | |
Private Placements* | |
| 98,387,275 | | |
| – | | |
| – | | |
| 0.0505 | | |
| 4,967 | |
| May 26, 2023 | |
Registered Direct Offering* | |
| 276,697,310 | | |
| – | | |
| – | | |
| 0.0097 | | |
| 2,690 | |
| June 14, 2023 | |
Share sub-division and re-designation | |
| | | |
| | | |
| 4,063,321,418 | | |
| n/a | | |
| n/a | |
| December 21, 2023 | |
Shares issued to purchase Intangible asset (see note 5) | |
| 323,684,800 | | |
| – | | |
| – | | |
| 0.0040 | | |
| 1,279 | |
| December 21, 2023 | |
Registered Offering | |
| 485,391,200 | | |
| – | | |
| – | | |
| 0.0040 | | |
| 1,918 | |
| At December 31, 2023 | |
| 1,189,577,722 | | |
| 1,000,001 | | |
| 4,063,321,418 | | |
| | | |
| | |
| 10. | Related party transaction |
The Directors consider
there to be no related party transactions during the periods reported other than Directors Remuneration.
| 11. | Contingent liabilities |
The Company entered into an Arrangement
Agreement with Bioasis on December 13, 2022 as amended on December 18, 2022. Under the agreement the Company agreed to acquire the
entire issued share capital of Bioasis for consideration of, in aggregate, approximately C$7.4
million (c£4.4 million). The agreement was subject to shareholder approval. On January 23, 2023 at the General Meeting to
approve the Arrangement Agreement none of the special resolutions were passed and, accordingly, the acquisition of Bioasis did not
proceed. Under the agreement the Company agreed to reimburse Bioasis US$225,000
for expenses relating to the transaction should the Company’s shareholders not approve the transaction. On March 3, 2023 the
Company advised Bioasis that it would offset this liability against the $500,000 loan it advanced to them during December 2022 and
January 2023.
As at June 30,
2024 and December 31, 2023 the Company had a contingent liability of $225,000 in relation to this potential liability.
On September 19, 2024, the Company announced a
ratio change on its ADSs from one (1) ADS representing four hundred (400) ordinary shares, to the new ratio of one (1) ADS representing
ten thousand (10,000) ordinary shares (the "Ratio Change"). The effective date of the Ratio Change is expected to be October
4, 2024.
| 12. | Events after the reporting date |
On July 22, 2024,
the Company utilised its capacity under its Registration Statement on Form F-3 to raise $5.0 million in gross proceeds in a Registered
Direct Offering with certain institutional investors for the sale of an aggregate of 5,050,808 ADSs and 278,975 pre-funded warrants at
a price of $0.94 per ADS. In a concurrent Private Placement, the Company issued and sold to the Investors (i) Series J warrants exercisable
for 5,329,783 Depositary Shares, and (ii) Series K Warrants to purchase an aggregate of 5,329,783 Depositary Shares. The Series J and
Series K warrants are exercisable for five years and one year, respectively, at $1.00 per ADS each.
On August 27,2024,
the Company , received a Staff Determination letter (the “Letter”) from the Listing Qualifications Department of The Nasdaq
Stock Market LLC (“Nasdaq”) notifying the Company of the Staff’s determination to delist the Company’s securities
from The Nasdaq Capital Market because the Company’s securities have had a closing bid price below $1.00 for 30 consecutive business
days, which triggers a notice of delisting pursuant to Nasdaq Listing Rule 5550(a)(2) (the “Rule”). Normally, a company would
be afforded a 180-calendar day period to demonstrate compliance with the Rule. However, pursuant to Listing Rule 5810(c)(3)(A)(iv), the
Company is not eligible for any compliance period specified in Rule 5810(c)(3)(A) because the Company effected reverse stock splits over
the prior two-year period with a cumulative ratio of 250 shares or more to one.
Accordingly, and
as described in the Letter, unless the Company timely requested a hearing before a Hearings Panel (the “Panel”), the Company’s
securities would be subject to suspension/delisting. Accordingly, the Company requested a hearing before the Panel. The hearing request
will automatically stay any suspension or delisting action pending the hearing and the expiration of any additional extension period granted
by the Panel following the hearing.
On September 19, 2024, the Company announced a ratio change on its
ADSs from one (1) ADS representing four hundred (400) ordinary shares, to the new ratio of one (1) ADS representing ten thousand (10,000)
ordinary shares (the "Ratio Change"). The effective date of the Ratio Change is expected to be October 4, 2024.
BIODEXA PHARMACEUTICALS PLC
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
The Board of Directors and Shareholders of Biodexa Pharmaceuticals
plc (formerly known as Midatech Pharma plc)
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated
statements of financial position of Biodexa Pharmaceuticals plc (formerly known as Midatech Pharma plc) and its subsidiaries (the “Group”)
as of December 31, 2023 and 2022, and the related consolidated statements of comprehensive income, changes in equity, and cash flows for
each of the years in the three-year period ended December 31, 2023, including the related notes (collectively, the “Consolidated
Financial Statements”). In our opinion, the Consolidated Financial Statements present fairly, in all material respects, the financial
position of the Group as of December 31, 2023 and 2022, and the consolidated results of its operations and its cash flows for each of
the year in the three-year period ended December 31, 2023, in conformity with International Financial Reporting Standards as issued by
the International Accounting Standards Board.
Going Concern Uncertainty
The accompanying Consolidated Financial Statements
have been prepared assuming that the Group will continue as a going concern. As discussed in note 1 to the Consolidated Financial Statements
the Group has suffered recurring losses from operations and has a net capital deficiency that raise substantial doubt about its ability
to continue as a going concern. Management’s plans regarding these matters are also described in note 1. The Consolidated Financial
Statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These Consolidated Financial Statements are the responsibility of the
Group’s management. Our responsibility is to express an opinion on these Consolidated Financial Statements based on our audits.
We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and
are required to be independent with respect to the Group in accordance with the U.S. federal securities laws and the applicable rules
and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the
standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the Consolidated
Financial Statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we
engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding
of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s
internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess
the risks of material misstatement of the Consolidated Financial Statements, whether due to error or fraud, and performing procedures
that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the
Consolidated Financial Statements. Our audits also included evaluating the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the Consolidated Financial Statements. We believe that our audits provide
a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below
are matters arising from the current period audit of the Consolidated Financial Statements that were communicated or required to be communicated
to the audit committee and that: (1) relate to accounts or disclosures that are material to the Consolidated Financial Statements and
(2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter
in any way our opinion on the Consolidated Financial Statements, taken as a whole, and we are not, by communicating the critical audit
matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
We have identified one
critical audit matter, being the going concern basis of preparation. The nature of the critical audit matter, together with our conclusion,
is set out above in the going concern uncertainty paragraph. Given the circumstances described, the Directors were required
to exercise significant judgement in making their assessment as to whether it is appropriate to prepare the Consolidated Financial Statements
on a going concern basis and in preparing their related explanatory disclosures. As a result of the requirement for the Directors to exercise
significant judgment, much of which is qualitative in nature, together with the pervasive impact of the going concern basis of preparation
and the importance of the related explanatory disclosures in providing context for the Consolidated Financial Statements, we have concluded
that the going concern basis of preparation is a critical audit matter.
Our evaluation of the Directors’ assessment
of the appropriateness of the going concern basis of preparation of these consolidated financial statements included, but was not limited
to:
|
· |
Undertaking an initial assessment at the planning
stage of the audit to identify events or conditions that may cast significant doubt on the Group’s ability to continue as a going
concern; |
|
· |
Obtaining an understanding of the relevant controls relating to the Directors’
going concern assessment; |
|
· |
Reviewing the Directors’ formal going concern
assessment, including the supporting cash flow projections to 31 December 2026; |
|
· |
Evaluating the key assumptions used and judgements
applied by the Directors in forming their conclusions on going concern; and |
|
· |
Reviewing the appropriateness of the disclosures
made by the Directors in the Consolidated Financial Statements. |
We have served as the Group’s auditor since
2020.
Mazars LLP
London, England
April 18, 2024
Consolidated
StatementS of Comprehensive Income
For the year ended
31 December
| | |
| | | |
| | | |
| | | |
| | |
| | |
Note | | |
2023 £’000 | | |
2022 £’000 | | |
2021 £’000 | |
| Revenue | |
| 3 | | |
| 381 | | |
| 699 | | |
| 578 | |
| Other income | |
| | | |
| 14 | | |
| 22 | | |
| 24 | |
| Research and development costs | |
| | | |
| (4,067 | ) | |
| (5,111 | ) | |
| (4,654 | ) |
| Administrative costs | |
| | | |
| (4,342 | ) | |
| (4,542 | ) | |
| (2,946 | ) |
| Loss from operations | |
| 4 | | |
| (8,014 | ) | |
| (8,932 | ) | |
| (6,998 | ) |
| Finance income | |
| 6 | | |
| 570 | | |
| 497 | | |
| 936 | |
| Finance expense | |
| 6 | | |
| (41 | ) | |
| (53 | ) | |
| (44 | ) |
| Loss before tax | |
| | | |
| (7,485 | ) | |
| (8,488 | ) | |
| (6,106 | ) |
| Taxation | |
| 7 | | |
| 406 | | |
| 832 | | |
| 646 | |
| Loss for the year attributable to the owners of the parent | |
| | | |
| (7,079 | ) | |
| (7,656 | ) | |
| (5,460 | ) |
| Other comprehensive income: | |
| | | |
| | | |
| | | |
| | |
| Items that will or may be reclassified subsequently to profit or loss: | |
| | | |
| | | |
| | | |
| | |
| Total other comprehensive income net of tax | |
| | | |
| – | | |
| – | | |
| – | |
| Total comprehensive loss attributable to the owners of the parent | |
| | | |
| (7,079 | ) | |
| (7,656 | ) | |
| (5,460 | ) |
| Loss per share | |
| | | |
| | | |
| | | |
| | |
| Continuing operations | |
| | | |
| | | |
| | | |
| | |
| Basic and diluted loss per ordinary share - pence | |
| 8 | | |
| (2 | )p | |
| (155) p | | |
| (136) p | |
The notes form an integral
part of these consolidated financial statements.
Consolidated
statementS of financial position
At 31 December
| | |
| | | |
| | | |
| | | |
| | |
| Company number 09216368 | |
Note | | |
2023 £’000 | | |
2022 £’000 | | |
2021 £’000 | |
| Assets | |
| | | |
| | | |
| | | |
| | |
| Non-current assets | |
| | | |
| | | |
| | | |
| | |
| Property, plant and equipment | |
| 9 | | |
| 571 | | |
| 831 | | |
| 1,152 | |
| Intangible assets | |
| 11 | | |
| 2,941 | | |
| 6 | | |
| – | |
| Total Non-Current Assets | |
| | | |
| 3,512 | | |
| 837 | | |
| 1,152 | |
| Current assets | |
| | | |
| | | |
| | | |
| | |
| Trade and other receivables | |
| 13 | | |
| 637 | | |
| 1,006 | | |
| 1,034 | |
| Current taxation receivable | |
| | | |
| 422 | | |
| 846 | | |
| 670 | |
| Cash and cash equivalents | |
| 14 | | |
| 5,971 | | |
| 2,836 | | |
| 10,057 | |
| Total Current Assets | |
| | | |
| 7,030 | | |
| 4,688 | | |
| 11,761 | |
| Total assets | |
| | | |
| 10,542 | | |
| 5,525 | | |
| 12,913 | |
| Liabilities | |
| | | |
| | | |
| | | |
| | |
| Non-current liabilities | |
| | | |
| | | |
| | | |
| | |
| Borrowings | |
| 16 | | |
| 295 | | |
| 463 | | |
| 620 | |
| Total Non-Current Liabilities | |
| | | |
| 295 | | |
| 463 | | |
| 620 | |
| Current liabilities | |
| | | |
| | | |
| | | |
| | |
| Trade and other payables | |
| 15 | | |
| 1,240 | | |
| 1,447 | | |
| 1,092 | |
| Borrowings | |
| 16 | | |
| 169 | | |
| 161 | | |
| 146 | |
| Provisions | |
| 17 | | |
| – | | |
| 207 | | |
| 50 | |
| Derivative financial liability | |
| 18 | | |
| 4,160 | | |
| 85 | | |
| 553 | |
| Total Current liabilities | |
| | | |
| 5,569 | | |
| 1,900 | | |
| 1,841 | |
| Total liabilities | |
| | | |
| 5,864 | | |
| 2,363 | | |
| 2,461 | |
CONSOLIDATED STATEMENTS
OF FINANCIAL POSITION(continued)
At 31 December
| | |
Note | | |
2023 £’000 | | |
2022 £’000 | | |
2021 £’000 | |
| Issued capital and reserves attributable to owners of the parent | |
| | | |
| | | |
| | | |
| | |
| Share capital | |
| 21 | | |
| 6,253 | | |
| 1,108 | | |
| 1,098 | |
| Share premium | |
| 22 | | |
| 86,732 | | |
| 83,667 | | |
| 83,434 | |
| Merger reserve | |
| 22 | | |
| 53,003 | | |
| 53,003 | | |
| 53,003 | |
| Warrant reserve | |
| 22 | | |
| 3,457 | | |
| 720 | | |
| 720 | |
| Accumulated deficit | |
| 22 | | |
| (144,767 | ) | |
| (135,336 | ) | |
| (127,803 | ) |
| Total equity | |
| | | |
| 4,678 | | |
| 3,162 | | |
| 10,452 | |
| Total equity and liabilities | |
| | | |
| 10,542 | | |
| 5,525 | | |
| 12,913 | |
The notes form an integral
part of these consolidated financial statements.
Consolidated
statements of cash flows
For the year ended 31 December
| | |
| | | |
| | | |
| | | |
| | |
| | |
Note | | |
2023 £’000 | | |
2022 £’000 | | |
2021 £’000 | |
| Cash flows from operating activities | |
| | | |
| | | |
| | | |
| | |
| Loss for the year | |
| | | |
| (7,079 | ) | |
| (7,656 | ) | |
| (5,460 | ) |
| Adjustments for: | |
| | | |
| | | |
| | | |
| | |
| Depreciation of property, plant and equipment | |
| 9 | | |
| 143 | | |
| 174 | | |
| 213 | |
| Depreciation of right of use asset | |
| 9 | | |
| 137 | | |
| 166 | | |
| 190 | |
| Amortisation of intangible fixed assets | |
| 11 | | |
| 3 | | |
| 3 | | |
| – | |
| Loss/(Profit) on disposal of property, plant and equipment | |
| | | |
| 2 | | |
| 14 | | |
| (39 | ) |
| Impairment of loan | |
| 4,13 | | |
| 79 | | |
| 207 | | |
| – | |
| Finance income | |
| 6 | | |
| (570 | ) | |
| (497 | ) | |
| (936 | ) |
| Finance expense | |
| 6 | | |
| 41 | | |
| 53 | | |
| 44 | |
| Share-based payment charge | |
| 4 | | |
| 28 | | |
| 123 | | |
| 89 | |
| Taxation | |
| 7 | | |
| (406 | ) | |
| (832 | ) | |
| (646 | ) |
| Foreign exchange gains | |
| | | |
| – | | |
| (1 | ) | |
| (3 | ) |
| Cash flows from operating activities before changes in working capital | |
| | | |
| (7,622 | ) | |
| (8,246 | ) | |
| (6,548 | ) |
| Decrease/(Increase) in trade and other receivables | |
| | | |
| 365 | | |
| 7 | | |
| (487 | ) |
| (Decrease)/Increase in trade and other payables | |
| | | |
| (207 | ) | |
| 356 | | |
| (130 | ) |
| (Decrease)/Increase in provisions | |
| | | |
| (207 | ) | |
| 157 | | |
| – | |
| Cash used in operations | |
| | | |
| (7,671 | ) | |
| (7,726 | ) | |
| (7,165 | ) |
| Taxes received | |
| | | |
| 845 | | |
| 678 | | |
| 1,157 | |
| Net cash used in operating activities | |
| | | |
| (6,826 | ) | |
| (7,048 | ) | |
| (6,008 | ) |
Consolidated
statements of cash flows(continued)
For the year ended 31 December
| | |
Note | | |
2023 £’000 | | |
2022 £’000 | | |
2021 £’000 | |
| Investing activities | |
| | | |
| | | |
| | | |
| | |
| Purchases of property, plant and equipment | |
| 9 | | |
| (26 | ) | |
| (62 | ) | |
| (320 | ) |
| Proceeds from disposal of fixed assets | |
| | | |
| 4 | | |
| 20 | | |
| 42 | |
| Purchase intangible asset | |
| 11 | | |
| (237 | ) | |
| – | | |
| – | |
| Loan granted | |
| 4,13 | | |
| (79 | ) | |
| (207 | ) | |
| – | |
| Interest received | |
| | | |
| 73 | | |
| 29 | | |
| – | |
| Net cash (used in)/generated from investing activities | |
| | | |
| (265 | ) | |
| (220 | ) | |
| (278 | ) |
| Financing activities | |
| | | |
| | | |
| | | |
| | |
| Interest paid | |
| | | |
| (13 | ) | |
| (18 | ) | |
| (15 | ) |
| Amounts paid on lease liabilities | |
| | | |
| (188 | ) | |
| (178 | ) | |
| (112 | ) |
| Repayment from Government loan | |
| 16 | | |
| – | | |
| – | | |
| (103 | ) |
| Share issues including warrants, net of costs | |
| 14 | | |
| 10,427 | | |
| 243 | | |
| 9,035 | |
| Net cash generated from financing activities | |
| | | |
| 10,226 | | |
| 47 | | |
| 8,805 | |
| Net increase/(decrease) in cash and cash equivalents | |
| | | |
| 3,135 | | |
| (7,221 | ) | |
| 2,519 | |
| Cash and cash equivalents at beginning of year | |
| | | |
| 2,836 | | |
| 10,057 | | |
| 7,546 | |
| Exchange (losses)/gains on cash and cash equivalents | |
| | | |
| – | | |
| – | | |
| (8 | ) |
| Cash and cash equivalents at end of year | |
| 14 | | |
| 5,971 | | |
| 2,836 | | |
| 10,057 | |
The notes form an integral
part of these consolidated financial statements.
Consolidated
statements of changes in equity
For the year ended 31 December
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| | |
Note | | |
Share capital £’000 | | |
Share premium £’000 | | |
Merger
reserve £’000 | | |
Warrant
reserve
£’000 | | |
Accumulated deficit £’000 | | |
Total equity £’000 | |
| At 1 January 2023 | |
| | | |
| 1,108 | | |
| 83,667 | | |
| 53,003 | | |
| 720 | | |
| (135,336 | ) | |
| 3,162 | |
| Loss for the year | |
| | | |
| – | | |
| – | | |
| – | | |
| – | | |
| (7,079 | ) | |
| (7,079 | ) |
| Total comprehensive loss | |
| | | |
| – | | |
| – | | |
| – | | |
| – | | |
| (7,079 | ) | |
| (7,079 | ) |
| Transactions with owners | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Shares issued on 15 February 2023 | |
| 14,21 | | |
| 1,956 | | |
| 3,013 | | |
| – | | |
| – | | |
| – | | |
| 4,969 | |
| Costs associated with share issue on 15 February 2023 | |
| 14,21 | | |
| – | | |
| (903 | ) | |
| – | | |
| – | | |
| – | | |
| (903 | ) |
| Shares issued on 26 May 2023 | |
| 14,21 | | |
| 2,380 | | |
| – | | |
| – | | |
| – | | |
| (355 | ) | |
| 2,025 | |
| Costs associated with share issue on 26 May 2023 | |
| 14,21 | | |
| – | | |
| – | | |
| – | | |
| – | | |
| (527 | ) | |
| (527 | ) |
| Shares issued on 21 December 2023 | |
| 14,21 | | |
| 485 | | |
| – | | |
| – | | |
| 1,315 | | |
| (1,273 | ) | |
| 527 | |
| Costs associated with share issue on 21 December 2023 | |
| 14,21 | | |
| – | | |
| – | | |
| – | | |
| – | | |
| (441 | ) | |
| (441 | ) |
| Issue of shares to purchase intangible asset | |
| 11 | | |
| 324 | | |
| 955 | | |
| – | | |
| 1,422 | | |
| – | | |
| 2,701 | |
| Share-based payment charge | |
| | | |
| – | | |
| – | | |
| – | | |
| – | | |
| 244 | | |
| 244 | |
| Total contribution by and distributions to owners | |
| | | |
| 5,145 | | |
| 3,065 | | |
| – | | |
| 2,737 | | |
| (2,352 | ) | |
| 8,595 | |
| At 31 December 2023 | |
| | | |
| 6,253 | | |
| 86,732 | | |
| 53,003 | | |
| 3,457 | | |
| (144,767 | ) | |
| 4,678 | |
Consolidated
statements of changes in equity(cONTINUED)
| | |
Note | | |
Share capital £’000 | | |
Share premium £’000 | | |
Merger
reserve £’000 | | |
Warrant
reserve
£’000 | | |
Accumulated deficit £’000 | | |
Total equity £’000 | |
| At 1 January 2022 | |
| | | |
| 1,098 | | |
| 83,434 | | |
| 53,003 | | |
| 720 | | |
| (127,803 | ) | |
| 10,452 | |
| Loss for the year | |
| | | |
| – | | |
| – | | |
| – | | |
| – | | |
| (7,656 | ) | |
| (7,656 | ) |
| Total comprehensive loss | |
| | | |
| – | | |
| – | | |
| – | | |
| – | | |
| (7,656 | ) | |
| (7,656 | ) |
| Transactions with owners | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Exercise of warrants on 22 March 2022 | |
| 14,21 | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | |
| Shares issued on 19 December 2022 | |
| 14,21 | | |
| 10 | | |
| 311 | | |
| – | | |
| – | | |
| – | | |
| 321 | |
| Costs associated with share issue on 19 December 2022 | |
| 14,21 | | |
| – | | |
| (78 | ) | |
| – | | |
| – | | |
| – | | |
| (78 | ) |
| Share-based payment charge | |
| | | |
| – | | |
| – | | |
| – | | |
| – | | |
| 123 | | |
| 123 | |
| Total contribution by and distributions to owners | |
| | | |
| 10 | | |
| 233 | | |
| – | | |
| – | | |
| 123 | | |
| 366 | |
| At 31 December 2022 | |
| | | |
| 1,108 | | |
| 83,667 | | |
| 53,003 | | |
| 720 | | |
| (135,336 | ) | |
| 3,162 | |
Consolidated
statements of changes in equity(cONTINUED)
| | |
Note | | |
Share capital £’000 | | |
Share premium £’000 | | |
Merger
reserve £’000 | | |
Warrant
reserve
£’000 | | |
Accumulated deficit £’000 | | |
Total equity £’000 | |
| At 1 January 2021 | |
| | | |
| 1,063 | | |
| 74,364 | | |
| 53,003 | | |
| 720 | | |
| (122,432 | ) | |
| 6,718 | |
| Loss for the year | |
| | | |
| – | | |
| – | | |
| – | | |
| – | | |
| (5,460 | ) | |
| (5,460 | ) |
| Total comprehensive loss | |
| | | |
| – | | |
| – | | |
| – | | |
| – | | |
| (5,460 | ) | |
| (5,460 | ) |
| Transactions with owners | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Shares issued on 19 February 2021 | |
| 14,21 | | |
| – | | |
| 161 | | |
| – | | |
| – | | |
| – | | |
| 161 | |
| Costs associated with share issue on 19 February 2021 | |
| 14,21 | | |
| – | | |
| (10 | ) | |
| – | | |
| – | | |
| – | | |
| (10 | ) |
| Shares issued on 6 July 2021 | |
| 14,21 | | |
| 35 | | |
| 9,965 | | |
| – | | |
| – | | |
| – | | |
| 10,000 | |
| Costs associated with share issue on 6 July 2021 | |
| 14,21 | | |
| – | | |
| (1,046 | ) | |
| – | | |
| – | | |
| – | | |
| (1,046 | ) |
| Share-based payment charge | |
| | | |
| – | | |
| – | | |
| – | | |
| – | | |
| 89 | | |
| 89 | |
| Total contribution by and distributions to owners | |
| | | |
| 35 | | |
| 9,070 | | |
| – | | |
| – | | |
| 89 | | |
| 9,194 | |
| At 31 December 2021 | |
| | | |
| 1,098 | | |
| 83,434 | | |
| 53,003 | | |
| 720 | | |
| (127,803 | ) | |
| 10,452 | |
Notes
forming part of the financial statements
For the years ended 31 December
2023, 2022 and 2021
General information
Biodexa Pharmaceuticals
PLC (the ‘Company’) is a company registered and domiciled in England and Wales. The Company was incorporated on 12 September
2014.
The Company is a public
limited company, whose ordinary shares were admitted to trading on AIM (‘AIM’), which is a submarket of the London Stock Exchange,
on 8 December 2014 until admission of the Company’s ordinary shares to trading on AIM was cancelled 26 April 2023.
In addition, since 4
December 2015 the Company has American Depository Receipts (‘ADRs’) registered with the US Securities and Exchange Commission
(‘SEC’) and is listed on the NASDAQ Capital Market.
On 27 March 2023 the
company changed its name to Biodexa Pharmaceuticals PLC from Midatech Pharma Plc.
The financial statements
were approved and authorised for issue by the Board of Directors on 18 April 2024.
Basis of preparation
The Group was formed
on 31 October 2014 when the Company entered into an agreement to acquire the entire share capital of Biodexa Limited and its wholly owned
subsidiaries through the issue equivalent of shares in the Company which took place on 13 November 2014.
These financial statements
have been prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards
Board (IASB).
The principal accounting
policies adopted in the preparation of the financial statements are set out below. The policies have been consistently applied to all
the periods presented.
The consolidated financial
statements have been prepared on a historical cost basis, except for the following item (refer to individual accounting policies for details):
- Certain financial
instruments – fair value through profit or loss.
Adoption of new
and revised standards
New standards, interpretations
and amendments effective from 1 January 2023
The Group reviewed the
new standards, interpretations and amendments effective from 1 January 2023 and deemed none were applicable to the annual financial statements
for the year ended 31 December 2023.
New
standards, interpretations and amendments not yet effective
There
are a number of standards, amendments to standards, and interpretations which have been issued by the IASB that are effective in future
accounting periods that the group has decided not to adopt early.
The
Group reviewed the new standards, interpretations and amendments effective from 1 January 2024 and 1 January 2025 and deemed none have
a material impact on the group.
| 1 | Accounting policies (continued) |
Basis for consolidation
The
Group financial statements consolidate those of the parent company and all of its subsidiaries. The parent controls a subsidiary if it
has power over the investee to significantly direct the activities, exposure, or rights to variable returns from its involvement with
the investee, and the ability to use its power over the investee to affect the amount of the investor’s returns. All subsidiaries
have a reporting date of 31 December.
All transactions and
balances between Group companies are eliminated on consolidation, including unrealised gains and losses on transactions between Group
companies. Where unrealised losses on intra-Group asset sales are reversed on consolidation, the underlying asset is also tested for impairment
from a Group perspective. Amounts reported in the financial statements of subsidiaries have been adjusted where necessary to ensure consistency
with the accounting policies adopted by the Group.
The consolidated financial
statements consist of the results of the following entities:
| Schedule of entities |
|
| Entity |
Summary description |
| Biodexa Pharmaceuticals PLC |
Ultimate holding company |
| |
|
| Biodexa Limited (formerly Midatech Limited) |
Trading company |
| |
|
| Biodexa Pharmaceuticals (Wales) Limited formerly (Midatech Pharma (Wales) Limited) |
Trading company |
| |
|
| Haaland UK Limited |
Dormant – incorporated October 2022 |
| |
|
| Haaland Jersey Limited |
Incorporated January 2023
Dissolved March 2023 |
| |
|
| Midatech Pharma (Espana) SL (formerly Midatech Biogune SL) |
Liquidated - 2021 |
| |
|
| PharMida AG |
Dormant |
Going concern –
material uncertainty
We have
experienced net losses and significant cash outflows from cash used in operating activities over the past years as it develops its
portfolio. For the year ended 31 December 2023, the Group incurred a consolidated loss for the year of £7.08 million
and negative cash flows from operating activities of £6.83 million.
As of 31 December 2023, the Group had an accumulated deficit of £142.82 million.
Our future viability
is dependent on our ability to raise cash from financing activities to finance its development plans until milestones and/or royalties
can be secured from partnering the Company’s assets. Our failure to raise capital as and when needed could have a negative impact
on its financial condition and ability to pursue its business strategies.
We believe there are
adequate options and time available to secure additional financing for the Company and after considering the uncertainties, we consider
it is appropriate to continue to adopt the going concern basis in preparing these financial statements. The Group's consolidated financial
statements have therefore been presented on a going concern basis, which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business.
As at 31 December 2023,
we had cash and cash equivalents of £5.97m. We have prepared cash flow forecasts and considered the cash flow requirement for the
Group for the next three years including the period 12 months from the date of approval of the consolidated financial statements. These
forecasts show that further financing will be required before the fourth quarter of 2024 assuming, inter alia, that certain development
programs and other operating activities continue as currently planned. If the Company does not secure additional funding before the fourth quarter of 2024, it will no longer
be a going concern and would likely be placed in Administration.
Our forecast of the
period of time through which our financial resources will be adequate to support our operations is a forward-looking statement and involves
risks and uncertainties, and actual results could vary as a result of a number of factors, including the timing of clinical trials. We
have based this estimate on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we
currently expect. If we lack sufficient capital to expand our operations or otherwise capitalize on our business opportunities, our business,
financial condition and results of operations could be materially adversely affected.
If we raise additional
funds through the issuance of debt securities or additional equity securities, it could result in dilution to our existing shareholders,
increased fixed payment obligations and these securities may have rights senior to those of our ordinary shares (including the ADSs) and
could contain covenants that would restrict our operations and potentially impair our competitiveness, such as limitations on our ability
to incur additional debt, limitations on our ability to acquire, sell or license intellectual property rights and other operating restrictions
that could adversely impact our ability to conduct our business. Any of these events could significantly harm our business, financial
condition and prospects.
| 1 | Accounting policies (continued) |
Going concern (continued)
In our opinion, the
environment for financing of small and micro-cap biotech companies remains challenging. While this may present acquisition and/or merger
opportunities with other companies with limited or no access to financing, as noted above, any attendant financings by Biodexa are likely
to be dilutive. We continue to evaluate financing options, including those connected to acquisitions and/or mergers, potentially available
to the Group. Any alternatives considered are contingent upon the agreement of counterparties and accordingly, there can be no assurance
that any alternative courses of action to finance the Company would be successful.
This requirement for
additional financing in the short term represents a material uncertainty that may cast significant doubt upon the Group and Parent Company’s
ability to continue as a going concern. Should it become evident in the future that there are no realistic financing options available
to the Company which are actionable before its cash resources run out then the Company will no longer be a going concern. In such circumstances,
we would no longer be able to prepare financial statements under paragraph 25 of IAS 1. Instead, the financial statements would be prepared
on a liquidation basis and assets would be stated at net realizable value and all liabilities would be accelerated to current liabilities.
Revenue
Revenue is accounted
for in line with principles of IFRS 15 ‘Revenue from contracts with customers.
Supply of Research
and Development Services
Revenue from the supply
of services is subject to specific agreement. This is recognised over the contract term, proportionate to the progress in overall satisfaction
of the performance obligations (the services performed by the Group), measured by cost incurred to date out of total estimate of costs.
The primary input of substantially all work performed under these arrangements is labour. There is normally a direct relationship between
costs incurred and the proportion of the contract performed to date.
Where the Group supplies
services to a client it generally bills an agreed percentage in advance of the commencement of any work and the balance on completion.
Invoices to clients are payable under normal commercial terms.
Grant revenue
Where grant income is
received, which is not a direct re-imbursement of related costs, revenue is recognised at the point at which the conditions have been
met, this has been recognised within grant revenue. Where grants are received as a re-imbursement of directly related costs they are credited
to research and development expense in the same period as the expenditure towards which they are intended to contribute.
Business combinations
and externally acquired intangible assets
Business combinations
are accounted for using the acquisition method at the acquisition date, which is the date at which the Group obtains control over the
entity. The cost of an acquisition is measured as the amount of the consideration transferred to the seller, measured at the acquisition
date fair value, and the amount of any non-controlling interest in the acquiree. The Group measures goodwill initially at cost at the
acquisition date, being:
| · | the fair value of the consideration transferred to the seller, plus; |
| · | the amount of any non-controlling interest in the acquiree, plus; |
| · | if the business combination is achieved in stages, the fair value of the existing equity interest in the acquiree re-measured at the
acquisition date, less; |
| · | the fair value of the net identifiable assets acquired and assumed liabilities. |
Acquisition costs incurred
are expensed and included in administrative costs. Any contingent consideration to be transferred by the acquirer is recognised at fair
value at the acquisition date. Subsequent changes to the fair value of the contingent consideration, whether it is an asset or liability,
will be recognised through the consolidated statement of comprehensive income. If the contingent consideration is classified as equity,
it is not re-measured.
| 1 | Accounting policies (continued) |
Business combinations
and externally acquired intangible assets (continued)
An intangible asset, which is an identifiable non-monetary
asset without physical substance, is recognised to the extent that it is probable that the expected future economic benefits attributable
to the asset will flow to the Group and that its cost can be measured reliably. The asset is deemed to be identifiable when it is separable
or when it arises from contractual or other legal rights. Further contingent payments due on the purchase of the intangible asset are
only recognised when it is probable that payments are due.
Externally acquired
intangible assets other than goodwill are initially recognised at cost and subsequently amortised on a straight-line basis over their
useful economic lives where they are in use. Goodwill is stated at cost less any accumulated impairment losses.
The amounts ascribed
to intangibles recognised on business combinations are arrived at by using appropriate valuation techniques. In-process research and development
(‘IPRD’) programmes acquired in business combinations are recognised as assets even if subsequent expenditure is written off
because the criteria specified in the policy for development costs below are not met.
IPRD is subject to annual
impairment testing until the completion or abandonment of the related project. No further costs are capitalised in respect of this IPRD
unless they meet the criteria for research and development capitalisation as set out below.
As per IFRS 3, once
the research and development of each defined project is completed, the carrying value of the acquired IPRD is reclassified as a finite-lived
asset and amortised over its useful life.
The significant intangibles
recognised by the Group and their useful economic lives are as follows:
| Schedule of intangibles assets useful economic lives |
|
| Goodwill |
– Indefinite life |
| |
|
| IPRD |
– In process, not yet amortising |
| |
|
| IT and website costs |
– 4 years |
The useful economic
life of IPRD will be determined when the in-process research projects are completed.
Internally generated
intangible assets (development costs)
Expenditure on the research
phase of an internal project is recognised as an expense in the period in which it is incurred. Development costs incurred on specific
projects are capitalised when all the following conditions are satisfied:
| · | completion of the asset is technically feasible so that it will be available for use or sale; |
| · | the Group intends to complete the asset and use or sell it; |
| · | the Group has the ability to use or sell the asset and the asset will generate probable future economic benefits (over and above cost); |
| · | there are adequate technical, financial and other resources to complete the development and to use or sell the asset; and |
| · | the expenditure attributable to the asset during its development can be measured reliably. |
All internal activities
related to the research and development of new projects are continuously monitored by the Directors. The Directors consider that the criteria
to capitalise development expenditure are not met for a product prior to that product receiving regulatory approval in at least one country.
Development expenditure
not satisfying the above criteria, and expenditure on the research phase of internal projects are included in research and development
costs recognised in the Consolidated Statement of Comprehensive Income as incurred. No projects have yet reached the point of capitalisation.
Impairment of non-financial
assets
Assets that have an
indefinite useful life, for example goodwill, or intangible assets not ready for use, such as IPRD, are not subject to amortisation and
are tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s
carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell
and value in use. The reversal of any impairment charge is limited to the carrying amount of the asset that would have been determined
(net of amortisation or depreciation) had no impairment charge been recognised for the asset in prior periods.
For the purposes of
assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating
units). The Group at 31 December 2023 had only one cash generating unit (2022: one, 2021: one). Non-financial assets other than goodwill
that suffered impairment are reviewed for possible reversal of impairment at each reporting date.
Patents and trademarks
The costs incurred in
establishing patents and trademarks are either expensed in accordance with the corresponding treatment of the development expenditure
for the product to which they relate or capitalised if the development expenditure to which they relate has reached the point of capitalisation
as an intangible asset.
| 1 | Accounting policies (continued) |
Foreign currency
Transactions entered
into by Group entities in a currency other than the currency of the primary economic environment, in which they operate, are recorded
at the rates ruling when the transactions occur. Foreign currency monetary assets and liabilities are translated at the rates ruling at
the reporting date. Exchange differences arising on the retranslation of unsettled monetary assets and liabilities are recognised immediately
in profit or loss.
The presentational currency
of the Group is Pounds Sterling. Foreign subsidiaries use the local currencies of the country where they operate. On consolidation, the
results of overseas operations are translated into Pounds Sterling at rates approximating to those ruling when the transactions took place.
All assets and liabilities of overseas operations, including goodwill arising on the acquisition of those operations, are translated at
the rate ruling at the reporting date. Exchange differences arising on translating the opening net assets at opening rate and the results
of overseas operations at actual rate are recognised in other comprehensive income and accumulated in the foreign exchange reserve.
Exchange differences
recognised in the profit or loss of Group entities on the translation of long-term monetary items forming part of the Group’s net
investment in the overseas operation concerned are reclassified to other comprehensive income and accumulated in the foreign exchange
reserve on consolidation.
On disposal of a foreign
operation, the cumulative exchange differences recognised in the foreign exchange reserve relating to that operation up to the date of
disposal are transferred to the consolidated statement of comprehensive income as part of the gain or loss on disposal.
Financial assets
and liabilities
Assets at amortised
cost
The Group does not have
any financial assets which it would classify as fair value through profit or loss. Therefore, all financial assets are classed as assets
at amortised cost as defined below.
These assets are non-derivative
financial assets with fixed or determinable payments that are not quoted in an active market. They arise principally through the provision
of goods and services to customers (e.g., trade receivables), but also incorporate other types of contractual monetary asset. They are
initially recognised at fair value plus transaction costs that are directly attributable to their acquisition or issue and are subsequently
carried at amortised cost using the effective interest rate method, less provision for impairment.
For impairment provisions,
the Group applies the IFRS 9 simplified approach to measure expected credit losses using a lifetime expected credit loss provision for
trade receivables to measure expected credit losses on a collective basis. Trade receivables are grouped based on a similar credit risk
and ageing.
The expected loss rates
are based on the Group’s historic credit losses experienced over the three-year period prior to the period end. The historic loss
rates are then adjusted for current and forward-looking information on macroeconomic factors.
The Group’s assets
at amortised costs comprise trade and other receivables and cash and cash equivalents in the consolidated statement of financial position.
Cash and cash equivalents
include cash in hand, deposits held at call with original maturities of three months or less.
| 1 | Accounting policies (continued) |
Financial liabilities
The Group classifies
its financial liabilities into one of two categories, depending on the purpose for which the liability was acquired.
Fair value through
profit and loss (‘FVTPL’)
The Group has outstanding
warrants in the ordinary share capital of the company. The number of ordinary shares to be issued when exercised is fixed, however the
exercise price is denominated in US Dollars being different to the functional currency of the parent company. Therefore, the warrants
are classified as equity settled derivative financial liabilities recognised at fair value through the profit and loss account.
The financial liability
is valued using the either the Monte Carlo model or the Black-Scholes option pricing model. Financial liabilities at FVTPL are stated
at fair value, with any gains or losses arising on re-measurement recognised in profit or loss. The net gain or loss recognised in profit
or loss incorporates any interest paid on the financial liability and is included in the ‘finance income’ or ‘finance
expense’ lines item in the income statement. Fair value is determined in the manner described in note
18.
Other financial liabilities
include the following items:
| · | Borrowings are initially recognised at fair value net of any transaction costs directly attributable to the issue of the instrument.
Such interest-bearing liabilities are subsequently measured at amortised cost using the effective interest rate method, which ensures
that any interest expense over the period to repayment is at a constant rate on the balance of the liability carried in the consolidated
statement of financial position. Interest expense in this context includes initial transaction costs and premium payable on redemption,
as well as any interest or coupon payable while the liability is outstanding. |
| · | Government loans received on favourable terms below market rate are discounted at a market rate of interest. The difference between
the present value of the loan and the proceeds is held as a government grant within deferred revenue and is released to research and development
expenditure or grant income in line with when the asset or expenditure is recognised in the income statement. |
| · | Trade payables and other short-term monetary liabilities are initially recognised at fair value and subsequently carried at amortised
cost using the effective interest method. |
Share capital
Financial instruments
issued by the Group are classified as equity only to the extent that they do not meet the definition of a financial liability or financial
asset. The Group has three classes of share in existence:
| · | ordinary shares of £0.001 each are classified as equity instruments; |
| · | ‘A’ deferred shares of £1 each are classified as equity instruments; |
| · | ‘B’ deferred shares of £0.001 each are classified as equity instruments. |
Retirement benefits:
defined contribution schemes
Contributions to defined
contribution pension schemes are charged to the consolidated statement of comprehensive income in the year to which they relate.
Provisions
Provisions are recognised
when the Group has a present obligation (legal or constructive) as a result of a past event; it is probable that an outflow of resources
embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.
Share-based payments
The Group operates a
number of equity-settled, share-based compensation plans, under which the entity receives services from employees as consideration for
equity instruments (options) of the Group. The fair value of the employee services received in exchange for the grant of the options is
recognised as an expense. The total amount to be expensed is determined by reference to the fair value of the options granted:
| · | including any market performance conditions (including the share price); |
| · | excluding the impact of any service and non-market performance vesting conditions (for example, remaining an employee of the entity
over a specified time period); and |
| · | including the impact of any non-vesting conditions (for example, the requirement for employees to save). |
Non-market performance
and service conditions are included in assumptions about the number of options that are expected to vest. The total expense is recognised
over the vesting period, which is the period over which all of the specified vesting conditions are to be satisfied. Where vesting conditions
are
| 1 | Accounting policies (continued) |
Share-based payments
(continued)
accelerated on the occurrence
of a specified event, such as a change in control or initial public offering, such remaining unvested charge is accelerated
to the income statement.
In addition, in some
circumstances employees may provide services in advance of the grant date and therefore the grant date fair value is estimated for the
purposes of recognising the expense during the period between service commencement period and grant date.
At the end of each reporting
period, the Group revises its estimates of the number of options that are expected to vest based on the non-market vesting conditions.
It recognises the impact of the revision to original estimates, if any, in the income statement, with a corresponding adjustment to equity.
When the options are exercised, the Company issues new shares. The proceeds received net of any directly attributable transaction costs
are credited to share capital (nominal value) and share premium.
The Group also issues
warrants over ADSs to certain professional advisors in connection with equity transactions that fall within the scope of IFRS2 and are
accounted for as share based payments. The fair value of the services received in exchange for the grant of the warrant is recognised
as an expense of the equity transaction. The total expense is recognised immediately.
Leases
Identifying
Leases
The
Group accounts for a contract, or a portion of a contract, as a lease when it conveys the right to use an asset for a period of time in
exchange for consideration. Leases are those contracts that satisfy the following criteria:
(a)
There is an identified asset;
(b)
The Group obtains substantially all the economic benefits from use of the asset; and
(c)
The Group has the right to direct use of the asset.
The
Group considers whether the supplier has substantive substitution rights. If the supplier does have those rights, the contract is not
identified as giving rise to a lease.
In
determining whether the Group obtains substantially all the economic benefits from use of the asset, the Group considers only the economic
benefits that arise from the use of the asset, not those incidental to legal ownership or other potential benefits.
In
determining whether the Group has the right to direct use of the asset, the Group considers whether it directs how and for what purpose
the asset is used throughout the period of use. If there are no significant decisions to be made because they are pre-determined due to
the nature of the asset, the Group considers whether it was involved in the design of the asset in a way that predetermines how and for
what purpose the asset will be used throughout the period of use. If the contract or portion of a contract does not satisfy these criteria,
the Group applies other applicable IFRSs rather than IFRS 16.
All
leases are accounted for by recognising a right-of-use asset and a lease liability except for:
| · | Leases of low value assets; and |
| · | Leases with a duration of 12 months or less. |
Lease
liabilities are measured at the present value of the contractual payments due to the lessor over the lease term, with the discount rate
determined by reference to the group’s incremental borrowing rate on commencement of the lease.
Right
of use assets are initially measured at the amount of the lease liability, reduced for any lease incentives received, and increased for
lease payments made at or before commencement of the lease. The Group has taken advantage of the practical expedient to ignore the requirement
to separate non-lease components and instead account for the entire contract as a single lease.
Subsequent
to initial measurement lease liabilities increase as a result of interest charged at a constant rate on the balance outstanding and are
reduced for lease payments made. Right-of-use assets are amortised on a straight-line basis over the remaining term of the lease.
When
the group revises its estimate of the term of any lease (because, for example, it re-assesses the probability of a lessee extension or
termination option being exercised), it adjusts the carrying amount of the lease liability to reflect the payments to make over the revised
term, which are discounted using a revised discount rate. An equivalent adjustment is made to the carrying value of the right-of-use asset,
with the revised carrying amount being amortised over the remaining (revised) lease term. If the carrying amount of the right-of-use asset
is adjusted to zero, any further reduction is recognised in profit or loss.
Nature
of leasing activities (in the capacity as lessee)
As
at 31 December 2023 the Group had one property lease in place in the UK.
| 1 | Accounting policies (continued) |
Taxation
Tax
is recognised in the Comprehensive Statement of Income, except that a charge attributable to an item of income and expense recognised
as other comprehensive income or to an item recognised directly in equity is also recognised in other comprehensive income or directly
in equity respectively.
The
current income tax credit is calculated on the basis of tax rates and laws that have been enacted or substantively enacted by the reporting
date in the country where the Company operates and generates income.
Deferred taxation
Deferred tax assets
and liabilities are recognised where the carrying amount of an asset or liability in the consolidated statement of financial position
differs from its tax base, except for differences arising on:
| · | the initial recognition of goodwill; |
| · | the initial recognition of an asset or liability in a transaction which is not a business combination and at the time
of the transaction affects neither accounting or taxable profit; and |
| · | investments in subsidiaries and jointly controlled entities where the Group is able to control the timing of the reversal of the difference
and it is probable that the difference will not reverse in the foreseeable future. |
Recognition of deferred
tax assets is restricted to those instances where it is probable that taxable profit will be available against which the difference can
be utilised.
The amount of the asset
or liability is determined using tax rates that have been enacted or substantively enacted by the reporting date and are expected to apply
when the deferred tax assets or liabilities are recovered or settled.
Property, plant
and equipment
Property, plant and
equipment is stated at cost, net of accumulated depreciation and accumulated impairment losses.
Depreciation is provided
on all items of property, plant and equipment so as to write off their carrying value over their expected useful economic lives. It is
provided at the following rates:
| Schedule of depreciation rates of property, plant and equipment |
|
| Fixtures and fittings |
– 20%- 25% per annum straight line |
| |
|
| Leasehold improvements |
– the shorter of 10% per annum straight line or over the lease term |
| |
|
| Computer equipment |
– 25% per annum straight line |
| |
|
| Laboratory equipment |
– 15% – 25% per annum straight line |
| |
|
| Right of use asset |
– Economic life of contractual relationship |
| 2 | Critical accounting estimates and judgements |
The preparation of these
consolidated financial statements requires the Group to make estimates, assumptions and judgments that can have a significant impact on
the reported amounts of assets and liabilities, revenue and expenses and related disclosure of contingent assets and liabilities, at the
respective dates of our financial statements. The Group bases its estimates, assumptions and judgments on historical experience and various
other factors that we believe to be reasonable under the circumstances. Actual results may differ from these estimates under different
assumptions or conditions. Management evaluates estimates, assumptions and judgments on a regular basis and makes changes accordingly
and discusses critical accounting estimates with the board of Directors.
The following are considered
to be critical accounting estimates:
Impairment of intangible
assets not yet ready for use
Intangible assets not
yet ready for use are tested for impairment at the cash generating unit level on an annual basis at the year end and between annual tests
if an event occurs or circumstances change that would more likely than not reduce the fair value of a cash generating unit below its carrying
value. Impairment indications include events causing significant changes in any of the underlying assumptions used in valuing intangibles
not ready for use. The key assumptions are the probability of success, the discount factor, the timing of future revenue flows, market
penetration and peak sales assumptions, and expenditure required to complete development.
The fair value of each
cash generating unit or asset is estimated using the income approach, on a discounted cash flow methodology. This analysis requires significant
judgments, including estimation of future cash flows, which is dependent on internal forecasts, including for revenues and development
costs, estimation of the long-term rate of growth for the business, estimation of the useful life over which cash flows will occur and
determination of our weighted-average cost of capital.
The carrying value of
intangibles not yet ready for use was £2.9million (2022: £Nil; 2021: £Nil) as at 31 December 2023 (note
11).
Management apply a further
20% sensitivity to the probability of success, this resulted in a 18% change in the fair value of the asset.
Share-based payments
The Group accounts for
share-based payment transactions for employees in accordance with IFRS 2 Share-based Payment, which requires the measurement of the cost
of employee services received in exchange for the options on our ordinary shares, based on the fair value of the award on the grant date.
The Directors selected
the Black-Scholes-Merton option pricing model as the most appropriate method for determining the estimated fair value of our share-based
awards without market conditions. For performance-based options that include vesting conditions relating to the market performance of
our ordinary shares, a Monte Carlo pricing model was used in order to reflect the valuation impact of price hurdles that have to be met
as conditions to vesting.
The resulting cost of
an equity incentive award is recognised as an expense over the requisite service period of the award, which is usually the vesting period.
The assumptions used
for estimating fair value for share-based payment transactions are disclosed in note 24
to our consolidated financial statements and are estimated as follows:
| · | volatility is estimated based on the average annualised volatility of a number of publicly traded peer companies in the biotech sector; |
| · | the estimated life of the option is estimated to be until the first exercise period, which is typically the month after the option
vests; and |
| · | the dividend return is estimated by reference to our historical dividend payments. Currently, this is estimated to be zero as no dividend
has been paid in the prior periods. |
| 2 | Critical accounting estimates and judgements (continued) |
Financial
liabilities
Fair
value through profit and loss (‘FVTPL’)
The Group has outstanding
warrants in the ordinary share capital of the Company. The number of ordinary shares to be issued when exercised is fixed, however the
exercise price is denominated in US Dollars being different to the functional currency of the parent company. Therefore, the warrants
are classified as equity settled derivative financial liabilities recognised at fair value through the profit and loss account.
The financial liability
is valued using the either the Monte Carlo model or the Black-Scholes option pricing model. Financial liabilities at FVTPL are stated
at fair value, with any gains or losses arising on re-measurement recognised in profit or loss. The net gain or loss recognised in profit
or loss incorporates any interest paid on the financial liability and is included in the ‘finance income’ or ‘finance
expense’ lines item in the income statement.
The assumptions used
for estimating fair value for warrants transactions as disclosed in note 18 to our consolidated financial statements and are estimated
as follows:
| · | volatility is estimated based on the average annualised volatility of a number of publicly traded peer companies in the biotech sector; |
| · | the dilutive impact of the exercise of the warrants; and |
| · | the dividend return is estimated by reference to our historical dividend payments. Currently, this is estimated to be zero as no dividend
has been paid in the prior periods. |
The
following are considered to be critical accounting judgments:
Revenue
Supply Research and
Development of Services
There are significant
management judgements and estimates involved in the recognition of revenue from the supply of services. Revenue on services is recognised
over the contract term, proportionate to the progress in overall satisfaction of the performance obligations (the services performed by
the Group), measured by cost incurred to date out of total estimate of costs. The Company’s R&D collaboration agreements require
the delivery of services within 12 months.
Income taxes
Deferred tax assets
are recognised for unused tax losses to the extent that it is probable that taxable profit will be available against which the losses
can be utilised. Judgment is required to determine the amount of deferred tax assets that can be recognised based upon the likely timing
and the level of future taxable profits together with future tax planning strategies.
In 2023, there
were approximately £73.4million
of gross unutilised tax losses carried forward (2022: £71.1 million;
2021: £67.2 million).
No deferred tax asset has been provided in respect of these losses as there was insufficient evidence to support their
recoverability in future periods. The losses do not have an expiry date.
| 2 | Critical accounting estimates and judgements (continued) |
Going Concern –
material uncertainty
We have
experienced net losses and significant cash outflows from cash used in operating activities over the past years as it develops its
portfolio. For the year ended 31 December 2023, the Group incurred a consolidated loss for the year of £7.08 million
and negative cash flows from operating activities of £6.83 million.
As of 31 December 2023, the Group had an accumulated deficit of £142.82 million.
Our future viability
is dependent on our ability to raise cash from financing activities to finance its development plans until milestones and/or royalties
can be secured from partnering the Company’s assets. Our failure to raise capital as and when needed could have a negative impact
on its financial condition and ability to pursue its business strategies.
We believe there are
adequate options and time available to secure additional financing for the Company and after considering the uncertainties, we consider
it is appropriate to continue to adopt the going concern basis in preparing these financial statements. The Group's consolidated financial
statements have therefore been presented on a going concern basis, which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business.
As at 31 December 2023,
the Group had cash and cash equivalents of £5.97m. We have prepared cash flow forecasts and considered the cash flow requirement
for the Group for the next three years including the period 12 months from the date of approval of the consolidated financial statements.
These forecasts show that further financing will be required before the fourth quarter of 2024 assuming, inter alia, that certain development
programs and other operating activities continue as currently planned. If the Company does not secure additional funding before the fourth quarter of 2024,
it will no longer be a going concern and would likely be placed in Administration.
Our forecast of the
period of time through which our financial resources will be adequate to support our operations is a forward-looking statement and involves
risks and uncertainties, and actual results could vary as a result of a number of factors, including the timing of clinical trials. We
have based this estimate on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we
currently expect. If we lack sufficient capital to expand our operations or otherwise capitalize on our business opportunities, our business,
financial condition and results of operations could be materially adversely affected.
If we raise additional
funds through the issuance of debt securities or additional equity securities, it could result in dilution to our existing shareholders,
increased fixed payment obligations and these securities may have rights senior to those of our ordinary shares (including the ADSs) and
could contain covenants that would restrict our operations and potentially impair our competitiveness, such as limitations on our ability
to incur additional debt, limitations on our ability to acquire, sell or license intellectual property rights and other operating restrictions
that could adversely impact our ability to conduct our business. Any of these events could significantly harm our business, financial
condition and prospects.
In our opinion, the
environment for financing of small and micro-cap biotech companies remains challenging. While this may present acquisition and/or merger
opportunities with other companies with limited or no access to financing, as noted above, any attendant financings by Biodexa are likely
to be dilutive. We continue to evaluate financing options, including those connected to acquisitions and/or mergers, potentially available
to the Group. Any alternatives considered are contingent upon the agreement of counterparties and accordingly, there can be no assurance
that any alternative courses of action to finance the Company would be successful.
This requirement for
additional financing in the short term represents a material uncertainty that may cast significant doubt upon the Group and Parent Company’s
ability to continue as a going concern. Should it become evident in the future that there are no realistic financing options available
to the Company which are actionable before its cash resources run out then the Company will no longer be a going concern. In such circumstances,
we would no longer be able to prepare financial statements under paragraph 25 of IAS 1. Instead, the financial statements would be prepared
on a liquidation basis and assets would be stated at net realizable value and all liabilities would be accelerated to current liabilities.
Revenue from contracts
with customers
Geographical analysis
of revenue by destination of customer
| Schedule of revenue by geographical analysis | |
| | | |
| | | |
| | |
| | |
2023 £’000 | | |
2022 £’000 | | |
2021 £’000 | |
| Revenue: | |
| | | |
| | | |
| | |
| Belgium | |
| 381 | | |
| 699 | | |
| 578 | |
| | |
| 381 | | |
| 699 | | |
| 578 | |
All revenue came from
the sale of services in 2023, 2022 and 2021. It is derived entirely from the Group’s R&D collaboration agreements. It is recognised
over the contract term proportionate to the progress in overall satisfaction of the performance obligations.
| Schedule of performance obligations | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| | |
| Contractual Assets | | |
| Contractual Liabilities | |
| | |
| | | |
| | |
| | |
| 2023 £’000 | | |
| 2022 £’000 | | |
| 2021 £’000 | | |
| 2023 £’000 | | |
| 2022 £’000 | | |
| 2021 £’000 | |
| At 1 January | |
| – | | |
| – | | |
| 71 | | |
| (197 | ) | |
| – | | |
| (68 | ) |
| Transfers in the period from contract assets to trade receivables | |
| – | | |
| – | | |
| (71 | ) | |
| – | | |
| – | | |
| – | |
| Amounts included in contract liabilities that was recognised as revenue during the period | |
| – | | |
| – | | |
| – | | |
| 197 | | |
| – | | |
| 68 | |
| Excess of revenue recognised over cash | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | |
| Cash received in advance of performance and not recognised as revenue during the period | |
| – | | |
| – | | |
| – | | |
| – | | |
| (197 | ) | |
| – | |
| At 31 December | |
| – | | |
| – | | |
| – | | |
| – | | |
| (197 | ) | |
| – | |
The Group’s R&D
collaboration agreements are the delivery of services within the next 12 months for which the practical expedient in paragraph 121 (a)
of IFRS15 applies.
In 2023, all revenue
came from 1 customer (2022: 1 customer; 2021: 1 customer).
| Schedule of commercial segment | |
| | |
| | |
| |
| | |
2023 £’000 | | |
2022 £’000 | | |
2021 £’000 | |
| Customer A | |
| 100 | % | |
| 100 | % | |
| 100 | % |
The Group contains one
reportable operating segment, Pipeline Research and Development (‘Pipeline R&D’). This segment seeks to develop products
using the Group’s nanomedicine and sustained release technology platforms. All the reconciliations required for segmental reporting
can be found in the primary statements.
The accounting policies
of the reportable segments are consistent with the Group’s accounting policies described in note 1.
| Schedule of loss from operations | |
| | | |
| | | |
| | | |
| | |
| | |
Note | | |
2023 £’000 | | |
2022 £’000 | | |
2021 £’000 | |
| Loss from operations is stated after charging/(crediting): | |
| | | |
| | | |
| | | |
| | |
| Depreciation of property, plant and equipment | |
| | | |
| | | |
| | | |
| | |
| - Research and development costs | |
| 9 | | |
| 135 | | |
| 162 | | |
| 198 | |
| - Administrative costs | |
| 9 | | |
| 8 | | |
| 12 | | |
| 15 | |
| Depreciation of right of use asset | |
| | | |
| | | |
| | | |
| | |
| - Research and development costs | |
| 9 | | |
| 113 | | |
| 151 | | |
| 165 | |
| - Administrative costs | |
| 9 | | |
| 24 | | |
| 15 | | |
| 25 | |
| Amortisation of intangible assets – software | |
| | | |
| | | |
| | | |
| | |
| - Research and development costs | |
| 11 | | |
| 3 | | |
| 3 | | |
| – | |
| Impairment of financial asset(1) | |
| 13 | | |
| 79 | | |
| 207 | | |
| – | |
| Provision against future loss on loan agreement | |
| 17 | | |
| – | | |
| 207 | | |
| – | |
| Fees payable to the Company’s auditor for the audit of the parent Company financial statements | |
| | | |
| 127 | | |
| 106 | | |
| 88 | |
| Fees payable to the Company’s auditor for the audits of the subsidiary financial statements | |
| | | |
| 58 | | |
| 44 | | |
| 44 | |
| Fees payable to the Company’s auditor for: | |
| | | |
| | | |
| | | |
| | |
| - Audit related services | |
| | | |
| 131 | | |
| 70 | | |
| – | |
| Fees payable to the Company’s previous auditor for: | |
| | | |
| | | |
| | | |
| | |
| - Audit related services | |
| | | |
| 32 | | |
| 67 | | |
| 41 | |
| Foreign exchange loss | |
| | | |
| 164 | | |
| 9 | | |
| 12 | |
Profit/(Loss)
on disposal of property, plant and equipment | |
| | | |
| 2 | | |
| 14 | | |
| (42 | ) |
| Equity settled share-based payment – employee schemes | |
| | | |
| 28 | | |
| 123 | | |
| 89 | |
| (1) | During 2023 a loan was provided to Adhera of $100,000, this was written off on completion of the Assignment and Exchange Agreement
in December 2023. |
Staff costs (including
Directors) comprise:
Employee numbers
The average number of
staff employed by the Group during the financial year amounted to:
| Schedule for average number of employed staff | |
| | | |
| | | |
| | |
| | |
2023 | | |
2022 | | |
2021 | |
| Research and development | |
| 16 | | |
| 22 | | |
| 15 | |
| General and administration | |
| 5 | | |
| 5 | | |
| 5 | |
| | |
| 21 | | |
| 27 | | |
| 20 | |
Key management
personnel compensation
Key management personnel
are those persons having authority and responsibility for planning, directing and controlling the activities of the Group, including the
Directors of the Company, including the Chief Executive Officer and Chief Scientific Officer.
| Schedule of Management Personnel Compensation | |
| | | |
| | | |
| | |
| | |
2023 £’000 | | |
2022 £’000 | | |
2021 £’000 | |
| Short term employee benefits | |
| 677 | | |
| 668 | | |
| 658 | |
| Post-employment benefits | |
| 21 | | |
| 21 | | |
| 27 | |
| Share-based payment | |
| 22 | | |
| 53 | | |
| 61 | |
| | |
| 720 | | |
| 742 | | |
| 746 | |
During the year no
Directors (2022: 0; 2012: 1) participated in a defined contribution pension scheme. Pension contributions in the above note include
those of the Chief Scientific Officer.
Emoluments disclosed above include the following
amounts in respect of the highest paid Director.
| Schedule of emoluments
disclosed | |
| | | |
| | | |
| | |
| | |
2023 £’000 | | |
2022 £’000 | | |
2021 £’000 | |
| Short term employee benefits | |
| 252 | | |
| 238 | | |
| 223 | |
| Post-employment benefits | |
| – | | |
| – | | |
| 11 | |
| | |
| 252 | | |
| 238 | | |
| 234 | |
None of the Directors
have exercised share options during the year (2022: nil, 2021: nil).
| 6 | Finance income and expense |
| | |
2023 £’000 | | |
2022 £’000 | | |
2021 £’000 | |
| Finance expense | |
| | | |
| | | |
| | |
| Interest expense on lease liabilities | |
| 28 | | |
| 43 | | |
| 36 | |
| Other loans | |
| 13 | | |
| 10 | | |
| 8 | |
| Total finance expense | |
| 41 | | |
| 53 | | |
| 44 | |
The gain on the equity
settled derivative financial liability in 2023, 2022 and 2021 arose as a result of the movement in share price (note
18).
The reasons for the
difference between the actual tax charge for the year and the standard rate of corporation tax in the United Kingdom applied to losses
for the year are as follows:
The taxation credit
arises on the enhanced research and development tax credits accrued for the respective periods.
At a General Meeting
on 24 March 2023, shareholders approved a consolidation of the Company’s Ordinary Shares on a one for 20 basis. As a result, the
par value of the Ordinary Shares was changed from £0.001 per share to £0.02 per share. The denominator has been calculated
to reflect the share consolidation in the current and prior periods.
At a General Meeting
on 14 June 2023, shareholders approved the subdivision and redesignation of the Company’s Issued Ordinary Shares of £0.02
each into to one Ordinary Share of £0.001 each and 19 ‘B’ Deferred Shares of £0.001 each. The ‘B’
Deferred Shares have limited rights and are effectively valueless. The share sub-division and redesignation did not impact the calculation
of the denominator as the number of Issued Ordinary Shares did not change.
During the year the
Company issued warrants that were accounted through the Warrant Reserve as detailed in note 21.
The Company has considered
the guidance set out in IAS 33 in calculating the denominator in connection with the issuance of Pre-Funded, Series A, Series B and Series
C warrants as disclosed in note 21. Management have recognised the warrants from the date
of grant rather than the date of issue of the corresponding Ordinary Shares when calculating the denominator.
The Group has made a
loss in the current and previous periods presented, and therefore the options and warrants are anti-dilutive. As a result, diluted earnings
per share is presented on the same basis as basic earning per share.
| 9 | Property, plant and equipment |
| | |
Fixtures
and fittings
£’000
| | |
Leasehold
improvements
£’000
| | |
Computer
equipment
£’000
| | |
Laboratory
equipment
£’000
| | |
Right
of use
asset
£’000
| | |
Total
£’000
| |
| Accumulated depreciation | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| At 1 January 2021 | |
| 49 | | |
| 2 | | |
| 199 | | |
| 1,239 | | |
| 112 | | |
| 1,601 | |
| Charge for the year | |
| – | | |
| – | | |
| – | | |
| (74 | ) | |
| 74 | | |
| – | |
| Disposal | |
| 8 | | |
| 5 | | |
| 22 | | |
| 178 | | |
| 190 | | |
| 403 | |
| Exchange differences | |
| (50 | ) | |
| (3 | ) | |
| (8 | ) | |
| (138 | ) | |
| (164 | ) | |
| (363 | ) |
| At 31 December 2021 | |
| 7 | | |
| 4 | | |
| 213 | | |
| 1,205 | | |
| 212 | | |
| 1,641 | |
| Transfer to intangibles | |
| – | | |
| – | | |
| (113 | ) | |
| – | | |
| – | | |
| (113 | ) |
| Charge for the year | |
| 12 | | |
| 11 | | |
| 12 | | |
| 139 | | |
| 166 | | |
| 340 | |
| Disposal | |
| – | | |
| – | | |
| (41 | ) | |
| (155 | ) | |
| (41 | ) | |
| (237 | ) |
| At 31 December 2022 | |
| 19 | | |
| 15 | | |
| 71 | | |
| 1,189 | | |
| 337 | | |
| 1,631 | |
| Transfers | |
| – | | |
| – | | |
| – | | |
| 103 | | |
| (103 | ) | |
| – | |
| Charge for the year | |
| 12 | | |
| 11 | | |
| 7 | | |
| 113 | | |
| 137 | | |
| 280 | |
| Disposal | |
| – | | |
| – | | |
| (38 | ) | |
| (146 | ) | |
| – | | |
| (184 | ) |
| At 31 December 2023 | |
| 31 | | |
| 26 | | |
| 40 | | |
| 1,259 | | |
| 371 | | |
| 1,727 | |
| Net book value | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| At 31 December 2023 | |
| 32 | | |
| 27 | | |
| 10 | | |
| 152 | | |
| 350 | | |
| 571 | |
| At 31 December 2022 | |
| 44 | | |
| 38 | | |
| 17 | | |
| 245 | | |
| 487 | | |
| 831 | |
| At 31 December 2021 | |
| 53 | | |
| 49 | | |
| 29 | | |
| 358 | | |
| 663 | | |
| 1,152 | |
As
at 31 December right of use asset consisted of leasehold improvements of net book value £350k (2022: £485k; 2021: £619k)
and laboratory equipment of net book value £Nil (2022: £2k; 2021: £44k).
On
1 February 2023 laboratory equipment previously disclosed within right of use assets was transferred to laboratory equipment when the
final payment on the finance lease was made. On 1 January 2022 software previously disclosed within computer equipment was transferred
to intangible assets.
The
right of use assets is disclosed in note 9.
In
April 2021 the Group signed an agreement to lease new premises in Cardiff, Wales, to house its corporate offices and laboratories. The
agreement to lease allowed the Group to carry out the Cat A works and fit out prior to completion of the lease and its occupation in August
2021. The lease agreed was for a 5 year period with no break clause. The lease was recognised as a right of use asset in 2021. The recognition
in 2021 of the right of use asset and corresponding lease liability were a non cash investing and financing transaction.
In
May 2021 the Group provided notice to terminate its property lease on its historical building in Cardiff. The lease required 6 months’
notice.
Low value leases
expensed in year:
| Low value leases expensed in year | |
| | | |
| | | |
| | |
| | |
2023 £’000 | | |
2022 £’000 | | |
2021 £’000 | |
| Low value leases expensed | |
| 2 | | |
| 3 | | |
| 2 | |
| | |
| 2 | | |
| 3 | | |
| 2 | |
Total
cash outflow for leases in 2023 was £190k (2022: £181k; 2021: £114k)
| Schedule of intangible assets | |
| | | |
| | | |
| | | |
| | |
| | |
In-process
research and
development £’000 | | |
Goodwill £’000 | | |
IT/Website
costs £’000 | | |
Total £’000 | |
| Cost | |
| | | |
| | | |
| | | |
| | |
| At 1 January 2021 | |
| 13,378 | | |
| 2,291 | | |
| – | | |
| 15,669 | |
| | |
| - | | |
| - | | |
| - | | |
| - | |
| At 31 December 2021 | |
| 13,378 | | |
| 2,291 | | |
| – | | |
| 15,669 | |
| Transfer from property, plant and equipment | |
| – | | |
| – | | |
| 122 | | |
| 122 | |
| Disposal | |
| – | | |
| – | | |
| (12 | ) | |
| (12 | ) |
| At 31 December 2022 | |
| 13,378 | | |
| 2,291 | | |
| 110 | | |
| 15,779 | |
| Acquisition | |
| 2,938 | | |
| – | | |
| – | | |
| 2,938 | |
| At 31 December 2023 | |
| 16,316 | | |
| 2,291 | | |
| 110 | | |
| 18,717 | |
| | |
| | | |
| | | |
| | | |
| | |
| | |
| In-process research and development £’000 | | |
| Goodwill £’000 | | |
| IT/Website Costs £’000 | | |
| Total £’000 | |
| Accumulated amortisation and impairment | |
| | | |
| | | |
| | | |
| | |
| At 1 January 2021 | |
| 13,378 | | |
| 2,291 | | |
| – | | |
| 15,669 | |
| At 31 December 2021 | |
| 13,378 | | |
| 2,291 | | |
| – | | |
| 15,669 | |
| Amortisation charge for the year | |
| – | | |
| – | | |
| 3 | | |
| 3 | |
| Transfer from property, plant and equipment | |
| – | | |
| – | | |
| 113 | | |
| 113 | |
| Disposal | |
| – | | |
| – | | |
| (12 | ) | |
| (12 | ) |
| At 31 December 2022 | |
| 13,378 | | |
| 2,291 | | |
| 104 | | |
| 15,773 | |
| Amortisation charge for the year | |
| – | | |
| – | | |
| 3 | | |
| 3 | |
| Disposal | |
| – | | |
| – | | |
| – | | |
| – | |
| At 31 December 2023 | |
| 13,378 | | |
| 2,291 | | |
| 107 | | |
| 15,776 | |
| Net book value | |
| | | |
| | | |
| | | |
| | |
| At 31 December 2023 | |
| 2,938 | | |
| – | | |
| 3 | | |
| 2,941 | |
| At 31 December 2022 | |
| – | | |
| – | | |
| 6 | | |
| 6 | |
| At 31 December 2021 | |
| – | | |
| – | | |
| – | | |
| – | |
| 11 | Intangible assets (continued) |
The individual intangible
asset which is material to the financial statements is as follows:
| Schedule of individual intangible assets | |
| | |
| | |
| | |
| | |
| | |
| |
| | |
Carrying amount | | |
Remaining amortisation
period | |
| | |
2023 £’000 | | |
2022 £’000 | | |
2021 £’000 | | |
2023 (years) | | |
2022 (years) | | |
2021 (years) | |
| MTX228 tolimidone acquired IPRD* | |
| 2,938 | | |
| – | | |
| – | | |
| n/a | | |
| n/a | | |
| n/a | |
| * | asset is not yet in use and has not started amortising |
On 21 December 2023 the Company executed an Assignment
and Exchange Agreement with Adhera for assignment of Adhera’s rights and a new licence for tolimidone (MTX228) with Melior for total
consideration of $11.12 million. The initial consideration was settled as follows:
| Schedule of purchase on intangible assets |
|
| |
| |
$’000 |
£’000 | |
| Cash paid to Adhera |
300 |
237 | |
| 100,356 ADSs, valued at the Offer price issued to Adhera Loan Noteholders |
201 |
159 | |
| 899,642 Pre-funded warrants at the Offering price issued to Adhera Loan Noteholders |
1,799 |
1,422 | |
| 708,856 ADSs at the Offer price issued to Melior |
1,418 |
1,120 | |
| Recognised as intangible asset purchase |
3,718 |
2,938 | |
In addition, conditional upon Adhera Loan
Noteholders subscribing for not less than $4 million in the Registered Offering the company paid a further $0.4 million in cash and
as an adjustment to equity of $3.0 million satisfied by the issue of 124,591 ADSs and 1,375,408 pre-funded warrants and not as
consideration for the acquisition of the intangible asset. These have been accounted for within the December 2023 Registered
Offering.
The Assignment and Exchange Agreement also provides
for deferred consideration totalling $4.0 million payable upon in part upon the completion of a positive Phase II clinical study of tolimidone
in Type-1 diabetes and in part upon the first commercial sale of tolimidone. In addition, the Company is obligated to pay single digit
tiered royalties on net sales of tolimidone to Melior.
The ADSs issued under
the transaction are subject to restrictions on their resale.
The Group reviews the
carrying amounts of its intangible assets to determine whether there are any indications that those assets have suffered an impairment
loss. If any such indications exist, the recoverable amount of the asset is estimated in order to determine the extent of the impairment
loss. Impairment indications include events causing significant changes in any of the underlying assumptions used in the income approach
utilised in valuing in process R&D. The key assumptions are : estimation of future cash flows which is dependent on the probability
of success, the discount factor, the timing of future revenue flows, market penetration and peak sales assumptions, and expenditure required
to complete development, estimation of the long-term rate of growth for the business, estimation of the useful life over which cash flows
will occur and determination of our weighted-average cost of capital.
The subsidiaries of
the Company, all of which are 100% owned as at 31 December 2023, either directly or through subsidiaries where indicated, and have been
included in these financial statements in accordance with the details set out in the basis of preparation and basis of consolidation note
1, are as follows:
| Schedule of subsidiaries | |
| |
| |
|
| Name | |
Registered Office | |
Nature of Business | |
Notes |
| Biodexa Limited (formerly Midatech Limited) | |
1 Caspian Point, Caspian Way, Cardiff,
CF10 4DQ | |
Trading company | |
|
| Biodexa Pharmaceuticals (Wales) Limited (formerly Midatech Pharma (Wales) Limited) | |
1 Caspian Point, Caspian Way, Cardiff,
CF10 4DQ | |
Trading company | |
|
| Haaland UK Limited | |
1 Caspian Point, Caspian Way, Cardiff,
CF10 4DQ | |
Dormant | |
|
| PharMida AG | |
c/o Kellerhals, Hirschgässlein 11, 4051 Basel, Switzerland | |
Dormant | |
(a) (b) |
Notes:
| (a) | Wholly owned subsidiary of Biodexa Limited. |
| (b) | PharMida AG became dormant in January 2016. |
| 13 | Trade and other receivables |
| Schedule of trade and other receivables | |
| | | |
| | | |
| | |
| | |
2023 £’000 | | |
2022 £’000 | | |
2021 £’000 | |
| Trade receivables | |
| – | | |
| 329 | | |
| 33 | |
| Prepayments | |
| 355 | | |
| 376 | | |
| 607 | |
| Other receivables | |
| 282 | | |
| 301 | | |
| 394 | |
| Total trade and other receivables | |
| 637 | | |
| 1,006 | | |
| 1,034 | |
| Less: non-current portion | |
| – | | |
| – | | |
| – | |
| Current portion | |
| 637 | | |
| 1,006 | | |
| 1,034 | |
The Group has applied
the practical expedient permitted by IFRS 15 to not disclose the transaction price allocated to performance obligations unsatisfied (or
partially unsatisfied) as of the end of the reporting period as contracts typically have an original expected duration of a year or less.
Book values approximate
to fair value at 31 December 2023, 2022 and 2021.
Expected
Credit Loss
Given
the short-term nature of the Group’s trade receivables and accrued income, which are mainly due from large national or multinational
companies, the Group's assessment of expected credit losses includes provisions for specific clients and receivables where the contractual
cash flow is deemed at risk. Considerations include the current economic environment along with historical and forward-looking information.
No assumptions or estimating techniques are applied in considering these. Additional provisions are made based on the assessment of recoverability
of aged receivables over one year where sufficient evidence of recoverability is not evident.
Trade
and other receivables contained one impaired asset in 2022, as detailed below, this asset was written off in 2023. In 2023 and 2021 Trade
and other receivables did not contain an impaired asset. The Group did hold security in 2022 as detailed below against one asset, in 2023
and 2021 it did not hold any collateral as security.
The
maximum exposure to credit risk at the consolidated statement of financial position date is the fair value of each class of receivable.
The
Company recognises a default on a financial asset when the counter party announces they have limited resources to satisfy the debt.
Bioasis
Loans
On
13 December 2022 the Company entered into an Arrangement Agreement with Bioasis Technologies Inc (‘Bioasis’) under which the
Company would acquire the entire issued share capital of Bioasis, the agreement entered into was subject to shareholder approval. In addition
to this, on 19 December 2022 the Company entered into a Promissory Note and Security Agreement with Bioasis to assist in the short term
with Bioasis’ working capital requirements. Under the agreement the Company agreed to advance Bioasis up to US$750,000 in 3 tranches
payable on 19 December 2022, 2 January 2023 and 6 February 2023. The loan was repayable on the earliest of the following:
| a) | The occurrence of an event of default |
| b) | The closing date (as defined in the Arrangement Agreement for the proposed acquisition of Bioasis) |
The
promissory note is subject to interest at a rate equal to 2% per month or, from and after the Bioasis maturity date, at a default rate
of 15% per annum. Under the Security Agreement the Company was made a secured creditor.
On
3 February 2023 Bioasis announced they were ‘urgently exploring and evaluating all financing and strategic alternatives that may
be available to address its liquidity requirements’ which triggered an event of default. As a result of this the 3rd payment under
the agreement was not made. On 5 March 2023 Bioasis were served with notice of an event of default. On 20 June 2023 Bioasis announced
the suspension of operations.
The Company has advanced
US$500,000 to Bioasis in two tranches over 2022 and 2023. Management considered the recovery of the debt to be uncertain and therefore
recognised an impairment provision of £414,000 in the year to 31 December 2022. As a result of Bioasis’ s announcement on
20 June 2023 the loans have been written off.
| 14 | Cash and cash equivalents and cash flow supporting notes |
Cash and cash equivalents
for purposes of the consolidated statement of cash flows comprises:
During 2023, 2022 and
2021, cash inflows arose from equity financing transactions, included within financing activities on the face of the cash flow statement.
As part of the equity transactions entered in December and May 2023 warrants to the value of £4.6million (December 2022:£nil;
July 2021: £nil) were issued as disclosed in note 18.
The following changes
in loans and borrowings arose as a result of financing activities during the year:
| Schedule of changes in bank loan liabilities | |
| | | |
| | | |
| | |
| | |
Non-current
liabilities £’000 | | |
Current
liabilities £’000 | | |
Total £’000 | |
| At 1 January 2023 | |
| 463 | | |
| 246 | | |
| 709 | |
| Cash flows | |
| – | | |
| (188 | ) | |
| (188 | ) |
| Non-cashflows: | |
| | | |
| | | |
| | |
| Loans and borrowings classified as non-current 31 December 2021 becoming current in 2022 | |
| (168 | ) | |
| 168 | | |
| – | |
| Warrants issued | |
| | | |
| 4,562 | | |
| 4,562 | |
| Gain recognised in finance income within the consolidated statement of comprehensive income | |
| – | | |
| (487 | ) | |
| (487 | ) |
| Interest accruing in period | |
| – | | |
| 28 | | |
| 28 | |
| At 31 December 2023 | |
| 295 | | |
| 4,329 | | |
| 4,624 | |
| 14 | Cash and cash equivalents and cash flow supporting notes(continued) |
| | |
Non-current
liabilities £’000 | | |
Current
liabilities £’000 | | |
Total £’000 | |
| At 1 January 2022 | |
| 620 | | |
| 699 | | |
| 1,319 | |
| Cash flows | |
| – | | |
| (178 | ) | |
| (178 | ) |
| Non-cashflows: | |
| | | |
| | | |
| | |
| Loans and borrowings classified as non-current 31 December 2021 becoming current in 2022 | |
| (178 | ) | |
| 178 | | |
| – | |
| Gain recognised in finance income within the consolidated statement of comprehensive income | |
| – | | |
| (468 | ) | |
| (468 | ) |
| Interest accruing in period | |
| 21 | | |
| 15 | | |
| 36 | |
| At 31 December 2022 | |
| 463 | | |
| 246 | | |
| 709 | |
| | |
Non-current
liabilities £’000 | | |
Current
liabilities £’000 | | |
Total £’000 | |
| At 1 January 2021 | |
| 60 | | |
| 1,759 | | |
| 1,819 | |
| Cash flows | |
| – | | |
| (215 | ) | |
| (215 | ) |
| Non-cashflows: | |
| | | |
| | | |
| | |
| Foreign Exchange | |
| – | | |
| (4 | ) | |
| (4 | ) |
| New leases | |
| 715 | | |
| 5 | | |
| 720 | |
| Effect of modification to lease term – IFRS 16 | |
| – | | |
| (24 | ) | |
| (24 | ) |
| Loans and borrowings classified as non-current 31 December 2020 becoming current in 2021 | |
| (178 | ) | |
| 178 | | |
| – | |
| Transfer to share premium on exercise of warrants | |
| – | | |
| (70 | ) | |
| (70 | ) |
| Gain recognised in finance income within the consolidated statement of comprehensive income | |
| – | | |
| (936 | ) | |
| (936 | ) |
| Interest accruing in period | |
| 23 | | |
| 6 | | |
| 29 | |
| At 31 December 2021 | |
| 620 | | |
| 699 | | |
| 1,319 | |
| 15 | Trade and other payables |
Book values approximate
to fair value at 31 December 2023, 2022 and 2021.
All current trade and
other payables are payable within 3 months of the period end date shown above.
Book values approximate
to fair value at 31 December 2023, 2022 and 2021.
Obligations under finance
leases are secured by a fixed charge over the fixed assets to which they relate.
Government loans
in Spain
During 2021 a euro denominated
government and research loan of £103k was repaid. This amount translated at year end rate was £107k. The loan was repaid in
February 2021 prior to the liquidation of MPE.
The provision as at
31 December 2021 represents management’s best estimate of the ‘making good’ clause on the Cardiff office which was vacated
during the fourth quarter of 2021. This liability was settled during 2022.
Bioasis
Loans
On
19 December 2022 the Company entered into a Promissory Note and Security Agreement with Bioasis to assist in the short term with Bioasis’
working capital requirements. Under the agreement the Company agreed to advance Bioasis up to US$750,000 in 3 tranches payable on 19 December
2022, 3 January 2023 and 6 February 2023. The terms of the agreement are set out in note 13.
The
Company advanced US$250,000 to Bioasis in the year to 31 December 2022. A further advance of US$250,000 was made to Bioasis on 3 January
2023.
Management
considered recovery of the debt to be uncertain and in 2022 recognised an impairment provision of £207,000 against the advance made
in December 2022, see note 13, and a provision of £207,000 against future credit losses
resulting from the Promissory Note.
On
3 February 2023 Bioasis announced they were ‘urgently exploring and evaluating all financing and strategic alternatives that may
be available to address its liquidity requirements’ which triggered an event of default. As a result of this the 3rd payment under
the agreement was not made in the post year end period. On 5 March 2023 Bioasis were served with a notice of an event of default. On 20
June 2023 Bioasis announced the suspension of operations.
In
2023 the provision was utilised against the advance made to Bioasis in January 2023.
| 18 | Derivative financial liability – current |
| Schedule of derivative financial liability | |
| | | |
| | | |
| | |
| | |
2023 £’000 | | |
2022 £’000 | | |
2021 £’000 | |
| Equity settled derivative financial liability | |
| | |
| | |
| |
| At 1 January | |
| 85 | | |
| 553 | | |
| 1,559 | |
| Warrants issued | |
| 4,562 | | |
| – | | |
| – | |
| Transfer to share premium on exercise of warrants | |
| – | | |
| – | | |
| (70 | ) |
| Gain recognised in finance (income)/expense within the consolidated statement of comprehensive income | |
| (487 | ) | |
| (468 | ) | |
| (936 | ) |
| At 31 December | |
| 4,160 | | |
| 85 | | |
| 553 | |
Equity settled derivative
financial liability is a liability that is not to be settled for cash.
No warrants recognised
as equity settled derivatives were exercised in 2023, 2022 or 2021.
The Company issues warrants
in the ADSs of the Company as part of registered direct offerings and private placements in the US. The number of ADSs to be issued when
exercised is fixed, however the exercise price is denominated in US Dollars being different to the functional currency of the Company.
Therefore, the warrants are classified as equity settled derivative financial liabilities recognised at fair value through the profit
and loss account (‘FVTPL’). The financial liability is valued using the Black-Scholes model in 2023, in previous periods the
Monte Carlo model was used. The change in methodology is as result of the Company de-listing from AIM in 2023 and no longer needing to
consider foreign exchange movements in fair value calculation. Financial liabilities at FVTPL are stated at fair value, with any gains
or losses arising on re-measurement recognised in profit or loss. The net gain or loss recognised in profit or loss incorporates any interest
paid on the financial liability and is included in the ‘finance income’ or ‘finance expense’ lines item in the
income statement. A key input in the valuation of the instrument is the Company share price.
Details of the warrants
are as follows:
December 2023
warrants
In December 2023 the
Company issued 3,000,063 Series E ADS Warrants and 3,000,063 Series F ADS Warrants as part of the Registered Offering in the US. The exercise
price per ADS is $2.20.
May 2023 warrants
In June 2023 the Company
issued 276,689 Series D ADS Warrants as part of a registered direct offering and private placement in the US after securing shareholder
approval. The exercise price per ADS was $16.00.
May 2020 warrants
In May 2020 the Company
issued 838 ADS warrants as part of a registered direct offering in the US.
October 2019 warrants
In October 2019 the
Company issued 392 ADS warrants as part of a registered direct offering in the US.
May 2020 and October
2019 warrant re-price
On 13 December 2022
the Company entered into a Securities Purchase Agreement with Armistice Capital Master Fund Ltd (‘Armistice’) to re-price
previously issued ADS warrants issued to Armistice to $320 per ADS. The impact of the re-pricing is shown in the table below: The warrant
exercise price per ADS for the remaining warrants remains unchanged as follows: October 2019 warrants at $10,000 per ADS; May 2020 warrants
at $3,280 and $3,300 per ADS.
| Schedule of warrant exercise price |
|
|
|
|
| |
ADS Warrants Number* |
Original price per
ADS* |
New price per ADS |
Equivalent Ordinary
Shares (400 ordinary
shares per ADS)
Number
|
| October 2019 warrants |
375 |
$10,000 |
$320 |
150,000 |
| May 2020 warrants |
406 |
$3,280 |
$320 |
162,400 |
| * |
Number and original
price of warrants have been adjusted to reflect the share consolidation and ratio change of ADS’s to ordinary shares that occurred
on 2 March 2020 and 24 March 2023 and the ratio change of ADS’s to ordinary shares on 26 September 2022 and 5 July 2023. |
| 18 | Derivative financial liability – current (continued) |
DARA warrants
and share options
The Group also assumed
fully vested warrants and share options on the acquisition of DARA Biosciences, Inc. (which took place in 2015). The number of ordinary
shares to be issued when exercised is fixed, however the exercise prices are denominated in US Dollars. The warrants are classified equity
settled derivative financial liabilities and accounted for in the same way as those detailed above. The financial liability is valued
using the Black-Scholes option pricing model. The exercise price of the outstanding options is $1,903.40.
The following table
details the outstanding warrants over ADSs and ordinary shares as at 31 December and also the movement in the year:
| Schedule of warrants outstanding | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| | |
At 1
January
2021 | | |
Lapsed | | |
Exercised | | |
At 31
December
2021 | | |
Lapsed | | |
At 31
December
2022 | | |
Lapsed | | |
Granted | | |
At 31
December
2023 | |
| ADSs | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| December 2023 grant | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| | | |
| 6,000,126 | | |
| 6,000,126 | |
| May 2023 grant | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| | | |
| 276,689 | | |
| 276,689 | |
| May 2020 grant | |
| 876 | | |
| – | | |
| (38 | ) | |
| 838 | | |
| – | | |
| 838 | | |
| – | | |
| – | | |
| 838 | |
| October 19 grant | |
| 392 | | |
| – | | |
| – | | |
| 392 | | |
| – | | |
| 392 | | |
| – | | |
| – | | |
| 392 | |
| Ordinary Shares | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| DARA Warrants | |
| 231 | | |
| (27 | ) | |
| – | | |
| 204 | | |
| (204 | ) | |
| – | | |
| – | | |
| – | | |
| – | |
| DARA Options | |
| 138 | | |
| – | | |
| – | | |
| 138 | | |
| | | |
| 138 | | |
| (10 | ) | |
| – | | |
| 128 | |
| * |
*Number and original
price of warrants have been adjusted to reflect the share consolidation and ratio change of ADS’s to ordinary shares that occurred
on 2 March 2020 and 24 March 2023 and the ratio change of ADS’s to ordinary shares on 26 September 2022 and 5 July 2023. |
| 19 | Financial instruments – risk management |
The Group is exposed
through its operations to the following financial risks:
This note describes
the Group’s policies and processes for managing those risks. The policy for managing these risks is reviewed and agreed with the
Board, however it has delegated the authority for designing and operating processes that ensure the effective management of the risks
to the Group’s management.
Principal financial
instruments
The principal financial
instruments used by the Group, from which financial instrument risk arises, are as follows:
| · | Trade and other receivables |
| · | Cash and cash equivalents |
| · | Trade and other payables |
| · | Derivative financial liability |
A summary of the financial
instruments held by category is provided below:
Financial assets
– amortised cost
| Schedule of consolidated derivative financial instruments | |
| | | |
| | | |
| | |
| | |
2023 £’000 | | |
2022 £’000 | | |
2021 £’000 | |
| Cash and cash equivalents | |
| 5,971 | | |
| 2,836 | | |
| 10,057 | |
| Trade receivables | |
| – | | |
| 329 | | |
| 33 | |
| Other receivables | |
| 282 | | |
| 301 | | |
| 394 | |
| Total financial assets | |
| 6,253 | | |
| 3,466 | | |
| 10,484 | |
Financial liabilities
– amortised cost
| | |
2023 £’000 | | |
2022 £’000 | | |
2021 £’000 | |
| Trade payables | |
| 314 | | |
| 339 | | |
| 485 | |
| Other payables | |
| 7 | | |
| 17 | | |
| 5 | |
| Accruals | |
| 857 | | |
| 817 | | |
| 546 | |
| Borrowings | |
| 464 | | |
| 624 | | |
| 766 | |
| Total financial liabilities – amortised cost | |
| 1,642 | | |
| 1,797 | | |
| 1,802 | |
Financial liabilities
– fair value through profit and loss – current
| | |
2023 £’000 | | |
2022 £’000 | | |
2021 £’000 | |
| Equity settled derivative financial liability | |
| 4,160 | | |
| 85 | | |
| 553 | |
19 Financial
instruments – risk management (continued)
Fair value hierarchy
The Group uses the following
hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:
| · | Level 1: quoted (unadjusted) prices in active markets for identical assets and liabilities; |
| · | Level 2: other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly
or indirectly; and |
| · | Level 3: techniques which use inputs that have a significant effect on the recorded fair value that are not based on observable market
data. |
The fair value of the
Group’s derivative financial liability is measured on a recurring basis. The following table gives information about how the fair
value of this financial liability is determined, additional disclosure is given in note 18:
| Schedule of consolidated financial assets and liabilities at fair value | |
| | | |
| |
| |
| |
|
Financial
liabilities | |
Fair value as
at
31/12/2023 | | |
Fair
value
hierarchy | |
Valuation
technique(s)
and key input(s) | |
Significant unobservable input(s) | |
Relationship of
unobservable inputs to
fair value |
| Equity settled financial derivative liability –
Series E warrants | |
£ | 2,592,000 | | |
Level 3 | |
Black-Scholes Model | |
Volatility rate of 90.0% determined using historical volatility of comparable companies. | |
The higher the volatility the higher the fair value. |
| | |
| | | |
| |
| |
Expected life between a range of 0.1 and 0.98 years determined using the remaining life of the warrant. | |
The shorter the expected life the lower the fair value. |
| | |
| | | |
| |
| |
Risk-free rate of 4.79% determined using the expected life assumptions. | |
The higher the risk-free rate
the higher the fair value. |
| Equity settled financial derivative liability – Series F
warrants | |
£ | 1,444,000 | | |
Level 3 | |
Black-Scholes Model | |
Volatility rate of 95.0% determined using historical volatility of comparable companies. | |
The higher the volatility the higher the fair value. |
| | |
| | | |
| |
| |
Expected life between a range of 0.1 and 4.98 years determined using the remaining life of the warrant. | |
The shorter the expected life the lower the fair value. |
| | |
| | | |
| |
| |
Risk-free rate of 3.84% determined using the expected life assumptions. | |
The higher the risk-free rate
the higher the fair value. |
| Equity settled financial derivative liability – Series D
warrants | |
£ | 124,000 | | |
Level 3 | |
Black-Scholes Model | |
Volatility rate of 95.0% determined using historical volatility of comparable companies. | |
The higher the volatility the higher the fair value. |
| | |
| | | |
| |
| |
Expected life between a range of 0.1 and 4.40 years determined using the remaining life of the share options. | |
The shorter the expected life the lower the fair value. |
| | |
| | | |
| |
| |
Risk-free rate of 3.93% determined using the expected life assumptions. | |
The higher the risk-free rate
the higher the fair value. |
| Equity settled financial derivative liability – May 2020
warrants | |
£ | – | | |
Level 3 | |
Black-Scholes Model | |
Volatility rate of 100.0% determined using historical volatility of comparable companies. | |
The higher the volatility the higher the fair value. |
| | |
| | | |
| |
| |
Expected life between a range of 0.1 and 1.88 years determined using the remaining life of the warrant. | |
The shorter the expected life the lower the fair value. |
| | |
| | | |
| |
| |
Risk-free rate of 4.23% determined using the expected life assumptions. | |
The higher the risk-free rate
the higher the fair value. |
| Equity settled financial derivative liability – October 2019
warrants | |
£ | – | | |
Level 3 | |
Black-Scholes Model | |
Volatility rate of 100.0% determined using historical volatility of comparable companies. | |
The higher the volatility the higher the fair value. |
| | |
| | | |
| |
| |
Expected life between a range of 0.1 and 1.50 years determined using the remaining life of the warrant. | |
The shorter the expected life the lower the fair value. |
| | |
| | | |
| |
| |
Risk-free rate of 4.51% determined using the expected life assumptions. | |
The higher the risk-free rate
the higher the fair value. |
| Total | |
£ | 4,160,000 | | |
| |
| |
| |
|
| 19 | Financial instruments – risk management (continued) |
Financial
liabilities | |
Fair value as
at
31/12/2022 | | |
Fair
value
hierarchy | |
Valuation
technique(s)
and key input(s) | |
Significant unobservable input(s) | |
Relationship of
unobservable inputs to
fair value |
| Equity settled financial derivative liability – May 2020 warrants | |
£ | 48,000 | | |
Level 3 | |
Monte Carlo simulation model | |
Volatility rate of 70.0% determined using historical volatility of comparable companies. | |
The higher the volatility the higher the fair value. |
| | |
| | | |
| |
| |
Expected life between a range of 0.1 and 2.88 years determined using the remaining life of the warrant. | |
The shorter the expected life the lower the fair value. |
| | |
| | | |
| |
| |
Risk-free rate of 4.22% determined using the expected life assumptions. | |
The higher the risk-free rate
the higher the fair value. |
| Equity settled financial derivative liability – October 2019 warrants | |
£ | 37,000 | | |
Level 3 | |
Monte Carlo simulation model | |
Volatility rate of 70.0% determined using historical volatility of comparable companies. | |
The higher the volatility the higher the fair value. |
| | |
| | | |
| |
| |
Expected life between a range of 0.1 and 2.5 years determined using the remaining life of the warrant. | |
The shorter the expected life the lower the fair value. |
| | |
| | | |
| |
| |
Risk-free rate of 4.32% determined using the expected life assumptions. | |
The higher the risk-free rate
the higher the fair value. |
| Total | |
£ | 85,000 | | |
| |
| |
| |
|
| 19 | Financial instruments – risk management (continued) |
Financial
liabilities | |
Fair value as
at
31/12/2021 | | |
Fair
value
hierarchy | |
Valuation
technique(s)
and key input(s) | |
Significant unobservable input(s) | |
Relationship of
unobservable inputs to
fair value |
| Equity settled financial derivative liability – May 2020 warrants | |
£ | 467,000 | | |
Level 3 | |
Monte Carlo simulation model | |
Volatility rate of 95.0% determined using historical volatility of comparable companies. | |
The higher the volatility the higher the fair value. |
| | |
| | | |
| |
| |
Expected life between a range of 0.1 and 3.88 years determined using the remaining life of the warrant. | |
The shorter the expected life the lower the fair value. |
| | |
| | | |
| |
| |
Risk-free rate of 0.31% determined using the expected life assumptions. | |
The higher the risk-free rate
the higher the fair value. |
| Equity settled financial derivative liability – October 2019 warrants | |
£ | 86,000 | | |
Level 3 | |
Monte Carlo simulation model | |
Volatility rate of 85.0% determined using historical volatility of comparable companies. | |
The higher the volatility the higher the fair value. |
| | |
| | | |
| |
| |
Expected life between a range of 0.1 and 3.5 years determined using the remaining life of the warrant. | |
The shorter the expected life the lower the fair value. |
| | |
| | | |
| |
| |
Risk-free rate of 0.71% determined using the expected life assumptions. | |
The higher the risk-free rate
the higher the fair value. |
| Equity settled financial derivative liability – DARA warrants | |
| – | | |
Level 3 | |
Black-Scholes option pricing model | |
Volatility rate of 85.0% determined using historical volatility of comparable companies. | |
The higher the volatility the higher the fair value. |
| | |
| | | |
| |
| |
Expected life between a range of 0.10 and 0.9 years determined using the remaining life of the warrant. | |
The shorter the expected life
the lower the fair value. |
| | |
| | | |
| |
| |
Risk-free rate of 0.71% determined using the expected life assumptions. | |
The higher the risk-free rate
the higher the fair value. |
| Total | |
£ | 553,000 | | |
| |
| |
| |
|
Changing the unobservable
risk-free rate input to the valuation model by 10% higher while all other variables were held constant, would not impact the carrying
amount of warrants (2022: nil; 2021: nil).
There were no transfers
between Level 1 and 2 in the period.
The financial liability
measured at fair value on Level 3 fair value measurement represents consideration relating to warrants issued in December 2024, May 2024,
May 2020 and October 2019 as part of Registered Direct offerings, private placement and also a business combination.
Credit risk
The Group is exposed
to credit risk from amounts due from collaborative partners and from cash and cash equivalents and deposits with banks and financial institutions.
The risk from collaborative partners is deemed to be low. For banks and financial institutions, only independently rated parties with
high credit status are accepted. The Group does not enter into derivatives to manage credit risk. The gross carrying amount of a financial
asset is written off (either partially or in full) to the extent that there is no realistic prospect of recovery.
The total exposure to
credit risk of the Group is equal to the total value of the financial assets held at each year end as noted above.
| 19 | Financial instruments – risk management (continued) |
Foreign exchange
risk
The group operates internationally
although its operations are based in the United Kingdom and the majority of assets and liabilities denominated in Pounds Sterling. It
therefore is exposed to foreign exchange risk arising from exposure to various currencies primarily the Euro and US Dollar.
The table below shows
analysis of the Pounds Sterling equivalent of year-end cash and cash equivalent balances by currency:
| Schedule of foreign exchange risk | |
| | | |
| | | |
| | |
| | |
2023 £’000 | | |
2022 £’000 | | |
2021 £’000 | |
| Cash and cash equivalents: | |
| | | |
| | | |
| | |
| Pounds Sterling | |
| 2,244 | | |
| 2,588 | | |
| 10,057 | |
| US Dollar | |
| 3,727 | | |
| 248 | | |
| – | |
| Euro | |
| – | | |
| – | | |
| – | |
| Total | |
| 5,971 | | |
| 2,836 | | |
| 10,057 | |
Foreign exchange risk
also arises when individual Group entities enter into transactions denominated in a currency other than their functional currency, the
Group’s transactions outside the UK to the US and Europe drive foreign exchange movements where suppliers invoice in currency other
than sterling. The Group does retain some cash balances in US Dollars from its US Dollar denominated equity raises to reduce the foreign
exchange exposure on US$ denominated suppliers related to its NASDAQ listing and US based clinical trial. All other assets and/or consumables
that are purchased in foreign currencies, such currency is purchased immediately upon invoice. These transactions are not hedged because
the cost of doing so is disproportionate to the risk.
Foreign currency
sensitivity analysis
The most significant
currencies in which the Group transacts, other than Pounds Sterling, are the US Dollar and the Euro. The Group also trades in other currencies
in small amounts as necessary.
The following table
details the Group’s sensitivity to a 10% change in year-end exchange rates, which the Group feels is the maximum likely change in
rate based upon recent currency movements, in the key foreign currency exchange rates against Pounds Sterling:
| Schedule of foreign currency exchange rates | |
| | | |
| | | |
| | |
| Year ended 31 December 2023 | |
US Dollar £’000 | | |
Euro £’000 | | |
Other £’000 | |
| Loss before tax | |
| 373 | | |
| 2 | | |
| – | |
| Total equity | |
| 373 | | |
| 2 | | |
| – | |
| Year ended 31 December 2022 | |
US Dollar £’000 | | |
Euro £’000 | | |
Other £’000 | |
| Loss before tax | |
| 25 | | |
| (1 | ) | |
| – | |
| Total equity | |
| 25 | | |
| (1 | ) | |
| – | |
| Year ended 31 December 2021 | |
US Dollar £’000 | | |
Euro £’000 | | |
Other £’000 | |
| Loss before tax | |
| – | | |
| 2 | | |
| – | |
| Total equity | |
| – | | |
| 2 | | |
| – | |
| 19 | Financial instruments – risk management (continued) |
Liquidity risk
Liquidity risk arises
from the Group’s management of working capital. It is the risk that the Group will encounter difficulty in meeting its financial
obligations as they fall due. It is the Group’s aim to settle balances as they become due.
In February 2023, the
Company completed a Private Placement in the US which raised £5.0million before expenses. In May 2023, the Company completed a Registered
Direct Offering in the US which raised £2.7million before expenses. In December 2023, the Company completed a Registered Offering
in the US which raised £4.4million before expenses.
In December 2022, the
Company completed a Registered Direct Offering in the US which raised £0.3million before expenses.
In February 2021, previously
issued warrants were exercised resulting in the Company receiving £0.13million before expenses. In July 2021, the Company completed
a UK placing which raised £10.0million before expenses.
The Directors have prepared cash flow forecasts and
considered the cash flow requirement for the Group for the next three years including the period 12 months from the date of approval of
the consolidated financial statements. These forecasts show that further financing will be required before the fourth quarter of 2024
assuming, inter alia, that certain development programs and other operating activities continue as currently planned. If the Company does
not secure additional funding before the fourth quarter of 2024, it will no longer be a going concern and would likely be placed in Administration.
If we raise additional
funds through the issuance of debt securities or additional equity securities, it could result in dilution to our existing shareholders,
increased fixed payment obligations and these securities may have rights senior to those of our ordinary shares (including the ADSs) and
could contain covenants that would restrict our operations and potentially impair our competitiveness, such as limitations on our ability
to incur additional debt, limitations on our ability to acquire, sell or license intellectual property rights and other operating restrictions
that could adversely impact our ability to conduct our business. Any of these events could significantly harm our business, financial
condition and prospects.
In the Directors’
opinion, the environment for financing of small and micro-cap biotech companies remains challenging. While this may present acquisition
and/or merger opportunities with other companies with limited or no access to financing, as noted above, any attendant financings by Biodexa
are likely to be dilutive. The Directors continue to evaluate financing options, including those connected to acquisitions and/or mergers,
potentially available to the Group. Any alternatives considered are contingent upon the agreement of counterparties and accordingly, there
can be no assurance that any alternative courses of action to finance the Company would be successful.
This requirement for
additional financing in the short term represents a material uncertainty that may cast significant doubt upon the Group and Parent Company’s
ability to continue as a going concern. Should it become evident in the future that there are no realistic financing options available
to the Company which are actionable before its cash resources run out then the Company will no longer be a going concern. In such circumstances,
we would no longer be able to prepare financial statements under paragraph 25 of IAS 1. Instead, the financial statements would be prepared
on a liquidation basis and assets would be stated at net realizable value and all liabilities would be accelerated to current liabilities.
| 19 | Financial instruments – risk management (continued) |
The following table
sets out the contractual maturities (representing undiscounted contractual cash-flows) of financial liabilities:
| Schedule of contractual maturities of financial liabilities | |
| | | |
| | | |
| | | |
| | | |
| | |
| 2023 | |
Up to 3
months £’000 | | |
Between 3 and 12 months £’000 | | |
Between
1 and 2 years £’000 | | |
Between
2 and 5
years £’000 | | |
Over
5 years £’000 | |
| Trade and other payables | |
| 1,178 | | |
| – | | |
| – | | |
| – | | |
| – | |
| Lease liabilities | |
| 47 | | |
| 141 | | |
| 189 | | |
| 112 | | |
| – | |
| Total | |
| 1,225 | | |
| 141 | | |
| 189 | | |
| 112 | | |
| – | |
| 2022 | |
Up to 3
months £’000 | | |
Between 3 and 12 months £’000 | | |
Between
1 and 2 years £’000 | | |
Between
2 and 5
years £’000 | | |
Over
5 years £’000 | |
| Trade and other payables | |
| 1,173 | | |
| – | | |
| – | | |
| – | | |
| – | |
| Lease liabilities | |
| 49 | | |
| 140 | | |
| 188 | | |
| 254 | | |
| – | |
| Total | |
| 1,222 | | |
| 140 | | |
| 188 | | |
| 254 | | |
| – | |
| 2021 | |
Up to 3
months £’000 | | |
Between 3 and 12 months £’000 | | |
Between
1 and 2 years £’000 | | |
Between
2 and 5
years £’000 | | |
Over
5 years £’000 | |
| Trade and other payables | |
| 1,036 | | |
| – | | |
| – | | |
| – | | |
| – | |
| Lease liabilities | |
| 46 | | |
| 171 | | |
| 195 | | |
| 442 | | |
| – | |
| Total | |
| 1,082 | | |
| 171 | | |
| 195 | | |
| 442 | | |
| – | |
More details with regard
to the line items above are included in the respective notes:
| · | Trade and other payables – note 15 |
As a result of
the Strategic Review undertaken in March 2020 the Group repaid all Government Research loans during 2020 and 2021.
| 19 | Financial instruments – risk management (continued) |
Capital risk
management
The Group monitors capital
which comprises all components of equity (i.e. share capital, share premium, foreign exchange reserve and accumulated deficit).
The Group’s objectives
when maintaining capital are:
| · | to safeguard the entity’s ability to continue as a going concern; and |
| · | to have sufficient resource to take development projects forward towards commercialisation. |
The Group continues
to incur substantial operating expenses. Until the Group generates positive net cash inflows from the commercialisation of its products
it remains dependent upon additional funding through the injection of equity capital and government funding. The Group may not be able
to generate positive net cash inflows in the future or to attract such additional required funding at all, or on suitable terms. In such
circumstances the development programmes may be delayed or cancelled, and business operations cut back.
The Group seeks to reduce
this risk by keeping a tight control on expenditure, avoiding long term supplier contracts (other than clinical trials), prioritising
development spend on products closest to potential revenue generation, obtaining government grants (where applicable), maintaining a focussed
portfolio of products under development and keeping shareholders informed of progress.
There have been no changes
to the Group’s processes for managing capital risk since the previous year.
Deferred tax is calculated
in full on temporary differences under the liability method using tax rates applicable in the tax jurisdictions where the tax asset or
liability would arise.
The movement on the
deferred tax account in 2023 is £nil (2022: £nil, 2021: £nil) as the net credit arising on the amortisation of intangible
assets and other timing differences has been matched by a reduction in the deferred tax asset recognised on the losses offsetting the
liability remaining.
Unused tax losses carried
forward, subject to agreement with local tax authorities, were as follows:
| Schedule of unused tax losses carried forward | |
| | | |
| | |
| | |
Gross losses £’000 | | |
Potential
deferred tax
asset £’000 | |
| 31 December 2023 | |
| 75,530 | | |
| 18,947 | |
| 31 December 2022 | |
| 71,139 | | |
| 17,867 | |
| 31 December 2021 | |
| 67,210 | | |
| 16,925 | |
The remaining potential
deferred tax asset of £18.9milion (2022: £17.9million, 2021: £16.9million) has not been provided in these accounts due
to uncertainty as to whether the asset would be recovered. The losses have arisen as a result of accumulated trading losses.
Deferred tax asset balances
disclosed as at 31 December 2023 have been calculated at 25%. The main rate of corporation tax increased to 25% from 1 April 2023.
| Schedule of detailed information about share capital | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Authorised, allotted and fully
paid – classified as equity | |
2023 Number | | |
2023 £ | | |
2022 Number | | |
2022 £ | | |
2021 Number | | |
2021 £ | |
| At 31 December | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Ordinary shares of
£0.001 each | |
| 1,189,577,722 | | |
| 1,189,578 | | |
| 5,417,137 | | |
| 108,343 | | |
| 4,923,420 | | |
| 98,468 | |
| ‘A’ Deferred shares of £1 each | |
| 1,000,001 | | |
| 1,000,001 | | |
| 1,000,001 | | |
| 1,000,001 | | |
| 1,000,001 | | |
| 1,000,001 | |
| ‘B’ Deferred shares of £0.001 each | |
| 4,063,321,418 | | |
| 4,063,321 | | |
| – | | |
| – | | |
| – | | |
| – | |
| Total | |
| | | |
| 6,252,900 | | |
| | | |
| 1,108,344 | | |
| | | |
| 1,098,469 | |
At a General Meeting
on 24 March 2023, shareholders approved a consolidation of the Company’s Ordinary Shares on a one for 20 basis. As a result, the
par value of the Ordinary Shares was changed from £0.001 per share to £0.02 per share. At the same time, the ratio of the
Company’s Ordinary Shares to ADSs was changed from each ADS representing 25 Ordinary Shares to each ADS representing five Ordinary
Shares.
At a General Meeting
on 14 June 2023, shareholders approved the subdivision and redesignation of the Company’s Issued Ordinary Shares of £0.02
each into to one Ordinary Share of £0.001 each and 19 ‘B’ Deferred Shares of £0.001 each. The ‘B’
Deferred Shares have limited rights and are effectively valueless. The previously issued Deferred Shares were redesignated ‘A’
Deferred Shares.
On 5 July 2023 the Company
effected a ratio change in the number of Ordinary Shares represented by ADSs from five Ordinary Shares per ADS to 400 Ordinary Shares
per ADS.
On 26 May 2023 the Company entered into Private Placement
and on 21 December 2023 the Company entered into a Registered Offering. As no share premium was recognised in relation to these transactions
the transaction costs have been charged to retained earnings.
| 21 | Share capital (continued) |
During the year the Company issued the following warrants
over ADSs, and these were recognised in the warrant reserve until exercise:
| Schedule of warrant reserve recognize | |
| | | |
| | | |
| | | |
| | |
| | |
Pre-Funded
Warrants | | |
Series A
Warrants | | |
Series B
Warrants | | |
Series C
Warrants | |
| Exercise price | |
£ | 0.0001 | | |
$ | 214.40 | | |
$ | 214.40 | | |
$ | 16.00 | |
| As at 1 January 2023 | |
| – | | |
| – | | |
| – | | |
| – | |
| Issued: | |
| | | |
| | | |
| | | |
| | |
| Private Placement February 2023 | |
| 155,461 | | |
| 32,327 | | |
| 48,491 | | |
| – | |
| Registered Direct Offering May 2023 | |
| – | | |
| – | | |
| – | | |
| 415,043 | |
| Registered Offering December 2023 | |
| 1,911,176 | | |
| – | | |
| – | | |
| – | |
| Adhera Assignment and Exchange Agreement | |
| 899,642 | | |
| – | | |
| – | | |
| – | |
| Exercised | |
| (155,461 | ) | |
| (32,327 | ) | |
| (48,491 | ) | |
| (415,043 | ) |
| As at 31 December 2023 | |
| 2,810,818 | | |
| – | | |
| – | | |
| – | |
The Series A, Series
B and Series C warrants are exercisable on an ‘alternative cashless basis’ effectively allowing the holders to exercise for
nil consideration.
Numbers of shares and
share options/ warrants and related exercise/issue prices are after the impact of the 24 March 2023 share consolidation, ADS ratio changes
on 24 March 2023 and 5 July 2023.
In accordance with the
Articles of Association for the Company adopted on 14 June 2023, the share capital of the Company consists of an unlimited number of ordinary
shares of nominal value £0.001 each. Ordinary and deferred shares were recorded as equity.
Rights attaching
to the shares following the incorporation of Biodexa Pharmaceuticals plc
Shares classified
as equity
The holders of ordinary
shares in the capital of the Company have the following rights:
(a) to receive
notice of, to attend and to vote at all general meetings of the Company, in which case shareholders shall have one vote for each share
of which he is the holder; and,
(b) to receive
such dividend as is declared by the Board on each share held.
The holders of both
classes of deferred shares in the capital of the Company:
(a) shall not
be entitled to receive notice of or to attend or speak at any general meeting of the Company or to vote on any resolution to be proposed
at any general meeting of the Company; and
(b) shall not
be entitled to receive any dividend or other distribution of out of the profits of the Company.
In the event of a distribution
of assets, the deferred shareholders shall receive the nominal amount paid up on such share after the holder of each ordinary share shall
have received (in cash or specie) the amount paid up or credited as paid up on such ordinary share together with an additional payment
of £100 per share. The Company has the authority to purchase the deferred shares and may require the holder of the deferred shares
to sell them for a price not exceeding 1p for all the deferred shares.
| 21 | Share capital (continued) |
| Schedule of ordinary and deferred shares |
| |
|
| | | |
| | | |
| | | |
| | | |
|
| |
| |
|
Ordinary Shares Number | | |
‘A’ Deferred
Shares Number | | |
‘B’ Deferred
Shares Number | | |
Share
Price £ | | |
Total consideration £’000 |
| At 1 January 2021 |
| |
|
| 3,153,694 | | |
| 1,000,001 | | |
| | | |
| | | |
|
| 19 February 2021 |
| Exercise
of warrants |
|
| 15,340 | | |
| | | |
| | | |
| 5.960 | | |
91 |
| 6 July 2021 |
| Placing |
|
| 1,754,386 | | |
| | | |
| | | |
| 5.700 | | |
10,000 |
| At 31 December 2021 |
| |
|
| 4,923,420 | | |
| 1,000,001 | | |
| | | |
| | | |
|
| 22 March 2022 |
| Exercise of warrants |
|
| 1 | | |
| | | |
| | | |
| 200.000 | | |
– |
| 3 May 2022 |
| Share issue to SIPP trustee
(see note 24)
|
|
| 1,250 | | |
| | | |
| | | |
| 0.001 | | |
– |
| 19 December 2022 |
| Registered Direct Offering |
|
| 492,466 | | |
| | | |
| | | |
| 0.666 | | |
321 |
| At 31 December 2022 |
| |
|
| 5,417,137 | | |
| 1,000,001 | | |
| | | |
| | | |
|
| 15 February 2023 |
| Private Placements* |
|
| 98,387,275 | | |
| | | |
| | | |
| 0.0505 | | |
4,967 |
| 26 May 2023 |
| Registered Direct Offering* |
|
| 276,697,310 | | |
| | | |
| | | |
| 0.0097 | | |
2,690 |
| 14 June 2023 |
| Share sub-division and
re-designation
|
|
| | | |
| | | |
| 4,063,321,418 | | |
| n/a | | |
n/a |
| 21 December 2023 |
| Shares issued on purchase
Intangible asset (see note 11)
|
|
| 323,684,800 | | |
| | | |
| | | |
| 0.0040 | | |
1,279 |
| 21 December 2023 |
| Registered Offering |
|
| 485,391,200 | | |
| | | |
| | | |
| 0.0040 | | |
1,918 |
| At 31 December 2023 |
| |
|
| 1,189,577,722 | | |
| 1,000,001 | | |
| 4,063,321,418 | | |
| | | |
|
* |
Number
of shares issued includes exercise of pre-funded warrants and Series A, Series B and Series C warrants that were exercisable on an ‘alternative
cashless basis’. |
The following describes
the nature and purpose of each reserve within equity:
| Schedule of reserves |
|
| Reserve |
Description and purpose |
| Share capital |
Nominal value of subscribed share capital |
| Share premium |
Amount subscribed for share capital in excess of nominal value. |
| Merger reserve |
Represents the difference between the fair value and nominal value of shares issued on the acquisition of subsidiary companies where the Company has elected to take advantage of merger accounting. |
| Foreign exchange reserve |
Gains/losses arising on retranslating the net assets of overseas operations into sterling |
| Warrant reserve |
Represents the following:
· the
fair value of warrants denominated in £ at the date of grant. The number and price are fixed at the date of grant. The warrants
expire in November 2025
· the
fair value of pre-funded warrants granted. The pre-funded warrants do not have an expiry date.
· The
fair value of Series A, B and C warrants denominated in US$ at the date of grant but allow for the warrants to be exercised on an alternative
cashless basis effectively allowing the holders to exercise for nil consideration. |
| Accumulated deficit |
All other net gains and losses and transactions with owners (e.g., dividends) not recognised elsewhere. |
The Group operates a
defined contribution pension scheme for the benefit of its employees. The assets of the scheme are administered by trustees in funds independent
from those of the Group. The annual charge for the year was £86,000 (2022: £98,000)
Share Options
The Group has issued
options over ordinary shares under the 2014 Biodexa Pharmaceuticals PLC Enterprise Management Incentive Scheme and unapproved share options
awarded to non-UK staff. In addition, certain share options originally issued over shares in Biodexa Limited under the Biodexa Limited
2008 unapproved share option scheme or Biodexa Limited 2013 approved Enterprise Incentive scheme were reissued in 2015 over shares in
Biodexa Pharmaceuticals PLC under the 2014 Biodexa Pharmaceuticals PLC Enterprise Management Incentive Scheme. Exercise of an option is
subject to continued employment.
At a General Meeting
on 24 March 2023, shareholders approved a consolidation of the Company’s Ordinary Shares on a one for 20 basis. As a result, the
par value of the Ordinary Shares was changed from £0.001 per share to £0.02 per share.
At a General Meeting
on 14 June 2023, shareholders approved the subdivision and redesignation of the Company’s Issued Ordinary Shares of £0.02
each into to one Ordinary Share of £0.001 each and 19 ‘B’ Deferred Shares of £0.001 each.
The options granted
in 2023 were made under the 2014 Biodexa Pharmaceuticals PLC Enterprise Management Incentive Scheme.
Details of all share
options granted under the Schemes are set out below:
| Details of all share options granted under the Schemes are set out below: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Date of grant | |
At 1 January
2023 | | |
Granted in 2023 | | |
Lapsed in 2023 | | |
Forfeited in
2023 | | |
At 31
December
2023 | | |
Exercise Price | |
| 30 June 2014 | |
| 25 | | |
| – | | |
| – | | |
| – | | |
| 25 | | |
£ | 30.00 | |
| 19 December 2016 | |
| 13 | | |
| – | | |
| – | | |
| – | | |
| 13 | | |
£ | 484.00 | |
| 15 December 2017 | |
| 40 | | |
| – | | |
| – | | |
| – | | |
| 40 | | |
£ | 184.00 | |
| 24 April 2019 | |
| 312 | | |
| – | | |
| – | | |
| – | | |
| 312 | | |
£ | 29.20 | |
| 2 October 2019 | |
| 1,500 | | |
| – | | |
| – | | |
| – | | |
| 1,500 | | |
£ | 21.00 | |
| 17 April 2020 | |
| 5,000 | | |
| – | | |
| – | | |
| – | | |
| 5,000 | | |
£ | 4.80 | |
| 17 June 2020 | |
| 33,600 | | |
| – | | |
| (6,250 | ) | |
| – | | |
| 27,350 | | |
£ | 4.04 | |
| 15 July 2021 | |
| 64,350 | | |
| – | | |
| – | | |
| (5,500 | ) | |
| 58,850 | | |
£ | 5.55 | |
| 2 August 2021 | |
| 2,500 | | |
| – | | |
| – | | |
| (2,500 | ) | |
| – | | |
£ | 5.30 | |
| 1 September 2021 | |
| 6,000 | | |
| – | | |
| – | | |
| – | | |
| 6,000 | | |
£ | 5.10 | |
| 7 February 2022 | |
| 18,750 | | |
| – | | |
| – | | |
| (6,250 | ) | |
| 12,500 | | |
£ | 3.05 | |
| 12 August 2022 | |
| 12,500 | | |
| – | | |
| – | | |
| (12,500 | ) | |
| – | | |
£ | 2.10 | |
| | |
| 144,590 | | |
| – | | |
| (6,250 | ) | |
| (26,750 | ) | |
| 111,590 | | |
| | |
| Options exercisable at 31 December 2023 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| 75,720 | |
| Weighted average exercise price of outstanding options at 31 December 2023 | |
| | | |
| | | |
| | | |
| | | |
| | | |
£ | 5.241 | |
| Weighted average exercise price of options exercised in 2023 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| – | |
| Weighted average exercise price of options lapsed in 2023 | |
| | | |
| | | |
| | | |
| | | |
| | | |
£ | 4.04 | |
| Weighted average exercise price of options forfeited in 2023 | |
| | | |
| | | |
| | | |
| | | |
| | | |
£ | 3.33 | |
| Weighted average exercise price of options granted in 2023 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| – | |
| Weighted average remaining contractual life of outstanding options at 31 December 2023 | | |
| | | |
| 7.3 years | |
| 24 | Share-based payments (continued) |
| Date of grant | |
At 1 January
2022 | | |
Granted in 2022 | | |
Lapsed in 2022 | | |
Forfeited in
2022 | | |
At 31
December
2022 | | |
Exercise Price | |
| 20 April 2012 | |
| 79 | | |
| – | | |
| (79 | ) | |
| – | | |
| – | | |
£ | 1,676.00 | |
| 9 May 2014 | |
| 500 | | |
| – | | |
| (500 | ) | |
| – | | |
| – | | |
£ | 30.00 | |
| 30 June 2014 | |
| 25 | | |
| – | | |
| – | | |
| – | | |
| 25 | | |
£ | 30.00 | |
| 31 October 2016 | |
| 352 | | |
| – | | |
| (352 | ) | |
| – | | |
| – | | |
£ | 1,072.00 | |
| 19 December 2016 | |
| 396 | | |
| – | | |
| (383 | ) | |
| – | | |
| 13 | | |
£ | 484.00 | |
| 15 December 2017 | |
| 59 | | |
| – | | |
| – | | |
| (19 | ) | |
| 40 | | |
£ | 184.00 | |
| 24 April 2019 | |
| 625 | | |
| – | | |
| – | | |
| (313 | ) | |
| 312 | | |
£ | 29.20 | |
| 2 October 2019 | |
| 1,500 | | |
| – | | |
| – | | |
| – | | |
| 1,500 | | |
£ | 21.00 | |
| 17 April 2020 | |
| 5,000 | | |
| – | | |
| – | | |
| – | | |
| 5,000 | | |
£ | 4.80 | |
| 17 June 2020 | |
| 43,175 | | |
| – | | |
| (5,625 | ) | |
| (3,950 | ) | |
| 33,600 | | |
£ | 4.04 | |
| 15 July 2021 | |
| 71,450 | | |
| – | | |
| – | | |
| (7,100 | ) | |
| 64,350 | | |
£ | 5.55 | |
| 2 August 2021 | |
| 2,500 | | |
| – | | |
| – | | |
| – | | |
| 2,500 | | |
£ | 5.30 | |
| 1 September 2021 | |
| 6,000 | | |
| – | | |
| – | | |
| – | | |
| 6,000 | | |
£ | 5.10 | |
| 7 February 2022 | |
| – | | |
| 18,750 | | |
| – | | |
| – | | |
| 18,750 | | |
£ | 3.05 | |
| 12 August 2022 | |
| – | | |
| 12,500 | | |
| – | | |
| – | | |
| 12,500 | | |
£ | 2.10 | |
| | |
| 131,661 | | |
| 31,250 | | |
| (6,939 | ) | |
| (11,382 | ) | |
| 144,590 | | |
| | |
| Options exercisable at 31 December 2022 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| 55,932 | |
| Weighted average exercise price of outstanding options at 31 December 2022 | |
| | | |
| | | |
| | | |
| | | |
| | | |
£ | 4.836 | |
| Weighted average exercise price of options exercised in 2022 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| n/a | |
| Weighted average exercise price of options lapsed in 2022 | |
| | | |
| | | |
| | | |
| | | |
| | | |
£ | 105.612 | |
| Weighted average exercise price of options forfeited in 2022 | |
| | | |
| | | |
| | | |
| | | |
| | | |
£ | 5.974 | |
| Weighted average exercise price of options granted in 2022 | |
| | | |
| | | |
| | | |
| | | |
| | | |
£ | 2.670 | |
| Weighted average remaining contractual life of outstanding options at 31 December 2022 | | |
| | | |
| 8.1 years | |
| 24 | Share-based payments (continued) |
| Date of grant | |
At 1 January
2021 | | |
Granted in 2021 | | |
Lapsed in 2021 | | |
Forfeited in 2021 | | |
At 31 December 2021 | | |
Exercise Price | |
| 13 September 2011 | |
| 8 | | |
| – | | |
| (8 | ) | |
| – | | |
| – | | |
£ | 1,676.00 | |
| 20 April 2012 | |
| 79 | | |
| – | | |
| – | | |
| – | | |
| 79 | | |
£ | 1,676.00 | |
| 9 May 2014 | |
| 500 | | |
| – | | |
| – | | |
| – | | |
| 500 | | |
£ | 30.00 | |
| 30 June 2014 | |
| 25 | | |
| – | | |
| – | | |
| – | | |
| 25 | | |
£ | 30.00 | |
| 31 October 2016 | |
| 397 | | |
| – | | |
| – | | |
| (45 | ) | |
| 352 | | |
£ | 1,072.00 | |
| 19 December 2016 | |
| 499 | | |
| – | | |
| – | | |
| (103 | ) | |
| 396 | | |
£ | 484.00 | |
| 15 December 2017 | |
| 164 | | |
| – | | |
| – | | |
| (105 | ) | |
| 59 | | |
£ | 184.00 | |
| 24 April 2019 | |
| 2,275 | | |
| – | | |
| – | | |
| (1,650 | ) | |
| 625 | | |
£ | 29.20 | |
| 2 October 2019 | |
| 1,500 | | |
| – | | |
| – | | |
| – | | |
| 1,500 | | |
£ | 21.00 | |
| 17 April 2020 | |
| 5,000 | | |
| – | | |
| – | | |
| – | | |
| 5,000 | | |
£ | 4.80 | |
| 17 June 2020 | |
| 63,700 | | |
| – | | |
| – | | |
| (20,525 | ) | |
| 43,175 | | |
£ | 4.04 | |
| 15 July 2021 | |
| – | | |
| 85,450 | | |
| – | | |
| (14,000 | ) | |
| 71,450 | | |
£ | 5.55 | |
| 2 August 2021 | |
| – | | |
| 2,500 | | |
| – | | |
| – | | |
| 2,500 | | |
£ | 5.30 | |
| 1 September 2021 | |
| – | | |
| 6,000 | | |
| – | | |
| – | | |
| 6,000 | | |
£ | 5.10 | |
| | |
| 74,147 | | |
| 93,950 | | |
| (8 | ) | |
| (36,428 | ) | |
| 131,661 | | |
| | |
| Options exercisable at 31 December 2021 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| 8,982 | |
| Weighted average exercise price of outstanding options at 31 December 2021 | |
| | | |
| | | |
| | | |
| | | |
| | | |
£ | 10.759 | |
| Weighted average exercise price of options exercised in 2021 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| n/a | |
| Weighted average exercise price of options lapsed in 2021 | |
| | | |
| | | |
| | | |
| | | |
| | | |
£ | 1,676.000 | |
| Weighted average exercise price of options forfeited in 2021 | |
| | | |
| | | |
| | | |
| | | |
| | | |
£ | 8.955 | |
| Weighted average exercise price of options granted in 2021 | |
| | | |
| | | |
| | | |
| | | |
| | | |
£ | 5.515 | |
| Weighted average remaining contractual life of outstanding options at 31 December 2021 | | |
| | | |
| 9.0 years | |
| 24 | Share-based payments (continued) |
The following information
is relevant in the determination of the fair value of options granted during the year 2022 under the equity share based remuneration schemes
operated by the Group.
| Schedule of fair value of options granted | |
| | | |
| | | |
| | |
| | |
February 2022 | | |
August 2022 | | |
August 2022 | |
| Number of options | |
| 375,000 | | |
| 100,000 | | |
| 150,000 | |
| Option pricing models used | |
| Black-Scholes | | |
| Black-Scholes | | |
| Black-Scholes | |
| Share price | |
£ | 0.1525 | | |
£ | 0.105 | | |
£ | 0.105 | |
| Exercise price of options issued in year | |
£ | 0.1525 | | |
£ | 0.105 | | |
£ | 0.105 | |
| Contractual life | |
| 10 years | | |
| 10 years | | |
| 10 years | |
| Expected life | |
| 5 years | | |
| 5 years | | |
| 5 years | |
| Volatility | |
| 87.88 | %** | |
| 91.78 | %** | |
| 91.66 | %** |
| Expected dividend yield | |
| 0 | % | |
| 0 | % | |
| 0 | % |
| Risk free rate | |
| 1.28 | % | |
| 1.92 | % | |
| 1.92 | % |
The share price used
in the determination of the fair value of the options granted in 2022 was the share price on the date of grant.
| ** | Volatility was calculated with reference to the historic share price volatility of comparable companies measured over a five-year
period. |
The following information
is relevant in the determination of the fair value of options granted during the year 2021 under the equity share based remuneration schemes
operated by the Group.
| | |
July 2021 | | |
August 2021 | | |
September 2021 | |
| Number of options | |
| 1,709,000 | | |
| 50,000 | | |
| 120,000 | |
| Option pricing models used | |
| Black-Scholes | | |
| Black-Scholes | | |
| Black-Scholes | |
| Share price | |
£ | 0.2775 | * | |
£ | 0.265 | * | |
£ | 0.255 | * |
| Exercise price of options issued in year | |
£ | 0.2775 | | |
£ | 0.265 | | |
£ | 0.255 | |
| Contractual life | |
| 10 years | | |
| 10 years | | |
| 10 years | |
| Expected life | |
| 5 years | | |
| 5 years | | |
| 5 years | |
| Volatility | |
| 88.63 | %** | |
| 88.59 | %** | |
| 88.11 | %** |
| Expected dividend yield | |
| 0 | % | |
| 0 | % | |
| 0 | % |
| Risk free rate | |
| 0.38 | % | |
| 0.26 | % | |
| 0.32 | % |
| * | The share price used in the determination of the fair value of the options granted in 2021 was the share price on the date of grant. |
| ** | Volatility was calculated with reference to the historic share price volatility of comparable companies measured over a five-year
period. |
All other share options
relate to the Biodexa Limited 2008 unapproved share option scheme.
Share Incentive
Plan
In April 2017 the Group
set up the Biodexa Pharmaceuticals Share Incentive Plan (MPSIP). Under the BPSIP, Group employees and Directors can acquire ordinary shares
in the Company via a salary sacrifice arrangement. Biodexa grants matching shares for every share bought. In order to retain these shares,
scheme participants must remain employed by the Group for three years from the date of acquisition. All shares purchased by the BPSIP
are held by an Employee Benefit Trust that is not under the control of Biodexa. Shares must be left in the plan for 5 years to qualify
for full income tax and NIC relief.
On 24 April 2023 the
Company terminated the Trust and requested the Trustees distribute the assets of the Trust to the relevant Group employees.
| 24 | Share-based payments (continued) |
Warrants issued
in lieu of fees
The Company issues warrants
over ADSs to certain its brokers in lieu of broker fees connected to the equity transactions in the year. The warrants are accounted for
as share based payments.
| Schedule of warrants are accounted for
as share based payments | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Date of grant | |
At 1 January
2023 | | |
Granted in 2023 | | |
Lapsed in 2023 | | |
Forfeited in
2023 | | |
At 31 December 2023 | | |
Exercise
Price per ADS | |
| 24 March 2023 | |
| – | | |
| 49 | | |
| – | | |
| – | | |
| 49 | | |
$ | 400.00 | |
| 24 March 2023 | |
| – | | |
| 1,293 | | |
| – | | |
| – | | |
| 1,293 | | |
$ | 232.00 | |
| 14 June 2023 | |
| – | | |
| 11,067 | | |
| – | | |
| – | | |
| 11,067 | | |
$ | 15.00 | |
| 21 December 2023 | |
| – | | |
| 120,002 | | |
| – | | |
| – | | |
| 120,002 | | |
$ | 2.50 | |
| | |
| – | | |
| 132,411 | | |
| – | | |
| – | | |
| 132,411 | | |
| | |
| Warrants exercisable at 31 December 2023 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| 132,411 | |
| Weighted average exercise price of outstanding options at 31 December 2023 | |
| | | |
| | | |
| | | |
| | | |
| | | |
$ | 5.93 | |
| Weighted average exercise price of options exercised in 20233 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| – | |
| Weighted average exercise price of options lapsed in 202 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| – | |
| Weighted average exercise price of options forfeited in 2023 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| – | |
| Weighted average exercise price of options granted in 2023 | |
| | | |
| | | |
| | | |
| | | |
| | | |
$ | 5.93 | |
| Weighted average remaining contractual life of outstanding options at 31 December 2023 | | |
| | | |
| 2.2 years | |
The following information
is relevant in the determination of the fair value of warrants granted during the year 2023.
| Schedule of fair value of warrants granted | |
March 2023 | | |
June 2023 | | |
December 2023 | |
| Number of ADS warrants granted | |
| 1,342 | | |
| 11,067 | | |
| 120,002 | |
| Option pricing models used | |
| Black-Scholes | | |
| Black-Scholes | | |
| Black-Scholes | |
| Share price | |
$ | 201.60 | * | |
$ | 10.54 | * | |
$ | 2.53 | |
| Exercise price of warrants issued in year | |
| $232.00/$400.00 | | |
$ | 15.00 | | |
$ | 2.50 | |
| Contractual life | |
| 3 years | | |
| 3 years | | |
| 3 years | |
| Expected life | |
| 3 years | | |
| 3 years | | |
| 3 years | |
| Volatility | |
| 75.00 | %** | |
| 80.00 | %** | |
| 60 | %** |
| Expected dividend yield | |
| 0 | % | |
| 0 | % | |
| 0 | % |
| Risk free rate | |
| 4.35 | % | |
| 4.04 | % | |
| 4.06 | % |
| * | The share price used in the determination of the fair value of the ADS warrants granted in 2023 was the ADS price on the date of grant. |
| ** | Volatility was calculated with reference to the historic share price volatility of comparable companies measured over a three-year
period. |
The Group had no capital
commitments at 31 December 2023, 31 December 2022 and 31 December 2021.
| 26 | Related party transactions |
There were no related party transactions in the current
or prior periods other than Directors’ remuneration.
The Company entered
into an Arrangement Agreement with Bioasis on 13 December 2022 as amended on 18 December 2022. Under the agreement the Company agreed
to acquire the entire issued share capital of Bioasis for consideration of, in aggregate, approximately C$7.4 million (c£4.4 million).
The agreement was subject to shareholder approval. On 23 January 2023 at the General Meeting to approve the Arrangement Agreement none
of the special resolutions were passed and, accordingly, the acquisition of Bioasis did not proceed. Under the agreement the Company agreed
to reimburse Bioasis US$225,000 expenses relating to the transaction should the Company’s shareholders not approve the transaction.
On 3 March 2023 the Company advised Bioasis that it would offset this liability against the sums it advanced as disclosed in note 13.
As at 31 December 2023
and 31 December 2022 the Company had a contingent liability of $225,000 in relation to this potential liability.
| 28 | Ultimate controlling party |
The Directors do not
consider that there is an ultimate controlling party.
| 29 | Post Balance Sheet Events |
On 22 January 2024
membership of the Board Committees were changed to the following:
| Schedule of share consolidation |
|
|
|
| |
Audit Committee |
Remuneration Committee |
Nominations Committee |
| Stephen Parker |
X |
|
X* |
| Sijmen de Vries |
|
X* |
X |
| Ann Merchant |
X |
X |
|
| Simon Turton |
X* |
X |
X |
| *Chair of Committee |
|
|
|
PROSPECTUS
JANUARY 27, 2024
Biodexa Pharmaceuticals (NASDAQ:BDRX)
Historical Stock Chart
From Jan 2025 to Feb 2025
Biodexa Pharmaceuticals (NASDAQ:BDRX)
Historical Stock Chart
From Feb 2024 to Feb 2025
