UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
☒
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2024
OR
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission File Number 001-36288
Akari Therapeutics, Plc
(Exact name of registrant as specified in its charter)
England and Wales
98-1034922
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
22 Boston Wharf Road, FL 7
Boston, Massachusetts
02210
(Address of principal executive offices)
(Zip Code)
Registrant’s telephone number, including area code: (929) 274-7510
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading
Symbol(s)
Name of each exchange on which registered
American Depository Shares, each representing 2,000 Ordinary
Shares, par value $0.0001 per share
AKTX
The Nasdaq Capital Market
Ordinary Shares, $0.0001 par value per share*
The Nasdaq Capital Market
* Trading, but only in connection with the American Depository Shares.
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ☐ No ☒
Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the Registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large
accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
☐
Accelerated filer
☐
Non-accelerated filer
☒
Smaller reporting company
☒
Emerging growth company
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided
pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of
the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously
issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during
the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ☐ NO ☒
The aggregate market value of the voting and non-voting common equity held by non-affiliates of the Registrant, based on the closing price of the Registrant’s American Depository Shares, as reported on the
Nasdaq Capital Market on June 30, 2024, was $14.0 million.
The number of shares of Registrant’s Ordinary Shares outstanding as of March 31, 2025 was 57,752,981,523.
DOCUMENTS INCORPORATED BY REFERENCE
None.
TABLE OF CONTENTS
Page
PART I
Item 1.
Business
3
Item 1A.
Risk Factors
31
Item 1B.
Unresolved Staff Comments
65
Item 1C.
Cybersecurity
65
Item 2.
Properties
66
Item 3.
Legal Proceedings
66
Item 4.
Mine Safety Disclosures
66
PART II
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
67
Item 6.
[Reserved]
69
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
70
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk
87
Item 8.
Financial Statements and Supplementary Data
87
Item 9.
Changes in and Disagreements With Accountants on Accounting and Financial Disclosures
87
Item 9A.
Controls and Procedures
88
Item 9B.
Other Information
90
Item 9C.
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
90
PART III
Item 10.
Directors, Executive Officers, and Corporate Governance
91
Item 11.
Executive Compensation
95
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
106
Item 13.
Certain Relationships and Related Transactions, and Director Independence
110
Item 14.
Principal Accounting Fees and Services
113
PART IV
Item 15.
Exhibits, Financial Statement Schedules
114
Item 16.
Form 10-K Summary
114
Signatures
118
GENERAL INFORMATION
Unless otherwise stated or the context requires otherwise, references in this Annual Report on Form 10-K (“Form 10-K”) to “Akari,” the “company,” the
“Company,” “we,” “us,” “our” or similar designations refer to Akari Therapeutics, Plc and its subsidiaries, taken together. All trademarks, service marks,
trade names and registered marks used in this report are trademarks, trade names or registered marks of their respective owners.
Website addresses referenced in this Form 10-K are provided for convenience only, and the content on the referenced websites does not constitute a part of,
and are specifically not incorporated by reference into, this Form 10-K.
Statements made in this Form 10-K concerning the contents of any agreement, contract or other document are summaries of such agreements, contracts or
documents and are not complete description of all of their terms. If we filed any of these agreements, contracts or documents as exhibits to this Form 10-K
or to any previous filing with the Securities and Exchange Commission (“SEC”), you may read the document itself for a complete understanding of its
terms.
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Form 10-K and the documents we incorporate by reference contain forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All
statements, other than statements of historical fact, included or incorporated in this report regarding, among other things, our cash resources and projected
cash runway, financial position, our strategy, strategic alternatives, future operations, clinical trials (including, without limitation, the anticipated timing
enrollment, and results thereof), collaborations, intellectual property, future revenues, projected costs, fundraising and/or financing plans, prospects,
developments relating to our competitors and our industry, the timing or likelihood of regulatory actions, filings and approvals for our current and future
drug candidates, and the benefits related to the Merger Agreement (as defined below) and the plans and objectives of management are forward-looking
statements. The words “believes,” “anticipates,” “estimates,” “plans,” “expects,” “intends,” “may,” “could,” “should,” “potential,” “likely,” “projects,”
“intend,” “continue,” “will,” “schedule,” “would,” “aim,” “contemplate,” “estimate,” and similar expressions are intended to identify forward-looking
statements, although not all forward-looking statements contain these identifying words. We cannot guarantee that we will actually achieve the plans,
intentions, or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. These
forward-looking statements involve known and unknown risks, uncertainties, and other factors, which may be beyond our control, and which may cause
our actual results, performance, or achievements to be materially different from future results, performance, or achievements expressed or implied by such
forward-looking statements.
There are a number of important factors that could cause our actual results to differ materially from those indicated or implied by forward-looking
statements. These important factors include those set forth below under Part I, Item 1A “Risk Factors” and in our other disclosures and filings with the
Securities and Exchange Commission (“SEC”). These factors and the other cautionary statements made in this Form 10-K and the documents we
incorporate by reference should be read as being applicable to all related forward-looking statements whenever they appear in this Form 10-K and the
documents we incorporate by reference.
In addition, any forward-looking statements represent our estimates only as of the date that this Form 10-K is filed with the SEC and should not be relied
upon as representing our estimates as of any subsequent date. All forward-looking statements included in this Form 10-K are made as of the date hereof
and are expressly qualified in their entirety by this cautionary notice. We disclaim any intention or obligation to update or revise any forward-looking
statement, whether as a result of new information, future events, or otherwise, except as may be required by law.
1
SUMMARY OF PRINCIPAL RISK FACTORS
Below is a summary of material factors that make an investment in our American Depositary Shares (“ADSs”) speculative or risky. Importantly, this
summary does not address all the risks and uncertainties that we face. Additional discussion of the risks and uncertainties summarized in this risk factor
summary, as well as other risks and uncertainties that we face, can be found within Part I, Item 1A, “Risk Factors” in this Form 10-K. The below summary
is qualified in its entirety by those more complete discussions of such risks and uncertainties. You should consider carefully the risks and uncertainties
described under Part I, Item 1A, “Risk Factors” in this Form 10-K as part of your evaluation of an investment in our ADSs.
•
We have a history of operating losses and cannot give assurance of future revenues or operating profits.
•
We will require substantial additional capital to fund our operations, and if we are unable to obtain such capital, we will be unable to
successfully develop and commercialize any product candidates.
•
We have identified material weaknesses in our internal control over financial reporting.
•
We have not initiated clinical studies for any of the programs in our active pipeline or entered into any strategic partnerships regarding the
continued development of our legacy pipeline assets. As a result, it may be years before we commercialize a product candidate, if ever.
•
If preclinical studies or clinical trials of our product candidates are prolonged or delayed, we may be unable to obtain required regulatory
approvals, and therefore be unable to commercialize our product candidates or any of our future product candidates on a timely basis or at all.
•
We may encounter substantial delays in the commencement, enrollment or completion of clinical trials or we may fail to demonstrate safety and
efficacy to the satisfaction of applicable regulatory authorities, which could prevent us from commercializing any product candidates we
determine to develop on a timely basis, if at all.
•
Serious adverse events, undesirable side effects or other unexpected properties of our product candidates may be identified during development
or after approval, which could lead to the discontinuation of our development programs, refusal by regulatory authorities to approve our product
candidates or, if discovered following marketing approval, revocation of marketing authorizations or limitations on the use of our product
candidates, any of which would limit the commercial potential of such product candidates.
•
Our proprietary ADC Platform is based on novel technologies that are unproven and may not result in approvable or marketable products,
which exposes us to unforeseen risks and makes it difficult for us to predict the time and cost of product development and potential for
regulatory approval, and we may not be successful in our efforts to expand our development portfolio of product candidates.
•
Interim, initial, or preliminary results from our preclinical testing or clinical trials that we announce or publish from time to time may change as
more patient data become available and are subject to additional audit, validation and verification procedures that could result in material
changes in the final data.
•
We or a future strategic partner may choose to, or may be required to, suspend, repeat, or terminate clinical trials of our assets if they are not
conducted in accordance with regulatory requirements, the results are negative or inconclusive or the trials are not well designed.
•
Our employees, independent contractors, principal investigators, contract research organizations, consultants, vendors and collaboration
partners may engage in misconduct or other improper activities, including non-compliance with regulatory standards.
•
Our industry is highly competitive, and our product candidates may become obsolete.
2
•
If we are unable to establish sales, marketing and distribution capabilities on our own or through collaborations with partners, we may not be
successful in commercializing any approved drugs.
•
Even if any of our current or future product candidates receive marketing approval, such product candidates may fail to achieve market
acceptance by physicians, patients, third-party payors or others in the medical community necessary for commercial success, in which case we
may not generate significant revenues or become profitable.
•
Even if we are able to commercialize any product candidate, the third-party payor coverage and reimbursement status of newly-approved
products is uncertain. Failure to obtain or maintain adequate coverage and reimbursement for our product candidates could limit our ability to
market those products and decrease our ability to generate revenue.
•
Our future growth may depend, in part, on our ability to commercialize products in foreign markets, where we would be subject to additional
regulatory burdens and other risks and uncertainties.
•
EU drug marketing and reimbursement regulations may materially affect our ability to market and receive coverage for our products in the EU
Member States.
•
Our success depends in part on our ability to protect our intellectual property and proprietary technologies.
•
We rely on third parties to conduct, supervise and monitor our preclinical studies and clinical trials, and to manufacture our product candidates,
and if those third parties perform in an unsatisfactory manner it may harm our business.
•
We are currently operating in a period of economic uncertainty and capital markets disruption, which has been significantly impacted by
geopolitical instability. Our business, financial condition and results of operations could be materially adversely affected by any negative
impact on the global economy and capital markets resulting from the geopolitical tensions or high inflation.
•
Our business is subject to risks associated with conducting business internationally.
•
Insiders own a significant amount of our outstanding shares which could delay or prevent a change in corporate control or result in the
entrenchment of management and/or the board of directors.
•
Future sales and issuances of our ordinary shares or ADSs or rights to purchase ordinary shares or ADSs pursuant to our equity incentive plans
could result in additional dilution.
•
We have in the past and may in the future fail to meet the requirements for continued listing on Nasdaq, causing our ADSs to be delisted.
•
The rights of our shareholders may differ from the rights typically offered to shareholders of a U.S. corporation.
3
PART I
Item 1. Business.
Overview
We are an oncology company developing next-generation antibody-drug conjugates (“ADCs”) designed around novel, proprietary cancer-killing toxins
(“payloads”). We believe these novel payloads may have the potential to transform the efficacy and safety outcomes of ADCs as cancer therapies beyond
options that are currently available or in development.
Cancers are the second leading cause of mortality in the United States and the leading cause of death for those under 65 years of age. The American Cancer
Society estimates that approximately 618,000 people will die of cancer in the United States in 2025.
ADCs are a class of cancer therapies that combine the precision targeting of antibodies with payload toxins that attack cancer cells. To date, innovation in
the field of ADC therapies has focused primarily on the development of novel antibodies linked to existing classes of payload toxins. For example, there is
a range of approved ADCs with antibodies that target the Her2, Trop2, CD19, CD22, CD30, Nectin-4, Tissue Factor, and FR alpha antibodies. But there is
a surprising lack of diversity in the payload toxins to which those antibodies are linked, as all of these marketed products, and more than 90% of ADCs in
late-stage clinical development of which we are aware, utilize payloads from just two standard classes: (1) microtubule inhibitors or (2) DNA-damaging
agents such as topoisomerase I inhibitors.
Despite the initial success of ADCs as oncology therapies, each of these payload classes has limitations in terms of providing significant and enduring
efficacy and manageable toxicity and tolerability for cancer patients:
•
Microtubule Inhibitors: resistance by cancer cells after initial response, off-target toxicity to healthy tissues and cells, and limited efficacy against
static cancer cells that are not in division mode.
•
Topoisomerase I Inhibitors: resistance by cancer cells after initial response, off-target toxicities, that include lung scarring, gastrointestinal and
hematological toxicities (including low white blood cells and platelets), and limited ability to combine with other cancer therapies due to
cumulative toxicities.
Our approach centers on creating novel payloads that work through different biological mechanisms than these standard payload classes. We believe that
doing so may allow us to discover and develop ADCs that solve for the known limitations of therapies that utilize existing payload classes. However, our
strategy is new and unproven, and we cannot guarantee that we will be successful in our efforts.
Our differentiated ADC discovery and development platform (our “ADC Platform”) enables us to generate a range of ADC product candidates that pair our
novel payloads with biologically validated antibody targets prevalent in cancer tumors. We believe that our focus on the development of ADCs that utilize
our novel payloads may allow us to develop ADCs with benefits that include:
•
more effective cancer-killing properties, or cytotoxicity;
•
generation of greater numbers of neoepitopes than currently available ADCs, leading to activation of both B-cells and T-cells in the tumor
microenvironment to generate an immune response that has the potential to continue to kill cancer cells in the tumor microenvironment and
throughout the body;
•
ability to be used in combination with key immunotherapy agents such as anti-PD1 and anti-PD-L1 therapies (“checkpoint inhibitors”) to
potentially deliver synergistic efficacy results (more than additive);
•
sustained duration of response of tumor regression or elimination;
•
reduced tumor resistance; and
4
•
improved safety and tolerability relative to ADCs that are currently available.
Our lead payload, PH1, derives its cytotoxic properties from its ability to disrupt the function of spliceosomes, which play a critical role in protein
synthesis, and we believe it is unique among ADC payloads that are currently in development or used in approved ADC therapies in that regard. We have
observed in preclinical studies that PH1 may also have the ability to trigger an immune response that leads to additional cancer cell killing via the
activation B-cells and T-cells through neoepitope formation. We believe this dual action of tumor killing by PH1 is differentiated from current standard
ADC payloads used today and suggests that PH1 possesses a “bifunctional” mechanism of action (“MoA”).
Our lead product candidate is AKTX-101, a preclinical stage Trop2-targeting ADC that combines PH1 with the Trop2 antibody, which is expressed in the
highest number of solid tumor cancer types, including lung, breast, colon and prostate. We aim to establish AKTX-101 as a best-in-class Trop2-targeting
ADC for the treatment of a variety of solid tumors.
Beyond AKTX-101, our ADC Platform enables us to develop additional ADCs that combine the PH1 payload and other novel payloads that we are
developing or may in the future develop with a number of antibodies known to be key cancer targets. Our pipeline currently consists of AKTX-101 and
AKTX-102, a discovery-stage ADC that pairs PH1 with an undisclosed target antibody.
We are also pursuing research on two additional novel payloads that possess distinct MoAs from those demonstrated by traditional payloads:
•
PH5: inhibits DNA mismatch repair (“MMR”) and DNA Damage Response (“DDR”) to generate neoepitopes.
•
PH6: inhibits DNA transcription in cancer cells and co-opted immune cells.
We acquired the proprietary rights to PH1, PH5 and PH6 in our business combination (the “Merger”) with Peak Bio, Inc. (“Peak Bio”), which was
completed in November 2024. Prior to that time, we were primarily focused on advancing our former product candidates nomacopan and PAS-nomacopan
(longer-acting nomacopan that is PASylated). Since the closing of the Merger, we have focused substantially all of our efforts on the development of ADCs
and our ADC Platform. We have suspended further internal development of our legacy programs, nomacopan and PAS-nomacopan, and intend to seek
strategic partners to advance their development externally. For our PHP-303 program, a program that Peak Bio had advanced prior to the closing of the
Merger, we intend to seek strategic partners for it as well to further its development externally. See “—Our Legacy Programs” for more information.
Our Strategy
We aim to create more effective and safer ADC cancer therapies by leveraging our novel payload expertise to potentially improve cancer outcomes for
patients. We intend to leverage the core capabilities of our experienced team in cancer biology and chemistry, as well as experienced senior leadership in
the oncology space to advance our novel ADC Platform and candidates. In March 2025, we announced that our director Abizer Gaslightwala would be
joining our management team as President and CEO effective April 21, 2025. Mr. Gaslightwala brings a proven track record of successfully developing
and commercializing oncology therapies as well as expertise in antibody-based therapies.
Our approach is focused on five key areas:
•
Advance AKTX-101 to IND and potential initiation of first-in-human (“FIH”) trial. AKTX-101 has demonstrated its potential efficacy and safety
in several preclinical models to date. We intend to focus on defining the tumor strategy that drives maximum future commercial opportunity,
developing additional preclinical data to support this strategy, developing a manufacturing supply, and completing formal toxicology studies to
potentially support a future IND or other regulatory submission for a FIH trial.
5
•
Progress AKTX-102, our discovery-stage ADC that utilizes PH1 against a novel cancer target. Our AKTX-102 product candidate is a novel
bispecific ADC that utilizes PH1 as its payload and targets two key antigens present on many solid tumor cancers. From our initial early data, we
believe AKTX-102 has the potential to overcome shortcomings of ADCs focused on similar targets that use standard payloads. We plan to
advance AKTX-102 through additional efficacy and safety preclinical experiments to further understand its potential benefits.
•
Develop additional ADC programs that utilize our PH5 and PH6 payloads. In addition to our efforts to identify additional product candidates
utilizing PH1, we intend to continue our efforts to discover product candidates that utilize PH5 and PH6, each of which may have the potential to
kill cancer cells in novel ways that may be more beneficial than ADCs containing standard payloads.
•
Leverage our ADC product candidates and payload library to partner with biopharmaceutical companies that desire to develop ADCs with novel
payloads. Our focus on the development of novel proprietary payloads and antibody-payload linkers affords us with a broad and flexible
partnering strategy that allows us to out-license rights to specific molecules, such as AKTX-101, or to our novel proprietary payloads, such as
PH1, and to develop novel ADC product candidates for our potential future partners based on the partner’s specifications.
•
Out-license our legacy non-oncology assets. Nomacopan and PHP-303 are clinical stage assets with key clinical data in inflammation and rare
diseases. PAS- nomacopan is a preclinical, longer-acting version of nomacopan with a focus on geographic atrophy for retinal/ophthalmological
diseases. We hope to out-license these assets as a means for raising capital that can be applied to the advancement of our ADC product candidates
and the development of our ADC Platform.
Our Novel Payloads
PH1: Our Lead Payload
PH1, or Thailanstatin ThA13, is an analog of a toxin produced by the bacterium Burkholderia thailandensis MSMB43 with cytotoxic properties that stem
from its ability to inhibit the ability of spliceosomes in eukaryotic cells to properly generate mature messenger mRNA (“mRNA”) from pre-messenger
RNA (“pre-mRNA”) during the step of protein synthesis called splicing.
We believe spliceosomes are attractive targets for ADCs because the inhibition of spliceosomal function prevents cells from receiving critical information
necessary for their continued survival. During splicing, pre-RNA is converted to mRNA via the removal of “junk” sequences of pre-mRNA called introns,
and the stitching together of the meaningful parts of pre-mRNA called exons. After the introns have been removed and the exons stitched together, the
resulting mRNA is then translated into proteins. The spliceosome is the machinery responsible for the correct splicing of pre-mRNA and resultant
formation of mRNA.
Faulty spliceosome function, results in improper construction of exons, leading to faulty mRNA and resultant aberrant proteins. Accumulation of thousands
of aberrant mis-spliced RNA sequences and misfolded unnatural proteins within the cell cause it to die by endoplasmic reticulum stress, unfolded protein
response, and other various mechanisms. The accumulation of mis-spliced RNA also produces unnatural proteins called neoepitopes, which generate an
immunostimulatory response that leads to further elimination by the immune system of cells that express similar neoepitopes. We believe the secondary
cytotoxic effect of spliceosome malfunction that results from neoepitope formation makes the use of spliceosome inhibitors attractive in the development of
potential ADC therapies due to their potential to exhibit a bifunctional MoA through which the payload targets and kills cancer cells and the resultant
formation of neoepitopes triggers the body’s immune system to do the same.
Preclinical data that we have gathered indicate that PH1 possesses the ability to induce neoepitope formation. In an in vitro study, we performed an
unbiased comparison of PH1-, ravtansine (“DM4”)- and dimethyl sulfoxide (“DMSO”) (vehicle control)- treated human gastric cancer cells by performing
RNA sequencing all genes and looking for sequences that would give rise to neoepitopes. After identifying the normal and novel RNA species, we
6
highlighted the neoepitope-containing species that respectively increased in response to treatment with DM4 and PH1 as compared to the control treatment.
We observed that PH1-treated cells contained 765 neoepitope-containing species, representing approximately 9 times the number of neoepitope-containing
species created by DM4, which suggests that PH1 may be highly proficient at recruiting immune cells to the tumor and stimulating immune-cell mediated
cancer cell death. When we looked for genes that were negatively impacted and reduced in quantity, we found 660 unique RNA species were depleted in
PH1-treated cells which was over three times greater than the number found in DM4-treated cells.
This bifunctional MoA is described in the following two graphics:
7
Summary of Preclinical Studies of PH1
We have examined the cytotoxic and immunostimulatory effects of PH1 on multiple targets on several solid tumor types and examined PH1’s potential
synergies with checkpoint inhibitors in various in vitro and in vivo preclinical studies.
In in vitro gastric and breast cancer models, we compared the cytotoxicity of an ADC comprised of PH1 conjugated to a Her2 antibody (“Her2-PH1 ADC”)
with that of Kadcyla®, a Her2-targeting ADC commercially approved for use in the treatment of Her2-positive breast cancer. In both studies, the Her2-
PH1 ADC demonstrated superior cytotoxic activity. We also studied PH1 conjugated to a novel target (undisclosed) in an in vitro preclinical model of non-
small cell lung cancer (NSCLC) and found that the PH1 ADC showed increased anti-tumor activity in comparison to a vehicle comprised of the antibody
target alone.
We have also studied PH1’s bifunctional MoA and its potential synergies with checkpoint inhibitors in a mouse colon cancer model in which we examined
tumor regression and survival rates in 76 mice that were injected subcutaneously with colon cancer cells expressing Her2. We compared a Her2-PH1 ADC
with Kadcyla®, (Kadcyla® is not approved for colon cancer) both as single treatment agents and in combination with checkpoint inhibitor therapy (“I/O”).
When administered as a combination with I/O therapy, the Her2-PH1 ADC induced 14 complete tumor regressions (“CRs”) whereas 5 tumors rebounded
after initial shrinkage (n=19 mice per arm). As a result, 73% of Her2-PH1 + I/O treated mice showed complete regressions and were still on study at 5
months, and median survival was not reached. In the Kadcyla® combination arm with I/O, there were 8 CRs and 11 tumor rebounds, and 42% of Kadcyla®
+ I /O treated mice were tumor-free at 5 months. The median survival of Kadcyla® + I/O treated mice was 149 days.
A second in vivo preclinical mouse study was performed using the identical mouse colon cancer model with the cancer cells expressing Her2. The mice
developed measurable tumors and were then treated with two doses of a Her2-PH1 ADC, both as monotherapy and in combination with I/O. Of the eight
mice treated with the Her2-PH1 ADC in combination with I/O, seven (87.5%) had achieved CR and survived at 150 days. These seven mice were
subsequently rechallenged with colon cancer cells expressing Her2, similar to the cells administered at the onset of the study. No tumor growth was
observed in any of the seven mice after they were rechallenged. This zero occurrence of cancer was found despite these mice not receiving any additional
treatment with the Her2-PH1 ADC
8
after being rechallenged, indicating that these mice retained immune memory against the colon cancer cells expressing Her2. Based on the results of these
two combination studies, we believe that PH1 has the potential to generate an immunostimulatory effect and may possess synergies with checkpoint
inhibitors, which could improve the longer term control of cancer after the completion of initial treatment.
We have also observed that PH1 may be less susceptible to multidrug resistance (“MDR”), which can occur when cancer cells develop resistance to
chemotherapeutic agents. One mechanism by which MDR occurs is through the overexpression of what are referred to as MDR transporters, which have
the ability to pump standard payloads out of the cell before the payload can kill the cell.
We evaluated PH1 and Monomethyl auristatin E’s (MMAE) ability to kill mouse embryonic stem (“MES”) cells with normal and high levels of MDR. We
found that MMAE, but not PH1, was recognized by these pumps, and the presence of high levels of these pumps reduced the in vitro cytotoxicity (IC50) of
MMAE 198-fold. The presence of high levels of these pumps had no significant effect on the cytotoxic potency of PH1, as the latter were not substrates
and therefore not recognized by MDRs nor pumped out of the cell. The MDR-specific inhibitor Elacridar prevented MDR pumps in MDR-high MES cells
from pumping MMAE payload out of the cell, allowing its accumulation, and returning MMAE’s cell killing potency back to baseline. This finding
confirmed that the loss of MMAE’s potency was specific to the increase in the number of MDR pumps and did not occur even in the presence of increased
numbers, when we blocked MDR’s ability to pump out the payload using Elacridar. We believe this is important because MDR transporters are known to
be implicated in the emergence of resistance against many chemotherapies, including some ADC payloads. Furthermore, if MDRs recognized PH1, it
would have reduced its potency, and restricted its cytotoxicity to only targets that were highly expressed in cancer cells.
Our PH5 Payload
Our discovery stage PH5 payload targets MMR and/or DDR. Cancer cells are associated with uncontrolled cell division. Before cells divide, they replicate
their DNA to forward one chromosome copy to each daughter cell. Largely, DNA replication is a robust process controlled by enzymes with precise
fidelities, low error rates, and the presence of correction mechanisms (i.e., MMR). Due to rapid and frequent cell division, cancer cells tend to accumulate
errors such as mutations and single- and double-stranded DNA breaks, that are corrected in real time by MMR enzymes. Errors left uncorrected trigger a
set of cellular responses (i.e., DDR). DDR engages signaling pathways that regulate the recognition of DNA damage, the recruitment of DNA repair
factors, the initiation and coordination of DNA repair pathways, and transition through the cell division cycle. If the cells are at a significant survival
disadvantage, DDR processes activate apoptosis and trigger cell death.
When cancer cells are treated with DNA-damaging chemotherapeutic agents, such as the DNA alkylating agent platinum, cancer cells activate DDR and
MMR processes, and when the errors are significant in terms of cellular liability and cannot be repaired, they are committed to programmed cell death.
In adult cancer patients, cancer cells are likely to be actively involved in cell division compared to normal differentiated cells. As a result, ADC payloads
that target DNA DDR and/or MMR are likely to preferentially target proliferating cancer cells. If an ADC is able to prevent DDR or MMR from occurring,
cancer cells are likely to be committed to cell death because of the errors they incorporate.
Conversely, mutations in MMR and DDR genes may provide a selective advantage to the cancer cell by not correcting the mutation that would offer a
significant growth or survival advantage. MMR-deficiency (“dMMR”) is common in many colorectal, gastrointestinal, and endometrial cancers and found
in lower frequency in other solid cancers of breast, prostate, bladder and thyroid. Here, dMMR patients can have increasing numbers of microsatellite
repeats, also called high microsatellite instability (“MSI-H”). Both dMMR and MSI-H are considered biomarkers and predict response to checkpoint
therapy and are consistent with the neoepitopes that are formed when errors in DNA go uncorrected.
It is therefore likely that an ADC payload targeting MMR or DDR may also have a bifunctional MOA, inducing apoptosis in targeted cells as well as
activating the immune system in parallel.
9
We are currently evaluating the first generation of PH5 linker-toxins against an undisclosed MMR/ DDR target. The payload is bystander-enabled for
killing the neighboring cell and may be adapted for low and heterogenous target expression. This MoA is supplemented with the potential killing of cancer
cells via the immune system which is also potentially activated by neoepitopes.
Our PH6 Payload
Our discovery stage PH6 payload targets immune suppression. Protein synthesis is integral to most biological functions. Even slow-growing, stem cell-like
progenitors of tumor cells that divide less frequently synthesize proteins to support vital functions. Theoretically, both inhibitors of transcription and
translation may function as ADC payloads if one can partition them selectively to cancer cells using target-specific antibodies that can differentiate them
from a normal cell. PH6 is an undisclosed payload that prevents protein synthesis at the stage of transcription.
Tumors containing an active population of immune cells capable of responding to immunogenic stimuli and killing cancer cells are referred to as immune
“hot” tumors. Conversely, those tumors that have a low population of immune cells or have immune cells that are actively suppressed or co-opted into
working for the tumor are referred to as immune “cold”. An extreme form of immune cold tumors called immune desert reflects tumors where immune
cells are confined to the tumor periphery.
Immune cold tumors are hard to target and typically unresponsive to immunotherapy. Checkpoint inhibitor therapy and immune stimulation approaches
have largely been unsuccessful due the immune cells being suppressed or co-opted. These tumors have regulatory T cells that suppress T cell activation or
express soluble factors that induce immune deserts. In this case, we are testing payloads that (a) induce cytotoxicity of tumor cells, and (b) suppress
immunosuppressive immune cells. This dual action protein synthesis inhibitor payload may potentially have a second function where tumor
immunogenicity is increased by killing co-opted immune cells or suppressing function(s) of immunosuppressive cells.
We are planning to evaluate the first generation of PH6 linker-toxins against an undisclosed target and validating its bifunctional MoA. Due to the varied
effects of new protein synthesis inhibition, this payload may also prevent the formation or recruitment of new blood vessels to the tumor.
AKTX-101: Our Lead ADC Product Candidate
We aim to establish a best-in-class Trop2-targeting ADC with our lead product candidate AKTX-101. AKTX-101 is designed to treat solid tumors by
delivering PH1 into cells expressing Trop2. Trop2 is a cell surface antigen which is upregulated in a variety of malignant tumors, including breast, ovarian,
prostate, gastric, colorectal, pancreatic and lung cancer, but has limited expression in normal human tissues, making it an ideal target in cancer.
We have studied AKTX-101 in a number of preclinical models, both in vitro and in vivo, as well as in a non-human primate (“NHP”) toxicity study. Based
on our preclinical experiments, we believe AKTX-101 may have the potential to offer advantages over existing therapies in terms of increased cytotoxicity,
reduced resistance, better tolerance, and ability to combine with I/O therapies.
In in vitro preclinical studies, we compared AKTX-101 (drug antibody ratio (“DAR”) 4) to a currently approved Trop2-targeting ADC (with DAR 8). We
found that AKTX-101 showed greater cytotoxicity at lower drug doses in gastric, pancreatic and bladder cancer models. To further corroborate our in vitro
observations, we evaluated AKTX-101 and the same currently approved ADC in an in vivo model against the same Trop2high gastric carcinoma cell-line
derived xenograft grown as tumors in mice. Two doses of each agent were given with the currently approved ADC administered at 10 mg/kg while AKTX-
101 (DAR 4) was administered at 3 mg/kg. Both treatments induced tumor regression at 3-6 weeks. At the conclusion of the study at 150 days, five out of
ten mice (50%) treated with AKTX-101 experienced a tumor regression, as compared to two out of ten mice (20%) treated with currently approved Trop2
ADC.
To evaluate activity with checkpoint inhibition, mice that were administered bladder cancer cells expressing human
10
Trop2 were treated with AKTX-101, I/O, a combination of both, or placebo. In these studies, AKTX-101 monotherapy was equivalent to I/O monotherapy
for bladder cancer in terms of tumor growth inhibition (TGI), however the combination of AKTX-101 and I/O was significantly superior in terms of TGI
(p=0.01) and prolonged overall survival (p=0.013) compared to single agent therapy with AKTX-101 or I/O at day 14. We believe the data suggests a
synergistic effect between AKTX-101 and checkpoint inhibition.
The use of our proprietary L22 linker in AKTX-101 may contribute to a safety profile that has the potential to be superior to currently approved Trop2-
targeting ADCs. As a non-cleavable linker, L22 causes PH1 to bind irreversibly to the spliceosome machinery, thereby eliminating the potential for PH1 to
be released by the cancer cell and thus enter and kill normal, non-cancerous cells, which is referred to as the bystander effect. In pre-clinical in vitro
models, AKTX-101 demonstrated minimal killing of normal human fibroblasts not expressing Trop2 in comparison to an approved Trop2-targeting ADC,
which, due to its known bystander effect, is toxic to normal human fibroblasts. We believe this preclinical data suggests that a higher therapeutic index may
be possible using AKTX-101 over current Trop2 ADCs available today.
We also studied the toxicity and tolerability of AKTX-101 in a NHP model. We evaluated AKTX-101 at DARs of two and four and performed a repeat-
dose study wherein three ADC doses were intravenously administered every three weeks, followed by a three-week recovery period. To gain an
understanding of the maximal cumulative effects of AKTX-101, animals were evaluated two days after receiving at the conclusion of all three doses being
administered. Reversibility was addressed in another set of animals that received all three doses but were allowed a three-week recovery period.
Histopathology was performed unilaterally for all tissues in both sets of animals. We found that AKTX-101 was well-tolerated at both dosages, with
observed side effects (skin rash, mild thrombocytopenia and mild elevation of liver enzymes) resolving within weeks after administration. Importantly,
there was no evidence of neutropenia, leukopenia, interstitial lung disease or mucosal inflammation, which have been associated with other Trop2-targeting
ADCs that use standard payloads comprising of topoisomerase I inhibitors. We believe the absence of observed lung complications, colitis and
hypothyroidism in this study may further support AKTX-101’s potential suitability and feasibility for use in combination with checkpoint inhibitors, given
these side effects are often common with checkpoint inhibitors.
Our Legacy Programs
Nomacopan
Prior to the Merger, our lead product candidate was nomacopan, a bi-specific complement C5 and leukotriene B4 inhibitor that we had advanced into
Phase-3 trials for the treatment of paroxysmal nocturnal hemoglobinuria (“PNH”), a rare, acquired blood disorder characterized by the destruction of red
blood cells, and pediatric hematopoietic stem cell transplantation-associated thrombotic microangiopathy (“HSCT-TMA”). HSCT-TMA is a rare but
serious complication of hematopoietic stem cell transplant that appears to involve complement activation,
11
inflammation, tissue hypoxia and blood clots, leading to progressive organ damage and death. Mortality in patients who develop severe transplant-related
TMAs is 80%.
Nomacopan was also studied in a phase 2 trial in bullous pemphigoid, a chronic autoimmune skin condition, and preclinical testing for the treatment of
trauma. We believe that nomacopan’s dual inhibitory action may prevent proinflammatory and prothrombotic activities of two key pathways, and that its
biophysical properties may allow it to be used in a variety of formulations and routes of administration, including subcutaneous, intravenous, topical to eye,
inhaled and intravitreous. We suspended internal development of nomacopan in June 2024 to shift our resources to ADC development in connection with
the Merger.
PAS-Nomacopan
We previously conducted preclinical studies on long-acting PAS-nomacopan for the potential treatment of geographic atrophy, an advanced form of age-
related macular degeneration of the eye. We suspended internal development of PAS-nomacopan in November 2024.
PHP-303
We acquired PHP-303, a Phase-2-ready neutrophil elastase inhibitor that Peak Bio was advancing for the potential treatment of a genetic disorder known as
alpha-1 antitrypsin disorder, in the Merger. Peak Bio was also conducting preclinical studies on PHP-303 as a potential treatment of acute respiratory
distress syndrome. Peak Bio acquired the rights to PHP-303 and licensed associated know-how from Bayer Pharmaceuticals in March 2017.
Competition
The biotechnology and pharmaceutical industries, and the oncology subsector, are characterized by rapid technological evolution, fierce competition and
strong defense of intellectual property. While we believe that our technology, the expertise of our team, and our development experience and scientific
knowledge provide us with competitive advantages, we face competition from biotechnology and pharmaceutical companies, including companies that are
larger and better funded than we are, academic institutions, governmental agencies and public and private research institutions, among others. Moreover,
we may also compete with smaller or earlier-stage companies, universities and other research institutions that have developed, are or may be developing or
may in the future develop current and future cancer therapeutics. Product candidates that we successfully develop and commercialize may compete with
existing therapies and new therapies that may become available in the future.
We also face competition more broadly across the oncology market for cost-effective and reimbursable cancer treatments. The most common methods of
treating patients with cancer are surgery, radiation and drug therapy, including chemotherapy, hormone therapy, biologic therapy such as monoclonal and
bispecific antibodies, immunotherapy, cell-based therapy and targeted therapy, or a combination of any such methods. There is a variety of available drug
therapies marketed for cancer. In many cases, these drugs are administered in combination to enhance efficacy. While our product candidates, if any are
approved, may compete with these existing drugs and other therapies, to the extent they are ultimately used in combination with or as an adjunct to these
therapies, our product candidates may not be competitive with them. Insurers may also encourage the use of generic products or specific branded products.
As a result, obtaining market acceptance of, and gaining significant share of the market for, any product candidates that we successfully introduce to the
market may pose challenges. In addition, many companies are developing new oncology therapeutics, and we cannot predict what the standard of care will
be as our current and future product candidates progress through development.
AKTX-101 will compete with approved Trop2-targeting ADCs such as Trodelvy® and Datroway® as well as other programs in clinical trials that also target
Trop2. If we are unable to effectively differentiate AKTX-101 from other products and product candidates or other common methods of treating cancer
patients our ability to compete would be negatively impacted.
12
Sales and Marketing
Because we have been focused on discovery and development of drugs, we currently have limited sales, marketing and distribution capabilities in order to
commercialize any other product candidates that may be approved in the future. If our lead product candidate is approved, we intend either to establish a
sales and marketing organization with technical expertise and supporting distribution capabilities, or to outsource some or all of these functions to third
parties. We may take different approaches to commercialization in different geographies. We will adopt a similar strategy for the other compounds in our
pipeline.
Manufacturing
We currently employ third-party contract development and manufacturing organizations (“CDMOs”), which manufacture in accordance with current good
manufacturing practice (“GMP”) requirements, for our investigational medical products, including active pharmaceutical ingredients, drug substance and
drug product for our preclinical research and clinical studies for our product candidates. Analytical methods, compliant with GMP requirements, have been
established and qualified for release and stability testing of drug substance and drug products.
We do not own or operate, and currently have no plans to establish, any manufacturing facilities. We currently rely, and expect to continue to rely, on
CDMOs for the manufacture of any potential product candidates that we may develop for larger scale preclinical and clinical testing, as well as for
commercial quantities of any product candidates that are approved.
We have identified multiple CDMOs with the ability to produce the antibody component of our product candidates at different scales and have strong track
records in GMP requirements. The production of all necessary elements for the manufacture of our ADC product candidates, and the final manufacture of
the ADC drug product, will be handled entirely by CDMOs.
13
Intellectual Property
We will be able to protect our technology and products from unauthorized use by third parties only to the extent it is covered by valid and enforceable
patents or is effectively maintained as trade secrets. Patents and other proprietary rights are thus an essential element of our business.
Our success will depend in part on our ability to obtain and maintain proprietary protection for our product candidates, technology, and know-how, to
operate without infringing on the proprietary rights of others, and to prevent others from infringing our proprietary rights. Our policy is to seek to protect
our proprietary position by, among other methods, filing U.S. and foreign patent applications related to our proprietary technology, inventions, and
improvements that are important to the development of our business and defending our patent applications and patents if they are subjected to challenge by
a third party. We also rely on trade secrets, know-how, continuing technological innovation, and in-licensing opportunities to develop and maintain our
proprietary position.
As of March 1, 2024, we own or have exclusive rights to patents and patent applications based on 16 international patent applications. This includes nine
issued United States patents, nine patents granted by the European Patent Office and foreign issued patents in other jurisdictions. This further includes
pending patent applications in the United States and other jurisdictions. Our patents and patent applications relate to the complement C5 inhibitor protein
nomacopan and to its use in the treatment of key disease indications, as well as to nomacopan variants, and histamine binding proteins. As of March 1,
2024, our current patent portfolio includes granted patents in the jurisdictions of United States, Canada, major European countries, Japan, China, Brazil,
Israel, Hong Kong, Mexico, Russia, Australia, New Zealand and pending applications in the jurisdictions of United States, Canada, Europe, Japan, China,
Brazil, Israel, Republic of Korea, Australia and New Zealand.
Issued patents in the US and other countries which cover our product candidate nomacopan and its uses will expire between 2024 and 2038, excluding any
patent term adjustment that might be available in certain countries, or any patent term extensions that might be available following the grant of marketing
authorizations. We have pending patent applications for our product candidate nomacopan and its uses that, if issued, would expire in the United States and
in countries outside of the United States between 2024 and 2040, excluding any patent term adjustment that might be available following the grant of the
patent and any patent term extensions that might be available following the grant of marketing authorizations. These patent and patent applications relate to
subject matters including: complement inhibitor molecule; methods for treating myasthenia gravis; methods for treating peripheral nerve disorders;
methods for treating respiratory disorders; methods for treating viral infections of the respiratory tract; methods of treating complement-mediated diseases
in patients with C5 polymorphisms, methods of treating acute graft versus host disease; methods of treating cicatrizing eye inflammatory disorders;
methods of treating autoimmune blistering diseases; methods of treating rheumatic diseases; methods of treating proliferative retinal diseases; methods of
treating HSCT-TMA, and nomacopan variants lacking C5 or LTB4 binding.
We have licensed rights to patents and patent applications relating to PAS polypeptides and nucleic acids encoding PAS polypeptides, which include
patents/applications which cover PAS-nomacopan fusion proteins. We also own a pending PCT patent application directed to certain PAS-nomacopan
fusion proteins and their use in the treatment of key disease indications, including GA. If granted, national/regional patents derived from this PCT
application would expire in 2043.
If we are unable to obtain, maintain, defend and enforce patent and other intellectual property rights for our technologies and product candidate
nomacopan, or if the scope of the patent and other intellectual property rights obtained is not sufficiently broad, our competitors and other third parties
could develop and commercialize technology, biologics and/or biosimilars similar or identical to ours, and erode or negate any competitive advantage that
we may have, which could harm our business and ability to achieve profitability.
We can provide no assurance that our patent applications or those of our licensors will result in additional patents being issued or that issued patents will
afford sufficient protection against competitors with similar technologies, nor can there be any assurance that the patents issued will not be infringed,
designed around or invalidated by third parties. Even issued patents may later be found unenforceable or may be modified or revoked in proceedings
instituted by third parties before various patent offices or in courts. The degree of future protection for our
14
proprietary rights is uncertain. Only limited protection may be available and may not adequately protect our rights or permit us to gain or keep competitive
advantage. Composition-of-matter patents on the biological or chemical active pharmaceutical ingredients are generally considered to offer the strongest
protection of intellectual property and provide the broadest scope of patent protection for pharmaceutical products, as such patents provide protection
without regard to any method of use or any method of manufacturing. While we have issued composition-of-matter patents in the United States and other
countries for nomacopan, we cannot be certain that the claims in our issued composition-of-matter patents will not be found invalid or unenforceable if
challenged. We cannot be certain that the claims in any patent applications covering composition-of-matter or formulations of our product candidates that
are pending, or that we may file, will be considered patentable by the United States Patent and Trademark Office (“USPTO”), and courts in the United
States or by the patent offices and courts in foreign countries, nor can we be certain that the claims in our issued composition-of-matter patents will not be
found invalid or unenforceable if challenged. Even if any patent applications that we may file relating to specific formulations of our product candidates
issue as patents, formulation patents protect a specific formulation of a product and may not be enforced against competitors making and marketing a
product that has the same active pharmaceutical ingredient in a different formulation. Method-of-use patents protect the use of a product for the specified
method or for treatment of a particular indication. This type of patent may not be enforced against competitors making and marketing a product that has the
same active pharmaceutical ingredient for use in a method not claimed by the patent. Moreover, even if competitors do not actively promote their product
for our targeted indications, physicians may prescribe these products “off-label.” Although off-label prescriptions may infringe or contribute to the
infringement of method-of-use patents, the practice is common and such infringement may be difficult to prevent or prosecute. Also, as is the case for
composition-of-matter patents, we cannot be certain that the claims in our issued method-of-use patents will not be found invalid or unenforceable if
challenged. We cannot be certain that the claims in any patent applications covering methods of using our product candidates that are pending, or that we
may file, will be considered patentable by the USPTO and courts in the United States or by the patent offices and courts in foreign countries, nor can we be
certain that the claims in our issued method-of-use patents will not be found invalid or unenforceable if challenged.
15
Government Regulation
Government Regulation and Product Approval
Government authorities in the U.S., at the federal, state and local level, and in other countries extensively regulate, among other things, the research,
development, testing, manufacture, quality control, approval, labeling, packaging, storage, record-keeping, promotion, advertising, distribution, marketing
and export and import of products such as those that we are developing. A new drug must be approved by the FDA, generally through the new drug
application (“NDA”) process and a new biologic must be approved by the FDA through the biologics license application (“BLA”) process before it may be
legally marketed in the U.S. The animal and other non-clinical data and the results of human clinical trials performed under an Investigational New Drug
application (“IND”) and under similar foreign applications will become part of the NDA or BLA.
U.S. Drug Development Process
In the U.S., the FDA regulates drugs under the Federal Food, Drug, and Cosmetic Act (“FDCA”) and in the case of biologics, also under the Public Health
Service Act (“PHSA”) and the implementing regulations for both statutes. The process of obtaining marketing authorizations and the subsequent
compliance with applicable federal, state, local, and foreign statutes and regulations require the expenditure of substantial time and financial resources.
Failure to comply with the applicable U.S. requirements at any time during the product development process, approval process or after approval, may
subject an applicant to administrative or judicial sanctions. These sanctions could include the FDA’s refusal to approve pending applications, withdrawal of
an approval, a clinical hold, warning letters, requesting product recalls, product seizures, total or partial suspension of production or distribution,
injunctions, fines, refusals of government contracts, restitution, disgorgement, or civil or criminal penalties. Any agency or judicial enforcement action
could have a material adverse effect on us. The process required by the FDA before a drug or biologic may be marketed in the U.S. generally involves the
following:
•
completion of preclinical laboratory tests, animal studies and formulation studies according to Good Laboratory Practices (“GLP”) and relevant
provisions of the Animal Welfare Act, where applicable, or other applicable laws and regulations;
•
submission to the FDA of an IND which must become effective before human clinical trials may begin;
•
performance of adequate and well-controlled human clinical trials according to Good Clinical Practices (“GCP”) to establish the safety and
efficacy of the proposed drug for its intended use;
•
submission to the FDA of an NDA or BLA;
•
satisfactory completion of an FDA inspection of the manufacturing facility or facilities at which the drug is produced to assess compliance with
current good manufacturing practice (“cGMP”) to assure that the facilities, methods and controls are adequate to preserve the drug’s identity,
strength, quality and purity; and
•
FDA review and approval of the NDA or BLA.
Once a product candidate is identified for development, it enters the preclinical testing stage. Preclinical tests include laboratory evaluations of product
chemistry, toxicity and formulation, as well as animal studies. An IND sponsor must submit the results of the preclinical tests, together with manufacturing
information and analytical data, to the FDA as part of the IND. The sponsor will also include a protocol detailing, among other things, the objectives of the
first phase of the clinical trials, the parameters to be used in monitoring safety, and the effectiveness criteria to be evaluated, if the first phase lends itself to
an efficacy evaluation. Some preclinical testing may continue even after the IND is submitted. The IND automatically becomes effective 30 days after
receipt by the FDA, unless the FDA, within the 30-day time period, places the clinical trial on a clinical hold. In such a case, the IND sponsor and the FDA
must resolve any outstanding concerns before the clinical trial can begin. Clinical holds also may be imposed by the FDA at any time before or during
studies due to safety concerns or non-compliance.
All clinical trials must be conducted under the supervision of one or more qualified investigators in accordance with GCP. They must be conducted under
protocols detailing the objectives of the trial, dosing procedures, subject
16
selection and exclusion criteria and the safety and effectiveness criteria to be evaluated. Each protocol must be submitted to the FDA as part of the IND,
and progress reports detailing the results of the clinical trials must be submitted at least annually. In addition, timely safety reports must be submitted to the
FDA and the investigators for serious and unexpected adverse events. An institutional review board (“IRB”) responsible for the research conducted at each
institution participating in the clinical trial must review and approve each protocol before a clinical trial commences at that institution and must also
approve the information regarding the trial and the consent form that must be provided to each trial subject or his or her legal representative, monitor the
study until completed and otherwise comply with IRB regulations.
Human clinical trials are typically conducted in three sequential phases that 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 products for severe or life-threatening diseases, such as cancer, especially when the
product may be too inherently toxic to ethically administer to healthy volunteers, the initial human testing may be conducted in patients.
•
Phase 2: This phase involves studies in a limited patient population to identify possible adverse effects and safety risks, to preliminarily
evaluate the efficacy of the product for specific targeted diseases and to determine dosage tolerance and optimal dosage.
•
Phase 3: Clinical trials are undertaken to further evaluate dosage, clinical efficacy and safety in an expanded patient population at
geographically dispersed clinical study sites. These studies are intended to establish the overall risk-benefit ratio of the product candidate and
provide, if appropriate, an adequate basis for product labeling.
The FDA or the sponsor may suspend a clinical trial at any time on various grounds, including a finding that the research subjects or patients are being
exposed to an unacceptable health risk. Similarly, an IRB can suspend or terminate approval of a clinical trial at its institution 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. Phase 1, Phase 2,
and Phase 3 testing may not be completed successfully within any specified period, if at all.
During the development of a new drug, sponsors are given opportunities to meet with the FDA at certain points. These points may include prior to
submission of an IND, at the end of Phase 2, and before an NDA or BLA is submitted. Meetings at other times may be requested. These meetings can
provide an opportunity for the sponsor to share information about the data gathered to date, for the FDA to provide advice, and for the sponsor and FDA to
reach agreement on the next phase of development. Sponsors typically use the end of Phase 2 meeting to discuss their Phase 2 clinical results and seek
feedback on their plans for the pivotal Phase 3 clinical trial that they believe will support approval of the new drug.
Progress reports detailing the results of the clinical trials must be submitted at least annually to the FDA. Safety reports must be submitted to the FDA and
the clinical investigators 15 calendar days after the trial sponsor determines that the adverse event information qualifies for reporting. The sponsor also
must notify FDA of any unexpected fatal or life-threatening suspected adverse reaction as soon as possible but in no case later than 7 calendar days after
the sponsor’s initial receipt of the information. Sponsors of clinical trials of drugs and biologics are required to register and disclose certain clinical trial
information on a registry maintained by the National Institutes of Health, at www.clinicaltrials.gov.
Concurrent with clinical trials, sponsors usually complete additional animal studies and must also develop additional information about the chemistry and
physical characteristics of the drug and finalize a process for manufacturing the product in commercial quantities in accordance with cGMP requirements.
The manufacturing process must be capable of consistently producing quality batches of the product candidate and, among other things, the manufacturer
must develop methods for testing the identity, strength, quality and purity of the final drug. Additionally, appropriate packaging must be selected and tested
and stability studies must be conducted to demonstrate that the product candidate does not undergo unacceptable deterioration over its shelf life.
17
U.S. Review and Approval Processes
The results of product development, preclinical studies and clinical trials, along with descriptions of the manufacturing process, analytical tests conducted
on the chemistry of the drug, proposed labeling, and other relevant information are submitted to the FDA as part of an NDA or BLA requesting approval to
market the product. The submission of an NDA or BLA is subject to the payment of substantial user fees; a waiver of such fees may be obtained under
certain limited circumstances. Within sixty days of receipt, the FDA initially reviews all NDAs and BLAs submitted to ensure that they are sufficiently
complete for substantive review before it accepts them for filing. The FDA may request additional information rather than accept a NDA or BLA for filing.
In this event, the NDA or BLA must be resubmitted with the additional information. The resubmitted application also is 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. FDA may refer an NDA or BLA that is
novel or that presents difficult questions of safety or efficacy to an advisory committee for review, evaluation and recommendation on questions presented
by the FDA, which may include questions related to whether the application should be approved and under what conditions. The FDA is not bound by the
recommendation of an advisory committee, but it generally follows such recommendations. Before approving an NDA or BLA, the FDA will typically
inspect one or more clinical sites to assure compliance with GCP. Additionally, the FDA will inspect the facility or the facilities at which the product is
manufactured to assess compliance with cGMP.
The FDA may also place other conditions on approval, including the requirement for a Risk Evaluation and Mitigation Strategy (“REMS”) to assure the
safe use of the product. If the FDA concludes a REMS is needed, the sponsor of the NDA or BLA must submit a proposed REMS, and the FDA will not
approve the application without an approved REMS. A REMS could include medication guides, physician communication plans or elements to assure safe
use, such as restricted distribution methods, patient registries and other risk minimization tools. Any of these limitations on approval or marketing could
restrict the commercial promotion, distribution, prescription or dispensing of a product.
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 FDA may issue an approval letter following its review process if it determines that the NDA or BLA has met all applicable requirements.
Alternatively, the FDA may issue a complete response letter (“CRL”), which may require additional clinical or other data or impose other conditions that
must be met in order to secure final approval of the NDA or BLA. The applicant may either resubmit the NDA or BLA, addressing all of the deficiencies
identified in the letter, withdraw the application, or, in the case of an NDA, request an opportunity for a hearing. The applicant also may request resolution
of any dispute concerning the CRL. If the FDA denies approval of a BLA, the applicant may request, and FDA must issue, a notice of opportunity for
hearing.
NDAs or BLAs may receive either standard or priority review. Under current FDA review goals, standard review of an NDA for a new molecular entity
(“NME”) or original BLA will be ten months from the date that the NDA or BLA is filed. A drug representing a significant improvement in treatment,
prevention or diagnosis of a serious disease or condition may receive a priority review of six months. Priority review does not change the standards for
approval, but may expedite the approval process.
If a product receives marketing authorization, the approval may be significantly limited to specific diseases and dosages or the indications for use may
otherwise be limited, which could restrict the commercial value of the product. In addition, the FDA may require a sponsor to conduct Phase IV testing,
such as clinical trials designed to further assess a drug’s safety and/or effectiveness after NDA or BLA approval, and may require testing and surveillance
programs to monitor the safety of approved products which have been commercialized.
The Pediatric Research Equity Act (“PREA”) requires a sponsor to conduct pediatric studies for most drugs and biologics with a new active ingredient,
new indication, new dosage form, new dosing regimen or new route of administration. Under PREA, original NDAs and BLAs and certain supplemental
applications must contain a
18
pediatric assessment unless the sponsor has received a deferral or waiver. The required assessment must assess the safety and effectiveness of the product
for the claimed indications in all relevant pediatric subpopulations and support dosing and administration for each pediatric subpopulation for which the
product is safe and effective. The sponsor or FDA may request a deferral of pediatric studies for some or all of the pediatric subpopulations. A deferral may
be granted for several reasons, including a finding that the drug or biologic is ready for approval for use in adults before pediatric studies are complete or
that additional safety or effectiveness data needs to be collected before pediatric studies can begin.
The Best Pharmaceuticals for Children Act (“BPCA”) provides NDA holders a six-month period of exclusivity attached to any patent or regulatory
exclusivity listed in the Orange Book, and BLA holders a six-month period of exclusivity attached to any unexpired regulatory exclusivity, if certain
conditions are met. Conditions for pediatric exclusivity include a determination by the FDA that information relating to the use of a new drug in the
pediatric population may produce health benefits in that population, a written request by the FDA for pediatric studies, completion of the studies in
accordance with the written request, and submission of reports from the requested studies to the FDA. The issuance of a written request does not require the
sponsor to undertake the described studies.
Patent Term Restoration and Marketing Exclusivity
Depending upon the timing, duration and specifics of FDA approval of our product candidates, some of our U.S. patents may be eligible for limited patent
term extension under the Drug Price Competition and Patent Term Restoration Act of 1984, referred to as the Hatch-Waxman Amendments. The Hatch-
Waxman Amendments permit a patent restoration term of up to five years as partial compensation for effective patent term lost due to time spent during
product development and the FDA regulatory review process. However, patent term restoration cannot extend the remaining term of a patent beyond a total
of 14 years from the product’s approval date. The patent term restoration period is generally one-half the time between the effective date of an IND and the
submission date of an NDA or BLA, plus the time between the submission date of an NDA or BLA and the approval of that application, except that the
period is reduced by any time during which the applicant failed to exercise due diligence. Only one patent applicable to an approved drug may be extended,
and the extension must be applied for prior to expiration of the patent. The United States Patent and Trademark Office, in consultation with the FDA,
reviews and approves the application for any patent term extension or restoration.
Biologics Price Competition and Innovation Act of 2009 (BPCIA)
The BPCIA amended the PHSA to create an abbreviated approval pathway for biosimilar and interchangeable biosimilar products and provide for a twelve-
year exclusivity period for the first approved biological product, or reference product, against which a biosimilar or interchangeable biosimilar application
is evaluated. 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 biosimilar product is a biosimilar product that, subject to state pharmacy laws, may be substituted for
the reference product without the intervention of the health care 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) as applicable, 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.
An application for a biosimilar product may not be submitted until four years after the date on which the reference product was first approved. The first
approved interchangeable biosimilar product will be granted an exclusivity period of up to one year after it is first commercially marketed, but the
exclusivity period may be shortened under certain circumstances.
19
Orphan Drug Designation
Under the Orphan Drug Act, the FDA may grant orphan drug designation to a drug intended to treat a rare disease or condition, which is generally a disease
or condition that affects fewer than 200,000 individuals in the U.S., or more than 200,000 individuals in the U.S. and for which there is no reasonable
expectation that the cost of developing and making available in the U.S. a drug for this type of disease or condition will be recovered from sales in the U.S.
for that drug. Orphan drug designation must be requested before submitting an NDA or BLA. After the FDA grants orphan drug designation, the identity of
the therapeutic agent and its potential orphan use are disclosed publicly by the FDA. Orphan drug designation does not itself convey any advantage in or
shorten the duration of the regulatory review and approval process. If a product that has orphan drug designation subsequently receives the first FDA
approval for the disease for which it has such designation, the product is entitled to orphan product exclusivity, which means that the FDA may not approve
any other applications to market the same drug for the same indication, except in very limited circumstances, for seven years. Orphan drug exclusivity,
however, also could block the approval of one of our product candidates for seven years if a competitor obtains approval of the same drug, for the same
designated orphan indication or if our product candidate is determined to be contained within the competitor’s product for the same indication or disease.
Rare Pediatric Disease
With the Food and Drug Administration Safety and Innovation Act of 2012 (“FDASIA”), Congress authorized the FDA under Section 529 of the FDCA to
award priority review vouchers (“PRVs”), to sponsors of certain rare pediatric disease product applications. This provision is designed to encourage
development of new drug and biological products for prevention and treatment of certain rare pediatric diseases.
Under this program, a sponsor who receives approval for a new drug or biologic for a rare pediatric disease may qualify for a PRV, which can be redeemed
for priority review of a subsequent marketing application for a different product. The sponsor of a rare pediatric disease drug product that receives a PRV
may transfer, including by sale, the PRV to another sponsor and that PRV may be further transferred any number of times before it is used. A PRV entitles
the holder to designate a single human drug application submitted under Section 505(b)(1) of the FDCA or Section 351 of the PHSA as qualifying for a
priority review. An FDA priority review may expedite the review process of a marketing application reducing the review time from ten months after formal
acceptance of the file to six months after formal acceptance of the file.
In order for a sponsor to receive a PRV in connection with approval of a BLA or NDA, the investigational product must be designated by the FDA as a
product for a rare pediatric disease prior to submission of the marketing application. A rare pediatric disease is a disease that is serious or life-threatening
and which primarily affects individuals aged from birth to 18 years and fewer than 200,000 people in the United States. Alternatively, the disease may
affect more than 200,000 people in the United States if there is no reasonable expectation that the cost of developing and making available in the United
States a product for such disease or condition will be recovered from sales in the United States of such product. In addition, to qualify for a PRV, the
sponsor must request the voucher and the BLA or NDA must itself be given priority review, rely on clinical data derived from studies examining a
pediatric population and dosages of the product intended for that population, not seek approval for a different adult indication in the original rare pediatric
disease product application and be for a product that does not include a previously approved active ingredient.
The Rare Pediatric Disease PRV program was originally set to expire in October 2020. Under the current statutory sunset provisions, the FDA may only
award a rare pediatric disease PRV if a sponsor has a rare pediatric disease designation for the drug or biologic before December 20, 2024, and the NDA or
BLA for the product is approved before September 30, 2026.
20
Fast Track Designation and Accelerated Approval
The FDA has established programs to facilitate the development, and expedite the review of, drugs that are intended for the treatment of a serious or life-
threatening disease or condition for which there is no effective treatment and which demonstrate the potential to address unmet medical needs for the
condition. Under the fast track program, the sponsor of a product candidate may request that the FDA designate the product candidate for a specific
indication as a fast track drug concurrent with or after the filing of the IND for the product candidate. The FDA determines if the product candidate
qualifies for fast track designation within 60 days of receipt of the sponsor’s request.
The FDA may designate a drug for fast track status if it is intended to treat a serious or life-threatening illness and nonclinical or clinical data demonstrate
the potential to address an unmet medical need. If so designated, the FDA takes steps to expedite the development and review of the product’s marketing
application, including by meeting with the sponsor more frequently to provide timely advice so that the development program is as efficient as possible.
Another benefit of fast track designation is that the FDA may initiate review of sections of an NDA or BLA before the application is complete. This rolling
review is available if the applicant provides, and the FDA approves, a schedule for the submission of the remaining information and the applicant pays
applicable user fees. The FDA’s review goal date does not begin until the last section of the application is submitted, however. Fast track designation may
be withdrawn by the FDA if the FDA believes that the designation is no longer supported by data emerging in clinical trials.
The agency may determine that an accelerated approval pathway is appropriate if a product candidate is intended to treat a serious condition and provide
meaningful therapeutic benefit to patients over existing treatments based upon a surrogate endpoint that is reasonably likely to predict clinical benefit, or on
a clinical endpoint that can be measured earlier than irreversible morbidity or mortality, that is reasonably likely to predict an effect on irreversible
morbidity or mortality or other clinical benefit, taking into account the severity, rarity, or prevalence of the condition and the availability or lack of
alternative treatments.
In clinical trials, a surrogate endpoint is a measurement of laboratory or clinical signs of a disease or condition that substitutes for a direct measurement of
how a patient feels, functions, or survives. Surrogate endpoints can often be measured more easily or more rapidly than other clinical endpoints. As a
condition of accelerated approval, the FDA generally requires that the sponsor perform adequate and well-controlled post-marketing clinical trials with due
diligence to confirm clinical benefit and, under the Food and Drug Omnibus Reform Act of 2022 (“FDORA”), the FDA is now permitted to require, as
appropriate, that such trials be underway prior to approval or within a specific time period after the date accelerated approval is granted. Failure to conduct
required post-approval studies or to confirm clinical benefit through post-marketing studies allows the FDA to withdraw the drug from the market on an
expedited basis. In addition, for products under accelerated approval, FDA generally requires all promotional materials, including launch materials, to be
submitted for prior review.
Post-Approval Requirements
Once approval of an NDA or BLA is granted, the FDA may withdraw the approval if compliance with regulatory standards is not maintained or if
problems are identified after the product reaches the market. Newly discovered or developed safety or effectiveness data may require changes to a
product’s approved labeling, including the addition of new warnings and contraindications, and also may require the implementation of other risk
management measures, including a REMS or the conduct of post-marketing studies to assess a newly discovered safety issue. Later discovery of previously
unknown problems with a product may result in restrictions on the product or even complete withdrawal of the product from the market. After approval,
some types of changes to the approved product, such as adding new indications, manufacturing changes and additional labeling claims, are subject to
further FDA review and approval. Drug manufacturers and other entities involved in the manufacture and distribution of approved drugs are required to
register their establishments with the FDA and certain state agencies, and are subject to periodic unannounced inspections by the FDA and certain state
agencies for compliance with cGMP and other laws and regulations. We rely, and expect to continue to rely, on third parties for the production of clinical
and commercial quantities of our products. Future inspections by the FDA and other regulatory agencies may identify compliance issues at the facilities of
our contract manufacturers that may disrupt production or distribution, or require substantial resources to correct.
21
Any drug products manufactured or distributed by us pursuant to FDA approvals are subject to continuing regulation by the FDA, including, among other
things, requirements related to record-keeping, reporting of adverse experiences, submitting periodic reports, updating safety and efficacy information, drug
sampling and distribution, and electronic records and signatures. The FDA also closely regulates labeling, advertising, promotion and other types of
information that may be disseminated about products that are placed on the market. Drugs may be promoted only for the approved indications and in a
manner that is consistent with the approved label.
From time to time, legislation is drafted, introduced and passed in Congress that could significantly change the statutory provisions governing the
development, approval, manufacturing and marketing of products regulated by the FDA. It is impossible to predict whether further legislative changes will
be enacted, or whether FDA regulations, guidance or interpretations may change or what the impact of such changes, if any, may be.
Regulation and Marketing Authorization in the European Union
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 EU regulations and requirements. The results of the preclinical tests, together with relevant manufacturing information and
analytical data, are submitted as part of the CTA and MAA.
Clinical Trial Approval
Clinical trials in the EU are governed by the Clinical Trials Regulation, (EU) No 536/2014, or the CT Regulation. The CT Regulation was adopted in 2014
and replaced the Clinical Trials Directive 2001/20/EC, or the CT Directive and came into effect on January 31, 2022. To ensure that the rules for clinical
trials are identical throughout the EU, the EU clinical trials legislation was passed as a “regulation” that is directly applicable in all EU Member States. All
clinical trials performed in the EU are required to be conducted in accordance with the CT Regulation.
The CT Regulation aims to harmonize, simplify and streamline the approval of clinical trials in the EU. The main characteristics of the CT Regulation
include:
•
A streamlined application procedure via a single-entry point, through the centralized EU portal called the Clinical Trials Information System
(CTIS).
•
A single set of documents to be prepared and submitted for the application as well as simplified reporting procedures that will spare sponsors
from submitting broadly identical information separately to various bodies and different EU Member States.
•
A harmonized procedure for the assessment of applications for clinical trials, which is divided in two parts. Part I is assessed jointly by all
Member States Concerned. Part II is assessed separately by each Member State concerned.
•
Strictly defined deadlines for the assessment of clinical trial application.
•
The involvement of the ethics committees in the assessment procedure in accordance with the national law of the Member State concerned but
within the overall timelines defined by the CT Regulation.
22
Marketing Authorization
Authorization to market a product in the Member States of the EU proceeds under one of four procedures: a centralized authorization procedure, a mutual
recognition procedure, a decentralized procedure or a national procedure.
Centralized Authorization Procedure
The centralized procedure enables applicants to obtain a marketing authorization that is valid in all EU Member States based on a single application.
Certain medicinal products (as set out below) must use the centralized authorization procedure to obtain marketing authorization.
The centralized authorization procedure is mandatory for:
•
medicinal products developed by means of biotechnological processes such as genetic engineering;
•
advanced therapy medicinal products as defined in Article 2 of Regulation (EC) No. 1394/2007 on advanced therapy medicinal products (gene-
therapy, somatic cell-therapy or tissue-engineered medicines);
•
medicinal products containing a new active substance indicated for any of the following:
o
human immunodeficiency virus;
o
acquired immune deficiency syndrome;
o
cancer;
o
neurodegenerative disorder;
o
diabetes;
o
auto-immune diseases and other immune dysfunctions;
o
viral diseases; and
o
medicinal products that are designated as orphan medicinal products pursuant to Regulation (EC) No 141/2000.
The centralized authorization procedure is optional for other medicinal products if they contain a new active substance for conditions other than those set
out above, or if the applicant shows that the medicinal product concerned constitutes a significant therapeutic, scientific or technical innovation or that the
granting of authorization is in the interest of public health in the EU.
Administrative Procedure
Under the centralized authorization procedure, the European Medicines Agency’s (“EMA”) Committee for Medicinal Products for Human Use (“CHMP”)
serves as the scientific committee that renders opinions about the safety, efficacy and quality of medicinal products for human use on behalf of the EMA.
The CHMP has 210 days to adopt an opinion as to whether a marketing authorization should be granted. The process usually takes longer if additional
information is requested, which triggers clock-stops in the procedural timelines. When an application is submitted for a marketing authorization in respect
of a product that is of major interest from the point of view of public health and in particular from the viewpoint of therapeutic innovation, the applicant
may (pursuant to Article 14(9) Regulation (EC) No 726/2004) request an accelerated assessment procedure. 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
23
standard time limit for the centralized procedure if it considers that it is no longer appropriate to conduct an accelerated assessment. If the opinion is
negative, information is given as to the grounds on which this conclusion was reached. After the adoption of the CHMP opinion, a decision on the MAA
must be adopted by the European Commission, which is issued within 67 days of the EMA opinion.
Conditional Approval
In specific circumstances, EU legislation (Article 14(7) Regulation (EC) No 726/2004 and Regulation (EC) No 507/2006 on conditional marketing
authorizations for medicinal products for human use) enables applicants to obtain a conditional marketing authorization prior to obtaining the
comprehensive clinical data required for an application for a full marketing authorization. Such conditional approvals may be granted for product
candidates (including medicines designated as orphan medicinal products) if (1) the risk-benefit balance of the product candidate is positive, (2) it is likely
that the applicant will be in a position to provide the required comprehensive clinical trial data, (3) the product fulfills unmet medical needs and (4) 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 following grant of the market authorization, 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.
Marketing Authorization under Exceptional Circumstances
Under Article 14(8) Regulation (EC) No 726/2004, products for which the applicant can demonstrate that comprehensive data (in line with the
requirements laid down in Annex I of Directive 2001/83/EC, as amended) cannot be provided (due to specific reasons foreseen in the legislation) might be
eligible for marketing authorization under exceptional circumstances. This type of authorization is reviewed annually to reassess the risk-benefit balance.
The fulfillment of any specific procedures/obligations imposed as part of the marketing authorization under exceptional circumstances is aimed at the
provision of information on the safe and effective use of the product and will normally not lead to the completion of a full dossier/approval.
Market Authorizations Granted by Authorities of EU Member States
In general, if the centralized procedure is not mandatory or followed, there are three alternative procedures as prescribed in Directive 2001/83/EC:
•
The decentralized procedure allows applicants to file identical applications to several EU Member States and receive simultaneous national
approvals based on the recognition by EU Member States of an assessment by a reference Member State.
•
The mutual recognition procedure is based on the acceptance by the competent authorities of the EU Member States of the marketing
authorization of a medicinal product by the competent authorities of
another EU Member State.
•
The national procedure is only available for products intended to be authorized in a single EU Member State.
An EU marketing authorization may only be granted to an applicant established in the EU.
Pediatric Studies
Prior to obtaining a marketing authorization in the EU, applicants have to demonstrate compliance with all measures included in an EMA-approved
Pediatric Investigation Plan (“PIP”) covering all subsets of the pediatric population,
24
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 Pediatric 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 Pediatric Committee of the EMA (“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 an MAA 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.
Periods of Authorization and Renewals
A marketing authorization is valid for five years in principle and the marketing authorization may be renewed after five years on the basis of a re-
evaluation of the risk-benefit balance by the EMA (for a centrally authorized product) or the competent authority of the authorizing EU Member State (for
a product with a national authorization). 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 nine months before the marketing authorization ceases to be valid. Once renewed, the marketing authorization is valid for an unlimited period,
unless the European Commission or the competent authority decides, on justified grounds relating to pharmacovigilance, to proceed with one additional
five-year renewal. Any authorization of a medicinal product which is not followed by the actual placing of the product on the EU market (in case of
centralized procedure) or on the market of the authorizing EU Member State within three years after authorization ceases to be valid (the so-called sunset
clause).
Orphan Designation and Exclusivity
Pursuant to Regulation (EC) No 141/2000 and Regulation (EC) No. 847/2000, the European Commission can grant orphan medicinal product designation
where the sponsor can establish that the product 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 EU when the application is made, or for a life threatening, seriously debilitating or serious
and chronic condition in the EU and that without incentives it is unlikely that the product would generate a sufficient return in the EU to justify the
necessary investment in its development. In addition, the sponsor must establish that there is no other satisfactory method approved in the EU of
diagnosing, preventing or treating the condition, or if such a method exists, the proposed orphan product will be of significant benefit to patients.
Orphan 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 EU marketing authorization, as well as ten years of market exclusivity following grant of a marketing
authorization. During this market exclusivity period, neither the EMA, the European Commission nor the EU Member States can accept an application or
grant a marketing authorization for a “similar medicinal product” for the same therapeutic indication as the authorized orphan 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 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 product. Furthermore, a product can lose orphan designation, and the related benefits, prior to obtaining a
marketing authorization if it is demonstrated that the orphan designation criteria are no longer met.
Regulatory Data Protection
25
EU legislation also provides for a system of regulatory data and market exclusivity. According to Article 14(11) of Regulation (EC) No 726/2004, and
Article 10(1) of Directive 2001/83/EC, upon receiving marketing authorization, new active substances approved on the basis of complete and independent
data package benefit from eight years of data exclusivity and an additional two years of market exclusivity. Data exclusivity prevents applicants for generic
or biosimilar products from referencing the data contained in the dossier of the reference product when applying for a generic or biosimilar marketing
authorization in the EU, for a period of eight years from the date on which the reference product was first authorized in the EU. During the additional two-
year period of market exclusivity, a generic or biosimilar marketing authorization application can be submitted, and the innovator’s data may be referenced,
but no generic medicinal product can be marketed until the expiration of the market exclusivity. The overall ten-year period will be extended to a maximum
of eleven years if, during the first eight years of those ten years, the marketing authorization holder (“MAH”) 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 active substance and the innovator is able to gain the 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 and independent data package of pharmaceutical tests, preclinical tests and clinical trials.
Regulatory Requirements after a Marketing Authorization Has Been Obtained
If we obtain authorization for a medicinal product in the EU, we will be required to comply with a range of requirements applicable to the manufacturing,
marketing, promotion and sale of medicinal products.
Pharmacovigilance and Other Requirements
We will, for example, have to comply with the EU’s stringent pharmacovigilance or safety reporting rules, pursuant to which post-authorization studies and
additional monitoring obligations can be imposed. Other requirements relate, for example, to the manufacturing of products and APIs in accordance with
good manufacturing practice standards. EU regulators may conduct inspections to verify our compliance with applicable requirements, and we will have to
continue to expend time, money and effort to remain compliant. Non-compliance with EU requirements regarding safety monitoring or pharmacovigilance,
and with requirements related to the development of products for the pediatric population, can also result in significant financial penalties in the EU.
Similarly, failure to comply with the EU’s requirements regarding the protection of individual personal data can also lead to significant penalties and
sanctions. Individual EU Member States may also impose various sanctions and penalties in case we do not comply with locally applicable requirements.
Manufacturing
The manufacturing of authorized product, for which a separate manufacturer’s license is mandatory, must be conducted in strict compliance with the
EMA’s Good Manufacturing Practices (“GMP”) requirements and comparable requirements of other regulatory bodies in the EU, which mandate the
methods, facilities and controls used in manufacturing, processing and packing of products to assure their safety and identity. The EMA enforces its current
GMP requirements through mandatory registration of facilities and inspections of those facilities. The EMA may have a coordinating role for these
inspections while the responsibility for carrying them out rests with the EU Member States competent authority under whose responsibility the
manufacturer falls. Failure to comply with these requirements could interrupt supply and result in delays, unanticipated costs and lost revenues, and could
subject the applicant to potential legal or regulatory action, including but not limited to warning letters, suspension of manufacturing, seizure of product,
injunctive action or possible civil and criminal penalties.
Marketing and Promotion
The marketing and promotion of authorized products, including industry-sponsored continuing medical education and advertising directed toward the
prescribers of drugs and/or the general public, are strictly regulated in the EU under Directive 2001/83/EC and EU Member States’ national law
implementing it. The applicable regulations aim to ensure that information provided by holders of marketing authorizations regarding their products is
truthful, balanced and accurately reflects the safety and efficacy claims authorized by the EMA or by the competent authority
26
of the authorizing EU Member State. Failure to comply with these requirements can result in adverse publicity, warning letters, corrective advertising and
potential civil and criminal penalties.
Patent Term Extension
In order to compensate the patentee for delays in obtaining a marketing authorization for a patented product, a supplementary protection certificate (“SPC”)
may be granted extending the exclusivity period for that specific product by up to 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 EU. The six-month pediatric
extension of SPCs is not available for medicinal products that are designated as orphan medicinal products, as such products benefit from a separate two-
year pediatric extension of orphan status and exclusivity. The six-month pediatric extension of SPCs is, however, available for medicinal products which
were originally designated as orphan medicinal products but were subsequently (voluntarily) removed from the EU’s Register of Orphan Medicinal
Products.
All of the aforementioned EU rules are generally applicable in the European Economic Area which includes the EU Member States, Iceland, Liechtenstein
and Norway.
Reform of the Regulatory Framework in the European Union
The European Commission introduced legislative proposals in April 2023 that, if implemented, will replace the current regulatory framework in the EU for
all medicines (including those for rare diseases and for children). The European Commission has provided the legislative proposals to the European
Parliament and the European Council for their review and approval, and in April 2024, the European Parliament proposed amendments to the legislative
proposals. Once the European Commission’s legislative proposals are approved (with or without amendment), they will be adopted into EU law.
UK Regulation
The UK ceased being a Member State of the EU on January 31, 2020, and the EU and the UK have concluded a trade and cooperation agreement (“TCA”),
which was provisionally applicable since January 1, 2021 and has been formally applicable since May 1, 2021. The TCA includes specific provisions
concerning pharmaceuticals, which include the mutual recognition of GMP, inspections of manufacturing facilities for medicinal products and GMP
documents issued, but does not provide for wholesale mutual recognition of UK and EU pharmaceutical regulations. At present, the UK has implemented
previous EU legislation on the marketing, promotion and sale of medicinal products through the Human Medicines Regulations 2012. Except in respect of
the EU Clinical Trials Regulation, the regulatory regime in the UK therefore aligns in many ways with current EU medicines regulations, however it is
possible that these regimes will diverge more significantly in the future now that the UK’s regulatory system is independent from the EU and the TCA does
not provide for mutual recognition of UK and EU pharmaceutical legislation.
As a result of the Northern Ireland protocol, following Brexit, the EMA remained responsible for approving novel medicines for supply in Northern Ireland
under the EU centralized procedure, and a separate authorization was required to supply the same medicine in Great Britain (England, Wales and Scotland).
On February 27, 2023, the UK government and the EC announced a political agreement in principle to replace the Northern Ireland Protocol with a new set
of arrangements, known as the “Windsor Framework”. The Windsor Framework was approved by the EU-UK Joint Committee on March 24, 2023, and the
medicines aspects of the Windsor Framework have applied since January 1, 2025. This new framework fundamentally changes the previous system under
the Northern Ireland Protocol, including with respect to the regulation of medicinal products in the UK. In particular, the MHRA is now responsible for
approving all medicinal products destined for the UK market (i.e., Great Britain and Northern Ireland), and the EMA no longer has any role in approving
medicinal products destined for Northern Ireland under the EU centralized procedure. A single UK-wide MA will be granted by the MHRA for all novel
medicinal products to be sold in the UK, enabling products to be sold in a single pack and under a single authorization throughout the
27
UK. In addition, the new arrangements require all medicines placed on the UK market to be labeled “UK only,” indicating they are not for sale in the EU.
The MHRA has introduced changes to national licensing procedures, including procedures to prioritize access to new medicines that will benefit patients,
an accelerated assessment procedure and new routes of evaluation for novel products and biotechnology products. On January 1, 2024, the MHRA put in
place a new international recognition framework which means that the MHRA may have regard to decisions on the approval of marketing authorizations
made by the EMA and certain other regulators when determining an application for a new UK marketing authorization.
The MHRA offers a 150-day assessment timeline for all high quality applications for a UK, Great Britain or Northern Ireland marketing authorization. The
150 day timeline does not, however, include a “clock-stop” period which may occur if issues arise or points require clarification following an initial
assessment of the application. Such issues should be addressed within a 60-day period, although extensions may be granted in exceptional cases. There is
now no pre-MA orphan designation in the UK. Instead, the MHRA reviews applications for orphan designation in parallel to the corresponding MAA. The
criteria are essentially the same, but have been tailored for the UK market, i.e., the prevalence of the condition in the UK (rather than the European Union)
must not be more than five in 10,000. Should an orphan designation be granted, the period of market exclusivity will be set from the date of first approval
of the product in the UK.
Foreign Regulation
In addition to regulations in the United States, the European Union and the UK, we will be subject to a variety of other foreign regulations governing
clinical trials and commercial sales and distribution of our products. Whether or not we obtain FDA, EMA or MHRA approval for a product, we must
obtain approval by the comparable regulatory authorities of other countries or areas before we may commence clinical trials or market products in those
countries or areas. The approval process and requirements governing the conduct of clinical trials, product licensing, pricing and reimbursement vary
greatly from place to place, and the time may be longer or shorter than that required for FDA, EMA or MHRA approval.
Pharmaceutical Pricing and Reimbursement
Sales of pharmaceutical products depend in significant part on the extent of coverage and reimbursement from government programs, including Medicare
and Medicaid in the U.S., and other third party payers. Third party payers are sensitive to the cost of drugs and are increasingly seeking to implement cost
containment measures to control, restrict access to, or influence the purchase of drugs, biologicals, and other health care products and services.
Governments may regulate reimbursement, pricing, and coverage of products in order to control costs or to affect levels of use of certain products. Payers
may restrict coverage of some products due to cost concerns, by various means such as using payer formularies under which only selected drugs are
covered, variable co-payments that make drugs that are not preferred by the payer more expensive in terms of higher out-of-pocket expenses for patients,
and by employing utilization management controls, such as discouraging patients’ use of copay coupons and discount cards and imposing requirements for
prior authorization before a prescription can be billed or prior clinical failure on another type of treatment before a new product can be prescribed. Payers
may especially impose these obstacles to coverage for higher-priced drugs in order to limit the payer’s cost for treatment of the disease. Consequently, any
future products may be subject to payer-driven restrictions, rendering patients responsible for a higher percentage of the total cost of drugs in the outpatient
setting.
In addition, in some foreign countries, the proposed pricing for a drug must be approved before it may be lawfully marketed. Moreover, the requirements
governing drug pricing and reimbursement vary widely from country to country. For example, in the EU, the national authorities of the individual EU
Member States are free to restrict the range of medicinal products for which their national health insurance systems provide reimbursement and to control
the prices and/or reimbursement of medicinal products for human use. Some individual EU Member States adopt policies according to which a specific
price or level of reimbursement is approved for the medicinal product. Other EU Member States adopt a system of reference pricing, basing the price or
reimbursement level in their territory either, on the pricing and reimbursement levels in other countries, or on the pricing and reimbursement levels of
medicinal products intended for the same therapeutic indication. Some EU Member States may require the
28
completion of additional studies that compare the cost effectiveness of a particular product candidate to currently available therapies (so called health
technology assessments) in order to obtain reimbursement or pricing approval. Furthermore, some EU Member States impose direct or indirect controls on
the profitability of the company placing the medicinal product on the market. 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 of our product candidates.
Historically, products launched in the EU do not follow price structures of the U.S. and generally prices tend to be significantly lower.
U.S. Healthcare Reform and Other U.S. Healthcare Laws
In addition to FDA restrictions on marketing of pharmaceutical products, several other types of state and federal healthcare laws, including those
commonly referred to as “fraud and abuse” laws have been applied in recent years to restrict certain marketing practices in the pharmaceutical industry.
These laws impact, among other things, sales, marketing and educational programs associated with approved products. In addition, patient privacy
regulations by both the U.S. federal and state governments as well as pharmaceutical pricing and transparency requirements also apply to companies that
market approved pharmaceutical products.
Sanctions under these federal and state healthcare laws may include civil monetary penalties, exclusion of a manufacturer’s products from reimbursement
under government programs, monetary damages, criminal fines, disgorgement, additional reporting obligations and oversight if the manufacture becomes
subject to a corporate integrity agreement or other agreement to resolve allegations of non-compliance with these laws, and individual imprisonment.
In addition, there is significant interest in the United States in promoting changes in healthcare system with the stated goals of containing healthcare costs,
improving quality and/or expanding access, including increasing legislative and enforcement interest in the United States with respect to specialty drug
pricing practices, particularly with respect to drugs that have been subject to relatively large price increases over relatively short time periods. There have
been several recent U.S. Congressional inquiries and proposed bills designed to, among other things, bring more transparency to drug pricing and reform
government program reimbursement methodologies for drugs. Further, Executive Orders relating to the regulation of prescription drug pricing have also
been introduced over time. We cannot predict the scope or impact of future legislative, judicial, or executive efforts to reform healthcare in the United
States.
Other Regulations
We are also subject to the U.S. Foreign Corrupt Practices Act (“FCPA”), the U.K. Bribery Act (“Bribery Act”), and other anticorruption laws and
regulations pertaining to our financial relationships with foreign government officials. The FCPA prohibits U.S. companies and their representatives from
paying, offering to pay, promising, or authorizing the payment of anything of value to any foreign government official, government staff member, political
party, or political candidate to obtain or retain business or to otherwise seek favorable treatment. In many countries in which we operate, the healthcare
professionals with whom we interact may be deemed to be foreign government officials for purposes of the FCPA. The Bribery Act, which applies to any
company incorporated or doing business in the UK, prohibits giving, offering, or promising bribes in the public and private sectors, bribing a foreign public
official or private person, and failing to have adequate procedures to prevent bribery amongst employees and other agents. Penalties under the Bribery Act
include potentially unlimited fines for companies and criminal sanctions for corporate officers under certain circumstances. Liability in relation to breaches
of the Bribery Act is strict. This means that it is not necessary to demonstrate elements of a corrupt state of mind.
Recent years have seen a substantial increase in anti-bribery law enforcement activity by U.S. regulators, with more frequent and aggressive investigations
and enforcement proceedings by both the DOJ and the SEC, increased enforcement activity by non-U.S. regulators, and increases in criminal and civil
proceedings brought against companies and individuals. Increasing regulatory scrutiny of the promotional activities of pharmaceutical companies also has
been observed in a number of EU member states. In Germany, a specific anti-corruption provision with regard to healthcare professionals was introduced in
the Criminal Code in 2017.
29
Similar strict restrictions are imposed on the promotion and marketing of products in the EU, where a large portion of our non-U.S. business is conducted,
and other territories. Laws in the EU, including in the individual EU Member States, require promotional materials and advertising for products to comply
with the product’s Summary of Product Characteristics (“SmPC”), which is approved by the competent authorities. Promotion of a medicinal product
which does not comply with the SmPC is considered to constitute off-label promotion. The off-label promotion of medicinal products is prohibited in the
EU and in other territories. The promotion of medicinal products that are not subject to a marketing authorization is also prohibited in the EU. Laws in the
EU, including in the individual EU Member States, also prohibit the direct-to-consumer advertising of prescription-only medicinal products. Violations of
the rules governing the promotion of medicinal products in the EU and in other territories could be penalized by administrative measures, fines and
imprisonment. Furthermore, illegal advertising can be challenged by competitors, and as a result, can be prohibited by court and the responsible company
can be obligated to pay damages to the competitor.
Interactions between pharmaceutical companies and physicians are also governed by strict laws, regulations, industry self-regulation codes of conduct and
physicians’ codes of professional conduct in the individual EU Member States. The provision of any inducements to physicians to prescribe, recommend,
endorse, order, purchase, supply, use or administer a medicinal product is prohibited. A number of EU Member States have introduced additional rules
requiring pharmaceutical companies to publicly disclose their interactions with physicians and to obtain approval from employers, professional
organizations and/or competent authorities before entering into agreements with physicians. These rules have been supplemented by provisions of related
industry codes, including the EFPIA Disclosure Code on Disclosure of Transfers of Value from Pharmaceutical Companies to Healthcare Professionals and
Healthcare Organizations and related codes developed at national level in individual EU Member States. Additional countries may consider or implement
similar laws and regulations. Violations of these rules could lead to reputational risk, public reprimands, and/or the imposition of fines or imprisonment.
Our present and future business has been and will continue to be subject to various other laws and regulations. Laws, regulations and recommendations
relating to safe working conditions, laboratory practices, the experimental use of animals, and the purchase, storage, movement, import and export and use
and disposal of hazardous or potentially hazardous substances, including radioactive compounds, used in connection with our research work are or may be
applicable to our activities. We cannot predict the impact of government regulation, which may result from future legislation or administrative action, on
our business.
30
Employees and Human Capital Resources
Our mission is to deliver advanced therapies to improve the lives of patients and families battling autoimmune and inflammatory diseases. Accordingly, we
are a team who is passionate about and committed to our mission and establishing a culture where patients and their families are at the center of all we do,
with core values that connect us to each other and our stakeholders, and define who we are, what we stand for, and how we work.
As of March 31, 2025, we had 9 employees, 8 of which are full-time, including our Chief Financial Officer, Torsten Hombeck, Ph.D., our Executive
Director, Head of Oncology, Satyajit Mitra, Ph.D., and 6 other individuals, 4 of whom are engaged in research and development. None of our employees
are represented by labor unions or covered by collective bargaining agreements, and we consider our relationship with employees to be good. We also
utilize the services of several independent consultants to support our research and development and general and administrative operations.
We are focused on effective identification, recruitment, development, and retention of, and compensation and benefits to, human resource talent, including
workforce and management development, diversity and inclusion initiatives, succession planning, and corporate culture and leadership quality, which are
vital to our success. The principal purposes of our equity incentive plans are to attract, retain and motivate selected employees, consultants and directors
through the granting of stock-based compensation awards and cash-based performance bonus awards.
Corporate Information
We were originally established as a private limited company under the laws of England and Wales on October 7, 2004 under the name Freshname No. 333
Limited. On January 19, 2005, we changed our name to Morria Biopharmaceuticals Limited and on February 3, 2005, we completed a reverse merger with
Morria Biopharmaceuticals Inc., or Morria, a Delaware corporation, in which Morria became our wholly-owned subsidiary and we re-registered as a non-
traded public limited company under the laws of England and Wales. On March 22, 2011, we incorporated an Israeli subsidiary, Morria Biopharma Ltd. On
June 25, 2013, we changed our name to Celsus Therapeutics Plc and on October 13, 2013 Morria was renamed Celsus Therapeutics Inc. On September 18,
2015, we completed an acquisition of all of the capital stock of Volution Immuno Pharmaceuticals SA (“Volution”), a private Swiss company, from RPC
Pharma Limited (“RPC”), Volution’s sole shareholder, in exchange for our ordinary shares, in accordance with the terms of a Share Exchange Agreement,
dated as of July 10, 2015. In connection with the acquisition, our name was changed to Akari Therapeutics, Plc. As such, our affairs are governed by our
Articles of Association and the English law.
Our principal UK office is located at 75/76 Wimpole Street, London W1G 9RT, United Kingdom, and our telephone number is +44 20 8004 0270. Puglisi
& Associates (“Puglisi”) serves as our agent for service of process in the United States. Puglisi’s address is 850 Library Avenue, Suite 204, Newark,
Delaware 1971.
Our principal U.S. office is located at 22 Boston Wharf Road FL 7, Boston, Massachusetts 02210, and our telephone number is (929) 274-7510. Celsus
Therapeutics, Inc. serves as our agent for service of process in the United States.
Information Available on the Internet
We use our website (www.akaritx.com), LinkedIn (https://www.linkedin.com/company/akaritx/) and Twitter (https://twitter.com/AkariTX) as distribution
channels for Company information. The information contained on, or that can be accessed through our website, LinkedIn or Twitter, which may be deemed
material, is not part of this Form 10-K and such internet addresses are included in this document solely as inactive textual references. We make available
free of charge through our website our Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and exhibits and amendments to these
reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after we electronically file or furnish
such materials to the SEC. The SEC maintains an internet site at www.sec.gov containing reports, proxies and information statements and other
information regarding issuers that file electronically with the SEC.
31
Item 1A. Risk Factors.
Investing in our securities involves a high degree of risk. You should carefully consider the risks and uncertainties described below in addition to the other
information included or incorporated by reference in this Form 10-K before purchasing our ADSs. Our business, financial condition and results of
operations could be materially and adversely affected by any of these and currently unknown risks or uncertainties. In that case, the market price of our
ADSs could decline, and you may lose all or part of your investment in our securities.
Risks Related to Our Financial Position and Our Capital Requirements
We have a history of operating losses and cannot give assurance of future revenues or operating profits.
We do not expect to generate revenue or profitability that is necessary to finance our operations in the short term. We incurred net losses of $19.8
million and $10.0 million for the years ended December 31, 2024 and 2023, respectively. In addition, our accumulated deficit as of December 31, 2024 and
2023 was $247.3 million and $227.5 million, respectively. Losses have principally resulted from costs incurred for manufacturing, clinical trial and
preclinical activities and general and administrative expenses. We have funded our operations primarily through public and private offerings of equity
securities.
To date, we have not commercialized any products or generated any revenues from the sale of products, and absent the realization of sufficient
revenues from product sales, we may never attain profitability in the future. We expect to incur significant losses for the foreseeable future as we continue
to conduct research and development, clinical testing, regulatory compliance activities and, if any of our current or future product candidates receive
marketing authorization, sales and marketing activities.
We have not initiated clinical development of any of the product candidates in our active pipeline and expect that it will be many years, if ever,
before any of our candidates is ready for commercialization. To become and remain profitable, we must develop and, either directly or through
collaborators, commercialize products with market potential. This will require us to be successful in a range of activities, including identifying product
candidates, completing preclinical studies and clinical trials of product candidates, obtaining marketing approval for these product candidates,
manufacturing, marketing and selling products for which we may obtain marketing approval and satisfying any post-marketing requirements. We may
never succeed in these activities and, even if we do, we may never generate revenues that are significant or large enough to achieve profitability.
Additionally, we are unable to predict the extent of any future losses or when we will become profitable, if at all. Our failure to become and remain
profitable could impair our ability to raise capital, maintain our research and development efforts, expand our business or continue our operations.
Accordingly, investors may not receive any return on their investment or may lose their entire investment.
We will require substantial additional capital to fund our operations, and if we are unable to obtain such capital, we will be unable to successfully
develop and commercialize any product candidates.
As of December 31, 2024, we had cash of approximately $2.6 million. We will require additional capital in order to develop and commercialize
our current product candidates or any future product candidates that we may develop or acquire. There is no assurance that additional funds will be
available when we need them on terms that are acceptable to us, or at all. If adequate funds are not available on a timely basis, we may be required to
terminate or delay development for one or more of our product candidates, which raises substantial doubt about our ability to continue as a going concern.
We expect our expenses to increase in connection with our ongoing activities, particularly as we identify, continue the research and development
of, initiate and carry out preclinical studies and clinical trials of, and seek marketing approval for product candidates. The amount and timing of any
expenditure needed will depend on numerous factors, some of which are outside our control, including:
32
•
the costs of developing our current products and any future product candidates that we may develop, in-license or acquire;
•
the costs of obtaining, maintaining and enforcing our patents and other intellectual property rights;
•
the costs and timing of future clinical trials or the need for additional clinical trials in any indications or product candidates which we are
pursuing or may choose to pursue in the future;
•
the costs and timing of initiating manufacturing for our product candidates, including commercial manufacturing if any product candidate is
approved;
•
the terms and timing of establishing and maintaining collaborations, license agreements and other partnerships;
•
the costs and timing of enhanced internal controls over financial reporting;
•
the effect of competing technological and market developments; and
•
the costs associated with being a public company.
We have not sold any products, and we do not expect to sell or derive revenue from any product sales for the foreseeable future. We may seek
additional funding through future debt and equity financing, potential collaborations or strategic partnerships with other companies, non-dilutive financings
or the divestiture of programs and product candidates that we have ceased developing or may in the future cease developing. Additional funding may not be
available to us on acceptable terms or at all. General market conditions may make it difficult for us to seek financing from the capital markets. We may be
required to relinquish rights to our technologies or product candidates, or grant licenses on terms that are not favorable to us, in order to raise additional
funds through alliance, joint venture or licensing arrangements. In the event that we decide to pursue divestiture of any of our legacy programs or product
candidates, we may be unable to identify a potential buyer or to complete such a divestiture on favorable terms or at all. In addition, the terms of any
financing may adversely affect the holdings or the rights of our shareholders and the issuance of additional shares by us, or the possibility of such issuance,
may cause the market price of our shares to decline.
If we are unable to obtain funding on a timely basis, we will be delayed or unable to complete ongoing research for our programs and we may be
required to significantly curtail some or all of our activities. Additionally, any additional fundraising efforts may divert our management from their day-to-
day activities, which may adversely affect our ability to develop and commercialize any product candidates we may develop. We cannot be certain that
additional funding will be available on acceptable terms or at all. We have no committed source of additional capital and, 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 or
commercialization of any product candidates or other research and development initiatives. We could be required to seek collaborators for potential product
candidates or complete divestitures of some or all of our legacy programs or product candidates earlier than we would otherwise plan or on terms that are
less favorable than might otherwise be available. We could also be required to relinquish or license our rights to product candidates on unfavorable terms in
certain markets where we otherwise would seek to pursue development or commercialization ourselves.
Raising additional capital may cause significant dilution to our shareholders or restrict our operations.
Until such time, as ever, as we are able to generate substantial product revenues, we expect to finance our capital needs at least in part through a
combination of equity offerings and debt financings. To the extent that we do so, our shareholders may experience significant dilution, and the terms of
these securities may contain preferential rights that adversely affect the rights of holders of ADSs representing our ordinary shares. The sale of a substantial
number of ADSs, or anticipation of such sales, could cause the trading price of our ADSs to decline or make it more difficult for us to sell equity or equity-
linked securities in the future at a time and at a price that we might otherwise desire. Additionally, debt financing, if available, may involve agreements that
include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures, declaring
dividends and other restrictions.
33
Our ability to use net operating losses to offset future income may be subject to certain limitations.
As of December 31, 2024, we had cumulative UK, U.S. federal, various U.S. state, Switzerland, and South Korea net operating loss
carryforwards (“NOL”) to offset future taxable income of approximately $145.7 million, $38.1 million, $71.8 million, less than $0.3 million, and $87.0
million, respectively. NOLs in certain jurisdictions do not expire, while NOLs in some jurisdictions are subject to expiration. A lack of future taxable
income would adversely affect our ability to utilize these NOLs. In addition, under Section 382 of the Internal Revenue Code of 1986, as amended (the
Code), a corporation that undergoes an “ownership change” is subject to limitations on its ability to utilize its NOLs to offset future taxable income. We
have already experienced ownership changes as defined under Section 382 of the Code. Depending on the timing of any future utilization of our NOLs, the
amount that can be utilized each year may be limited as a result of such previous ownership changes. In addition, future changes in our stock ownership,
including changes that may be outside of our control, could result in additional ownership changes under Section 382 of the Code. Our NOLs may also be
impaired under similar provisions of state law. We maintain a full valuation allowance related to our NOLs and other deferred tax assets due to the
uncertainty of the ultimate realization of the future benefits of those assets.
We have identified material weaknesses in our internal control over financial reporting. If our remediation of the material weaknesses are not effective,
or if we experience additional material weaknesses in the future or otherwise fail to maintain an effective system of internal controls in the future, we
may not be able to accurately or timely report our financial condition or results of operations, which may adversely affect investor confidence in us
and, as a result, the value of our ADSs.
As a public company, we are required to maintain internal control over financial reporting and to report any material weaknesses in such
internal control. Section 404 of the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley”) requires that we evaluate and determine the effectiveness of our
internal control over financial reporting. The rules governing the standards that must be met for management to assess our internal control over financial
reporting are complex and require significant documentation, testing and possible remediation. In connection with our year-end assessment as part of the
preparation of this Form 10-K, we determined that, as of December 31, 2024, we did not maintain effective internal control over financial reporting due to
material weaknesses identified relating to the lack of formalized information technology general controls, lack of formally designed and implemented
“purchase to pay” controls, and lack of effective controls over business combination accounting, as more fully described in “Disclosure Controls and
Procedures” in Item 9A of Part II of this Form 10-K. A material weakness is a deficiency, or a combination of deficiencies, in internal control over
financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim consolidated financial statements will
not be prevented or detected on a timely basis.
While we are in the process of implementing changes to remediate the material weaknesses we have identified, we cannot assure you that
these measures will significantly improve or remediate such material weaknesses. We may discover additional weaknesses in our system of internal
financial and accounting controls and procedures that could result in a material misstatement of our consolidated financial statements. Our internal control
over financial reporting will not prevent or detect all errors or fraud. A control system, no matter how well designed and operated, can provide only
reasonable, not absolute, assurance that the control system’s objectives will be met. Because of the inherent limitations in all control systems, no evaluation
of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud will be
detected.
If we are unable to maintain proper and effective internal controls over financial reporting, we may not be able to produce timely and accurate
financial statements. If that were to happen, our investors could lose confidence in our reported financial information, the market price of our ADSs could
decline, and we could be subject to sanctions or investigations by the SEC or other regulatory authorities.
Risks Related to Discovery, Development and Regulatory Approval of Our Product Candidates
We have not initiated clinical studies for any of the programs in our active pipeline or entered into any strategic partnerships regarding the continued
development of our legacy pipeline assets. As a result, it may be years before we commercialize a product candidate, if ever. If we, alone or with a
strategic partner, are unable to identify and advance product candidates through preclinical studies and clinical trials, obtain marketing
34
approval and ultimately commercialize them, or experience significant delays in doing so, our business will be materially harmed.
The success of our business depends primarily upon our ability to identify, develop and commercialize product candidates, which are subject
to the risks of failure inherent in the novel approaches, targets and mechanisms of action upon which we base our efforts. We are early in our development
efforts, have not yet completed preclinical studies of AKTX-101, our lead product candidate, and our other current active programs are in the drug
discovery stage. We recently suspended further development of our legacy pipeline assets nomacopan, PAS-nomacopan, and PHP-303, and we cannot
guarantee that we will be able to enter into any strategic partnerships covering the continued development of such assets or that future strategic partnerships
with respect to such assets that we may enter into, if any, will result in successful therapeutic products. Furthermore, our reliance on our ADC Platform in
the identification and development of product candidates may not yield any viable pharmaceutical products.
Additionally, our ability to achieve and sustain profitability depends on obtaining regulatory approvals for, and successfully commercializing,
our product candidates, either alone or with third parties, and we cannot guarantee that we will ever obtain regulatory approval for any of our product
candidates. Before obtaining regulatory approval for the commercial distribution of any product candidates, we must conduct extensive preclinical studies
followed by clinical trials to demonstrate the safety and efficacy of our product candidates in humans. We cannot be certain of the timely completion or
outcome of our research and development activities, preclinical studies or any future clinical trials, and cannot predict if the FDA or other regulatory
authorities will accept our proposed clinical programs or if the outcome of our preclinical studies will ultimately support the further development of our
future product candidates.
We also may not have the financial resources to continue development of, or the ability to enter into collaborations or other strategic
partnerships for, a product candidate if we experience any issues that delay or prevent regulatory approval of, or our ability to commercialize, product
candidates, including:
•
negative or inconclusive results from our preclinical trials, leading to a decision to conduct additional preclinical studies or abandon a
program;
•
negative or inconclusive results from clinical trials or the clinical trials of others for product candidates similar to ours, leading to a decision or
requirement to conduct additional preclinical studies or clinical trials or abandon a program;
•
our clinical safety data in humans not matching the safety evaluation in relevant animal models;
•
our strategy of deploying payloads, including our PH-1 payload, as ADCs failing to mitigate known toxicities of those classes of small
molecules delivered as systemic chemotherapies;
•
our clinical data failing to match preclinical data supporting antibody selectivity, linker stability, pharmacokinetics, anti-tumor efficacy, or any
other key attributes;
•
product-related side effects experienced by participants in our clinical trials or by individuals using drugs or therapeutic antibodies similar to
ours;
•
delays in submitting IND applications 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 other regulatory authorities regarding the scope or design of our clinical trials;
•
delays in clinical trials as a result of the limited number of patients with the diseases that some or all of our current or expected future product
candidates target, patient enrollment taking longer than anticipated or patient withdrawal;
•
high drop-out rates or high failure rates of research subjects;
•
inadequate supply or quality of product candidate components or materials or other supplies necessary for the conduct of preclinical studies or
clinical trials;
35
•
greater-than-anticipated clinical trial costs;
•
poor effectiveness of our product candidates during clinical trials;
•
unfavorable FDA or other regulatory agency inspection and review of a clinical trial or manufacture 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, policies and guidelines;
•
the FDA or other regulatory agencies interpreting our data differently than we do;
•
or adverse impacts caused by any future pandemics or geopolitical considerations which could heighten any of the foregoing risks.
Our inability to complete development of, or commercialize, our product candidates, or significant delays in doing so due to one or more of
these factors, or other factors, could have a material and adverse effect on our business, financial condition, results of operations and prospects.
Preclinical and clinical drug development is a lengthy and expensive process, with uncertain timelines and outcomes. If preclinical studies or clinical
trials of our product candidates are prolonged or delayed, we may be unable to obtain required regulatory approvals, and therefore be unable to
commercialize our product candidates or any of our future product candidates on a timely basis or at all.
Successful development of pharmaceutical products involves a lengthy and expensive process, is highly uncertain, and is dependent on
numerous factors, many of which are beyond our control. Product candidates that appear promising in the early phases of development may fail to reach the
market for several reasons, including:
•
clinical trial results may show the product candidates to be less effective than expected (for example, a clinical trial could fail to meet its
primary or key secondary endpoint(s)) or have an unacceptable safety or tolerability profile;
•
failure to receive the necessary regulatory approvals or a delay in receiving such approvals, which, among other things, may be caused by
patients who fail the trial screening process, slow enrollment in clinical trials, patients dropping out of trials, patients lost to follow-up, length
of time to achieve trial endpoints, additional time requirements for data analysis or application preparation, discussions with the FDA, EMA
or other comparable foreign regulatory authorities (including FDA, EMA or other comparable foreign regulatory authorities requesting
additional preclinical or clinical data, such as long-term toxicology studies), or encountering unexpected safety or manufacturing issues;
•
preclinical study results may show the product candidate to be less effective than desired or to have harmful on-target or off-target side
effects; or
•
the proprietary rights of others and their competing products and technologies that may prevent our product candidates from being
commercialized.
Furthermore, the length of time necessary to complete clinical trials and submit an application for marketing approval for a final decision by a
regulatory authority varies significantly from one product candidate to the next and from one country or jurisdiction to the next and may be difficult to
predict. Even if we are successful in obtaining marketing approval, commercial success of any approved products will also depend in large part on the
availability of coverage and adequate reimbursement from third-party payors, including government payors such as the Medicare and Medicaid programs
and managed care organizations in the United States or country-specific governmental organizations in foreign countries, which may be affected by
existing and future healthcare reform measures designed to reduce the cost of healthcare. Third-party payors could require us to conduct additional studies,
including post-marketing studies related to the cost effectiveness of a product, to qualify for reimbursement, which could be costly and divert our resources.
If government and other healthcare payors were not to provide coverage and adequate reimbursement for our products once approved, market acceptance
and commercial success would be reduced. Even if we are able to obtain coverage and adequate reimbursement for our products once approved, there may
be features or characteristics of our products, such as dose preparation requirements, that
36
prevent our products from achieving market acceptance by the healthcare or patient communities.
In addition, if any of our product candidates receive marketing approval, we will be subject to significant regulatory obligations regarding the
submission of safety and other post-marketing information and reports and registration, and will need to continue to comply (or ensure that our third-party
providers comply) with current Good Manufacturing Practice (“cGMPs”) and Good Clinical Practice (“GCPs”) for any clinical trials that we conduct post-
approval. In addition, there is always the risk that we, a regulatory authority or a third party might identify previously unknown problems with a product
post-approval, such as AEs of unanticipated severity or frequency. Compliance with these requirements is costly, and any failure to comply or other issues
with our product candidates post-approval could adversely affect our business, financial condition and results of operations
We may encounter substantial delays in the commencement, enrollment or completion of clinical trials or we may fail to demonstrate safety and
efficacy to the satisfaction of applicable regulatory authorities, which could prevent us from commercializing any product candidates we determine to
develop on a timely basis, if at all.
The risk of failure in developing product candidates is high. It is impossible to predict when or if any product candidate would prove effective
or safe in humans or receive regulatory approval. Before obtaining marketing approval from regulatory authorities for the sale of any product candidate, we
must complete preclinical development, submit an IND or comparable foreign application to permit initiation of clinical studies, and then conduct extensive
clinical trials to demonstrate the safety and efficacy of product candidates in humans. We have not yet commenced or completed a clinical trial of any of
the product candidates in our active pipeline.
Before we can commence clinical trials for a product candidate, we must complete extensive preclinical testing and studies that support our
INDs and other regulatory filings. We cannot be certain of the timely identification of a product candidate or the completion or outcome of our preclinical
testing and studies and cannot predict whether the FDA, EMA or other comparable foreign regulatory authorities will accept our proposed clinical
programs or whether the outcome of our preclinical testing and studies will ultimately support the further development of any product candidates.
Conducting preclinical testing is a lengthy, time-consuming and expensive process. The length of time may vary substantially according to the type,
complexity and novelty of the program, and often can be several years or more per program. As a result, we cannot be sure that we will be able to submit
INDs or other comparable foreign regulatory submissions for our preclinical programs on the timelines we expect, if at all, and we cannot be sure that
submission of INDs will result in the FDA, EMA, or other comparable foreign regulatory authority allowing clinical trials to begin.
Furthermore, product candidates are subject to continued preclinical safety studies, which may be conducted concurrently with our clinical
testing. The outcomes of these safety studies may delay the launch of or enrollment in future clinical trials and could impact our ability to continue to
conduct our clinical trials.
Clinical testing is expensive, is difficult to design and implement, can take many years to complete and is uncertain as to outcome. We cannot
guarantee that any clinical trials will be conducted as planned or completed on schedule, or at all. A failure of one or more clinical trials can occur at any
stage of testing, which may result from a multitude of factors, including, but not limited to, flaws in trial design, dose selection issues, patient enrollment
criteria and failure to demonstrate favorable safety or efficacy traits.
Patient enrollment depends on many factors, including the size and nature of the patient population, eligibility criteria for the trial, the
proximity of patients to clinical sites, the design of the clinical protocol, the availability of competing clinical trials, the availability of new drugs or
biologics approved for the indication the clinical trial is investigating, and clinicians’ and patients’ perceptions as to the potential advantages of the drug
being studied in relation to other available therapies. These factors may make it difficult to enroll enough patients to complete clinical trials in a timely and
cost-effective manner.
Patient enrollment is affected by other factors, including:
•
design of the clinical trial protocol;
•
size and nature of the patient population;
•
eligibility criteria for the trial;
•
perceived risks and benefits of the product candidate under trial;
•
proximity and availability of clinical trial sites for prospective patients;
37
•
availability of competing therapies and clinical trials;
•
actual or threatened public health emergencies and outbreaks of disease;
•
clinicians’ and patients’ perceptions as to the potential advantages of the drug being studied in relation to other available therapies, including
any new drugs that may be approved for the indications we are investigating;
•
efforts to facilitate timely enrollment in clinical trials;
•
number of physicians that treat patients with these diseases;
•
ability to identify and enroll such patients with a stage of disease appropriate for our ongoing or future clinical trials;
•
the costs of finding and diagnosing patients;
•
patient referral practices of physicians; and
•
our ability to monitor patients adequately during and after treatment.
We could also encounter delays if a clinical trial is suspended or terminated by us, by the IRBs overseeing the conduct of such trials, by a Data
Safety Monitoring Board for such trial or by the FDA, EMA, or other comparable foreign regulatory authorities. Such regulatory authorities may impose
such a suspension or termination due to a number of factors, including failure to conduct the clinical trial in accordance with regulatory requirements or our
clinical protocols, inspection of the clinical trial operations or trial site by the FDA, EMA, or other comparable regulatory foreign authorities resulting in
the imposition of a clinical hold, unforeseen safety issues or adverse side effects, failure to demonstrate a benefit from using a drug, changes in
governmental regulations or administrative actions or lack of adequate funding to continue the clinical trial. In addition, changes in regulatory requirements
and policies may occur, and we may need to amend clinical trial protocols to comply with these changes. Amendments may require us to resubmit our
clinical trial protocols to IRBs for reexamination and approval, which may impact the costs, timing or successful completion of a clinical trial.
Further, conducting clinical trials in foreign countries, as we may do for our product candidates, presents additional risks that may delay
completion of our clinical trials. These risks include the failure of enrolled patients in foreign countries to adhere to clinical protocols as a result of
differences in healthcare services or cultural customs, managing additional administrative burdens associated with foreign regulatory requirements, as well
as political, currency exchange and other economic risks relevant to such foreign countries. We may face delays in meeting our anticipated timelines for
our ongoing and planned clinical trials, which could adversely affect our business, financial condition, results of operations and growth prospects.
Any inability to successfully complete preclinical and clinical development could result in additional costs to us or impair our ability to
generate revenue from future product sales and regulatory and commercialization milestones. In addition, if we make manufacturing or formulation
changes to our product candidates, we may need to conduct additional testing to bridge our modified product candidate to earlier versions. Clinical trial
delays could also shorten any periods during which we may have the exclusive right to commercialize our product candidates, if approved, or allow our
competitors to bring comparable products to market before we do, which could impair our ability to successfully commercialize our product candidates and
may harm our business, financial condition, results of operations and prospects.
Serious adverse events, undesirable side effects or other unexpected properties of our product candidates may be identified during development or after
approval, which could lead to the discontinuation of our development programs, refusal by regulatory authorities to approve our product candidates or,
if discovered following marketing approval, revocation of marketing authorizations or limitations on the use of our product candidates, any of which
would limit the commercial potential of such product candidates.
To date, we have not commenced or completed the evaluation of any of our current ADC candidates in human clinical trials. It is impossible
to predict when or if any product candidates we may develop will ultimately prove safe in humans. As is the case with pharmaceuticals generally, it is
likely that there may be side effects and AEs associated with our product candidates’ use. Often, it is not possible to determine whether or not the product
38
candidate being studied caused these conditions. Regulatory authorities may draw different conclusions or require additional testing to confirm these
determinations, if they occur. In addition, it is possible that as we test our product candidates in larger, longer and more extensive clinical trials with a
broader group of patients, or as use of these product candidates becomes more widespread if they receive marketing approval, illnesses, injuries,
discomforts and other AEs that were observed in earlier trials, as well as conditions that did not occur or went undetected in previous trials, will be reported
by participants. In some instances, certain side effects are only detectable after investigational product candidates are tested in large-scale, Phase 3 trials or
after they are made available to patients on a commercial scale after approval. If additional clinical experience indicates that any of our current or future
product candidates has serious or life-threatening side effects or other side effects that outweigh the potential therapeutic benefit, the development of the
product candidate may fail or be delayed, or, if the product candidate has received marketing approval, such approval may be limited or revoked, which
would harm our business, prospects, operating results and financial condition. If we elect, or are required, to delay, suspend or terminate any clinical trial of
our product candidates, the commercial prospects of our product candidates may be harmed and our ability to generate revenue through their sale may be
delayed or eliminated. Any of these occurrences may harm our business, financial condition and prospects significantly
Moreover, if our product candidates are associated with undesirable side effects in clinical trials or have characteristics that are unexpected,
we may elect to abandon their development or limit their development to more narrow uses or subpopulations in which the undesirable side effects or other
characteristics are less prevalent, less severe or more acceptable from a risk-benefit perspective, which may limit the commercial value for the product
candidate if approved. We may also be required to modify our trial plans based on findings after we commence our clinical trials. Many compounds that
initially showed promise in early-stage testing have later been found to cause side effects that prevented further development of the compound.
In addition, if any of our product candidates receive marketing approval, the FDA could require us to include a boxed warning in our label or
adopt a REMS to ensure that the benefits outweigh its risks, which may include, among other things, a medication guide outlining the risks of the drug for
distribution to patients, a communication plan to health care practitioners, or other elements to assure safe use. Furthermore, if we or others identify
undesirable side effects caused by our product candidates, several other potentially significant consequences could result, including:
•
regulatory authorities may suspend or withdraw approvals of any such product and require removal from the market;
•
regulatory authorities may require the addition of labeling statements, specific warnings, a contraindication or field alerts to physicians and
pharmacies, specialty pharmacies and other pharmacy related distribution networks (for example, oncology therapies do have inherent risks
and labeling considerations that in many instances require additional regulatory labeling requirements);
•
regulatory authorities may require a medication guide outlining the risks of such side effects for distribution to patients, or that we implement
a risk evaluation and mitigation strategy (REMS) plan to ensure that the benefits of the product outweigh its risks;
•
we may be required to change the way a product is administered, including changes in dosing regimens, frequency of dose, or reduction in
dosing and may require us to conduct additional clinical trials or change the labeling of a product;
•
we may be subject to limitations on how we may promote the product leading to the potential for sales of the product to decrease significantly;
•
third-party private or government payors may not offer, or may offer inadequate, reimbursement coverage for our product candidates, or
reimbursement payments may be delayed or impossible to recover; and
•
we may be subject to litigation or product liability claims; and our reputation may suffer.
Any of these events could prevent us from achieving or maintaining market acceptance of our product candidates or could substantially increase
commercialization costs and expenses, which in turn could delay or prevent us from generating significant revenue from the sale of our product candidates.
39
Our proprietary ADC Platform is based on novel technologies that are unproven and may not result in approvable or marketable products, which
exposes us to unforeseen risks and makes it difficult for us to predict the time and cost of product development and potential for regulatory approval,
and we may not be successful in our efforts to expand our development portfolio of product candidates.
A key element of our strategy is to develop a robust and diverse portfolio of potentially first-in-class and best-in-class oncology therapies
through the use of our proprietary ADC Platform to identify indications that are particularly suitable for the linkers and payloads that we have developed,
including AKTX-101, or may in the future develop.
We have only recently commenced preclinical studies of AKTX-101, the lead program developed via our ADC Platform, and the scientific
research that forms the basis of our efforts to develop product candidates with our ADC Platform is still ongoing. We are not aware of any FDA approved
ADCs that involve the deployment of spliceosome inhibitors as payloads. Further, the scientific evidence to support the feasibility of developing
therapeutic treatments based on our ADC Platform is both preliminary and limited. As a result, we are exposed to a number of unforeseen risks, and it is
difficult to predict the types of challenges and risks that we may encounter during development of our product candidates. For example, we have not yet
generated any clinical data on AKTX-101 or any other product candidate being developed using our ADC Platform, and our current data on AKTX-101 is
limited to animal models and preclinical cell lines, the results of which may not translate into humans. Further, relevant animal models and assays may not
accurately predict the safety and efficacy of our product candidates in humans, and we may encounter significant challenges creating appropriate models
and assays for demonstrating the safety and purity of our product candidates.
Even if we obtain human data to support our product candidates, the FDA or comparable foreign regulatory authorities may lack experience in
evaluating the safety and efficacy of product candidates like those developed using our ADC Platform, which could result in a longer than expected
regulatory review process, increase our expected development costs, and delay or prevent commercialization of our product candidates. We cannot be
certain that our approach will lead to the development of approvable or marketable products, alone or in combination with other therapies.
Although our research and development efforts to date have resulted in a development portfolio of potential programs and product candidates,
our deployment of our ADC Platform may not prove reliable or effective in expanding our development portfolio. We may also pursue opportunities to
acquire or in-license additional businesses, technologies or products, form strategic alliances or create joint ventures with third parties to complement or
augment our existing business. However, we may not be able to identify any product candidates through such acquisition or in-license.
Even if we are successful in continuing to build and expand our development portfolio, the potential product candidates that we identify may not
be suitable for clinical development. For example, they may be shown to have harmful side effects or other characteristics that indicate that they are
unlikely to be drugs that will be successful in clinical trials or receive marketing approval and achieve market acceptance. If we do not successfully develop
and commercialize product candidates, we will not be able to obtain drug revenues in future periods, which likely would result in significant harm to our
financial position.
Interim, initial, or preliminary results from our preclinical testing or clinical trials that we announce or publish from time to time may change as more
patient data become available and are subject to additional audit, validation and verification procedures that could result in material changes in the
final data.
From time to time, we may publish or present interim, initial, or preliminary data, including interim top-line results or initial or preliminary
results from our clinical trials. Any interim, initial or preliminary data and other results from our clinical trials may materially change as more patient data
becomes available. Preliminary, initial, interim or top-line results also remain subject to audit, validation and verification procedures that may result in the
final data being materially different from the interim, initial or preliminary data we previously published. As a result, interim, initial or preliminary data
may not be predictive of final results and should be viewed with caution until the final data is available. We may also arrive at different conclusions, or
considerations may qualify such results, once we have received and fully evaluated additional data. Differences between preliminary, initial or interim data
and final data could adversely affect our business.
Further, others, including regulatory agencies, may not accept or agree with our assumptions, estimates,
40
calculations, conclusions or analyses or may interpret or weigh the importance of data differently, which could impact the value of the particular program,
the approvability or commercialization of the particular product candidate or product and our company in general. In addition, the information we choose to
publicly disclose regarding a particular study or clinical trial is based on what is typically extensive information, and you or others may not agree with what
we determine is the material or otherwise appropriate information to include in our disclosure, and any information we determine not to disclose may
ultimately be deemed significant with respect to future decisions, conclusions, views, activities or otherwise regarding a particular product, product
candidate or our business. If the preliminary data that we report differ from actual results, or if others, including regulatory authorities, disagree with the
conclusions reached, our ability to obtain approval for, and commercialize, our product candidates may be harmed, which could harm our business,
operating results, prospects or financial condition.
We or a future strategic partner may choose to, or may be required to, suspend, repeat, or terminate clinical trials of our assets if they are not
conducted in accordance with regulatory requirements, the results are negative or inconclusive or the trials are not well designed.
Clinical trials must be conducted in accordance with GCPs and are subject to oversight by the FDA and institutional review boards at the medical
institutions where the clinical trials are conducted. In addition, clinical trials must be conducted with product candidates produced under cGMPs and may
require large numbers of test patients. Clinical trials may be suspended by the FDA at any time if the FDA finds deficiencies in the conduct of these trials
or it is believed that these trials expose patients to unacceptable health risks.
In addition, we or the FDA might delay or halt our clinical trials of a product candidate for various reasons, including:
•
the product candidate may have unforeseen adverse side effects;
•
the time required to determine whether the product candidate is effective may be longer than expected;
•
fatalities arising during a clinical trial due to medical problems that may not be related to clinical trial treatments;
•
the product candidate may not appear to be more effective than standard of care therapies;
•
insufficient statistical power due to significant patient dropout or crossover to other therapies;
•
insufficient patient enrollment in the clinical trials; or
•
we may not be able to produce sufficient quantities of the product candidate to complete the trials.
Furthermore, the process of obtaining and maintaining regulatory approvals for new products is lengthy, expensive, and uncertain. It can vary
substantially, based on the type, complexity and novelty of the product involved. Accordingly, our current product candidates or any of our other future
product candidates could take a significantly longer time to gain regulatory approval than we expect or may never gain approval, which would have a
significant adverse impact on our business and results of operations.
Our employees, independent contractors, principal investigators, contract research organizations, consultants, vendors and collaboration partners may
engage in misconduct or other improper activities, including non-compliance with regulatory standards.
We are exposed to the risk of employees, independent contractors, principal investigators, contract research organizations, consultants,
commercial partners or vendors engaging in fraud or other misconduct. Misconduct by employees, independent contractors, principal investigators,
consultants, commercial partners and vendors could include intentional failures to comply with applicable laws, including UK or EU regulations, to provide
accurate information to the UK, EMA or EU Member States authorities or to comply with manufacturing or quality standards we have or will have
established. In particular, sales, marketing and business arrangements in the healthcare industry are subject to extensive laws and regulations intended to
prevent fraud, misconduct, kickbacks, self-dealing and other abusive practices such as promotion of products by medical practitioners. Of general
application are the European Anti-Fraud Office Regulation 883/2013, and the UK Bribery Act 2010. Under the latter, a commercial organization can be
guilty of the offence if the bribery is carried out by an employee, agent, subsidiary, or another third-party, and the location of the third-party is irrelevant to
the prosecution. The advertising of medicinal products
41
in the EU is regulated by Title VIII of European Directive 2001/83/EC. The corresponding UK legislation is Part 14 of the Human Medicines Regulations
2012 (S.I. 2012/1916). Such 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. Misconduct could also involve the improper use of information obtained in the
course of clinical studies, which could result in regulatory sanctions and serious and irreparable harm to our reputation.
This could also apply with respect to data privacy. In the EU, the General Data Protection Regulation (EU) 2016/679 (“GDPR”) lays down the
legal framework for data protection and privacy. The GDPR applies directly in EU Member States and applies to companies with an establishment in the
EEA and to certain other companies not in the EEA that offer or provide goods or services to individuals located in the EEA or monitor the behavior of
individuals located in the EEA. Since January 1, 2021, the UK is not part of the EU. In the UK, the GDPR has been converted into UK 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 UK (“UK GDPR”). The UK GDPR is also supplemented by the Data Protection Act
2018. UK and EU data protection law is therefore aligned. The GDPR and UK GDPR implement stringent operational requirements for controllers 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, 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. The
activities of data processors are being regulated for the first time, and require companies undertaking processing activities to offer certain guarantees in
relation to the security of such processing and the handling of personal data. Contracts with data processors will also need to be updated to include certain
terms prescribed by the GDPR, and negotiating such updates may not be fully successful in all cases. The GDPR provides that EU 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. We are
also subject to evolving and strict rules on the transfer of personal data out of the EU and UK to the United States, under both the GDPR and the UK
GDPR. Under the GDPR personal data cannot be transferred to a third country (i.e. outside of the EEA or UK, as applicable) unless certain safeguards are
in place. These include, for example, where the transfer is to a country that the EU Commission has deemed “adequate” or where EU standard contractual
clauses have been implemented. Further prospective revision of the Directive on privacy and electronic communications (Directive 2002/58/EC) (“ePrivacy
Directive”) may affect our marketing communications. Failure to comply with EU 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 €20,000,000 (or £17,500,000 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. Failure to comply with the
GDPR and related laws may also give rise 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. Compliance with the GDPR and UK GDPR requires a rigorous and time-intensive process that may
increase our cost of doing business or require us to change our business practices, and despite those efforts, there is a risk that we may be subject to the
aforementioned fines and penalties, litigation, and reputational harm in connection with any European activities.
The UK is treated as a third country (for the purposes of data transfers). On June 28, 2021, the EU Commission published two adequacy
decisions in respect of transfers under EU GDPR and the Law Enforcement Directive stating that the UK provides adequate protection for personal data
transferred from the EU to the UK under EU GDPR. The adequacy decision is expected to last until June 27, 2025 but may end earlier, for example if an
EU data subject or EU data protection authority challenges the adequacy decisions. In such a case, the Court of Justice of the European Union would need
to determine whether the UK provides essentially equivalent protection.
The UK government has confirmed that the EEA is adequate, and so all transfers of personal data from the UK to the EEA will continue to be
unrestricted after July 1, 2021.
The UK has issued a consultation with respect to future changes to data protection law. There is risk that in the event UK and EU data protection
law diverges, that the adequacy decisions may come to an end. If this occurs, there will be cost implication due to dual compliance requirements and costs
with respect to international data transfers.
42
It is not always possible to identify and deter misconduct by employees or other parties. The precautions we take to detect and prevent this
activity may not protect us from legal or regulatory action resulting from a failure to comply with applicable laws or regulations. Misconduct by our
employees, principal investigators, consultants, commercial partners or vendors could result in significant financial penalties, criminal sanctions and thus
have a material adverse effect on our business, including through the imposition of significant fines or other sanctions, and our reputation.
Risks Related to Commercialization, Marketing and Competition
Our industry is highly competitive, and our product candidates may become obsolete.
We are engaged in a rapidly evolving field. Competition from other pharmaceutical companies, biotechnology companies and research and
academic institutions is intense and likely to increase. Many of those companies and institutions have substantially greater financial, technical and human
resources than we do. Those companies and institutions also may have substantially greater experience in developing products, conducting clinical trials,
obtaining marketing authorization and in manufacturing and marketing biologic products. Our competitors may succeed in obtaining marketing
authorization for their products more rapidly than we do. Competitors have developed or are in the process of developing technologies that are, or in the
future may be, the basis for competitive products. Our competitors may succeed in developing products that are more effective than those we are
developing, or that would render our product candidates less competitive or even obsolete. In addition, one or more of our competitors may achieve product
commercialization, patent protection or regulatory exclusivity that could impede the commercialization of our product candidates, which could materially
adversely affect our business.
If we are unable to establish sales, marketing and distribution capabilities on our own or through collaborations with partners, we may not be
successful in commercializing any approved drugs.
We currently have no marketing, sales or distribution capabilities. If any of our product candidates is approved, we must establish a sales and
marketing organization with technical expertise and supporting distribution capabilities or outsource this function to a third party. Either of these options
could be expensive and time-consuming. In addition, we may not be able to hire a commercial team in the United States or other target market that is
sufficient in size or has adequate expertise in the medical institutions that we intend to target. Any failure or delay in the development of our or third
parties’ internal sales, marketing and distribution capabilities could adversely impact the commercialization of any existing or future product candidates, if
and when approved by the FDA.
With respect to our existing and future product candidates, we may choose to collaborate with third parties that have direct sales forces and
established distribution systems, either to augment or to serve as an alternative to our own sales force and distribution capabilities. If we do so, any future
product revenue may be lower than if we directly marketed or sold any products that may be approved in the future. In addition, any revenue we receive
will depend in whole or in part upon the efforts of these third parties, which may not be as diligent or successful as if we were to market and sell any
products that may be approved in the future ourselves. If we are unable to enter into these arrangements on acceptable terms or at all, we may not be able to
successfully commercialize our approved products. If we are not successful in commercializing any products that may be approved in the future, our future
product revenue will suffer and we may incur significant losses.
Even if any of our current or future product candidates receive marketing approval, such product candidates may fail to achieve market acceptance by
physicians, patients, third-party payors or others in the medical community necessary for commercial success, in which case we may not generate
significant revenues or become profitable.
We have never commercialized a product, and even if any of our current or future product candidates are approved by the appropriate regulatory
authorities for marketing and sale, they may not gain market acceptance among physicians, patients, third-party payors or others in the medical community.
Market participants with significant influence over acceptance of new treatments, such as clinicians and third-party payors, may not be able to convince the
medical community and third-party payors to accept and use, or to provide favorable reimbursement for, any product candidates developed by us or our
existing or future collaborators. If our current or future product candidates do not achieve an adequate level of acceptance, we may not generate significant
product revenue and
43
may not become profitable. The degree of market acceptance of our current or future product candidates, if approved for commercial sale, will depend on a
number of factors, including but not limited to:
•
the clinical indications and patient populations for which the product candidate is approved;
•
the safety, efficacy and potential advantages compared to alternative treatments and therapies;
•
the timing of market introduction of the product as well as competitive products;
•
effectiveness of sales and marketing efforts;
•
the strength of our relationships with patient communities;
•
the cost of treatment in relation to alternative treatments and therapies, including any similar generic treatments;
•
our ability to offer such product for sale at competitive prices;
•
the convenience and ease of administration compared to alternative treatments and therapies;
•
the willingness of the target patient population to try new therapies and of physicians to prescribe these therapies;
•
the availability of third-party coverage and adequate reimbursement;
•
the willingness of patients to pay out-of-pocket in the absence of coverage and adequate reimbursement by third-party payors and government
authorities;
•
the strength of marketing and distribution support;
•
the inclusion of any REMS program or other restrictions included by the regulators;
•
the prevalence and severity of any side effects; and
•
any restrictions on the use of the product together with other medications.
Our efforts to educate physicians, patients, third-party payors and others in the medical community on the benefits of our product candidates may
require significant resources and may never be successful. Because we expect sales of our product candidates, if approved, to generate substantially all of
our revenues for the foreseeable future, the failure of our product candidates, if approved, to find market acceptance would harm our business and could
require us to seek additional financing.
Even if we are able to commercialize any product candidate, the third-party payor coverage and reimbursement status of newly-approved products is
uncertain. Failure to obtain or maintain adequate coverage and reimbursement for our product candidates could limit our ability to market those
products and decrease our ability to generate revenue.
The availability and adequacy of coverage and reimbursement by governmental healthcare programs such as Medicare and Medicaid, private
health insurers and other third-party payors in the United States are essential for most patients to be able to afford treatments such as our products or
product candidates, if approved. Our ability to achieve acceptable levels of coverage and reimbursement for drug treatments by governmental authorities,
private health insurers and other organizations will have an effect on our ability to successfully commercialize our products, and potentially attract
additional collaboration partners to invest in the development of our product candidates. We cannot be sure that adequate coverage and reimbursement in
the United States, the EU, Australia or elsewhere will be available for our products or any products that we may develop, and any reimbursement that may
become available may be decreased or eliminated in the future.
Third-party payors increasingly are challenging prices charged for pharmaceutical products, medical devices and services, and many third-party
payors may refuse to provide coverage and reimbursement for particular drugs when an equivalent generic drug is available. It is possible that a third-party
payor may consider our products or product candidates, if approved, and the generic or biosimilar parent drug as substitutable and only offer to reimburse
patients for the generic drug. Even if we show improved efficacy or safety or improved convenience of administration with our products or product
candidates, if approved, pricing of the existing parent drug may limit the
44
amount we will be able to charge for such product. If reimbursement is not available or is available only at limited levels, we may not be able to
successfully commercialize our products or product candidates, and may not be able to obtain a satisfactory financial return on products that we may
develop.
There is significant uncertainty related to the insurance coverage and reimbursement of newly approved products. In the United States, third-
party payors, including private and governmental payors, such as the Medicare and Medicaid programs, play an important role in determining the extent to
which new drugs, biologics and medical devices will be covered. The Medicare and Medicaid programs increasingly are used as models for how private
payors and other governmental payors develop their coverage and reimbursement policies for drugs, biologics and medical devices. It is difficult to predict
at this time what third-party payors will decide with respect to the coverage and reimbursement for our products or product candidates.
Outside the United States, international operations are generally subject to extensive governmental price controls and other market regulations,
and we believe the increasing emphasis on cost-containment initiatives in Europe, Canada, and other countries has and will continue to put pressure on the
pricing and usage of our products and product candidates, if approved, and on related parent drugs. In many countries, the prices of medical products are
subject to varying price control mechanisms as part of national health systems. Many countries, including the EU Member States, established complex and
lengthy procedures to obtain price approvals, coverage and reimbursement. These procedures vary from country to country but are commonly initiated after
grant of the related marketing authorization. More particularly, in the EU, potential reductions in prices and changes in reimbursement levels could be the
result of different factors, including reference pricing systems. It could also result from the application of external reference pricing mechanisms, which
consist of arbitrage between low-priced and high-priced countries. Reductions in the pricing of our medicinal products in one EU Member State could
affect the price in other EU Member States and, thus, have a negative impact on our financial results. Other countries allow companies to fix their own
prices for medical products, but monitor and control company profits. Additional foreign price controls or other changes in pricing regulation could restrict
the amount that we are able to charge for our products or product candidates. Accordingly, in markets outside the United States, the reimbursement for our
products may be reduced compared with the United States and may be insufficient to generate commercially reasonable revenue and profits. As an
example, many EU Member States review periodically their decisions concerning the pricing and reimbursement of medicinal products. The outcome of
these reviews cannot be predicted and could have adverse effects on the pricing and reimbursement of our medicinal products in the EU Member States.
Moreover, increasing efforts by governmental and third-party payors in the United States and abroad to cap or reduce healthcare costs may cause
such organizations to limit both coverage and the level of reimbursement for new products approved and, as a result, they may not cover or provide
adequate payment for our products or product candidates. We expect to experience pricing pressures in connection with the sale of our products and
product candidates due to the trend toward managed healthcare, the increasing influence of health maintenance organizations, and additional legislative
changes. The downward pressure on healthcare costs in general, particularly prescription drugs, medical devices and surgical procedures and other
treatments, has become very intense. As a result, increasingly high barriers are being erected to the entry of new products.
Our future growth may depend, in part, on our ability to commercialize products in foreign markets, where we would be subject to additional regulatory
burdens and other risks and uncertainties.
Our future growth may depend, in part, on our ability to develop and commercialize our product candidates in foreign markets. We are not
permitted to market or promote any of our product candidates before we receive regulatory approval from applicable regulatory authorities in foreign
markets, and we may never receive such regulatory approvals for any of our product candidates. To obtain separate regulatory approval in many other
countries we must comply with numerous and varying regulatory requirements regarding safety and efficacy and governing, among other things, clinical
trials, manufacturing, commercial sales, pricing and distribution of our product candidates. If we obtain regulatory approval of our product candidates and
ultimately commercialize our products in foreign markets, we would be subject to additional risks and uncertainties, including
•
different regulatory requirements for approval of drugs in foreign countries;
•
reduced protection for intellectual property rights;
•
the existence of additional third-party patent rights of potential relevance to our business;
45
•
unexpected changes in tariffs, trade barriers and regulatory requirements;
•
economic weakness, including inflation, or political instability in particular foreign economies and markets;
•
compliance with tax, employment, immigration and labor laws for employees living or traveling abroad;
•
foreign currency fluctuations, which could result in increased operating expenses and reduced revenues, and other obligations incident to
doing business in another country;
•
foreign reimbursement, pricing and insurance regimes;
•
workforce uncertainty in countries where labor unrest is common;
•
production shortages resulting from any events affecting raw material supply or manufacturing capabilities abroad;
•
business interruptions resulting from geopolitical actions, including war and terrorism, or natural disasters including earthquakes, typhoons,
floods and fires; and
•
business interruptions resulting from pandemics or similar public health crises.
EU drug marketing and reimbursement regulations may materially affect our ability to market and receive coverage for our products in the EU
Member States.
We intend to seek approval to market our product candidates in both the United States and in selected foreign jurisdictions, including the EU. If
we obtain approval in one or more foreign jurisdictions for our product candidates, we will be subject to rules and regulations in those jurisdictions. In
some foreign countries, particularly those in the EU, the pricing of products is subject to governmental control and other market regulations which could
put pressure on the pricing and usage of our product candidates. In these countries, pricing negotiations with governmental authorities can take
considerable time after obtaining marketing approval of a product candidate. In addition, market acceptance and sales of our product candidates will
depend significantly on the availability of adequate coverage and reimbursement from third-party payors for our product candidates and may be affected by
existing and future healthcare reform measures.
Much like the federal Anti-Kickback Statute prohibition in the United States, the provision of benefits or advantages to physicians to induce or
encourage the prescription, recommendation, endorsement, purchase, supply, order or use of medicinal products is also prohibited in the EU. The provision
of benefits or advantages to reward improper performance is typically governed by the national anti-bribery laws of EU Member States and the Bribery Act
2010 in the United Kingdom. Infringement of these laws could result in substantial fines and imprisonment. EU Directive 2001/83/EC, which is the EU
Directive governing medicinal products for human use, further provides that, where medicinal products are being promoted to persons qualified to
prescribe or supply them, no gifts, pecuniary advantages or benefits in kind may be supplied, offered or promised to such persons unless they are
inexpensive and relevant to the practice of medicine or pharmacy. This provision has been transposed into the Human Medicines Regulations 2012 and so
remains applicable in the United Kingdom despite its departure from the EU.
Payments made to physicians in certain EU Member States must be publicly disclosed. Moreover, agreements with physicians often must be the
subject of prior notification and approval by the physician’s employer, his or her competent professional organization and/or the regulatory authorities of
the individual EU Member States. These requirements are provided in the national laws, industry codes or professional codes of conduct, applicable in the
EU Member States. Failure to comply with these requirements could result in reputational risk, public reprimands, administrative penalties, fines or
imprisonment.
In addition, in some foreign countries, including some countries in the EU, the proposed pricing for a product must be approved before it may be
lawfully marketed. The requirements governing product pricing and reimbursement vary widely from country to country. For example, some EU Member
States have the option to restrict the range of medicinal products for which their national health insurance systems provide reimbursement and to control
the prices of medicinal products for human use. Reference pricing used by various EU Member States and parallel distribution, or arbitrage between low-
priced and high-priced EU Member States, can further reduce prices. An EU Member State may approve a specific price for the medicinal product or it
may instead adopt a system of direct or indirect controls on the profitability of the company placing the medicinal product on the market. In some
46
countries, we may be required to conduct a clinical trial or other studies that compare the cost-effectiveness of any of our product candidates to other
available therapies in order to obtain or maintain reimbursement or pricing approval. 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 of our product candidates.
Historically, products launched in the EU do not follow price structures of the United States and generally prices tend to be significantly lower. Publication
of discounts by third-party payors or authorities may lead to further pressure on the prices or reimbursement levels within the country of publication and
other countries. If pricing is set at unsatisfactory levels or if reimbursement of our products is unavailable or limited in scope or amount, our revenues from
sales and the potential profitability of any of our product candidates in those countries would be negatively affected.
Obtaining and maintaining marketing approval of our product candidates in one jurisdiction does not mean that we will be successful in obtaining
marketing approval of our product candidates in other jurisdictions.
Obtaining and maintaining marketing approval of our product candidates in one jurisdiction does not guarantee that we will be able to obtain or
maintain marketing approval in any other jurisdiction. For example, even if the FDA grants marketing approval of a product candidate, comparable foreign
regulatory authorities in foreign jurisdictions must also approve the manufacturing, marketing and promotion and reimbursement of the product candidate
in those countries, and they may not do so. A failure or delay in obtaining marketing approval in one jurisdiction may negatively impact the marketing
approval process in others. Approval procedures vary among jurisdictions and can involve requirements and administrative review periods different from,
and greater than, those in the United States, including additional preclinical 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.
Obtaining foreign marketing approvals and establishing and maintaining compliance with 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. If we or any future
collaborator fail to comply with the regulatory requirements in international markets or fail to 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, which would adversely affect our business,
prospects, financial condition, and results of operations.
If the market opportunities for any of our product candidates are smaller than we estimate, even assuming approval of a product candidate, our
revenue may be adversely affected, and our business may suffer.
The precise incidence and prevalence for all the conditions we aim to address with our product candidates are unknown. Our projections of both
the number of people who have these diseases, as well as the subset of people with these diseases who have the potential to benefit from treatment with our
product candidates, are based on our beliefs and estimates. These estimates have been derived from a variety of sources, including scientific literature,
surveys of clinics, patient foundations or market research, and may prove to be incorrect. Further, new information may change the estimated incidence or
prevalence of these diseases. The total addressable market across all of our product candidates will ultimately depend upon, among other things, the
diagnosis criteria included in the final label for each of our product candidates approved for sale for these indications, the availability of alternative
treatments and the safety, convenience, cost and efficacy of our product candidates relative to such alternative treatments, acceptance by the medical
community and patient access, drug pricing and reimbursement. The number of patients in the United States and other major markets and elsewhere may
turn out to be lower than expected, patients may not be otherwise amenable to treatment with our products or new patients may become increasingly
difficult to identify or gain access to, all of which would adversely affect our results of operations and our business.
If we or our partners market products in a manner that violates fraud and abuse and other healthcare laws, or if we or they violate government price
reporting laws, we or our partners may be subject to administrative civil and/or criminal penalties.
In addition to FDA restrictions on marketing of pharmaceutical products, several other types of state and federal healthcare laws, including those
commonly referred to as “fraud and abuse” laws have been applied in recent
47
years to restrict certain marketing practices in the pharmaceutical industry. These laws include, among others, false claims and anti-kickback statutes. At
such time, if ever, as we or any of our partners market any of our future approved products, it is possible that some of the business activities of us and/or
our partners could be subject to challenge under one or more of these laws.
Federal false claims, false statements and civil monetary penalties laws prohibit any person from knowingly presenting, or causing to be
presented, a false claim for payment to the federal government or to get a false claim paid. The federal healthcare program anti-kickback statute prohibits,
among other things, knowingly and willfully offering, paying, soliciting or receiving remuneration to induce, or in return for, purchasing, leasing, ordering
or arranging for the purchase, lease or order of any healthcare item or service reimbursable under Medicare, Medicaid or other federally financed healthcare
programs. This statute has been interpreted to apply to arrangements between pharmaceutical manufacturers on the one hand and prescribers, purchasers
and formulary managers on the other. Although there are several statutory exceptions and regulatory safe harbors protecting certain common activities from
prosecution, they are drawn narrowly, and practices that involve remuneration intended to induce prescribing, purchasing or recommending may be subject
to scrutiny if they do not qualify for an exception or safe harbor.
In addition, we and/or our partners may be subject to data privacy and security regulation, including HIPAA, as amended by the Health
Information Technology for Economic and Clinical Health Act (HITECH) and their respective implementing regulations, which impose specified
requirements relating to the privacy, security and transmission of individually identifiable health information.
Most states also have statutes or regulations similar to these federal laws, which may apply to items such as pharmaceutical products and services
reimbursed by private insurers. We and/or our partners may be subject to administrative, civil and criminal sanctions for violations of any of these federal
and state laws.
Risks Related to Intellectual Property
Our success depends in part on our ability to protect our intellectual property and proprietary technologies.
Our commercial success depends in part on our ability to obtain and maintain patent protection and trade secret protection in the U.S. and other
countries for our product candidates, proprietary technologies, and their uses as well as our ability to operate without infringing upon the proprietary rights
of others. We can provide no assurance that our patent applications or those of our licensors will result in additional patents being issued or that issued
patents will afford sufficient protection against competitors with similar technologies, nor can there be any assurance that the patents issued will not be
infringed, designed around or invalidated by third parties. Even issued patents may later be found unenforceable or may be modified or revoked in
proceedings instituted by third parties before various patent offices or in courts. The degree of future protection for our proprietary rights is uncertain. Only
limited protection may be available and may not adequately protect our rights or permit us to gain or keep competitive advantage. Although we have issued
composition-of-matter patents in the United States and other countries, we cannot be certain that the claims in our issued patents will not be found invalid
or unenforceable if challenged. We cannot be certain that the claims in any patent applications covering our product candidates that are pending, or that we
may file, will be considered patentable by the USPTO and courts in the United States or by the patent offices and courts in foreign countries, nor can we be
certain that the claims in our issued patents will not be found invalid or unenforceable if challenged. Even if any patent applications that we may file
relating to specific formulations of our product candidates issue as patents, formulation patents protect a specific formulation of a product and may not be
enforced against competitors making and marketing a product that has the same active pharmaceutical ingredient in a different formulation. Method-of-use
patents protect the use of a product for the specified method or for treatment of a particular indication. This type of patent may not be enforced against
competitors making and marketing a product that has the same active pharmaceutical ingredient for use in a method not claimed by the patent. Moreover,
even if competitors do not actively promote their product for our targeted indications, physicians may prescribe these products “off-label.” Although off-
label prescriptions may infringe or contribute to the infringement of method-of-use patents, the practice is common and such infringement may be difficult
to prevent or prosecute. Also, as is the case for composition-of-matter patents, we cannot be certain that the claims in our issued method-of-use patents will
not be found invalid or unenforceable if challenged. We cannot be certain that the claims in any patent applications covering methods of using our product
candidates that are pending, or that we may file, will be considered patentable by the USPTO and courts in the United States or by the patent offices and
courts in foreign countries, nor can we be certain that the claims in our issued method-of-use
48
patents will not be found invalid or unenforceable if challenged.
Further, the patent prosecution process is subject to numerous risks and uncertainties, expensive and time-consuming, and we or our licensors
may not be able to prepare, file and successfully prosecute all necessary or desirable patent applications for a commercially reasonable cost or in a timely
manner or in all jurisdictions. It is also possible that we or our licensors may fail to identify patentable aspects of inventions made in the course of
development and commercialization activities before it is too late to obtain patent protection for them.
Moreover, depending on the terms of any future in-licenses to which we may become a party, we may not have the right to control the
preparation, filing and prosecution of patent applications, or to maintain the patents, covering technology in-licensed from third parties. Therefore, these
patents and patent applications may not be prosecuted and enforced in a manner consistent with the best interests of our business.
In addition, we rely on the protection of our trade secrets and proprietary know-how. Although we have taken steps to protect our trade secrets
and unpatented know-how, including entering into confidentiality agreements with third parties, and confidential information and inventions agreements
with employees, consultants and advisors, we cannot provide any assurances that all such agreements have been duly executed, and third parties may still
obtain this information or may come upon this or similar information independently. Enforcing a claim that a third party obtained illegally and is using
trade secrets and/or proprietary know-how is expensive, time consuming and unpredictable. The enforceability of confidentiality agreements may vary
from jurisdiction to jurisdiction. Additionally, if the steps taken to maintain our trade secrets are deemed inadequate, we may have insufficient recourse
against third parties for misappropriating its trade secrets. If any of these events occurs or if we otherwise lose protection for our trade secrets or proprietary
know-how, our business may be harmed.
With respect to certain patents, we enjoy only limited geographical protection, and as a consequence we may not be able to protect our intellectual
property rights throughout the world.
It would be prohibitively expensive to file and prosecute patent applications and maintain and defend patents covering our product candidates in
all countries throughout the world and competitors may use our and our licensors’ technologies in jurisdictions where we have not obtained patent
protection to develop their competitor’s own product candidates and, further, may export otherwise infringing product candidates to territories where we
and our licensors have patent protection, but enforcement rights are not as strong as that in the United States or Europe.
As a result, these product candidates may compete with our product candidates, and our and our licensors’ patents or other intellectual property
rights may not be effective or sufficient to prevent them from competing.
Further, national and regional patent authorities may restrict the scope and coverage of our PCT applications before grant. The examination of
each national or regional patent application is an independent proceeding. As a result, patent applications in the same family may issue as patents in some
jurisdictions, such as in the United States, but may issue as patents with claims of different or limited scope or may even be refused in other jurisdictions,
such as in China and India, which have different requirements for patentability and it is also quite common that depending on the country, the scope of
patent protection may vary for the same product or technology.
As maintaining patents in multiple countries over their lifetimes (usually a period of 20 years) is expensive, we may decide to abandon pending
or granted national and regional patent applications for financial considerations, or, strategically, when projects are reprioritized, or for any other reason. In
hindsight, these decisions may hurt us, our revenue stream from licensing activities, and ultimately profitability.
In addition, the laws of some jurisdictions do not protect intellectual property rights to the same extent as the laws or rules and regulations in the
United States, The UK and Europe, and many companies have encountered significant difficulties in protecting and defending such rights in such
jurisdictions.
The legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents, trade secrets and other
intellectual property protection, which could make it difficult for us to stop the infringement of our patents or marketing of competing product candidates in
violation of our proprietary rights generally.
Proceedings to enforce our patent rights in other jurisdictions, whether or not successful, could result in substantial costs and divert our efforts
and attention from other aspects of our business, could put our patents at risk of being invalidated or interpreted narrowly and our patent applications at risk
of not issuing as patents, and could
49
provoke third parties to assert claims against us. Should we seek legal redress, we may not prevail or if we do prevail, the damages or other remedies
awarded may not be meaningful. As a result, our efforts to enforce our intellectual property rights around the world may be inadequate to obtain a
significant commercial advantage from the intellectual property that we develop or license.
While we intend to protect our intellectual property rights in our expected significant markets, we cannot ensure that we will be able to initiate or
maintain similar efforts in all jurisdictions in which we may wish to market our product candidates. Accordingly, our efforts to protect our intellectual
property rights in such countries may be inadequate, which may have an adverse effect on our ability to successfully commercialize our product candidates
in all of our expected significant foreign markets.
If we or our licensors encounter difficulties in protecting, or are otherwise precluded from effectively protecting, the intellectual property rights
important for our business in such jurisdictions, the value of these rights may be diminished, and we may face additional competition from others in those
jurisdictions.
Another risk we face is that some countries in Europe and China have compulsory licensing laws under which a patent owner may be compelled
to grant licenses to third parties and some countries limit the enforceability of patents against government agencies or government contractors. As a result,
in those countries, the patent owner may have limited remedies, which could materially diminish the value of such patents. If we, or any of our licensors,
are forced to grant a license to third parties with respect to any patents relevant to our business, our competitive position may be impaired and our business,
financial condition and results of operations may be adversely affected.
Our intellectual property rights may not adequately protect our technologies and product candidates and may not necessarily address all potential
threats to our competitive advantage.
The degree of protection afforded by our intellectual property rights is uncertain because intellectual property rights have limitations, and may
not adequately protect our business, or permit us to maintain our competitive advantage. For example:
•
others may be able to make compounds that are the same as or similar to our product candidates but that are not covered by the claims of the
patents that we own or have exclusively licensed;
•
the patents of third parties may impair our ability to develop or commercialize our product candidates;
•
the patents of third parties may be extended beyond the expected patent term and thus may impair our ability to develop or commercialize our
product candidates;
•
we or our licensors or any future strategic collaborators might not have been the first to conceive or reduce to practice the inventions covered
by the issued patents or pending patent applications that we own or have exclusively licensed;
•
we or our licensors or any future strategic collaborators might not have been the first to file patent applications covering our inventions, our
product candidates, or uses of the product candidates in the indications under our development or to be developed;
•
it is possible that the pending patent applications that we own or have exclusively licensed may not lead to issued patents;
•
issued patents that we own or have exclusively licensed may not provide us with any competitive advantage, or may be held invalid or
unenforceable, as a result of legal challenges by our competitors;
•
issued patents that we own or have exclusively licensed may not provide coverage for all aspects of our product candidates in all countries,
such as for uses of our product candidates in the indications under our development or to be developed;
•
others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing our intellectual
property rights;
•
our competitors might conduct research and development activities in countries where we do not have patent rights and then use the
information learned from such activities to develop competitive product candidates for sale in our major commercial markets;
50
•
others performing manufacturing or testing for us using our product candidates or technologies could use the intellectual property of others
without obtaining a proper license; or
•
our or our licensors’ inventions or technologies may be found to be not patentable; and we may not develop additional technologies that are
patentable.
We may become subject to third parties’ claims alleging infringement of third-party patents and proprietary rights, or we may be involved in
lawsuits to protect or enforce our patents and other proprietary rights, which could be costly and time consuming, delay or prevent the development and
commercialization of our product candidates, or put our patents and other proprietary rights at risk.
Others may claim an ownership interest in our intellectual property, which could expose us to litigation and have a significant adverse effect on our
prospects.
A third party may claim an ownership interest in one or more of our patents or other intellectual property. A third party could bring legal
actions against us and seek monetary damages and/or enjoin clinical testing, manufacturing and marketing of the affected product or products. We cannot
guarantee that a third-party will not assert a claim or an interest in any of such patents or intellectual property. If we become involved in any litigation, it
could consume a substantial portion of our resources, and cause a significant diversion of effort by our technical and management personnel. If any of these
actions are successful, in addition to any potential liability for damages, we could be required to obtain a license to continue to manufacture or market the
affected product, in which case we may be required to pay substantial royalties or grant cross-licenses to our patents. We cannot, however, assure you that
any such license will be available on acceptable terms, if at all. Ultimately, we could be prevented from commercializing a product, or be forced to cease
some aspect of our business operations as a result of claims of patent infringement or violation of other IP rights, Further, the outcome of IP litigation is
subject to uncertainties that cannot be adequately quantified in advance, including the demeanor and credibility of witnesses and the identity of the adverse
party. This is especially true in IP cases that may turn on the testimony of experts as to technical facts upon which experts may reasonably disagree.
Ultimately, there is no guarantee that courts or patent offices in the U.S. and abroad will rule in our favor.
We may be subject to claims by third parties asserting that we or our employees have misappropriated third-party intellectual property or claiming
ownership of what we regard as our own intellectual property. These claims may be costly to defend and if we do not successfully do so, we may be
required to pay monetary damages and lose valuable intellectual property rights or personnel.
Some of our employees, including our senior management, were previously employed at other biopharmaceutical or pharmaceutical companies,
including our competitors or potential competitors. Some of these employees 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 know-how, trade secrets, or other proprietary
information of others in their work for us, we may be subject to claims that we or these employees have used or disclosed confidential information or
intellectual property, including know-how, trade secrets, or other proprietary information, of any such employee’s former employer. Litigation may be
necessary to defend against these claims. If we fail in prosecuting or defending any such claims, in addition to paying monetary damages, we may lose
valuable intellectual property rights or personnel.
A loss of key research personnel or their work product could hamper or undermine our ability to develop and commercialize our product
candidates, which would severely harm our business. In addition, if such intellectual property rights were to be awarded to a third party, we could be
required to obtain a license from such third party to commercialize our technology or product candidates. Such a license may not be available on
commercially reasonable terms or at all, which could hamper or undermine our ability to develop and commercialize our product candidates, which would
severely harm our business. Even if we successfully prosecute or defend against such claims, litigation could result in substantial costs and distract
management from the development and commercialization of our product candidates.
Our proprietary information may be lost or we may suffer security breaches. In the ordinary course of our business, we collect and store sensitive
data, including intellectual property, clinical trial data, proprietary business information, personal data and personally identifiable information of our
clinical trial subjects and employees, in our data centers and on our networks. The secure processing, maintenance and transmission of this information is
51
critical to our operations. Despite our security measures, our information technology and infrastructure and those of our CROs or other contractors or
consultants may be vulnerable to attacks by hackers or breached due to employee error, malfeasance, or other disruptions. While the maintenance of
HIPAA-compliance and deidentification of clinical trial personal data is the responsibility of our CROs, breach of planned and future trials at our CRO
sites may result in costly lawsuits, stiff penalties from governmental agencies, and may also result in disbarment from operating within some socio-
geographic regions, such as the UK and the EU, where personal data is considered paramount. Furthermore, the loss of clinical trial data from completed,
ongoing, or planned trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data.
Although, to our knowledge, we have not experienced any such material security breach to date, any such breach could compromise our networks and the
information stored there could be accessed, publicly disclosed, lost, or stolen. Any such access, disclosure, or other loss of information could result in legal
claims or proceedings, liability under laws that protect the privacy of personal information, and significant regulatory penalties; disrupt our operations;
damage our reputation; and cause a loss of confidence in us and our ability to conduct clinical trials, which could adversely affect our reputation and delay
our clinical development of our product candidates. This could increase our cyber security risk, create data accessibility concerns, and make us more
susceptible to communication disruptions.
Any of the foregoing could have a material adverse effect on our business, financial condition, results of operations or prospects.
Risks Related to Our Reliance on Third Parties
We rely on third parties to conduct, supervise and monitor our preclinical studies and clinical trials, and if those third parties perform in an
unsatisfactory manner it may harm our business.
We do not currently have the ability to independently conduct preclinical studies or clinical trials required to develop our product candidates. We
rely upon CROs, clinical trial sites and other third parties to ensure the proper and timely conduct of our preclinical studies, and we expect to have limited
influence over their actual performance. We intend to rely upon CROs and others for the execution of future nonclinical studies and to monitor, manage
and report data any future clinical trials.
We and our CROs and other third parties are required to comply with good clinical practice and good manufacturing practice (collectively,
“GxP”) requirements, which are regulations and guidelines enforced by the FDA, the Competent Authorities of the Member States of the European
Economic Area, and comparable foreign regulatory authorities for all of our product candidates in clinical development. Regulatory authorities enforce
these GxP requirements through periodic inspections of trial sponsors, principal investigators and trial sites. At any point in time, the FDA may revoke or
suspend the license of our contract manufacturer for failure to maintain standards resulting in business losses for us. Further, if we fail to exercise adequate
oversight over any of our CROs or other third parties, or if we or any of our CROs or other third parties fail to comply with applicable GxP requirements,
the clinical data generated in our clinical trials may be deemed unreliable and the FDA, the EMA, or foreign regulatory authorities may require us to
perform additional clinical trials before approving our marketing applications. We cannot assure you that upon a regulatory inspection of us or our CROs or
other third parties, such regulatory authority will determine that any of our clinical trials complies with GxP requirements. Our failure to comply with these
regulations may require us to repeat clinical trials, which would delay the regulatory approval process.
Further, while we may only control certain aspects of these parties’ activities, 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 these third parties does not relieve
us of our regulatory responsibilities. Such standards may change, affecting the ability of contract manufacturers to produce our product candidates on the
schedule we require for our clinical trials.
These CROs and other third parties are not our employees and we are not able to control, other than by contract, the amount of resources,
including time, which they devote to our clinical trials. If our CROs or other third parties fail to devote sufficient resources to the development of our
product candidates, or if their performance is substandard, it may delay or compromise the prospects for approval and commercialization of our product
candidates. 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 is misappropriated. If any of our relationships with our CROs or other third parties terminate, we may not be able to enter into
arrangements with alternative CROs or
52
other third parties or to do so on commercially reasonable terms. Switching or adding additional investigators or CROs involves additional cost and
potential delays and requires our management’s time and focus. In addition, there is a natural transition period when a new independent investigator or
CRO commences work. As a result, delays could occur, which could materially impact our ability to meet our desired clinical development timelines.
If our CROs or other 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 is compromised due to a failure to adhere to our clinical protocols, regulatory
requirements, or for other reasons, our clinical trials may be extended, delayed, or terminated and we may not be able to obtain regulatory approval for or
successfully commercialize our product candidates. As a result, our results of operations and the commercial prospects for our product candidates would be
harmed, our costs could increase and our ability to generate revenue could be delayed.
We seek to partner with third-party collaborators with respect to aspects of the development and commercialization of our product candidates and we
may not succeed in establishing and maintaining collaborative relationships, which may significantly limit our ability to develop and commercialize our
product candidates successfully, if at all.
Our business strategy relies in part on partnering with pharmaceutical companies to supplement our internal development efforts, particularly
with respect to our legacy product candidates for which we have suspended development. If we are not able to enter into collaboration arrangements, we
may be required to undertake and fund further development, clinical trials, manufacturing and commercialization activities solely at our own expense and
risk. If we are unable to finance and/or successfully execute those activities, or we delay such activities due to capital availability, our business could be
materially and adversely affected, and potential future product launches could be materially delayed, be less successful, or we may be forced to discontinue
clinical development of product candidates.
The process of establishing and maintaining collaborative relationships is difficult, time-consuming and involves significant uncertainty,
including if a collaboration partner:
•
may shift its priorities and resources away from our product candidates due to a change in business strategies, or a merger, acquisition, sale or
downsizing;
•
may seek to renegotiate or terminate their relationships with us due to unsatisfactory clinical results, manufacturing issues, a change in
business strategy, a change of control or other reasons;
•
may cease development in therapeutic areas which are the subject of our strategic collaboration;
•
may not devote sufficient capital or resources towards our product candidates;
•
may change the success criteria for a drug candidate thereby delaying or ceasing development of such candidate;
•
experiences significant delays in initiating certain development activities, which will also delay payment of milestones tied to such activities,
thereby impacting our ability to fund our own activities;
•
develops a product that competes, either directly or indirectly, with our drug candidate;
•
may not commit sufficient financial or human resources to the marketing, distribution or sale of our product;
•
may encounter regulatory, resource or quality issues and be unable to meet demand requirements;
•
may exercise a contractual right to terminate a strategic alliance;
•
has a dispute arise concerning the research, development or commercialization of a drug candidate resulting in a delay in milestones, royalty
payments or termination of an alliance and possibly resulting in costly litigation or arbitration which may divert management attention and
resources; and
•
may use our products or technology in such a way as to invite litigation from a third party.
If any collaborator fails to fulfill its responsibilities in a timely manner, or at all, our research, clinical
53
development, manufacturing or commercialization efforts related to that collaboration could be delayed or terminated, or it may be necessary for us to
assume responsibility for expenses or activities that would otherwise have been the responsibility of our collaborator. If we are unable to establish and
maintain collaborative relationships on acceptable terms or to successfully transition terminated collaborative agreements, we may have to delay or
discontinue further development of one or more of our product candidates, undertake development and commercialization activities at our own expense or
find sources of additional capital.
If the third parties on which we intend to rely for our clinical trials and results do not perform our clinical trial activities in accordance with good
clinical practices and related regulatory requirements, we may be unable to obtain marketing authorization for or commercialize our product
candidates.
We intend to use and rely on CROs to conduct and/or oversee future clinical trials of our product candidates. Nonetheless, we will be responsible
for confirming that each of our future clinical trials is conducted in accordance with the FDA’s, MHRA’s or EMA’s requirements and general
investigational plans and protocols, as may be applicable. Our expected reliance on third parties will not relieve us of these responsibilities and
requirements. Third parties may not complete activities on schedule or conduct our clinical trials in accordance with regulatory requirements or the
respective trial plans and protocols. In addition, third parties may not be able to repeat their past successes in clinical trials. The third parties’ failure to
carry out their obligations could delay or prevent the development, approval and commercialization of our product candidates or result in enforcement
action against us.
Use of third parties to manufacture our product candidates may increase the risk that we will not have sufficient quantities of our product candidates,
products, or necessary quantities at an acceptable cost.
The process of manufacturing pharmaceuticals and biological products is complex, time-consuming, highly regulated and subject to multiple
risks. We do not own or operate manufacturing facilities for the production of clinical or commercial quantities of our product candidates, and we lack the
resources and the capabilities to do so. As a result, we currently rely on third parties for supply of the active pharmaceutical ingredients for our product
candidates. Our strategy is to outsource all manufacturing of our product candidates and products to third parties.
In addition, we have not yet concluded a commercial supply contract with any commercial manufacturer. There is no assurance that we will be
able to timely secure needed supply arrangements on satisfactory terms, or at all. Our failure to secure these arrangements as needed could have a material
adverse effect on our ability to complete the development of our product candidates or to commercialize them. We may be unable to conclude agreements
for commercial supply with third-party manufacturers, or may be unable to do so on acceptable terms. There may be difficulties in scaling up to
commercial quantities, and the costs of manufacturing could be prohibitive.
Even if we are able to establish and maintain arrangements with third-party manufacturers, reliance on third-party manufacturers entails
additional risks, including:
•
reliance on third-parties for manufacturing process development, regulatory compliance and quality assurance, which may result in delays or
inadequate supply of product;
•
limitations on supply availability resulting from capacity and scheduling constraints of third-parties;
•
limitation on supply availability due to difficulties in sourcing raw materials;
•
the possible breach of manufacturing agreements by third-parties because of factors beyond our control;
•
the possible termination or non-renewal of the manufacturing agreements by the third-party, at a time that is costly or inconvenient to us; and
•
delays associated with the lack of availability of staff at third-party manufacturers.
If we do not maintain our key manufacturing relationships, we may fail to find replacement manufacturers or develop our own manufacturing
capabilities, which could delay or impair our ability to develop and commercialize our product. If we do find replacement manufacturers, we may not be
able to enter into agreements with them on terms and conditions favorable to us and there could be a substantial delay before new facilities could be
qualified and registered with the FDA and other foreign regulatory authorities.
54
The FDA, MHRA EMA and other foreign regulatory authorities require manufacturers to register manufacturing facilities. The FDA and
corresponding foreign regulators also inspect these facilities to confirm compliance with cGMPs. Contract manufacturers may face manufacturing or
quality control problems causing drug substance production and shipment delays or a situation where the contractor may not be able to maintain
compliance with the applicable cGMP requirements. While we provide oversight of manufacturing activities, we do not and will not control the execution
of our manufacturing activities by, and are or will be essentially dependent on, our CDMOs for compliance with cGMP requirements for the manufacture
of our product candidates. Any failure to comply with FDA, MHRA, EMA and comparable foreign regulatory requirements could adversely affect our
clinical research activities and our ability to develop our product candidates and market our products.
Moreover, the manufacturing of therapeutic biologics products is highly complex. Problems may arise during manufacturing for a variety of
reasons, including but not limited to:
•
equipment malfunction;
•
failure to follow specific protocols and procedures;
•
changes in product specification;
•
low quality or insufficient supply of raw materials;
•
delays in the construction of new facilities as a result of changes in manufacturing production sites and limits to manufacturing capacity due to
regulatory requirements;
•
staffing shortages;
•
advances in manufacturing techniques;
•
physical limitations that could inhibit continuous supply; and
•
man-made or natural disasters and other environmental factors.
Products with quality issues may have to be discarded, resulting in product shortages or additional expenses. This could lead to, among other
things, increased costs, lost revenue, damage to customer relationships, time and expense spent investigating the cause and, depending on the cause, similar
losses with respect to other batches or products. If problems are not discovered before the product is released to the market, recall and product liability
costs may also be incurred.
Manufacturing methods and formulation are sometimes altered through the development of drug candidates from clinical trials to approval, and
further to commercialization, in an effort to optimize manufacturing processes and results. Such changes carry the risk that they will not achieve these
intended objectives. Any of these changes could cause the drug candidates to perform differently and affect the results of planned clinical trials or other
future clinical trials conducted with the altered materials. This could delay the commercialization of any approved drugs and require bridging studies or the
repetition of one or more clinical trials, which may result in increases in clinical trial costs, delays in drug approvals and may jeopardize our ability to
commence product sales and generate revenue.
We may also experience shortages of qualified personnel, raw materials or key contractors, and experience unexpected damage to our facilities
or the equipment in them. In these cases, we may be required to delay or suspend our manufacturing activities. We may be unable to secure temporary,
alternative manufacturers for our drugs with the terms, quality and costs acceptable to us, or at all. Such an event could delay our clinical trials and/or the
availability of our products for commercial sale. Moreover, we may spend significant time and costs to remedy these deficiencies before we can continue
production at our manufacturing facilities.
In addition, the quality of our products, including drug candidates manufactured by us for research and development purposes and drugs
manufactured by us for commercial use, depends significantly on the effectiveness of our quality control and quality assurance, which in turn depends on
factors such as the production processes used in our manufacturing facilities, the quality and reliability of equipment used, the quality of our staff and
related training programs and our ability to ensure that our employees adhere to our quality control and quality assurance protocol. However, there can be
no assurances that our quality control and quality assurance procedures will be effective in consistently preventing and resolving deviations from our
quality standards. Any significant failure or deterioration of our quality control and quality assurance protocol could render our products unsuitable for use,
jeopardize any cGMP certifications we may have and/or harm our market reputation and relationship with business
55
partners. Any such developments may have a material adverse effect on our business, financial condition and results of operations.
Risks Related to our Business Operations
We only have a limited number of employees to manage and operate our business. Our business could suffer if we are unable to attract and retain key
employees.
As of March 31, 2025, we had 9 employees, 8 of which are full-time. Our limited financial resources have led us to focus on the development of
our ADC Platform and to manage and operate our business in a highly efficient manner.
Our success depends upon the continued service and performance of our senior management and other key personnel. The loss of the services of
these personnel could delay or prevent the successful completion of our planned preclinical and clinical experiments, or the commercialization of our
therapeutic candidates or otherwise affect our ability to manage our company effectively and to carry out our business plan. We do not maintain key-man
life insurance. Although we have entered into employment agreements with members of our senior management team, members of our senior management
team may resign at any time. High demand exists for senior management and other skilled personnel in the biopharmaceutical industry. There can be no
assurance that we will be able to continue to attract and retain such personnel or train new hires to the skill level required for completing our preclinical/
clinical objectives.
Our growth and success also depend on our ability to attract and retain additional highly qualified scientific, clinical, technical, sales, managerial
and finance personnel. We experience intense competition for qualified personnel, and the existence of non-competition agreements between prospective
employees and their former employers may prevent us from hiring those individuals or subject us to suit from their former employers. In addition, if we
elect to independently commercialize any approved drug, we will need to expand our marketing and sales capabilities. While we attempt to provide
competitive compensation packages to attract and retain key personnel, many of our competitors are likely to have greater resources and more experience
than we have, making it difficult for us to compete successfully for key personnel. If we cannot attract and retain sufficiently qualified technical employees
on acceptable terms, we may not be able to develop and commercialize products. Further, any failure to effectively integrate new personnel could prevent
us from successfully growing our company.
If we or any third-party manufacturers we engage fail to comply with environmental, health and safety laws and regulations, we could become subject
to fines or penalties or incur costs or liabilities that could harm our business.
We and third-party manufacturers we engage are and will be subject to numerous environmental, health and safety laws and regulations, including
those governing laboratory procedures and the handling, use, storage, treatment and disposal of hazardous materials and wastes. Our operations involve the
use of hazardous and flammable materials, including chemicals and biological materials. Our operations also produce hazardous waste products. We
generally contract with third parties for the disposal of these materials and wastes. We cannot eliminate the risk of contamination or injury from these
materials. In the event of contamination or injury resulting from our use of hazardous materials, we could be held liable for any resulting damages, and any
liability could exceed our resources. Liability under certain environmental laws governing the release and cleanup of hazardous materials is joint and
several and could be imposed without regard to fault. We also could incur significant costs associated with civil or criminal fines and penalties or become
subject to injunctions limiting or prohibiting our activities for failure to comply with such laws and regulations.
Although we maintain general liability insurance as well as workers’ compensation insurance to cover us for costs and expenses we may incur due to
injuries to our employees resulting from the use of hazardous materials, this insurance may not provide adequate coverage against potential liabilities. We
do not maintain insurance for environmental liability or toxic tort claims that may be asserted against us in connection with our storage or disposal of
biological, hazardous or radioactive materials.
In addition, we may incur substantial costs in order to comply with current or future environmental, health and safety laws and regulations. These
current or future laws and regulations may impair our research, development or production efforts. Our failure to comply with these laws and regulations
also may result in substantial fines,
56
penalties or other sanctions.
Further, with respect to the operations of our current and any future third-party contract manufacturers, it is possible that if they fail to operate in
compliance with applicable environmental, health and safety laws and regulations or properly dispose of wastes associated with our products, we could be
held liable for any resulting damages, suffer reputational harm or experience a disruption in the manufacture and supply of our product candidates or
products. In addition, our supply chain may be adversely impacted if any of our third-party contract manufacturers become subject to injunctions or other
sanctions as a result of their non-compliance with environmental, health and safety laws and regulations.
Any pandemic, epidemic, or outbreak of an infectious disease, may materially and adversely affect our business and our financial results and could
cause a disruption to the development of our product candidates.
Public health crises, such as pandemics or similar outbreaks, could adversely impact our business. For example, we experienced delays in
enrollment of patients in our clinical trials and supply chain issues due in particular to the COVID-19 pandemic for certain of our past clinical trials,
including, without limitation, in our discontinued BP clinical program. Any future pandemic, epidemic or outbreak of an infectious disease could have
similar effects. Furthermore, economic recessions, increased inflation and/or interest rates, and any disruptions to our operations or workforce availability
brought on by the effects of a health epidemic may have a negative effect on our operating results. The foregoing could result in an adverse effect on our
business, results of operations, financial condition and cash flows.
Potential disruptions to our preclinical and clinical development efforts related to future outbreaks or pandemics may include, but are not limited
to, disruptions in our supply chain and our ability to procure the components for each of our product candidates for use in preclinical studies and clinical
trials and enrolling patients in clinical trials. We are unable to predict if a future outbreak or pandemic could have similar or different impacts on our
preclinical studies, clinical trials, business, financial condition, and results of operations.
We are currently operating in a period of economic uncertainty and capital markets disruption, which has been significantly impacted by geopolitical
instability. Our business, financial condition and results of operations could be materially adversely affected by any negative impact on the global
economy and capital markets resulting from the geopolitical tensions or high inflation.
U.S. and global markets are experiencing volatility and disruption following the escalation of geopolitical tensions between Russia and Ukraine
as well as the ongoing conflict between Israel and Hamas. Although the length and impact of the ongoing military conflict is highly unpredictable, the
conflicts could lead to market disruptions, including significant volatility in commodity prices, credit and capital markets, as well as supply chain
interruptions, which has led to high inflation globally. We are continuing to monitor inflation and global capital markets and assess the potential impacts on
our business.
Although our business has not been materially impacted by these geopolitical tensions to date, it is impossible to predict the extent to which our
operations, or those of our suppliers and manufacturers, will be impacted in the short and long term, or the ways in which the conflict may impact our
business. The extent and duration of the conflicts, geopolitical tensions, record inflation, sanctions and resulting market disruptions are impossible to
predict, but could be substantial. Any such disruptions may also magnify the impact of other risks described herein.
Disruptions at the FDA, the SEC and other government agencies caused by the change in presidential administration, funding shortages or potential
funding shortages could hinder their ability to hire and retain key leadership and other personnel, prevent new products and services from being
developed or commercialized in a timely manner, or otherwise prevent those agencies from performing normal business functions, which could
negatively impact our business and our timelines.
The ability of the FDA to review and clear or approve new products can be affected by a variety of factors, including government budget and
funding levels, ability to hire and retain key personnel and accept the payment of user fees, shifting policy priorities as a result of changes in the
presidential administration and its appointees tasked to oversee the agency, and statutory, regulatory, and policy changes. Average review times at the
agency have
57
fluctuated in the past as a result of these factors, and government funding of the SEC, and other government agencies on which our operations may rely, is
subject to the impacts of political events, which are inherently fluid and unpredictable.
Disruptions at the FDA and other agencies may slow the time necessary for review and approval (including any applications we may file with
respect to our current and future product candidates), which could adversely affect our business. For example, over the last several years, the U.S.
government has shut down several times and certain regulatory agencies, such as the FDA and the SEC, have had to furlough critical employees and stop
critical activities. If a prolonged government shutdown or other disruption occurs, it could significantly impact the ability of the FDA and the SEC to
timely review and process our submissions, which could have a material adverse effect on our business.
Our business and operations could suffer in the event of computer system failures or security breaches.
Despite the implementation of security measures, our internal computer systems, and those of our CROs and other third parties on which we rely,
are vulnerable to damage from computer viruses, unauthorized access, cyber-attacks, natural disasters, fire, terrorism, war, and telecommunication and
electrical failures. If such an event were to occur and interrupt our operations, it could result in a material disruption of our drug development programs.
For example, the loss of clinical trial data from planned clinical trials could result in delays in our marketing authorization efforts and significantly increase
our costs to recover or reproduce the data. To the extent that any disruption or security breach results in a loss of or damage to our data or applications, loss
of trade secrets or inappropriate disclosure of confidential or proprietary information, including protected health information or personal data of employees
or former employees, access to our clinical data, or disruption of the manufacturing process, we could incur liability and the further development of our
drug candidates could be delayed. We may also be vulnerable to cyber-attacks by hackers or other malfeasance. Especially since the merger, cyber-security
needs have grown as the combined company has offices in London and San Francisco Bay area with employees operating out of UK, US East and West
Coasts. This type of breach of our cybersecurity may compromise our confidential information and/or our financial information and adversely affect our
business or result in legal proceedings. If security breaches result in the loss of clinical trial data or other confidential information, we may be the subject of
legal proceedings and suffer financial and reputational damage. Further, these cybersecurity breaches may inflict reputational harm upon us that may result
in decreased market value and erode public trust.
Our business is subject to risks associated with conducting business internationally.
We source research and development, manufacturing, consulting, and other services from companies based throughout the United States, the
UK, the EU, and select Asian countries. Accordingly, our future results could be harmed by a variety of factors, including: economic weakness, including
inflation, or political instability in varying economies and markets; differing regulatory requirements for drug approvals in non-European Union (EU)
countries; differing jurisdictions could present different issues for securing, maintaining, or obtaining freedom to operate for our intellectual property in
such jurisdictions; such jurisdictions; potentially reduced protection for intellectual property rights; difficulties in compliance with non- US laws and
regulations; changes in non-U.S. regulations and customs, tariffs, and trade barriers; changes in non-U.S. currency exchange rates of the USD and currency
controls; changes in a specific country’s or region’s political or economic environment, trade protection measures, import or export licensing requirements
or other restrictive actions by the USA or non-U.S. governments; differing reimbursement regimes and price controls in certain non-U.S. markets; negative
consequences from changes in tax laws; compliance with tax, employment, immigration, and labor laws for employees living or traveling outside of the
USA; business interruptions resulting from geo-political actions, including war and terrorism, health epidemics and other widespread outbreaks of
contagious disease, or natural disasters, including earthquakes, typhoons, hurricanes, floods and fires.
Risks Related to our Ordinary Shares and ADSs
Our business, operating results and growth rates may be adversely affected by current or future unfavorable economic and market conditions and
adverse developments with respect to financial institutions and associated liquidity risk.
Our business depends on the health of the global economies. If the conditions of the global economies
58
remain uncertain or continue to be volatile, or if they deteriorate, including because of the impact of military conflict, such as the war between Russia and
Ukraine, terrorism or other geopolitical events, our business, operating results and financial condition may be materially adversely affected. Economic
weakness, inflation and increases in interest rates, limited availability of credit, liquidity shortages and constrained capital spending have at times in the
past resulted, and may in the future result, in challenging and delayed sales cycles, slower adoption of new technologies and increased price competition,
and could negatively affect our ability to forecast future periods, which could result in an inability to satisfy demand for our products and a loss of market
share.
In addition, inflation raises our costs for commodities, labor, materials and services and other costs required to grow and operate our business,
and failure to secure these on reasonable terms may adversely impact our financial condition. Additionally, inflation, along with the uncertainties
surrounding a resurgence of COVID-19, geopolitical developments and global supply chain disruptions, have caused, and may in the future cause, global
economic uncertainty and uncertainty about the interest rate environment, which may make it more difficult, costly or dilutive for us to secure additional
financing. A failure to adequately respond to these risks could have a material adverse impact on our financial condition, results of operations or cash
flows.
More recently, the closures of Silicon Valley Bank (“SVB”) and Signature Bank and their placement into receivership with the FDIC created
bank-specific and broader financial institution liquidity risk and concerns. Although the Department of the Treasury, the Federal Reserve and the FDIC
jointly released a statement that depositors at SVB and Signature Bank would have access to their funds, even those in excess of the standard FDIC
insurance limits, under a systemic risk exception, future adverse developments with respect to specific financial institutions or the broader financial
services industry may lead to market-wide liquidity shortages, impair the ability of companies to access near-term working capital needs, and create
additional market and economic uncertainty. There can be no assurance that future credit and financial market instability and a deterioration in confidence
in economic conditions will not occur. Our general business strategy may be adversely affected by any such economic downturn, liquidity shortages,
volatile business environment or continued unpredictable and unstable market conditions. If the current equity and credit markets deteriorate, or if adverse
developments are experienced by financial institutions, it may cause short-term liquidity risk and make any necessary debt or equity financing more
difficult, more costly, more onerous with respect to financial and operating covenants and more dilutive. Failure to secure any necessary financing in a
timely manner and on favorable terms could have a material adverse effect on our growth strategy and financial performance and could require us to alter
our operating plans. In addition, there is a risk that one or more of our service providers, financial institutions, manufacturers, suppliers and other partners
may be adversely affected by the foregoing risks, which could directly affect our ability to attain our operating goals on schedule and on budget.
If we are deemed or become a passive foreign investment company for U.S. federal income tax purposes in 2024 or in any prior or subsequent years,
there may be negative tax consequences for U.S. taxpayers that are holders of our ADSs.
We will be treated as a passive foreign investment company (“PFIC”) for U.S. federal income tax purposes in any taxable year in which either (i)
at least 75% of our gross income is “passive income” or (ii) 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 may have been a PFIC for 2023, but we have not performed a detailed analysis to determine PFIC status for 2023. Because the PFIC
determination is highly fact sensitive, there can be no assurance that we were not a PFIC for 2023 and there can be no assurance that we will not be a PFIC
for 2024 or for any other taxable year. 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 ADSs, and such U.S. shareholder does not make an election to treat us as a “qualified electing fund” (“QEF”) or make a “mark-
to-market” election, then “excess distributions” to such U.S. shareholder, and any gain realized on the sale or other disposition of our ADSs will be subject
to special rules. Under these rules: (i) the excess distribution or gain would be allocated ratably over the U.S. shareholder’s holding period for ADSs; (ii)
the
59
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 (iii) 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 U.S. Internal Revenue Service (“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 our ADSs during a period when we are a PFIC will be generally subject to the foregoing rules, even if we cease to be a PFIC in
subsequent years, subject to certain exceptions, including for U.S. shareholders who made a timely QEF or mark-to-market election. A U.S. shareholder
can make a QEF election by completing the relevant portions of and filing IRS Form 8621 in accordance with the instructions thereto. A QEF election
generally may not be revoked without the consent of the IRS. If an investor provides reasonable notice to us that it has determined to make a QEF election,
we intend to provide annual financial information to such investor as may be reasonably required for purposes of filing United States federal income tax
returns in connection with such QEF election.
U.S. investors are urged to consult their own tax advisors regarding the possible application of the PFIC rules.
The market price of our ADSs may be volatile and may fluctuate in a way that is disproportionate to our operating performance.
The market price of our ADSs may experience substantial volatility as a result of a number of factors. The market prices for securities of
biotechnology companies in general have been highly volatile and may continue to be so in the future. The following factors, in addition to other risk
factors described in this section, may have a significant impact on the market price of our ADSs:
•
sales or potential sales of substantial amounts of our ordinary shares or ADSs;
•
delay or failure in initiating, enrolling, or completing clinical trials or unsatisfactory results of these trials or events reported in any of our
current or future clinical trials;
•
announcements about us or about our competitors, including clinical trial results, marketing authorizations or new product introductions;
•
a serious AE in a clinical trial and/or a long-term safety issue;
•
developments concerning our licensors or product manufacturers;
•
litigation and other developments relating to our patents or other proprietary rights or those of our competitors;
•
conditions in the pharmaceutical or biotechnology industries;
•
variations in our anticipated or actual operating results;
•
governmental regulation and legislation, actual or anticipated;
•
change in securities analysts’ estimates of our performance, or our failure to meet analysts’ expectations;
•
whether, to what extent and under what conditions the FDA, MHRA or EMA will permit us to continue developing our product candidates, if
at all, and if development is continued, any reports of safety issues or other AEs observed in any potential future studies of these product
candidates;
•
adverse publicity;
•
our ability to enter into new collaborative arrangements with respect to our product candidates;
•
the terms and timing of any future collaborative, licensing or other arrangements that we may establish;
•
our ability to raise additional capital to carry through with our clinical development plans and current and future operations and the terms of
any related financing arrangements;
60
•
the timing of achievement of, or failure to achieve, our and any potential future collaborators’ clinical, regulatory and other milestones, such
as the commencement of clinical development, the completion of a clinical trial or the receipt of marketing authorization;
•
announcement of FDA, MHRA or European Commission approval or non-approval of our product candidates or delays in or AEs during the
FDA, MHRA or EMA review process;
•
actions taken by regulatory agencies with respect to our product candidates or products, our clinical trials or our future sales and marketing
activities, including regulatory actions requiring or leading to restrictions, limitations and/or warnings in the label of an approved product
candidate;
•
uncontemplated problems in the supply of the raw materials used to produce our product candidates;
•
the commercial success of any product approved by the FDA, MHRA, European Commission or any other foreign counterpart;
•
introductions or announcements of technological innovations or new products by us, our potential future collaborators, or our competitors, and
the timing of these introductions or announcements;
•
market conditions for equity investments in general, or the biotechnology or pharmaceutical industries in particular;
•
we may have limited or very low trading volume that may increase the volatility of the market price of our ADSs;
•
regulatory developments in the United States and foreign countries;
•
changes in the structure or reimbursement policies of health care payment systems;
•
any intellectual property infringement lawsuit involving us;
•
actual or anticipated fluctuations in our results of operations;
•
changes in financial estimates or recommendations by securities analysts;
•
hedging activity that may develop regarding our ADSs;
•
regional or worldwide recession;
•
sales of our ordinary shares or ADSs by our executive officers, directors and significant shareholders;
•
managerial costs and expenses;
•
changes in accounting principles or practices;
•
the loss of any of our key scientific or management personnel; and
•
natural disasters and political and economic instability, including wars, terrorism, political unrest, results of certain elections and votes,
emergence of a pandemic, or other widespread health emergencies (or concerns over the possibility of such an emergency, including for
example, a resurgence of COVID-19), boycotts, adoption or expansion of government trade restrictions, and other business restrictions.
The stock markets in general, and the markets for biotechnology stocks in particular, have experienced significant volatility that has often been
unrelated to the operating performance of particular companies. The financial markets continue to face significant uncertainty, resulting in a decline in
investor confidence and concerns about the proper functioning of the securities markets, which decline in general investor confidence has resulted in
depressed stock prices for many companies notwithstanding the lack of a fundamental change in their underlying business models or prospects. These
broad market fluctuations may adversely affect the trading price of our ADSs.
In the past, class action litigation has often been instituted against companies whose securities have experienced periods of volatility in market
price. Any such litigation brought against us, could result in substantial costs, which could hurt our financial condition and results of operations and divert
management’s attention and resources, which could result in delays of our clinical trials or commercialization efforts.
61
Insiders own a significant amount of our outstanding shares which could delay or prevent a change in corporate control or result in the entrenchment
of management and/or the board of directors.
As of March 31, 2025, our directors and executive officers, together with their affiliates and related persons, beneficially own, in the aggregate,
approximately 40% of our outstanding ordinary shares. Our Chairman, Hoyoung Huh, MD, PhD, our President and Chief Executive Officer, Dr. Samir
Patel, and our director Dr. Ray Prudo, each beneficially own approximately 18%, 12% and 10% of our outstanding ordinary shares, respectively.
Accordingly, these shareholders, if acting together, or Dr. Huh, Dr. Patel or Dr. Prudo, each individually, may have the ability to impact the outcome of
matters submitted to our shareholders for approval, including the election and removal of directors and any merger, consolidation, or sale of all or
substantially all of our assets. In addition, these persons may have the ability to influence the management and affairs of our Company. Accordingly, this
concentration of ownership may harm the market price of our ADSs by:
•
delaying, deferring, or preventing a change in control;
•
entrenching our management and/or the board of directors;
•
impeding a merger, consolidation, takeover, or other business combination involving us; or
•
discouraging a potential acquirer from making a tender offer or otherwise attempting to obtain control of us.
Future sales and issuances of our ordinary shares or ADSs or rights to purchase ordinary shares or ADSs pursuant to our equity incentive plans could
result in additional dilution of the percentage ownership of our shareholders and could cause our share price to fall.
We expect that significant additional capital will be needed in the future to continue our planned operations. To the extent we raise additional
capital by issuing equity securities, our shareholders may experience substantial dilution. We may sell ordinary shares (which may be represented by
ADSs), convertible securities or other equity securities in one or more transactions at prices and in a manner we determine from time to time. If we sell
ordinary shares, convertible securities or other equity securities in more than one transaction, investors may be materially diluted by subsequent sales. Such
sales may also result in material dilution to our existing shareholders, and new investors could gain rights superior to our existing shareholders.
Additionally, any ordinary shares or ADSs issued pursuant to our equity incentive plan may result in material dilution to our existing shareholders.
The withdrawal of the United Kingdom from the EU (Brexit) could adversely affect our business, financial condition, results of operations and
prospects.
The UK formally left the EU on January 31, 2020 (commonly referred to as Brexit), and the EU and the UK have concluded a trade and
cooperation agreement-please see Item 1. Business—UK Regulation for more details. The regulatory regime in the UK currently aligns in the most part
with EU medicines regulations, however it is possible that these regimes will diverge more significantly in the future now that the UK’s regulatory system
is independent from the EU.
For instance, the EU Clinical Trials Regulation which became effective on January 31, 2022 and provides for a streamlined clinical trial
application and assessment procedure covering multiple EU Member States has not been implemented into UK law, and a separate application must
therefore be submitted for clinical trial authorization in the UK. In addition, the UK is no longer covered by centralized marketing authorizations and a
separate authorization is required to market a product in the UK. Any new regulations in the future could add time and expense to the conduct of our
business in both the UK and EU, as well as the process by which our product candidates receive regulatory approval in the UK, the EU and elsewhere.
Provisions in our Articles of Association and under English law could make an acquisition of our Company more difficult and may prevent attempts by
our shareholders to replace or remove our organization management.
Provisions in our Articles of Association may delay or prevent an acquisition or a change in management. These provisions include a staggered
board and prohibition on actions by written consent of our shareholders. Although we believe these provisions collectively will provide for an opportunity
to receive higher bids by requiring potential acquirors to negotiate with our board of directors, they would apply even if the offer might be considered
62
beneficial by some shareholders. In addition, these provisions may frustrate or prevent any attempts by our shareholders to replace or remove then current
management by making it more difficult for shareholders to replace members of the board of directors, which is responsible for appointing the members of
management.
We have in the past and may in the future fail to meet the requirements for continued listing on Nasdaq. If we fail to maintain compliance with the
minimum listing requirements, our ADSs may be delisted, which could have a material adverse effect on the liquidity of our ADSs.
We have in the past received notices from The Nasdaq Stock Market relating to a failure to comply with the minimum $2,500,000 stockholders’
equity requirement for continued listing set forth in Listing Rule 5550(b) (the “Stockholders’ Equity Requirement”).
Most recently, in April 2024, we received a written notice from the Nasdaq Listing Department notifying us that we were in noncompliance with
the Stockholders’ Equity Requirement and we regained compliance in November 2024. There can be no assurance that we will continue to meet the
Stockholders’ Equity Requirement, or any other Nasdaq requirements, in the future.
Furthermore, we may also be unable to meet other applicable Nasdaq listing requirements, including maintaining minimum levels of
stockholders’ equity or market values of our ADSs, in which case our ADSs could be delisted. If our ADSs were to be delisted, the liquidity of our ADSs
would be adversely affected, and the market price of our ADSs could decrease.
We do not anticipate paying cash dividends, and accordingly, shareholders must rely on appreciation in our ADSs for any return on their investment.
We anticipate that we will retain future earnings for the development, operation and expansion of our business and do not anticipate declaring or
paying any cash dividends for the foreseeable future. Therefore, the success of an investment in our ADSs will depend upon any future appreciation in their
value. There is no guarantee that our ADSs will appreciate in value or even maintain the price at which our shareholders have purchased their shares.
As of January 1, 2024, we were no longer a foreign private issuer and we are required to comply with the provisions of the Exchange Act, and the rules
of Nasdaq, applicable to U.S. domestic issuers, which will continue to require us to incur significant expenses and expend time and resources.
As of January 1, 2024, we were no longer a foreign private issuer, and we are required to comply with all of the provisions applicable to a U.S.
domestic issuer under the Exchange Act, including filing an annual report on Form 10-K, quarterly periodic reports and current reports for certain events,
complying with the sections of the Exchange Act regulating the solicitation of proxies, requiring insiders to file public reports of their share ownership and
trading activities and insiders being liable for profit from trades made in a short period of time. We are also no longer exempt from the requirements of
Regulation FD promulgated under the Exchange Act related to selective disclosures. We are also no longer permitted to follow our home country’s rules in
lieu of the corporate governance obligations imposed by Nasdaq and are required to comply with the governance practices required by U.S. domestic
issuers listed on Nasdaq. We are also required to comply with all other rules of Nasdaq applicable to U.S. domestic issuers, including that our Articles of
Association specify a quorum of no less than one-third of our outstanding ordinary shares for meetings of our common shareholders, the solicitation of
proxies and the approval by our shareholders in connection with certain events such as the acquisition of stock or assets of another company, the
establishment of or amendments to equity-based compensation plans for employees, a change of control and certain private placements. The regulatory and
compliance costs associated with the reporting and governance requirements applicable to U.S. domestic issuers may be significantly higher than the costs
we previously incurred as a foreign private issuer.
The regulatory and compliance costs associated with the reporting and governance requirements applicable to U.S. domestic issuers may be
significantly higher than the costs we previously incurred as a foreign private issuer. We expect to continue to incur significant legal, accounting, insurance
and other expenses and to spend greater time and resources to comply with these requirements. In addition, we may need to develop our reporting and
compliance infrastructure and may face challenges in complying with the new requirements applicable to us.
63
We incur significant costs and demands upon management as a result of complying with the laws and regulations affecting public companies, which
could harm our operating results.
As a public company, we incur significant legal, accounting and other expenses, including costs associated with public company reporting
requirements. We also incur costs associated with current corporate governance requirements, including requirements under Section 404 and other
provisions of Sarbanes-Oxley, as well as rules implemented by the SEC and the Nasdaq Stock Market. The regulatory and compliance costs associated
with the reporting and governance requirements applicable to U.S. domestic issuers may be significantly higher than the costs we previously incurred as a
foreign private issuer. The expenses incurred by public companies for reporting and corporate governance purposes have increased dramatically in recent
years.
U.S. investors may not be able to enforce their civil liabilities against our Company or certain of our directors, controlling persons and officers.
It may be difficult for U.S. investors to bring and/or effectively enforce suits against our Company outside of the United States. We are a public
limited company incorporated in England and Wales under the Companies Act 2006, as amended (the “Companies Act”). A majority of our directors are
not residents of the United States, and all or substantial portions of their assets are located outside of the United States. As a result, it may be difficult for
U.S. holders of our ordinary shares or ADSs to effect service of process on these persons within the United States or to make effective recovery in the
United States by enforcing any judgments rendered against them. In addition, if a judgment is obtained in the U.S. courts based on civil liability provisions
of the U.S. federal securities laws against us or our directors or officers, it may, depending on the jurisdiction, be difficult to enforce the judgment in the
non-U.S. courts against us and any of our non-U.S. resident executive officers or directors. Accordingly, U.S. shareholders may be forced to bring legal
proceedings against us and our respective directors and officers under English law and in the English courts in order to enforce any claims that they may
have against us or our directors and officers. The enforceability of a U.S. judgment in the United Kingdom will depend on the particular facts of the case as
well as the laws and treaties in effect at the time. The United States and the United Kingdom do not currently have a treaty providing for reciprocal
recognition and enforcement of judgments (other than arbitration awards) in civil and commercial matters. Nevertheless, it may be difficult for U.S.
shareholders to bring an original action in the English courts to enforce liabilities based on the U.S. federal securities laws against us and any of our non-
U.S. resident executive officers or directors.
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 ADSs, are
governed by English law, including the provisions of 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.
Provisions in the UK City Code on Takeovers and Mergers may have anti-takeover effects that could discourage an acquisition of us by others, even if
an acquisition would be beneficial to our shareholders.
The UK City Code on Takeovers and Mergers (“Takeover Code”), applies, among other things, to an offer for a public company whose
registered office is in the United Kingdom and whose securities are not admitted to trading on a regulated market in the United Kingdom if we are
considered by the Panel on Takeovers and Mergers (“Takeover Panel”), to have its place of central management and control in the United Kingdom. This is
known as the “residency test.” The test for central management and control under the Takeover Code is different from that used by the UK tax authorities.
Under the Takeover Code, the Takeover Panel will determine whether we have our place of central management and control in the United Kingdom by
looking at various factors, including the structure of our board of directors, the functions of the directors and where they are resident. As of the date of this
report, our place of central management and control is not, and is not expected to be, in the UK (or the Channel Islands or the Isle of Man) for the purposes
of the jurisdictional criteria of the Takeover Code. Accordingly, we are not currently subject to the Takeover Code and, as a result, our shareholders are not
currently entitled to benefit from certain takeover offer protections provided under the Takeover Code, including the rules regarding mandatory takeover
bids (a summary of which is set out below). In the event that this changes, or if the interpretation and
64
application of the Takeover Code by the Takeover Panel, changes (including changes to the way in which the Takeover Panel assesses the application of
the Takeover Code to English companies whose shares are listed outside of the UK), the Takeover Code may apply to us in the future.
If at the time of a takeover offer the Takeover Panel determines that we have our place of central management and control in the United
Kingdom, we will be subject to a number of rules and restrictions, including but not limited to the following: (1) our ability to enter into deal protection
arrangements with a bidder will be extremely limited; (2) we may not, without the approval of our shareholders, be able to perform certain actions that
could have the effect of frustrating an offer, such as issuing shares or carrying out acquisitions or disposals; and (3) we will be obliged to provide equality
of information to all bona fide competing bidders.
Further, the Takeover Code contains certain rules in respect of mandatory offers. Under Rule 9 of the Takeover Code, if a person: (a) acquires an
interest in our shares which, when taken together with shares in which he or persons acting in concert with him are interested, carry 30% or more of our
voting rights; or (b) who, together with persons acting in concert with him, is interested in shares that in the aggregate carry not less than 30% of our voting
rights and does not hold shares carrying more than 50% of our voting rights, 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, will 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 interest in our
shares by the acquirer or its concert parties during the previous 12 months.
Holders of ADSs must act through the depositary to exercise their rights as shareholders of our Company.
Holders of our ADSs do not have the same rights of our shareholders and may only exercise the voting rights with respect to the underlying
ordinary shares in accordance with the provisions of the deposit agreement for the ADSs. Under our Articles of Association, the minimum notice period
required to convene a general meeting is 14 clear days’ notice (or, for an annual general meeting, 21 clear days’ notice (unless, in the case of an annual
general meeting, all members entitled to attend and vote at the meeting, or, in the case of any other general meeting, a majority in number of the members
entitled to attend and vote who hold not less than 95% of the voting shares (excluding treasury shares), agree to shorter notice)). When a general meeting is
convened, holders of our ADSs may not receive sufficient notice of a shareholders’ meeting to permit them to withdraw their ordinary shares to allow them
to cast their vote with respect to any specific matter. In addition, the depositary and its agents may not be able to send voting instructions to holders of our
ADSs or carry out their voting instructions in a timely manner. We will make all reasonable efforts to cause the depositary to extend voting rights to
holders of our ADSs in a timely manner, but we cannot assure them that they will receive the voting materials in time to ensure that they can instruct the
depositary to vote their ADSs. Furthermore, the depositary and its agents will not be responsible 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, holders of our ADSs may not be able to exercise their right to vote and they
may lack recourse if their ADSs are not voted as they requested. In addition, in the capacity as an ADS holder, they will not be able to call a shareholders’
meeting.
Holders of our ADSs may be subject to limitations on transfers of ADSs.
ADSs are transferable on the books of the depositary. However, the depositary may close its transfer books at any time or from time to time
when it deems expedient in connection with the performance of its duties. In addition, the depositary may refuse to deliver, transfer or register transfers of
ADSs generally when our books or the books of the depositary are closed, or at any time if we or the depositary deems it advisable to do so because of any
requirement of law or of any government or governmental body, or under any provision of the deposit agreement, or for any other reason.
The rights of holders of our ADSs to participate in any future rights offerings may be limited, which may cause dilution to their holdings, and they may
not receive cash dividends if it is impractical to make them available to them.
We may from time to time distribute rights to our shareholders, including rights to acquire our securities. However, we cannot make rights
available to holders of our ADSs 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
65
requirements is available. Also, under the deposit agreement, the depositary will not make rights available to holders of our ADSs unless either both the
rights and any related securities are registered under the Securities Act, or the distribution of them to ADS 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.
Accordingly, holders of our ADSs may be unable to participate in our rights offerings and may experience dilution in their holdings.
In addition, the depositary has agreed to pay to holders of our ADSs the cash dividends or other distributions it or the custodian receives on our
ordinary shares or other deposited securities after deducting its fees and expenses. Holders of our ADSs will receive these distributions in proportion to the
number of ordinary shares their ADSs represent. However, the depositary may, at its discretion, decide that it is inequitable or impractical to make a
distribution available to any holders of ADSs. For example, the depositary may determine that it is not practicable to distribute certain property through the
mail, or that the value of certain distributions may be less than the cost of mailing them. In these cases, the depositary may decide not to distribute such
property and holders of our ADSs will not receive any such distribution.
Item 1B. Unresolved Staff Comments.
None.
Item 1C. Cybersecurity.
Cybersecurity Risk Management and Strategy
In recognition of the evolving cybersecurity threat landscape, we acknowledge the increasing sophistication and frequency of cybersecurity incidents.
While we cannot completely protect against the possibility of a cybersecurity incident occurring, we take measures designed to mitigate risks from
cybersecurity threats, including those implemented by our third-party managed services provider.
As part of our cybersecurity procedures, we leverage a number of security controls, including network and device monitoring and system backup
procedures. We work to mitigate risks from cybersecurity threats stemming from third-party vendors by providing them with access only to systems that
they need to provide services to us.
We have not identified any cybersecurity incidents or threats that have materially affected us or are reasonably likely to materially affect us, including our
business strategy, results of operations, or financial condition. However, like other companies in our industry, we and our third-party vendors have from
time to time experienced threats that could affect our information or systems. For more information, please see “Item 1A, Risk Factors.”
Cybersecurity Governance
Senior management, including the Chief Executive Officer and Chief Financial Officer, are responsible for implementation of our risk management
controls, including controls in connection with risks from cybersecurity threats.
The Audit Committee of our Board of Directors (the “Audit Committee”) is primarily responsible for overseeing our compliance and risk management
obligations, including the management of risks from cybersecurity threats. Pursuant to its charter, the Audit Committee is responsible for monitoring the
effectiveness of our information system and cybersecurity controls.
On a quarterly basis, the Audit Committee discusses with senior management, our processes for assessing, identifying, and managing material risks from
cybersecurity threats and the state of our cybersecurity processes. The
66
Audit Committee also receives updates on, and monitors, our prevention, detection, mitigation and remediation of cybersecurity incidents.
Item 2. Properties.
We currently lease office space for both our U.K. and U.S. headquarters on a short-term basis. The lease for our U.K. headquarters, located in London,
expires in July 2025, unless terminated earlier with not less than three months' notice. We lease our U.S. headquarters office space, located in Boston, MA,
on a month-to-month basis. We also lease laboratory space, located in San Francisco, CA, which expires in September 2025 and is cancellable anytime
with 60 days' notice. We are not party to any material lease agreements. We believe that our current facilities are adequate to meet our needs and that
suitable additional alternative spaces will be available in the future on commercially reasonable terms, if required.
Item 3. Legal Proceedings.
From time to time, we may become involved in litigation relating to claims arising out of operations in the normal course of business, which we consider
routine and incidental to our business.
Refer to Note 10 of the Notes to our consolidated financial statements related to commitments and contingencies, which is incorporated herein by
reference.
Item 4. Mine Safety Disclosures.
Not applicable.
67
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Market Information
Our ordinary shares, $0.0001 par value per share, in the form of ADSs, currently trade on the Nasdaq Capital Market under the symbol “AKTX”.
ADS Ratio Changes
Currently, each ADS represents 2,000 ordinary shares, par value $0.0001. The following summarizes historical changes to the ratio of ADSs to ordinary
shares:
•
Effective January 3, 2014, we changed the ratio of our ADSs to ordinary shares from one ADS representing two ordinary shares to a new ratio
of one ADS representing ten ordinary shares.
•
Effective September 17, 2015, we changed the ratio of our ADSs to ordinary shares from one ADS representing ten ordinary shares to a new
ratio of one ADS representing one hundred ordinary shares.
•
Effective August 17, 2023, we changed the ratio of our ADSs to ordinary shares from one ADS representing 100 ordinary shares to a new ratio
of one ADS representing 2,000 ordinary shares.
Holders of Record
As of March 31, 2025, we had approximately 415 shareholders of record registered on our books, excluding shares held through banks and brokers. Of the
approximate 415 shareholders, 114 hold our ordinary shares through ADSs.
Dividends
We have never declared or paid cash dividends on our ordinary shares, and we do not expect to pay any cash dividends on our ordinary shares in the
foreseeable future. The declaration and payment of dividends in the future, of which there can be no assurance, will be determined by our board of directors
in light of conditions then existing, including earnings, financial condition, capital requirements, and other factors.
Recent Sales of Unregistered Securities
The privately placed unregistered securities described below were offered and sold pursuant to an exemption from the registration requirements under
Section 4(a)(2) of the Securities Act and Rule 506 of Regulation D promulgated thereunder since, among other things, the transactions did not involve a
public offering and the securities were acquired for investment purposes only and not with a view to or for sale in connection with any distribution thereof.
November 2024 Private Placement
In November 2024, we entered into a definitive purchase agreement with certain investors, Dr. Prudo and Dr. Patel, pursuant to which we sold and issued
in a private placement an aggregate of 1,713,402 ADSs, and Series D Warrants (the “Series D Warrants”) to purchase up to 1,713,402 ADSs, at a per unit
price of $2.26 for aggregate gross proceeds of $3.2 million (the “November 2024 Private Placement”). The Series D Warrants have 3-year terms ranging
from December 2, 2027 to June 2, 2028 and have cashless exercise provisions in limited circumstances.
At close of the November 2024 Private Placement, we incurred a total of $204,000 in placement agent fees with Paulson Investment Company, LLC
(“Paulson”). Net proceeds from the November 2024 Private Placement were
68
approximately $2.8 million after deducting placement agent fees and other expenses. In April 2025, we issued 408,000,000 ordinary shares to Paulson in
lieu of $204,000 in cash payment.
March 2025 Private Placement
On March 2, 2025, we entered into a securities purchase agreement (the “March 2025 Purchase Agreement”), pursuant to which we sold an aggregate of (i)
2,283,031 ADSs, each representing 2,000 of our ordinary shares (the “Shares”), (ii) 2,283,031 Series A warrants to purchase ADSs (“Series A Warrants”)
and (iii) 2,283,031 Series B warrants to purchase ADSs (“Series B Warrants”). The initial closing took place on March 6, 2025. For information on the
price per share for each of the Shares, Series A Warrants and Series B Warrants, see “Item 7. Management’s Discussion and Analysis of Financial
Condition and Results of Operations—Recent Developments—March 2025 Private Placement.”
The net proceeds from the March 2025 Offering, after deducting placement agent fees and other expenses, through the filing of this Form 10-K were
approximately $3.3 million. We expect to receive the remaining cash proceeds of $3.0 million in April 2025.
69
Issuer Purchases of Equity Securities
We did not repurchase any of our equity securities during the fiscal year ended December 31, 2024.
Item 6. [Reserved]
70
Item 7. Management’s Discussion and Analysis of Financial Condition 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 accompanying notes appearing elsewhere in this Form 10-K. In addition to historical information, this discussion and analysis includes
forward-looking statements that are subject to risks and uncertainties, including those discussed in the section titled “Risk Factors,” set forth in Part I,
Item 1A of this Form 10-K, that could cause actual results to differ materially from historical results or anticipated results.
Overview
We are an oncology company developing next-generation ADCs designed around novel payloads, which we believe may have the potential to transform
the efficacy and safety outcomes of ADCs as cancer therapies beyond options that are currently available or in development.
ADCs are a class of cancer therapies that combine the precision targeting of antibodies with payload toxins that attack cancer cells. To date, innovation in
the field of ADC therapies has focused primarily on the development of novel antibodies linked to existing classes of payload toxins. For example, there is
a range of approved ADCs with antibodies that target the Her2, Trop2, CD19, CD22, CD30, Nectin-4, Tissue Factor, and FR alpha antibodies. But there is
a surprising lack of diversity in the payload toxins to which those antibodies are linked, as all of these marketed products, and more than 90% of ADCs in
late-stage clinical development of which we are aware, utilize payloads from just two standard classes: (1) microtubule inhibitors or (2) DNA-damaging
agents such as topoisomerase I inhibitors.
Our ADC Platform enables us to generate a range of ADC product candidates that pair our novel payloads with biologically validated antibody targets
prevalent in cancer tumors. We believe that our focus on the development of ADCs that utilize our novel payloads may allow us to develop ADCs with
benefits that include:
•
more effective cancer-killing properties, or cytotoxicity;
•
generation of greater numbers of neoepitopes than currently available ADCs, leading to activation of both B-cells and T-cells in the tumor
microenvironment to generate an immune response that has the potential to continue to kill cancer cells in the tumor microenvironment and
throughout the body;
•
ability to be used in combination with checkpoint inhibitors to potentially deliver synergistic efficacy results (more than additive);
•
sustained duration of response of tumor regression or elimination;
•
reduced tumor resistance; and
•
improved safety and tolerability relative to ADCs that are currently available.
Our lead product candidate is AKTX-101, a preclinical stage Trop2-targeting ADC that combines PH1 with the Trop2 antibody, which is expressed in the
highest number of solid tumor cancer types, including lung, breast, colon and prostate. We aim to establish AKTX-101 as a best-in-class Trop2-targeting
ADC for the treatment of a variety of solid tumors.
We acquired the proprietary rights to our ADC discovery and development platform in connection with the Merger. Prior to that time, we were primarily
focused on advancing our former product candidates nomacopan and PAS-nomacopan (longer-acting nomacopan that is PASylated). Since the closing of
the Merger, we have focused substantially all of our efforts on the development of ADCs and our ADC Platform. We have suspended further internal
development of our legacy programs, nomacopan and PAS-nomacopan, and intend to seek strategic partners to advance their development externally. For
our PHP-303 program, a program that Peak Bio had advanced prior to the closing of the Merger, we intend to seek strategic partners for it as well to further
its development externally.
Our activities since inception have consisted of performing research and development activities and raising capital.
71
We do not have any products available for commercial sale, and we have not generated any product revenue from our portfolio of product candidates or
other sources. Our ability to generate revenue sufficient to achieve profitability, if ever, will depend on the successful development and eventual
commercialization of our potential therapies, which we expect, if it ever occurs, will take a number of years. The research and development efforts require
significant amounts of additional capital and adequate personnel infrastructure. There can be no assurance that our research and development activities will
be successfully completed, or that our potential therapies will be commercially viable.
Recent Developments
Appointment of New President and Chief Executive Officer
On March 14, 2025, we entered into an Executive Offer of Employment Agreement (as amended by a subsequent Chief Executive Officer Letter
Agreement, dated March 18, 2025) with Mr. Abizer Gaslightwala pursuant to which Mr. Gaslightwala will serve as our President and Chief Executive
Officer, effective on or around April 21, 2025. Mr. Gaslightwala will earn a base salary, which includes an annual cash bonus target, and receive share-
based payment compensation based on time service and the achievement of specific performance criteria.
March 2025 Private Placement
On March 2, 2025, we entered into the March 2025 Purchase Agreement, pursuant to which we agreed to sell and issue in a private placement (the “March
2025 Offering”) the Shares as described above, or prefunded warrants in lieu thereof (“Pre-Funded Warrants”), and, in each case, Series A Warrants and
Series B Warrants, together with the Pre-Funded Warrants and Series A Warrants, the “Warrants,” and together with the ADSs or Pre-Funded Warrants, the
“Units”)). The Units consist of (i) for investors committing less than $1.0 million in the March 2025 Offering (“Tier 1 Investors”) one ADS or Pre-Funded
Warrant plus a Series A Warrant to purchase one ADS and a Series B Warrant to purchase one ADS, (ii) for investors committing at least $1.0 million but
less than $3.0 million in the March 2025 Offering (“Tier 2 Investors”) one ADS or Pre-Funded Warrant plus a Series A Warrant to purchase 1.25 ADSs
and a Series B Warrant to purchase one ADS, and (iii) for investors committing $3.0 million or more in the March 2025 Offering (“Tier 3 Investors”), one
ADS or Pre-Funded Warrant plus a Series A Warrant to purchase 1.5 ADSs and a Series B Warrant to purchase one ADS. The purchase price per Unit for
investors purchasing ADSs is equal to $0.87 plus (a) $0.25 for Tier 1 Investors, (b) $0.28125 for Tier 2 Investors, or (c) $0.3125 for Tier 3 Investors (the
“ADS Unit Purchase Price”). The purchase price per Pre-Funded Warrant and accompanying Series A Warrant and Series B Warrant is equal to $0.67
(which represents the ADS purchase price minus the $0.20 exercise price for such Pre-Funded Warrant) plus (a) $0.25 for Tier 1 Investors, (b) $0.28125 for
Tier 2 Investors, or (c) $0.3125 for Tier 3 Investors (the “Pre-Funded Unit Purchase Price”).
As part of the March 2025 Offering, Dr. Huh agreed to purchase $1 million of Units, with the purchase price thereof to be satisfied through his agreement
to cancel and extinguish $1.0 million of notes previously issued to him by the Company (the “Note Termination”) for an equal amount of ordinary shares
and warrants.
The net proceeds from the March 2025 Offering, after deducting placement agent fees and other offering expenses payable by us, through the filing of this
Form 10-K were approximately $3.3 million. We expect to receive the remaining cash proceeds of $3.0 million in April 2025.
The placement agent was paid three percent (3%) of the total number of ADSs issued in the March 2025 Offering, including any of the ADSs issuable upon
exercise of the Pre-Funded Warrants (excluding the ADSs issued to Dr. Huh in respect to the Note Termination).
Pipeline Prioritization of the Merged Companies
In May 2024, we announced the completion of a joint portfolio prioritization review pursuant to which the anticipated combined entity, following
completion of the proposed Merger (as defined below), will focus on Peak Bio’s ADC platform technology. As a result, our nomacopan program in HSCT-
TMA was suspended, with enrollment in our pediatric clinical study discontinued due to cost and timeline. Our PAS-nomacopan GA program
72
has also been suspended and we are looking for an external licensing partner. Following the closing of the Merger on November 14, 2024, we expanded
our pipeline of assets spanning early and late development stages with the addition of Peak Bio’s ADC technology platform with novel payload and linker
technologies, as well as the Peak Bio PHP-303 small molecule selective and reversible neutrophil elastase inhibitor. The ADC program includes a novel
pre-clinical ADC candidate AKTX-101 targeting TROP-2. By combining our ADC program with immunotherapy strategies, we aim to develop cutting-
edge solutions for cancer patients. Further, related to PHP-303, we expect to emphasize partnering/collaboration and licensing opportunities with broad
potential impact on patients. We also plan to work closely with the FDA to define the best path for this platform and will pursue opportunities for external
partnering/collaboration and licensing for nomacopan, including as a potential treatment for pediatric HSCT-TMA.
Restructuring and Reduction-in-Force
In May 2024, we implemented a reduction-in-force (the “RIF”) of approximately 67% of our total workforce, as a result of the recently announced program
prioritization under which our nomacopan HSCT-TMA program was suspended. The RIF is part of an operational restructuring plan and includes the
elimination of certain senior management positions and was completed by the end of the second quarter of 2024. The purpose of the restructuring plan,
including the RIF, was to reduce HSCT-TMA related operating costs, while supporting the execution of our long-term strategic plan. For additional
information, refer below to our “Results of Operations” discussion under the heading “Restructuring and Other Costs” and to Note 2 of our consolidated
financial statements included in this Form 10-K.
Merger Agreement
On November 14, 2024, we completed the previously announced business combination contemplated by the Agreement and Plan of Merger (the “Merger
Agreement”) by and among us, Peak Bio and Pegasus Merger Sub, Inc., a Delaware corporation and a wholly-owned subsidiary of Akari (the “Merger
Sub”), as amended by a side letter dated August 15, 2024, pursuant to which, upon the terms and subject to the conditions thereof, Merger Sub was merged
with and into Peak Bio, with Peak Bio surviving such merger as our wholly owned subsidiary.
For additional information on our acquisition of Peak Bio, please refer to Note 3 of our consolidated financial statements included in this Form 10-K.
73
Results of Operations
Comparison of the Years Ended December 31, 2024 and 2023
Overview
During the year ended December 31, 2024, our loss from operations totaled $21.6 million, a 29% increase, compared to a loss from operations of $16.8
million for the year ended December 31, 2023. General and administrative expenses, merger related costs and restructuring costs comprise the majority of
our total operating expenses, as shown in the table below:
Year Ended
December 31,
($ in thousands)
2024
2023
$ Change
%
Operating expenses:
Research and development
$
6,983 $
5,450 $
1,533
28%
General and administrative
9,664
11,356
(1,692)
-15%
Merger-related expenses
3,273
—
3,273
100%
Restructuring and other expenses
1,723
—
1,723
100%
Total operating expenses
21,643
16,806
4,837
29%
Loss from operations
$
(21,643) $
(16,806) $
(4,837)
29%
Research and development expenses
Our research and development expenses are charged to operations as incurred, and we incur both direct and indirect expenses for all of our programs. We
track direct research and development expenses by preclinical and clinical programs, which may include third-party costs such as CROs, contract
laboratories, consulting, and clinical trial costs. We do not allocate indirect research and development expenses, which may include product development
and manufacturing, clinical, medical, regulatory, laboratory (equipment and supplies), personnel, facility and other overhead costs, to specific programs.
During the year ended December 31, 2024, total research and development expenses increased by approximately $1.5 million, or 28%, compared to the
year ended December 31, 2023. The following sets forth research and development expenses for the years ended December 31, 2024 and 2023 by category:
Year Ended
December 31,
($ in thousands)
2024
2023
$ Change
%
Clinical Trials:
HSCT-TMA clinical development (AK901)
$
1,896 $
1,802 $
94
5%
BP clinical development (AK802)
—
(1,073)
1,073
-100%
ADC preclinical development
47
—
47
100%
Chemistry, manufacturing and control
3,497
2,684
813
30%
Other external development expenses
837
1,498
(661)
-44%
Personnel costs
1,988
3,110
(1,122)
-36%
Tax credits
(1,282)
(2,571)
1,289
-50%
Total research and development expenses
$
6,983 $
5,450 $
1,533
28%
HSCT-TMA clinical development (AK901)
These expenses include external expenses that we have incurred in connection with the development of nomacopan for the treatment of pediatric HSCT-
TMA and primarily consist of payments to CROs and other vendors. The 5%
74
increase in expenses incurred during the year ended December 31, 2024, as compared to the year ended December 31, 2023, were primarily due to clinical
trial close-out costs. In May 2024, following the completion of a pipeline prioritization review, we decided to suspend our HSCT-TMA program.
Accordingly, we expect future HSCT-TMA costs to decrease following completion of the wind-down and close-out of the clinical trial.
Bullous Pemphigoid (“BP”) clinical development (AK802)
These expenses previously included external expenses that we incurred in connection with the development of nomacopan for the treatment of BP and
primarily consisted of payments to CROs and other vendors. In 2022, we discontinued our BP clinical program and in connection with the final
reconciliation of clinical trial close-out costs, we recorded a $1.1 million credit during the year ended December 31, 2023. We do not expect to incur
material additional costs related to this program.
ADC preclinical development
These expenses include external expenses that we incurred in connection with the research and discovery of our ADC platform and program(s), and
primarily consist of payments to CROs and other vendors. In 2024, we announced our strategic prioritization of our ADC technology and programs and
expect to incur material additional costs related to this program as we will invest in additional ADC related preclinical research and discovery activities.
Chemistry, manufacturing and control
These expenses include external expenses incurred related to the development and manufacturing of nomacopan for use in clinical trials and preclinical
development of PAS-nomacopan. In general, such expenses primarily consist of payments to contract manufacturing organizations and other vendors for
manufacturing of drug substance (including raw materials), drug product, supplies, and validation, quality assurance and other manufacturing development
activities. The $0.8 million, or 30%, increase in expenses incurred during the year ended December 31, 2024, as compared to the year ended December 31,
2023, is primarily due to the timing of manufacturing and development activities, including increased spending on the development of and preparation for
manufacturing of PAS-nomacopan.
Other external development expenses
These expenses include external expenses, such as payments to contract vendors, that may be related to preclinical development activities, discontinued
programs and unallocated expenses. The $0.7 million, or 44%, decrease in expenses incurred during the year ended December 31, 2024, as compared to the
year ended December 31, 2023, is primarily related to lower costs incurred related to preclinical studies and other development work investigating PAS-
nomacopan for the treatment of GA.
Personnel costs
These expenses include compensation and related costs associated with employees, independent consultants and staffing firms. The $1.1 million, or 36%,
decrease in expenses incurred during the year ended December 31, 2024, as compared to the year ended December 31, 2023, is primarily due to the impact
of the RIF which was announced in May 2024, along with lower costs incurred for consultants. Separation benefits paid to impacted employees are
classified separately under “Restructuring and other expenses”, as discussed below.
Tax credits
We record receipts of U.K. tax credits in the year received as a reduction in research and development expenses. Changes in tax credits received are the
result of eligible research and development expenses incurred in the previous tax year, which can fluctuate depending on timing of and location in which
expenses are incurred.
75
The extent of our future research and development expenditures will be determined based on future funding, and following the outcome of an assessment of
our combined pipeline post-Merger, including program prioritization.
General and administrative expenses
During the year ended December 31, 2024, total general and administrative costs decreased by approximately $1.7 million, or 15%, as compared to the year
ended December 31, 2023. The decrease was primarily due to decreases in (i) personnel costs of approximately $1.0 million resulting from the impact of
the RIF which was announced in May 2024 (excluding separation benefits paid to impacted employees classified separately under “Restructuring and other
expenses” below), (ii) director and officer insurance premiums of approximately $0.3 million, and (iii) consulting and professional fees of approximately
$1.2 million. These decreases were partially offset by increases in other expenses of approximately $0.8 million related to regulatory and legal fees.
Merger-related expenses
Merger-related expenses consist of direct expenses incurred in connection with the completed Merger and are comprised primarily of legal and professional
fees. No such expenses were incurred during the year ended December 31, 2023.
Restructuring and other expenses
Restructuring and other expenses consist primarily of severance and related benefit costs related to workforce reductions incurred in connection with the
RIF, which we implemented in May 2024. Restructuring and other expenses includes $0.3 million of non-cash stock-based compensation expense. No
restructuring expenses were incurred during the year ended December 31, 2023.
Interest income
During each of the years ended December 31, 2024 and 2023, interest income was less than $0.1 million and not material. The nominal decrease in interest
income during the year ended December 31, 2024, as compared to the year ended December 31, 2023, was primarily due to lower cash deposits in interest
bearing accounts. Amounts may fluctuate from period to period due to changes in average cash balances and prevailing interest rates.
Interest expense
Interest expense primarily consists of interest incurred on the May 2024 Convertible Notes, the financing of director and officer insurance premiums and
the notes assumed in the acquisition of the Peak Bio, Inc., which include the April 2023 Convertible Notes, the November 2023 Note, the September 2024
Note and the Notes Payable, Related Party. Refer to Note 6 and Note 9 of our consolidated financial statements included in this Form 10-K.
Interest expense may fluctuate from period to period due to changes in average interest-bearing loans and related interest rates. No interest expense was
recognized during the year ended December 31, 2023.
76
Change in fair value of warrant liabilities
Change in fair value of warrant liabilities represents non-cash warrant revaluation gains or losses related to the remeasurement of our liability-classified
instruments, namely our September 2022 Warrants and the warrants we assumed on November 14, 2024 in connection with our acquisition of Peak Bio
(the “Peak Bio Warrants”), which are more fully described in Note 4 of our consolidated financial statements included in this Form 10-K. Due to the nature
of and inputs in the model used to assess the fair value of our outstanding September 2022 Warrants and Peak Bio Warrants, it is not unusual to experience
significant fluctuations during each remeasurement period. These fluctuations may be due to a variety of factors, including changes in our stock price and
changes in estimated stock price volatility over the remaining life of the warrants.
During the years ended December 31, 2024 and 2023, we recorded a change in the fair value of warrant liabilities, representing a non-cash warrant
revaluation gain of approximately $2.1 million and $6.6 million, respectively. Change in the fair value of the warrant liabilities and resulting warrant
revaluation gain for the year ended December 31, 2024 was driven by the decrease in our stock price and decreases in the expected term and expected
volatility assumptions during the reporting period, offset by the recognition of warrant liabilities relating to the assumed warrants resulting from the
acquisition of Peak Bio. Change in the fair value of the warrant liabilities and resulting warrant revaluation gain for the year ended December 31, 2023 was
driven primarily by the decrease in our stock price and decreases in the expected term and expected volatility assumptions during the reporting period.
Foreign currency exchange gain, net
During each of the years ended December 31, 2024 and 2023, we recorded a net foreign currency exchange gain of approximately less than $0.1 million.
Exchange gains and losses can fluctuate significantly from period to period due to changes in exchange rates, as well as the volume and timing of
expenditures and related payments denominated in foreign currencies.
Other expense, net
During each of the years ended December 31, 2024 and 2023, we recorded a net other expense of less than $0.1 million. Such expenses are not material to
our results of operations.
Net Loss Applicable to Common Shareholders
As a result of the factors discussed above, our net loss applicable to common shareholders for the years ended December 31, 2024 and 2023 was $19.8
million and $10.0 million, respectively.
77
Financial Condition, Liquidity and Capital Resources
Sources of Liquidity
Since inception, we have incurred substantial losses, and we have primarily funded our operations with proceeds from the sale of equity securities,
including ordinary shares, warrants and pre-funded warrants, and convertible notes. At December 31, 2024, we had $2.6 million in cash and an
accumulated deficit of $247.3 million. To date, we have not generated any revenue.
We have devoted substantially all of our efforts to research and development, including clinical trials, and we have not commercialized any products. Our
research and development activities, together with our general and administrative expenses, are expected to continue to result in substantial operating losses
for the foreseeable future. These losses, among other things, have had and will continue to have an adverse effect on our shareholders’ equity, total assets
and working capital. Due to the numerous risks and uncertainties associated with developing drug candidates and, if approved, commercial products, we
are unable to predict the extent of any future losses, whether or when any of our drug candidates will become commercially available or when we will
become profitable, if at all. Our future capital requirements will depend on many factors, including:
•
the progress and costs of our preclinical studies, clinical trials and other discovery, research and development activities;
•
the costs associated with the integration activities related to the Merger;
•
the scope, prioritization and number of our clinical trials and other research and development programs;
•
the amount of revenues and contributions we receive under future licensing, development and commercialization arrangements with respect to
our product candidates;
•
the costs of the development and expansion of our operational infrastructure;
•
the costs and timing of obtaining regulatory approval for our product candidates;
•
the costs of filing, prosecuting, enforcing and defending patent claims and other intellectual property rights;
•
the costs and timing of securing manufacturing arrangements for clinical or commercial production;
•
the costs of contracting with third parties to provide sales and marketing capabilities for us;
•
the magnitude of our general and administrative expenses; and
•
any cost that we may incur under future in- and out-licensing arrangements relating to and current or future product candidates.
We currently do not have any commitments for future external funding. We will need to raise additional funds, and we may decide to raise additional funds
even before we need such funds if the conditions for raising capital are favorable. Until we can generate significant recurring revenues, we expect to satisfy
our future cash needs through debt or equity financings, credit facilities or by out-licensing arrangements of our product candidates. The sale of equity or
convertible debt securities may result in dilution to our existing shareholders. The incurrence of indebtedness would result in increased fixed obligations
and could also subject us to covenants that restrict our operations. We cannot be certain that additional funding, whether through grants, financings, credit
facilities or out-licensing arrangements, will be available to us on acceptable terms, if at all. If sufficient funds are not available, we may be required to
delay, reduce the scope of or eliminate research or development plans for, or commercialization efforts with respect to, one or more applications of our
product candidates, or obtain funds through arrangements
78
with collaborators or others that may require us to relinquish rights to certain potential products that we might otherwise seek to develop or commercialize
independently.
March 2025 Private Placement
In March 2025, we entered into the March 2025 Purchase Agreement with certain investors, pursuant to which we agreed to sell and issue in a private
placement an aggregate of a combination of Units. For more information, see “Item 7. Management’s Discussion and Analysis of Financial Condition and
Results of Operations—Recent Developments—March 2025 Offering.”
November 2024 Private Placement
In November 2024, we sold Series D Warrants in connection with the November 2024 Private Placement. For more information, see “Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations— Recent Sales of Unregistered Securities— November 2024
Private Placement.”
May 2024 Private Placement
In May 2024, we entered into a definitive purchase agreement with certain investors, Dr. Prudo and Dr. Patel, pursuant to which we sold and issued in a
private placement an aggregate of 4,029,754 ADSs, and Series C Warrants (the “Series C Warrants”) to purchase up to 4,029,754 ADS, at a per unit price
of $1.885 per ADS and Series C Warrant for aggregate gross proceeds of approximately $7.6 million (the “May 2024 Private Placement”). The Series C
Warrants have 3-year terms ranging from May 31, 2027 to June 21, 2027 and have cashless exercise provisions in limited circumstances. The Series C
Warrants (other than those issued to Dr. Prudo and Dr. Patel) have an exercise price of $1.76 per ADS. The Series C Warrants issued to Dr. Prudo and Dr.
Patel have an exercise price of $1.79 per ADS. Net proceeds from the May 2024 Private Placement were approximately $7.0 million after deducting
placement agent fees and other expenses.
May 2024 Convertible Notes
In May 2024, we entered into unsecured convertible promissory notes (the “May 2024 Notes”) with Dr. Prudo, our Chairman at the time, and our then
Interim President and Chief Executive Officer and director, Dr. Patel, for an aggregate of $1.0 million in gross proceeds. The May 2024 Notes bear interest
at 15% per annum, which may be increased to 17% upon the occurrence of certain events of default as described therein, and the principal and all accrued
but unpaid interest is due on the date that is the earlier of (a) ten (10) business days following our receipt of a U.K. research and development tax credit
from HM Revenue and Customs, and (b) November 10, 2024. Provided, however, at any time or times from the date of the note and until the tenth business
day prior to closing of the acquisition, the note holders are entitled to convert any portion of the outstanding and unpaid amount, including principal and
accrued interest, into our ADSs at a fixed conversion price equal to $1.59, representing the Nasdaq official closing price of our ADSs on the issuance date,
subject to certain restrictions.
In October 2024, Drs. Prudo and Patel each elected to convert $125,000 of principal and accrued interest into our ADSs at a conversion price of $1.59 per
ADS. These ordinary shares remain unissued as of December 31, 2024 and are expected to be issued during the second quarter of 2025. The remaining
unconverted aggregate principal balance of the May 2024 Notes, or $750,000, was repaid in cash with proceeds from our U.K. research and development
tax credit from HM Revenue and Customs.
March 2024 Private Placement
In March 2024, we entered into a definitive purchase agreement with certain existing investors, pursuant to which we sold and issued in a private placement
an aggregate of 1,320,614 ADSs at $1.48 per ADS, for aggregate gross proceeds of approximately $2.0 million (the “March 2024 Private Placement”). Net
proceeds from the March 2024 Private Placement were approximately $1.7 million after deducting placement agent fees and other expenses.
December 2023 Private Placement
79
In December 2023, we entered into purchase agreements to sell, in a private placement, to existing investors, Dr. Prudo, our Chairman at the time, and our
then Interim President and Chief Executive Officer and director, Dr. Patel, (the “December 2023 Private Placement”) an aggregate of 947,868 ADSs at
$2.11 per ADS, for aggregate gross proceeds of approximately $2.0 million. Net proceeds from the December 2023 Private Placement were approximately
$1.8 million after deducting placement agent fees and other expenses.
September 2023 Private Placement
In September 2023, we entered into purchase agreements to sell in a private placement to existing investors, including Dr. Ray Prudo, our Chairman at the
time, and Ms. Rachelle Jacques, our then President and Chief Executive Officer (the “September 2023 Private Placement”) an aggregate of 551,816 ADSs
at $3.30 per ADS, and pre-funded warrants (the “Pre-Funded Warrants”) to purchase up to 48,387 ADSs at a purchase price per Pre-Funded Warrant of
$3.10, for aggregate gross proceeds of approximately $2.0 million. The Pre-Funded Warrants are exercisable at an exercise price of $0.20 per ADS and will
not expire until exercised in full. The September 2023 Private Placement closed in October 2023 resulting in net proceeds of approximately $1.7 million
after deducting placement agent fees and other expenses.
March 2023 Registered Direct Offering
In March 2023, we sold to certain accredited and institutional investors, led by our existing investors, including Dr. Prudo, our Chairman at the time, an
aggregate of 1,333,333 ADSs in a registered direct offering (the “March 2023 Registered Offering”), at $3.00 per ADS for aggregate gross proceeds of
approximately $4.0 million. Net proceeds from the “March 2023 Registered Offering” were approximately $3.5 million after deducting placement agent
fees and other expenses.
Funding Requirements
As of the date of this report, we expect our existing cash, which includes gross proceeds of approximately $6.6 million received in connection with the
March 2025 Private Placement (as defined above), will be sufficient to fund our operations into September 2025. While we have additional funding
activities in progress to fund our operations, we will need to raise additional capital to continue to fund our operations and service our obligations in the
future. If we are unable to raise additional capital when needed, we will not be able to continue as a going concern. We do not currently have any products
approved for sale and do not generate any revenue from product sales. We are currently seeking and expect to continue to seek additional funding through
financings of equity and/or debt securities. We may also engage in strategic research and development collaborations, pre-clinical and clinical funding
arrangements, the sale or license of technology assets, and/or other strategic alternatives.
Financing may not be available to us when we need it, or on favorable or acceptable terms, or at all. We could be required to seek funds through means that
may require us to relinquish rights to some of our technologies, drug candidates or drugs that we would otherwise pursue on our own. In addition, if we
raise additional funds by issuing equity securities, our then existing shareholders may experience dilution. The terms of any financing may adversely affect
the holdings or the rights of existing shareholders. An equity financing that involves existing shareholders may cause a concentration of ownership. Debt
financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional
debt, making capital expenditures or declaring dividends, and are likely to include rights that are senior to the holders of our Ordinary Shares. Any
additional debt or equity financing may contain terms which are not favorable to us or to our shareholders, such as liquidation and other preferences, or
liens or other restrictions on our assets. As discussed in Note 11 to the consolidated financial statements included elsewhere in this Form 10-K, additional
equity financings may also result in cumulative changes in ownership over a three-year period in excess of 50% which would limit the amount of net
operating loss and tax credit carryforwards that we may utilize in any one year.
If we are unable to raise additional capital when required or on acceptable terms, we may be required to:
•
significantly delay, scale back, or discontinue the development or commercialization of our product candidates;
80
•
seek strategic alliances for research and development programs at an earlier stage than otherwise would be desirable or that we otherwise
would have sought to develop independently, or on terms that are less favorable than might otherwise be available in the future;
•
dispose of technology assets, including current product candidates, or relinquish or license on unfavorable terms, our rights to technologies or
any of our product candidates that we otherwise would seek to develop or commercialize ourselves;
•
pursue the sale of our company to a third party at a price that may result in a loss on investment for our shareholders; or
•
file for bankruptcy or cease operations altogether.
Any of these events could have a material adverse effect on our business, operating results, and prospects.
We believe the key factors which will affect our ability to obtain funding are:
•
the receptivity of the capital markets to financings by biotechnology companies generally and companies with drug candidates and
technologies similar to ours specifically;
•
the receptivity of the capital markets to any in-licensing, product acquisition or other transaction we may enter into or attempt to enter into;
•
our ability to successfully integrate operations with Peak Bio following the Merger and realize
anticipated benefits of the Merger;
•
the results of our pre-clinical and clinical development activities in our drug candidates we develop on the timelines anticipated;
•
competitive and potentially competitive products and technologies and investors’ receptivity to our drug candidates we develop and the
technology underlying them in light of competitive products and technologies; and
•
the cost, timing, and outcome of regulatory reviews.
In addition, increases in expenses or delays in clinical development may adversely impact our cash position and require additional funds or cost reductions.
Based on our recurring losses from operations incurred since inception, our expectation of continuing operating losses for the foreseeable future, negative
operating cash flows for the foreseeable future, and the need to raise additional capital to finance its future operations, we have concluded that there is
substantial doubt regarding our ability to continue as a going concern within one year after the date that our consolidated financial statements, included
elsewhere in this Form 10-K (such consolidated financial statements, the “consolidated financial statements”) are issued. Because of these uncertainties, the
accompanying consolidated financial statements have been prepared assuming that we will continue as a going concern, which contemplates the realization
of assets and the satisfaction of liabilities in the normal course of business. As such, the accompanying consolidated financial statements do not reflect any
adjustments relating to the recoverability and classification of recorded assets and liabilities that might be necessary if we are unable to continue as a going
concern.
Cash Flows
The following table summarizes our sources and uses of cash for each of the periods presented:
81
Year Ended
December 31,
(In thousands)
2024
2023
Net cash (used in) provided by:
Net cash used in operating activities
$
(12,552) $
(16,432)
Net cash provided by investing activities
382
—
Net cash provided by financing activities
10,988
7,020
Effect of exchange rates on cash
(4)
7
Net decrease in cash
$
(1,186) $
(9,405)
Operating Activities. The net cash used in operating activities for the periods presented consists primarily of our net loss adjusted for non-cash charges and
changes in components of working capital. The decrease in cash used in operating activities during the year ended December 31, 2024, as compared to the
year ended December 31, 2023, was primarily due to increases in accounts payable and accrued expenses resulting from the timing of cash outlays.
Investment Activities. The net cash provided by investing activities during the year ended December 31, 2024 is solely related to the Merger. There were no
investing activities during the year ended December 31, 2023.
Financing Activities. Net cash provided by financing activities primarily consisted of the following:
•
For the year ended December 31, 2024, an aggregate of $11.8 million in net proceeds received from the issuance of debt and equity securities,
including (i) $1.7 million in net proceeds from the March 2024 Private Placement, (ii) $1.0 million in net proceeds from the issuance of the May
2024 Convertible Notes, (iii) $7.0 million in net proceeds from the May 2024 Private Placement, and (iv) $2.8 million in net proceeds from the
November 2024 Private Placement, partially offset by repayment of $0.75 million towards the May 2024 Convertible Notes and $1.1 million in
payments related to our short-term insurance premium financing arrangement; and
•
For the year ended December 31, 2023, an aggregate of $7.0 million in net proceeds received from various offerings of equity securities,
including (i) $3.5 million in net proceeds from the March 2023 Registered Direct Offering, (ii) $1.7 million in net proceeds from the September
2023 Private Placement, and (iii) $1.8 million in net proceeds from the December 2023 Private Placement.
Material Cash Requirements
Insurance Financing Obligations
In January 2025, we entered into a short-term financing arrangement with a third-party vendor to finance insurance premiums. The aggregate amount
financed under this agreement was $0.5 million which is scheduled to be paid in monthly installments through November 2025.
Debt Obligations
In November 2024 as part of the Merger, we assumed convertible notes and notes payable with third parties, and notes payable with a related party, through
the acquisition of Peak Bio Inc., as more fully described in Note 6 and Note 9, respectively, to our consolidated financial statements appearing elsewhere in
this Form 10-K. These obligations are expected to result in payments of approximately $2.2 million.
Other
We enter into a variety of agreements and financial commitments in the normal course of business. The terms generally provide us the option to cancel,
reschedule and adjust our requirements based on our business needs, prior to the delivery of goods or performance of services. However, it is not possible
to predict the amount of future
82
payments under these agreements due to the conditional nature of our obligations and the unique facts and circumstances involved in each particular
agreement.
83
Critical Accounting Estimates
This management’s discussion and analysis of financial condition and results of operations is based on our consolidated financial statements, which have
been prepared in accordance with U.S. GAAP. In doing so, we must make estimates and assumptions that affect our reported amounts of assets, liabilities
and expenses, as well as related disclosure of contingent assets and liabilities. On an ongoing basis, management evaluates its estimates and judgments,
including, but not limited to, those related to (i) stock-based compensation, (ii) fair value of warrants classified as liabilities, (iii) research and development
prepayments, accruals and related expenses, (iv) the valuation allowance for deferred income taxes, (v) accounting for the acquisition of Peak Bio Inc., and
(vi) the valuation of intangible assets. Management bases its estimates and judgments on historical experience and on various other factors that are believed
to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that
are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
We regard an accounting estimate or assumption underlying our financial statements as a “critical accounting estimate” if:
•
the nature of the estimate or assumption is material due to the level of subjectivity and judgment necessary to account for highly uncertain
matters or the susceptibility of such matters to change; and
•
the impact of the estimates and assumptions on financial condition or operating performance is material.
While our significant accounting policies are described in more detail in Note 2 to our consolidated financial statements appearing elsewhere in this Form
10-K, we believe the following accounting policies to be the most critical to the judgments and estimates used in the preparation of our financial
statements.
Stock-based compensation
We measure all stock-based awards granted to employees, directors and non-employees based on the estimated fair value on the date of grant and
recognizes compensation expense of those awards over the requisite service period, which is generally the vesting period of the respective awards.
Forfeitures are accounted for as they occur. We classify stock-based compensation expense in our consolidated statements of operations and comprehensive
loss in the same manner in which the award recipient’s payroll costs are classified or in which the award recipient’s service payments are classified.
The fair value of each restricted ordinary share award is estimated on the date of grant based on the fair value of our Ordinary Shares on that same date.
The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model, which requires inputs based on certain
assumptions, including the expected stock price volatility, the expected term of the award, the risk-free interest rate, and expected dividends. We estimate
our expected stock price volatility based on the historical volatility of our ADSs, considering the expected term of the options. The expected term of our
options has been determined utilizing the “simplified” method for awards that qualify as “plain-vanilla” options. The risk-free interest rate is determined by
reference to the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award.
The expected dividend yield is based on the fact that we have never paid cash dividends on ordinary shares and do not expect to pay any cash dividends in
the foreseeable future.
Fair value of warrants classified as liabilities
We utilize a Black-Scholes model to value our outstanding September 2022 Warrants and the Peak Bio Warrants, at each reporting period, with changes in
fair value recognized in the consolidated statements of operations and comprehensive loss. The estimated fair value of warrant liabilities is determined
using Level 3 inputs. Inherent in an options pricing model are assumptions related to expected share-price volatility, expected life, risk-free interest rate and
dividend yield. We estimate the expected volatility of our stock price based on historical volatility of our ADSs, considering the expected remaining life of
the September 2022 Warrants and the Peak Bio Warrants. The risk-free interest rate is based on the U.S. Treasury zero-coupon yield curve on the valuation
date for a maturity similar to the expected remaining life of the September 2022 Warrants and the Peak Bio Warrants. The expected life of the
84
September 2022 Warrants and the Peak Bio Warrants is assumed to be equivalent to their remaining contractual term. The dividend rate is based on our
historical rate, which we anticipate to remain at zero. Due to the nature of and inputs in the model used to assess the fair value of the warrants, it is not
unusual to experience significant fluctuations during each remeasurement period.
Research and development prepayments, accruals and related expenses
As part of the process of preparing our financial statements, we are required to estimate our accrued and prepaid expenses for research and development
activities performed by third parties, including CROs and clinical investigators. These estimates are made as of the reporting date of the work completed
over the life of the individual study in accordance with agreements established with CROs and clinical trial sites. Some CROs invoice on a monthly basis,
while others invoice upon achievement of milestones and the expense is recorded as services are rendered. We determine the estimates of research and
development activities incurred at the end of each reporting period through discussion with internal personnel and outside service providers as to the
progress or stage of completion of trials or services, as of the end of each reporting period, pursuant to contracts with clinical trial centers and CROs and
the agreed upon fee to be paid for such services. We periodically confirm the accuracy of our estimates with the service providers and make adjustments if
necessary.
Income Tax
When determining if the realization of a deferred tax asset is likely to assess the need to record a valuation allowance, estimates and judgment are required.
We consider all available evidence, both positive and negative, including estimated future taxable earnings, ongoing planning strategies, future reversals of
existing temporary differences and historical operating results. Additionally, changes to tax laws and statutory tax rates can have an impact on our
determination. Our intention is to evaluate the realizability of our deferred tax assets quarterly.
We follow the provisions of ASC 740 “Accounting for Uncertainty in Income Taxes” (“ASC 740”), which prescribes recognition thresholds that must be
met before a tax position is recognized in the financial statements and provides guidance on de-recognition, classification, interest and penalties, accounting
in interim periods, disclosure, and transition. Under ASC 740, an entity may only recognize or continue to recognize tax positions that meet a “more-likely-
than-not” threshold. Interest and penalties related to uncertain tax positions are recognized as general and administrative expense.
Peak Bio Inc. Acquisition
On March 4, 2024, we entered into the Merger Agreement with Peak Bio and Merger Sub. On November 14, 2024, we completed the business combination
contemplated by the Merger Agreement, pursuant to which, Merger Sub merged with and into Peak Bio, with Peak Bio surviving the acquisition as a
wholly-owned subsidiary of Akari.
In connection with the acquisition, we issued a total of 12,613,942 Akari American Depositary Shares (“Akari ADSs”) which reflected the conversion of
each issued and outstanding share of Peak Bio common stock, par value $0.0001 (“Peak Bio Common Stock”) into the right to receive Akari ADSs
representing a number of Akari ordinary shares, par value $0.0001 per share (“Akari Ordinary Shares”) equal to the exchange ratio calculated in
accordance with the Merger Agreement (the “Exchange Ratio”). Each warrant to purchase capital stock of Peak Bio (“Peak Warrant”) and option to acquire
shares of Peak Common Stock (“Peak Option”) was converted into warrants to purchase a number of Akari Ordinary Shares or Akari ADSs, as determined
by Akari (“Adjusted Warrants”) and options to purchase a number of Akari Ordinary Shares or Akari ADSs, as determined by Akari (“Adjusted Options”),
respectively, to purchase a number of Akari Ordinary Shares or Akari ADSs, based on the Exchange Ratio. The Adjusted Warrants and the Adjusted
Options have substantially similar terms and conditions as were applicable to such Peak Warrants and Peak Options immediately prior to the Closing.
The estimated fair value of the Adjusted Warrants of $1.8 million at the acquisition closing date was calculated using the Black Scholes Option Pricing
Model. The following assumptions were used to determine the fair value of the assumed warrants as of November 14. 2024:
85
Peak Bio Assumed Warrants
November 2022
April 2023
Stock (ADS) price
$
2.23
$
2.23
Exercise price
$
39.18
$
2.04
Expected term (in years)
3.0
3.5
Expected volatility
86.4%
84.1%
Risk-free interest rate
4.3%
4.3%
Expected dividend yield
—
—
We assumed Peak Bio's outstanding stock option awards and granted options to purchase 1,618,081 ADSs as replacement awards for the Peak Bio
Adjusted Options. We determined the Peak Bio Adjusted Options were not probable of vesting prior to the consummation of the Merger Agreement. For
this reason, the fair value of the replacement awards was not included as consideration transferred in the business combination. Instead, the entire fair value
of the adjusted options will be recognized as compensation cost in the post-combination period. The estimated fair value of the Adjusted Options of $1.8
million at the acquisition closing date was calculated using the Black Scholes Option Pricing Model. The valuation assumptions used in the Black Scholes
Option Pricing Model include our stock price on the date of closing of $2.23, volatility ranging from 84.1% to 86.4%, an expected dividend yield of 0.0%,
an expected term ranging from 0.20 years to 5.32 years, and a risk-free interest rate ranging from 4.3% to 4.6%.
We recognized in-process research and development (“IPR&D”) in connection with the acquisition. The fair value of the acquired IPR&D was determined
based upon the income approach using a multi period excess earnings model which included a forecast of the expected cash flows, as discussed in more
detail under “Valuation of Intangible Assets.”
Valuation of Intangible Assets
In a business combination, the fair value of acquired IPR&D is capitalized and accounted for as indefinite-lived intangible assets, and not amortized until
the underlying project receives regulatory approval, at which point the intangible assets will be accounted for as definite-lived intangible assets or
discontinued. If discontinued, the intangible assets will be written off. R&D costs incurred after the acquisition are expensed as incurred.
The estimated fair values of identifiable intangible assets were determined using the multi-period excess earnings method, which is a valuation
methodology that provides an estimate of the fair value of an asset based on market participant expectations of the cash flows an asset would generate over
its remaining useful life. The projected discounted cash flow models used to estimate the fair value of assets of our IPR&D reflect significant assumptions
and are level 3 unobservable data regarding the estimates a market participant would make in order to evaluate a drug development asset, including the
following:
•
Probability of clinical trial success and obtaining regulatory approval;
•
Forecasted gross sales from up-front and milestone payments, royalties and product sales; and
•
A discount rate reflecting our weighted average cost of capital and specific risk inherent in the underlying assets.
The valuation of our acquired IPR&D has significant measurement uncertainty given the lack of historical data on which to base assumptions. We engaged
a third-party valuation firm to assist us with the valuation of the IPR&D. Assumptions are difficult to make accurately and were mainly derived from life
science studies, industry data, and peer company information that our management believes represent appropriate comparable data.
We test indefinite-lived intangible assets for impairment by first assessing qualitative factors to determine whether it is more likely than not that the fair
value is less than its carrying amount. If we conclude it is more likely than not that the fair value is less than its carrying amount, a quantitative impairment
test is performed.
Intangible Assets Impairment
86
We recognized goodwill and other intangible assets comprised of IPR&D during the year ended December 31, 2024 in connection with our acquisition of
Peak Bio (collectively, our “Intangible Assets”).
For our Intangible Assets, we have the option to first assess qualitative factors to determine whether the fair value of our reporting unit is "more likely than
not" less than its carrying value. For IPR&D, the qualitative assessment focuses on key inputs, assumptions and rationale utilized in the establishment of
the carrying value. When performing a quantitative analysis, we use our overall market capitalization as a basis to determine the fair value of our reporting
unit. When the carrying value of our reporting unit exceeds its fair value, an impairment charge is recorded in current earnings for the difference up to the
carrying value of the Intangible Assets recorded.
We manage our operations as a single operating segment for the purposes of assessing performance, making operating decisions and allocating resources,
resulting in a single reportable segment, or reporting unit. Subsequent to our acquisition of Peak Bio, the fair market value of our ADSs experienced a
significant decline. As a result, we performed a qualitative assessment as of December 31, 2024 to determine whether our Intangible Assets were impaired.
In our qualitative assessment, we considered relevant facts and circumstances for our reportable segment, including (i) overall financial performance,
including recent fundraising activities and our strategic acquisition of Peak Bio (ii) industry and market conditions in which we operate, (iii) changes in the
reporting unit carrying value since prior year, (iv) macroeconomic conditions, and (v) changes in the fair market value of our ADSs.
Based on the results of our qualitative assessment, we concluded that it is not more likely than not that the fair value of our reporting unit is less than its
carrying value.
Recent Accounting Pronouncements
We periodically monitor and review all current accounting pronouncements and standards from the Financial Accounting Standards Board (“FASB”) for
applicability to our operations. We do not expect the adoption of accounting pronouncements recently issued to have a material impact on our results of
operations, financial position or cash flow.
87
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
We are exposed to a variety of risks, including changes in foreign currency exchange risk and interest rates.
Currency Exchange Rate Sensitivity
The results of our operations are subject to currency transactional risk. Operating results and financial position are reported in local currencies and then
translated into U.S. dollars at the applicable exchange rate for preparation of our consolidated financial statements. The fluctuation of the U.S. dollar in
relation to the British Pound, Euro, Swiss Franc and Korean Won will therefore have an impact upon profitability of our operations and may also affect the
value of our assets and the amount of shareholders’ equity.
Our functional currency is the U.S. dollar and our activities are predominantly executed using both the U.S. dollar, Euro and British Pound. We have done
a limited number of financings, and we are not subject to significant operational exposures due to fluctuations in these currencies. We have not entered into
any agreements, or purchased any instruments, to hedge any possible currency risks at this time.
Interest Rate Sensitivity
We currently have short-term promissory notes, related party debt requiring interest payment and our short-term insurance premium financing arrangement
we entered into in January 2025, as more fully described above. This does not require us to consider entering into any agreements or purchasing any
instruments to hedge against possible interest rate risks at this time. Our interest-earning investments are short-term. Thus, any reductions in future income
or carrying values due to future interest rate declines are believed to be immaterial.
Based on a hypothetical ten percent adverse movement in interest rates, the potential losses in future earnings, fair value of risk sensitive financial
instruments, and cash flows are immaterial to our earnings, although the actual effects may differ materially from the hypothetical analysis.
Item 8. Financial Statements and Supplementary Data.
All financial statements required to be filed hereunder are filed under Item 15(a) of this Form 10-K and are incorporated herein by reference.
We are a smaller reporting company, as defined by Rule 12b-2 of the Exchange Act, and therefore we are permitted to provide a scaled Item 8 disclosure.
There have been no retrospective changes to our consolidated statements of operations for any of the quarters within the two years ended December 31,
2024.
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.
None.
88
Item 9A. Controls and Procedures.
Disclosure Controls and Procedures
Our management, with the participation of our principal executive officer and principal financial officer, evaluated the effectiveness of our disclosure
controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of December 31, 2024. In designing and evaluating our
disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only
reasonable assurance of achieving their objectives and our management necessarily applied its judgment in evaluating the cost-benefit relationship of
possible controls and procedures. Based on this evaluation, our principal executive officer and principal financial officer concluded that our disclosures
controls and procedures were not effective at a reasonable assurance level as of December 31, 2024, due to the material weaknesses described below in
Management's Annual Report on Internal Control over Financial Reporting.
a)
Management’s Annual Report on Internal Control over Financial Reporting
Our management, with the participation of our principal executive officer and principal financial officer, is responsible for establishing and maintaining
adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) and 15d-15(f) promulgated under
the Exchange Act as a process designed by, or under the supervision of, our principal executive and principal financial officers and effected by our Board
of Directors, management, and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:
•
Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;
•
Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with
generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our
management and directors; and
•
Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could
have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems
determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Projections of any
evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
Management assessed the effectiveness of our internal control over financial reporting as of December 31, 2024. In making this assessment, management
used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control — Integrated Framework
(2013). Based on its assessment, management concluded that as of December 31, 2024, our internal control over financial reporting was not effective at the
reasonable assurance level due to the material weaknesses described below.
A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility
that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.
During 2024, we migrated our ERP system to QuickBooks and our payables management to Bill.com with the intention of introducing manual controls to
mitigate the known control deficiencies inherent in such systems. In addition, we acquired Peak Bio in November 2024. Due to the reduction-in-force
announced in May 2024 and other personnel changes during the year, we did not have sufficient personnel available to lead the implementation of the
89
necessary manual controls relating to QuickBooks, Bill.com and the accounting for the business combination. As a result of these 2024 initiatives, and the
business combination that closed in November 2024, management identified three material weaknesses.
Lack of Formalized Controls over Information Technology General Controls (QuickBooks)
We did not design and maintain effective IT general controls (“ITGCs”) for information systems that are relevant to the preparation of our financial
statements. Specifically, we did not design and maintain:
(i)
Program and data change management controls to ensure that program and data changes are identified, tested, authorized, and implemented
appropriately;
(ii)
User access controls to ensure a secure access environment through appropriate segregation of duties that adequately restrict user and
privileged access to appropriate personnel;
(iii)
Computer operations controls to maintain data integrity and ensure that processing and transfer of data, and data backups and data recovery
are monitored; and
(iv)
Program development controls to ensure that new software development/enhancements are tested, authorized, and implemented appropriately.
Lack of Formally Designed and Implemented Internal Controls – Purchase to Pay (Bill.com)
We have not adequately designed or maintained effective internal controls in the purchase to pay process, specifically to monitor the completeness and
accuracy of vendor data, the approval and release of vendor payments, and appropriate segregation of duties.
Lack of Effective Controls over Business Combination Accounting
We have not adequately designed or maintained effective internal controls associated with our recent business combination, specifically, to monitor the
completeness of due diligence procedures, estimates and assumptions used in the valuation of acquired intangible assets, technical accounting matters and
the review and approval process of reconciliations and journal entries.
Management’s Plan to Remediate the Material Weaknesses
Management, with oversight from the Audit Committee, is taking steps to remediate the control deficiencies which resulted in the material weaknesses
described above by implementing changes to our internal control over financial reporting. Our plans for remediation include, but are not limited to, the
efforts summarized below, which are in the process of being implemented:
Information Technology Controls
We will focus on the following areas to mitigate the material weakness associated with QuickBooks:
•
Access Security: For user account creation and provisioning to in-scope systems, a designated system administrator will grant access only
upon request. The designated system administrator and appropriate approvers will consider segregation of duties access conflicts when
granting new access. For de-provisioning, the system administrator will remove users in a timely manner upon appropriate notification.
Further, to maintain integrity of access privileges, the appropriate personnel will perform periodic user access reviews of in-scope systems to
ensure access remains appropriate, ensure any inappropriate access is identified regularly, and perform lookback procedures as needed to
identify the impact of inappropriate activity.
•
Program Changes: Management will identify a system administrator who will manage change management to enforce appropriate
segregation of duties and change management controls.
90
Purchase to Pay Controls
We will perform the following over the subsequent reporting periods to mitigate the material weakness associated with Bill.com:
•
We will design and implement control activities related to vendor data and vendor payment reviews which will be completed on a periodic
basis (at least quarterly).
•
Perform a segregation of duties assessment to identify the systematic conflicts and/or operational incompatible duties and evaluate the impact
on our internal control environment.
•
Design and implement controls over the review of service organization control reports for key service organizations (as available) and map the
complementary user entity controls to our controls. This includes evaluating any control deficiencies identified at the service organization and
the impact on our control environment.
Business Combination Accounting
We are in the process of designing and implementing control activities to ensure that there is an appropriate periodic assessment of our business
combination accounting policies and procedures, and other complex technical accounting matters. Additionally, we are consulting with accounting experts
to provide appropriate guidance in connection with accounting for business combinations. Our Chief Executive Officer, Chief Financial Officer, and
management will continue to monitor the effectiveness of this remediation plan and refine it as appropriate.
We expect to expend efforts to remediate the material weaknesses as described above through fiscal year 2025. We believe that the implementation of the
above steps will allow us to address the deficient controls within our internal control environment, which will facilitate the remediation of the material
weaknesses. As we continue to evaluate and work to improve our internal control over financial reporting, we will take additional measures to address
control deficiencies, and we may modify certain of the remediation measures described above. Following our design and implementation of our
remediation efforts, we will need to demonstrate their operating effectiveness. We will not be able to consider the material weaknesses remediated until the
applicable remedial controls operate for a sufficient period of time and management has concluded, through testing, that our controls are operating
effectively.
b)
Attestation Report of the Registered Public Accounting Firm
Not Applicable.
c)
Changes in Internal Control over Financial Reporting
Other than the material weaknesses described above, there have been no changes in our internal control over financial reporting occurred during the fiscal
quarter ended December 31, 2024 that has materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Item 9B. Other Information.
Not applicable.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.
Not applicable.
91
PART III
Item 10. Directors, Executive Officers and Corporate Governance.
Information about our Directors
Our Articles of Association provide that our business is to be managed by the board of directors (subject to any directions made by the members of the
Company by special resolution). Our board of directors is divided into three classes for purposes of election (Class A Directors, who serve a one year term
before being subject to re-election at our annual general meeting; Class B Directors, who serve a two year term before being subject to re-election at the
annual general meeting; and Class C Directors who serve a three year term before being subject to re-election at the annual general meeting, provided also
that in any two year period, a majority of the board must stand for re-election).
Set forth below is information about each member of our board of directors, including (a) the year in which each director first became a director, (b) their
age as of March 31, 2025, (c) their positions and offices with us, (d) their principal occupations and business experience during at least the past five years
and (e) the names of other public companies for which they currently serve, or have served within the past five years, as a director. We have also included
information about each director's specific experience, qualifications, attributes, or skills that led our board of directors to conclude that such individual
should serve as one of our directors. We also believe that all of our directors have a reputation for integrity, honesty and adherence to high ethical
standards. They each have demonstrated business acumen and an ability to exercise sound judgment, as well as a commitment of service to our Company
and our board of directors.
The following table identifies our directors and their ages as of March 31, 2025:
Committee Memberships (1)
Name
Age
Relationship
Audit
Comp
N&CG
Class – Election Year
Hoyoung Huh, M.D.
55
Chair of the Board
X
Class A Director - 2025
Ray Prudo, M.D.
80
Director
X
Class C Director - 2025
Samir R. Patel, M.D.
55
Director
Class A Director - 2025
Robert Bazemore
57
Director
X
X
C
Class A Director - 2025
James Neal
69
Director
X
C
Class A Director - 2025
Sandip I. Patel
58
Director
C
X
Class A Director - 2025
Abizer Gaslightwala
51
Director
Class A Director - 2025
(1) "C" indicates Chair of applicable committee.
Hoyoung Huh, MD, PhD, has served as Chairman of our board of directors since November 2024, following our merger with Peak Bio, Inc. Dr. Huh is the
founder of Peak Bio Inc. (f/k/a pH Pharma) and has held positions of Chief Executive Officer and Board Chairman since founding pH Pharma in 2015. Dr.
Huh is a Silicon Valley-based entrepreneur and investor in healthcare and technology-based businesses and has served as Lead Director of Pliant
Therapeutics since December 2017. Dr. Huh has been involved in the formation and management of multiple biotechnology and innovation-based
companies, including holding board positions. He previously served as the Chairman of the board of directors of Geron Corporation from September 2011
to December 2018 and CytomX Therapeutics, Inc. from February 2012 to December 2018, and served as a member of the board of directors of Rezolute,
Inc. (f/k/a AntriaBio, Inc.) from 2013 to January 2019. He holds an A.B. in Biochemistry from Dartmouth
92
College, an M.D. from Cornell University Medical College and a Ph.D. in Cell Biology and Genetics from Cornell University Sloan Kettering Institute.
Raymond Prudo-Chlebosz, M.D., has served as a member of our board of directors since September 2015, and has previously served as our Executive
Chairman from September 2015 through December 2022 and Chairman of our board of directors from January 1, 2023 through November 14, 2024. Dr.
Prudo has been an active investor and developer of healthcare companies for 25 years. Dr. Prudo was the Founder, Chairman, and Chief Executive Officer
of Volution and its predecessor company, Varleigh Immuno Pharmaceuticals, since its inception in 2008. Dr. Prudo is also the co-founder of The Doctors’
Laboratory (“TDL”), past CEO and its Chairman since 2002. Since 2015 he has also been a director of Health Services Laboratories (“HSL”). Both TDL
and HSL are subsidiaries of Sonic Healthcare Limited (ASX: SHL.AX). Dr. Prudo is also currently a director of CIS Healthcare Limited, a privately-held
UK healthcare company. Dr. Prudo holds an MBBS from the University of London, and an FRCP(C) from the Royal College of Physicians and Surgeons
of Canada.
James Neal, MS, MBA, has served as a member of our board of directors since November 2024, following our merger with Peak Bio, Inc. He comes to our
board of directors as an experienced business professional serving as XOMA Corporation’s Chief Executive Officer and Chairman of the Board, joining
that company in 2009. Mr. Neal has more than 25 years’ experience in forming and maximizing business and technology collaborations globally and in
bringing novel products and technologies to market. Prior to XOMA, Mr. Neal was Acting Chief Executive Officer of Entelos, Inc., a leading
biosimulation company that acquired Iconix Biosciences, a privately held company where Mr. Neal was Chief Executive Officer. At Iconix, Mr. Neal
established multi-year collaborations with Bristol-Myers Squibb, Abbott Labs, Eli Lilly and the U.S. Food and Drug Administration. Mr. Neal earned his
B.S. in Biology and his M.S. in Genetics and Plant Breeding from the University of Manitoba, Canada, and holds an Executive MBA degree from
Washington University in St. Louis, Missouri.
Sandip I. Patel JD, BBA, has served as a member of our board of directors since November 2024, following our merger with Peak Bio, Inc. Mr. Patel has
been involved in the formation, development, growth, and successful exits of several companies in the healthcare services and technology sector, insurance,
and financial services. He has served on numerous boards including AtlasClear Holdings, Inc. (NYSE: ATCH), Quantum Fintech (NYSE: QFTA),
Monterey Bio (NASDAQ: MTRY), Anderen Bank, Avatar Property & Casualty, and Morton Plant Mease Hospital as a trusted advisor and entrepreneur.
Additionally, he has served in executive roles with leading organizations, including American Managed Care, Orion Communities, and WellCare. Mr. Patel
received his law degree from the Stetson University College of Law, and a B.B.A in Finance from the University of Georgia.
Robert Bazemore has served as a member of our board of directors since September 2024. Mr. Bazemore has spent over 30 years on the development and
commercialization of novel medicines. From 2015 to 2021, Mr. Bazemore served as the President, Chief Executive Officer and member of the Board of
Directors of Epizyme, Inc., developing and launching TAZVERIK ® for patients with Follicular Lymphoma and Sarcoma while building on the company’s
pipeline of promising epigenetic candidates in oncology. Prior to that, Mr. Bazemore served as the Chief Operating Officer of Synageva BioPharma Corp.,
where he established the company’s global commercial and medical organization to support the first product launch, helping lead the broader transition to a
sustainable commercial enterprise through the company’s acquisition by Alexion Pharmaceuticals, Inc. Mr. Bazemore served in increasing levels of
responsibility at Johnson & Johnson including Vice President of Centocor Ortho Biotech Sales & Marketing from 2008 to 2010 and President of Janssen
Biotech, where he led the successful launches of numerous products and indications, including the US launches of the oncology therapies ZYTIGA ® and
IBRUVICA ®. He was also Vice President of Global Surgery at Ethicon. Prior to Johnson & Johnson, Mr. Bazemore worked at Merck & Co. Inc., where
he served in a variety of roles in medical affairs, sales and marketing, including supporting the launch of SINGULAIR ® in the U.S. Mr. Bazemore
previously served on the board of Neon Therapeutics prior to its acquisition by BioNTech and served as Board Chairman for Pennsylvania BIO. Mr.
Bazemore received a B.S. in Biochemistry from the University of Georgia.
Abizer Gaslightwala has served as a member of our board of directors since December 2024. Mr. Gaslightwala is a well-established leader in the
biotechnology and pharmaceutical industry. He has a successful track record spanning over 25 years in the development and commercialization of novel
medicines across a range of companies and therapeutic areas. Mr. Gaslightwala serves as the Senior Vice President and Franchise Head for Oncology at
Jazz
93
Pharmaceuticals, where he manages a portfolio of products spanning both solid and hematological malignancies. Mr. Gaslightwala has led and driven
growth in several leadership roles at Amgen, Pfizer, and Johnson & Johnson. His experience spans business unit leadership, brand marketing, sales
leadership, commercial pipeline planning, advanced analytics and insights, and business development. Mr. Gaslightwala also helped lead R&D strategic
planning within the autoimmune/inflammation portfolio at Johnson & Johnson, as well as lead commercial planning for Remicade® and several novel
pipeline molecules focused on rheumatoid arthritis, inflammatory bowel disease, psoriasis, and atopic dermatitis. Additionally, Mr. Gaslightwala advised
several life science companies through his time at the Boston Consulting Group. Mr. Gaslightwala holds a BS in Chemical Engineering from Cornell
University, and an MBA from the Sloan School of Management, and a MS in Chemical Engineering from the Massachusetts Institute of Technology.
Samir R. Patel, M.D., has served as a member of our board of directors since November 2023 and as President and Chief Executive Officer since
December 16, 2024, after previously serving as Interim President and Chief Executive Officer effective May 1, 2024. Dr. Patel is founder and, since April
2017, principal of PranaBio Investments, LLC, a firm providing consulting, strategic advisory, and investment services for small cap biotechnology
companies. He is also a consultant to GE Global Research, Inc., GE’s innovation engine that is creating novel products and solutions across several sectors
including biomanufacturing and biotechnology, since May 2019. Dr. Patel has more than 20 years of experience in life sciences including co-founding
SPEC Pharma, LLC, a company that develops and manufactures injectables used in rheumatology, obstetric, orthopedic, and veterinary applications. He
holds multiple patents, has been an author on several publications and has been an investigator in numerous clinical research studies. Dr. Patel received his
medical degree from the Medical College of Ohio (now University of Toledo) in Toledo, Ohio, and completed his internal medicine internship and
residency, as well as rheumatology fellowship, at University of New Mexico School of Medicine Affiliated Hospitals.
Information about our Executive Officers
Our executive officers, their respective ages, positions, background and qualifications are described below. Our executive officers serve until they resign,
or the board terminates their position.
Name
Age
Position
Samir R. Patel, M.D
55
President and Chief Executive Officer
Torsten Hombeck
55
Chief Financial Officer
(1) Dr. Patel is a member of our board of directors. See “Information about our Directors” above for more information about Dr. Patel.
Torsten Hombeck, Ph.D., has served as our Chief Financial Officer since December 2024. Dr. Hombeck has more than 20 years of experience in the life
sciences industry, finance, capital markets and M&A transactions. Prior to joining Akari, Dr. Hombeck served as the CFO, Corporate Secretary and SVP at
Aspira Women’s Health. Prior to that, Dr. Hombeck served as the Chief Financial Officer of Akari Therapeutics from June 2020 – June 2023. Additionally,
his previous positions include Chief Commercial and Strategy Officer and Managing Director at Promethera Biosciences, and Co-Chief Executive Officer
and Chief Business Officer at Cytonet where he played an integral role in its acquisition by Promethera. Dr. Hombeck also served as Chief Financial
Officer at both Agennix and GPC Biotech. Dr. Hombeck holds a Masters in Business Administration and a Ph.D. in Finance from the EBS University of
Business and Law, Ostrich-Winkel, Germany.
.(1)
94
Corporate Governance
Audit Committee
Our board has established a formal standing Audit Committee. The current members of our Audit Committee are Mr. Patel (Chair), Mr. Neal, and Mr.
Bazemore. Our board has determined that Mr. Patel is an “audit committee financial expert” within the meaning of SEC rules and regulations. Each
member of the audit committee is independent as defined under applicable rules of the Nasdaq, including the independence requirements contemplated by
Rule 10A-3 under the Exchange Act.
The Board has adopted a written Audit Committee Charter. The composition and responsibilities of the Audit Committee and the attributes of its members,
as reflected in its Charter, are intended to be in accordance with certain listing requirements of Nasdaq and the rules of the SEC for corporate audit
committees. The Audit Committee Charter may be found in the “Investor Relations — Corporate Governance” section of our website, which is located at
www.akaritx.com.
Compensation Committee
Our compensation committee currently consists of three members, appointed by the board of directors: Mr. Neal (Chair), Mr. Patel, and Mr. Bazemore, all
of whom are independent within the meaning of SEC corporate governance rules of independence for purposes of the compensation committee.
The Board has adopted a written Compensation Committee Charter. The composition and responsibilities of the compensation committee and the attributes
of its members, as reflected in its Charter, are intended to be in accordance with certain listing requirements of Nasdaq and the rules of the SEC for
corporate compensation committees. The Compensation Committee Charter may be found in the “Investor Relations — Corporate Governance” section of
our website, which is located at www.akaritx.com.
Nominating and Corporate Governance Committee
Our nominating and corporate governance committee currently consists of three members, appointed by our board of directors: Mr. Bazemore (Chair), Dr.
Huh, and Dr. Prudo, all of whom are independent within the meaning of SEC corporate governance rules of independence for purposes of the nominating
and corporate governance committee. None of our non-employee directors have any service contracts with us or any of our subsidiaries that provide for
benefits upon termination of employment.
The Board has adopted a written Nominating and Corporate Governance Committee Charter. The composition and responsibilities of the nominating and
corporate governance committee and the attributes of its members, as reflected in its Charter, are intended to be in accordance with certain listing
requirements of Nasdaq and the rules of the SEC for corporate nominating and corporate governance committees. The Nominating and Corporate
Governance Committee Charter may be found in the “Investor Relations — Corporate Governance” section of our website, which is located at
www.akaritx.com.
Code of Business Conduct and Ethics
We have adopted a written code of business conduct and ethics that applies to our principal executive officer, principal financial officer, principal
accounting officer or controller, or persons performing similar functions. We have posted a current copy of the Code of Business Conduct and Ethics in the
“Investor Relations — Corporate Governance” section of our website, which is located at www.akaritx.com. We intend to satisfy the disclosure
requirements under Item 5.05 of Form 8-K regarding an amendment to, or waiver from, a provision of our code of business conduct and ethics by posting
such information on our website at www.akaritx.com.
95
Item 11. Executive Compensation.
In accordance with Item 402(l) of Regulation S-K, we have elected to avail itself of the scaled disclosure requirements available to smaller reporting
companies.
This section discusses the material components of our executive compensation program for our named executive officers (“NEOs”) for the fiscal year
ended December 31, 2024:
•
Samir Patel, President and Chief Executive Officer
•
Torsten Hombeck, Chief Financial Officer
•
Rachelle Jacques, Former President and Chief Executive Officer
•
Wendy DiCicco, Former Interim Chief Financial Officer
Summary Compensation Table
The following table sets forth information concerning the compensation of our NEOs during the years ended December 31, 2024 and 2023:
Name and Principal Position
Year
Salary
($)
Bonus
($)
Stock
Awards
(S)(3)
Option
Awards
($)(4)
All Other
Compensation ($)
(5)
Total
($)
Samir R. Patel
2024
–
–
127,497
308,270
–
435,767
President and Chief Executive Officer
2023
–
–
–
–
–
–
Torsten Hombeck
2024
12,500
–
–
–
–
12,500
Chief Financial Officer
2023
138,945
–
–
–
28,561
167,506
Rachelle Jacques
2024
207,582
–
658,216
–
535,375
1,401,173
Former President and Chief Executive
Officer
2023
615,750
–
729,393
198,498
16,500
1,560,141
Wendy DiCicco
2024
440,000
15,000
140,249
–
265,595
860,844
Former Interim Chief Financial Officer
2023
226,184
45,000
–
6,480
–
277,664
_____________________
(1)
Dr. Hombeck serves as our Chief Financial Officer, effective December 16, 2024, having previously served as our Chief Financial Officer until
June 15, 2023.
(2)
Ms. DiCicco served as our Interim Chief Financial Officer from July 17, 2023 through December 6, 2024.
(3)
Represents the aggregate grant date fair value of time-based restricted stock units (“RSUs”) issued under our 2014 Equity Incentive Plan (the
“2014 Plan”) and 2023 Equity Incentive Plan (the “2023 Plan”), as computed in accordance with FASB Accounting Standards Codification
(“ASC”) Topic 718, disregarding estimated forfeitures related to service-based vesting. See Note 8 to our consolidated financial statements
included elsewhere in this Form 10-K regarding assumptions we made in determining the fair value of RSUs.
(4)
Represents the aggregate grant date fair value of options to purchase ordinary shares issued under our 2014 Plan and 2023 Plan, as computed in
accordance with FASB ASC Topic 718, disregarding estimated forfeitures related to service-based vesting. See Note 8 to our consolidated
financial statements included elsewhere in this Form 10-K regarding assumptions we made in determining the fair value of option awards.
(5)
For 2024, all other compensation includes the following amounts:
(1)
(2)
96
Name
Company 401(k) Plan
Match
($)
Separation
($)
Other
($)
Total
($)
Dr. Patel
—
—
—
—
Dr. Hombeck
—
—
—
—
Ms. Jacques
11,563
450,000
73,812
535,375
Ms. DiCicco
—
265,595
—
265,595
For 2023, all other compensation includes the following amounts:
Name
Company 401(k) Plan
Match
($)
Separation
($)
Other
($)
Total
($)
Dr. Hombeck
11,461
—
17,100
28,561
Ms. Jacques
16,500
—
—
16,500
Ms. DiCicco
—
—
—
—
(a)
Amounts reported in the table above represent an accrued and unpaid one time payment due to Ms. Jacques pursuant to her Separation
Agreement (defined below). For Ms. DiCicco, the amount reported in the table above represents an accrued and unpaid payment due to be
paid in nine equal monthly installments beginning in March 2025 relating to claims for unpaid wages, wages owed due to improper
termination notice, unpaid bonuses and severance.
(b)
Amounts reported as “Other” in the table above represent earned and unused vacation paid upon termination of their employment with us.
(a)
(b)
(a)
(b)
97
Narrative Disclosure to Summary Compensation Table
Employment Agreements with Our NEOs
We have entered into employment agreements with each of our NEOs (or non-employee consulting services agreements in the case of Dr. Patel and Ms.
DiCicco). All employee NEOs are at-will employees.
Samir Patel Consulting Services Agreement
We are a party to a consulting services agreement, effective May 1, 2024, with Dr. Patel, who served as our Interim President and Chief Executive Officer
(the “Patel Agreement”). Pursuant to the Patel Agreement, Dr. Patel is to be paid $50,000 per month which would be in the form of fully vested Ordinary
Shares, and valued based on the closing price of the Ordinary shares on the Nasdaq Capital Market on the last day of each month (or partial month) Dr.
Patel serves as President and Chief Executive Officer.
On September 16, 2024, we entered into an amendment to the Patel Agreement (the “Amended Patel Agreement”) to revise the compensation to be
received. Pursuant to the Amended Patel Agreement, in lieu of receiving his stated monthly compensation of $50,000 in the form of fully vested Ordinary
Shares, Dr. Patel shall be paid in the form of fully vested non-qualified stock options to purchase Ordinary Shares (“NQSOs”), with the number of ADSs
underlying each such monthly NQSOs grant to be equal to two times the number determined by dividing (i) $50,000 by (ii) the closing price of our ADSs
on the Nasdaq Capital Market on the last day of each month (or partial month) Dr. Patel serves as our President and Chief Executive Officer.
The Amended Patel Agreement includes no annual bonus provisions, no eligibility for employee benefits and no severance entitlements. Further, the
Amended Patel Agreement can be terminated by us immediately for any reason.
There were no changes to the Amended Patel Agreement following Dr. Patel's appointment as President and Chief Executive Officer on December 16,
2024.
Rachelle Jacques Employment Agreement
Ms. Jacques stepped down as our President and Chief Executive Officer, effective May 1, 2024 (the “Separation Date”). On August 19, 2024, we entered
into a separation agreement with Ms. Jacques (the “Separation Agreement”). The Separation Agreement, in exchange for a release of claims and other
agreements, acknowledgements and representations of Ms. Jacques set forth therein, provides for: (i) a one-time lump sum payment in the amount of
$450,000 to be paid to Ms. Jacques on the earlier of (a) within 30 days of the closing date of our anticipated merger with Peak Bio, Inc. and (b) December
2, 2024; (ii) vesting of a portion of RSUs held by Ms. Jacques representing 276,000,000 ordinary shares; and (iii) forfeiture of a portion of RSUs held by
Ms. Jacques representing 482,250,000 ordinary shares.
Prior to her departure in May 2024, we were a party to an executive employment agreement, effective February 28, 2022, with Ms. Jacques (the “Jacques
Agreement”). Pursuant to the Jacques Agreement, Ms. Jacques’s initial annual base salary was $600,000, which is subject to review and increase on an
annual basis and she is eligible to receive an annual cash bonus with a target of 50% of base salary based on the achievement of performance goals
established by the chairman of the board of directors and the full board of directors, in consultation with Ms. Jacques. Under the terms of the Jacques
Agreement, Ms. Jacques received a cash signing bonus of $650,000 in connection with her hire. Ms. Jacques was required to repay us 50% of the signing
bonus if, prior to the first anniversary of her start date, her employment was terminated by us for “cause” (as defined in the Jacques Agreement) or by her
without “good reason” (as defined in the Jacques Agreement) and she is required to repays us one-third of the signing bonus if her employment is
terminated by us for cause or by her without good reason after the first anniversary but prior to the second anniversary of her start date. In addition, the
Jacques Agreement provides for the following RSU awards: (i) RSUs having a face value of $262,000 within 75 days of her start date, which vest 50% on
the first anniversary of the start date and monthly thereafter for the following year, (ii) RSUs having a value of $446,000 on the first anniversary of her start
date, which vest 50% on the second anniversary of the start date and monthly thereafter for the following year, and (iii) RSUs having a value of $446,000
on the second anniversary of her start date, which vest
98
50% on the third anniversary of the start date and monthly thereafter for the following year. Such RSU grants are subject to full acceleration in the event of
a “change in control” (as defined in the Jacques Agreement), involuntary termination of employment without cause, resignation for good reason, or
termination of employment due to death or "disability" (as defined in the Jacques Agreement). In the event that any change in control, involuntary
termination of employment without cause, resignation for good reason, or termination of employment due to death or disability occurs prior to any such
grant, we are obligated to pay Ms. Jacques a lump sum in cash equal to the face value of the ungranted RSU award. The Jacques Agreement further
provides that we will grant Ms. Jacques an option to purchase 237,396,700 ordinary shares, subject to ratable vesting on a semiannual basis over four years
from her start date. Commencing with annual long-term incentive awards to senior executives in 2023, in addition to the RSU and option awards described
above, the Jacques Agreement provides that Ms. Jacques will be eligible to receive awards under our equity incentive plan not less frequently than annually
with a target grant value of not less than 100% of Ms. Jacques’s annual base salary for fiscal year 2023 and thereafter otherwise commensurate with awards
to executives at similarly situated companies as recommended by a reputable compensation consultant engaged by the board of directors.
Upon termination of Ms. Jacques’s employment due to Ms. Jacques’s death or disability, Ms. Jacques or her estate or beneficiaries shall be entitled to
receive (i) a pro-rated portion of the annual bonus, if any, that she would have otherwise earned for the year in which the employment terminates had no
termination occurred (the “Pro-Rata Bonus”).
Upon termination of Ms. Jacques’s employment by us without cause, or by Ms. Jacques for good reason, subject to her compliance with the confidentiality
provisions of the Jacques Agreement and her execution and the effectiveness of a release of claims in favor of us and our affiliates in a form provided by us
(the “Release”), she is entitled to receive (i) a lump sum payment equal to the sum of the annual base salary and target annual performance bonus in effect
for the year in which the date of termination occurs (the “Cash Severance”), (ii) any earned but unpaid annual bonus for the previous year, (iii) the Pro-Rata
Bonus, and (iv) provided she timely and properly elects COBRA coverage, reimbursement for the monthly COBRA premium paid by Ms. Jacques for her
and her eligible dependents until the earliest of (x) 12 months following the date of termination, (y) the date on which she is no longer eligible to receive
such coverage, and (z) the date on which Ms. Jacques becomes eligible to receive similar coverage from another employer or other source (the “COBRA
Reimbursement”). In addition, if Ms. Jacques agrees in writing that the non-competition restrictions in the Jacques Agreement shall continue to apply
following the termination of her employment, (i) all outstanding equity-based compensation awards that do not vest based on the attainment of
performance goals shall fully vest, and (ii) all outstanding equity-based compensation awards that vest based on the attainment of performance goals shall
remain outstanding and eligible to vest based on attainment of the applicable performance goals.
In the event of a termination of Ms. Jacques’s employment by us without cause (other than on account of death or disability), or by Ms. Jacques for good
reason, in each case within 18 months following a change in control, and subject to her compliance with the cooperation, confidentiality, restrictive
covenants, and proprietary rights provisions of the Jacques Agreement and her execution and the effectiveness of a Release, in lieu of the severance
payments and benefits described in the preceding paragraph, she is entitled to receive (i) the Cash Severance, (ii) a lump sum payment equal to her target
bonus for the year in which the date of termination occurs (or the year in which the change in control occurs, if higher) and (iii) the COBRA
Reimbursement. In addition, if Ms. Jacques agrees in writing that the non-competition restrictions in the Jacques Agreement will continue to apply
following the termination of her employment, (i) all outstanding unvested stock options held by her will become fully vested and will remain exercisable
for the remainder of their original term and (ii) all outstanding equity-based awards other than stock options that do not vest based on the attainment of
performance goals will fully vest. If the payments or benefits payable to Ms. Jacques in connection with a change in control would be subject to the excise
tax on golden parachutes imposed under Section 4999 of the Internal Revenue Code of 1986, as amended (the “Code”), those payments or benefits will be
reduced if such reduction would result in a higher net after-tax benefit to Ms. Jacques.
The employment agreement also contains restrictive covenants for our benefit and Ms. Jacques is required to maintain the confidentiality of our
confidential information.
Wendy DiCicco Consulting Services Agreements
99
Prior to her departure in December 2024, we were a party to a consulting services agreement, dated January 15, 2024, and amended on April 26, 2024, with
an entity controlled by Ms. DiCicco, our former interim Chief Financial Officer (the “DiCicco Agreement”). The DiCicco Agreement provides for (i) a
$40,000 per month fee (the “Consulting Base Pay”) for services up to 80 hours per month, paid in two equal installments on the 15th and 30th date of each
month in which services are rendered and reimbursement of certain expenses; (ii) a 2024 target bonus percentage of 45% of the Consulting Base Pay; (iii) a
transaction bonus of 10% of the Consulting Base Pay upon the successful closing of the planned merger between us and Peak Bio Inc.; and (iv) a one-time
grant of RSUs on May 1, 2024 totaling 1% of our outstanding ordinary shares, which shall vest in full on May 1, 2025, subject to Ms. DiCicco’s continued
service to us.
Pursuant to the DiCicco Agreement, if we terminated Ms. DiCicco's services without cause and subject to Ms. DiCicco signing a separation agreement and
release in a form and manner satisfactory to us (the “Separation Agreement and Release”), and (ii) the Separation Agreement and Release becoming
irrevocable, all within 60 days after the Date of Termination (as defined in the DiCicco Agreement), Ms. DiCicco is entitled to a severance equal to nine
months of her Consulting Base Rate plus eligible Target Bonus, prorated for the year of termination and for the same time period, payable as lump-sum.
Prior to entering into the DiCicco Agreement, we were party to a consulting services agreement, dated July 17, 2023, and amended on September 1, 2023
(as amended, the “Original DiCicco Agreement”), with an entity controlled by Ms. DiCicco. The Original DiCicco Agreement had a six month term and
provided for a $32,000 per month fee, which was increased to $40,000 effective September 1, 2023, a performance bonus in an amount of up to $70,000
upon achievement of certain milestones, and reimbursement of certain expenses. The Original DiCicco Agreement also provided that Ms. DiCicco would
be granted an initial option to purchase 5,000,000 ordinary shares. If we terminate Ms. DiCicco’s engagement for any reason other than for cause prior to
the date that such option is fully vested, the option will continue to vest through July 17, 2024 or be accelerated, at our option.
The DiCicco Agreement also contains restrictive covenants for our benefit and Ms. DiCicco is required to maintain the confidentiality of our confidential
information.
Hombeck Employment Agreement
We are party to an executive employment agreement, effective December 16, 2024, with Dr. Hombeck (the “Hombeck Agreement”). Pursuant to the
Hombeck Agreement, Dr. Hombeck's initial annual base salary is $300,000, which is subject to review and increase on an annual basis and he is eligible to
receive an annual cash bonus with a target of 100% of base salary based on the achievement of performance goals established by the board of directors, in
consultation with Dr. Hombeck. Further, the Hombeck Agreement provides for participation in employee benefit plans and no severance for termination of
services with or without cause.
The Hombeck Agreement also contains restrictive covenants for our benefit and Dr. Hombeck is required to maintain the confidentiality of our confidential
information.
Prior to his departure in June 2023, we were party to an executive employment agreement, effective as of June 30, 2020, with Dr. Hombeck (the “Original
Hombeck Agreement”). The Original Hombeck Agreement had an initial term of one year from June 30, 2020 with automatic renewals for successive one-
year periods, provided that either party could have given written notice of non-renewal of the current term at least three months prior to the expiration of
the then-current term. Dr. Hombeck’s annual base salary for 2023 was $303,152 and he was eligible for an annual cash bonus with a target of 30% of base
salary. The Original Hombeck Agreement also provided that Dr. Hombeck would be granted an initial option to purchase 7,000,000 shares and an
additional option to purchase 3,000,000 shares on January 1, 2021.
Pursuant to the Original Hombeck Agreement, upon termination of Dr. Hombeck’s employment without “cause” (as defined in the Original Hombeck
Agreement), or by Dr. Hombeck for “good reason” (as defined in the Original Hombeck Agreement) or upon non-renewal by us of the term of the Original
Hombeck Agreement, in addition to any accrued but unpaid base salary, expense reimbursements and vested and accrued benefits and subject to Dr.
Hombeck’s execution and the effectiveness of a release of claims in a form acceptable to us, he would have been entitled to receive (i) an amount equal to
the sum of (x) his annual base salary at the rate in effect as of the
100
termination date, plus (y) other than in the case of a termination due to non-renewal of the term, an amount equal to the greater of his actual or target annual
performance bonus for the year in which the employment terminated and (ii) an amount equal to our share of the premium paid by Dr. Hombeck while he
was an active employee for medical insurance coverage under our health care plan (the “Healthcare Subsidy”) for 12 months following termination.
If Dr. Hombeck’s employment had been terminated by us without cause, or by him for good reason, in each case with one year following a “change in
control” (as defined in the Original Hombeck Agreement), and subject to Dr. Hombeck’s execution and the effectiveness of a release of claims in a form
acceptable to us, in lieu of the severance payments and benefits described in the preceding paragraph, he would have been entitled to receive (i) an amount
equal to one and a half times the sum of (x) his annual base salary at the rate in effect as of the termination date, plus (y) his target annual performance
bonus for the year in which the employment terminated and (ii) the Healthcare Subsidy for 18 months following termination. If the payments or benefits
payable to Dr. Hombeck in connection with a change in control would have been subject to the excise tax on golden parachutes imposed under Section
4999 of the Code, those payments or benefits would have been reduced if such reduction would result in a higher net after-tax benefit to Dr. Hombeck.
Determining Compensation
Our board of directors and compensation committee review compensation annually for our executives. In setting executive base salaries and bonuses and
granting equity incentive awards, we consider compensation for comparable positions in the market, the historical compensation of our executives,
individual performance as compared to our expectations and objectives, our desire to motivate our employees to achieve short- and long-term results that
are in the best interests of our shareholders, and a long-term commitment to us.
Our compensation committee is primarily responsible for determining the compensation for our executive officers. Our compensation committee typically
reviews and discusses management’s proposed compensation with our Chief Executive Officer for all executives other than the Chief Executive Officer.
Based on those discussions and its discretion, taking into account the factors noted above, the compensation committee then sets the compensation for each
executive officer other than the Chief Executive Officer and recommends the compensation for the Chief Executive Officer to our board of directors for
approval. Our board of directors discusses the compensation committee’s recommendation and ultimately approves the compensation of our Chief
Executive Officer without members of management present.
In 2024 and 2023, our compensation committee utilized the services of Amplify Strategy & Consulting LLC (“Amplify”), an independent compensation
consultant. During 2024 and 2023, Amplify did not provide material services to us other than the services to our compensation committee. Based on its
evaluation, our compensation committee has determined that Amplify’s work has not raised any conflict of interests.
Elements of Compensation
The compensation of our NEOs generally consists of three primary components, consisting of base salary, annual cash incentive awards, and long-term
incentive-based compensation in the form of stock-based awards.
101
Base Salary
In 2024, Dr. Hombeck received an annual salary of $300,000, and prior to her departure in May 2024, Ms. Jacques received an annual salary of $615,750.
Ms. DiCicco is a non-employee consultant and received a monthly fee of $40,000 from January 1, 2024 through November 30, 2024 prior to her departure.
Annual Cash Incentives
Annual cash incentive awards provide an opportunity for additional compensation to employee NEOs if pre-established annual performance goals are
attained. The annual cash incentive award targets are based on a target percentage of each employee NEO’s salary. The compensation committee generally
links cash awards to the achievement of the annual corporate goals; however, the compensation committee may take into consideration unexpected
corporate performance outside of the corporate goals and individual performance. The amount of the bonus paid, if any, may vary among the employee
NEOs depending on individual performance, individual contribution to the achievement of our annual corporate goals.
Annual cash incentive awards for 2024 for employees, including our NEOs, were based on corporate goals related to financing, pipeline advancement,
reputation, and strengthening our capabilities. For 2024, the annual cash incentive award for Ms. Jacques was targeted at 50% of base salary and the annual
cash incentive award for Dr. Hombeck was targeted at 100% of his base salary. However, Ms. Jacques was not eligible to receive an incentive bonus
because her employment terminated in May 2024 and Dr. Hombeck was not eligible to receive an incentive bonus because he had recently joined our
Company. After reviewing Company performance against the corporate goals, the compensation committee determined not to award cash bonuses to the
employee NEOs for the year ended December 31, 2024.
Pursuant to the Original DiCicco Agreement, Ms. DiCicco was eligible for performance bonuses in the aggregate amount of $70,000 upon achievement of
certain milestones, including (i) $25,000 upon achievement of a specified guaranteed cash flow target by August 23, 2023, (ii) $25,000 upon resolving
Nasdaq non-compliance on minimum bid price and shareholders' equity by October 23, 2023, and (iii) $20,000 upon achievement of internal finance
capability improvements by December 31, 2023. In 2024, Ms. DiCicco received total bonuses of $15,000 for achievement of milestone (iii).
Equity-Based Awards
Equity grants are intended as both a reward for contributing to our long-term success and an incentive for future performance. Additionally, the vesting
feature of our equity awards is intended to further our goal of executive retention by providing an incentive to our NEOs to remain in our service during the
vesting period. The compensation committee typically makes initial stock option awards to our employee NEOs upon commencement of employment and
annual equity awards in the form of either stock options, RSUs, or a combination of stock options and RSUs, thereafter.
In 2024, prior to their separation, we awarded equity compensation under the 2023 Plan to Dr. Patel in accordance with the Patel Agreement. We also
awarded Ms. Jacques and Ms. DiCicco in the form equity compensation of time-vesting stock options and/or time-based RSUs. However, unvested RSUs
granted to Ms. DiCicco were forfeited in connection with her separation. No awards of equity compensation were made to Dr. Hombeck.
We determine equity award amounts based on contractual obligations, competitive market factors in our industry, and the judgment of the compensation
committee of the board of directors, taking into account information and recommendations provided by our independent compensation consultant. With
respect to our NEO’s other than our Chief Executive Officer, the compensation committee also considers recommendations provided by our Chief
Executive Officer. For the 2024 awards of stock options and RSUs to our NEOs, the primary consideration was the award amounts included in the
applicable NEO’s employment and/or consulting services agreements.
Other Compensation and Benefits
102
We have established various employee benefit plans, including medical and 401(k) plans, in which employee NEOs are eligible to participate on the same
basis as other employees. It is generally our policy not to extend perquisites to our executives that are not available to our employees generally.
401(k) Plan and Defined Contribution Pension Scheme
We have adopted an employee benefit plan under Section 401(k) of the Code for our U.S.-based employees. The 401(k) plan allows employees to make
salary deferral contributions up to the statutorily prescribed annual limit under the Code. We provide matching contributions to the 401(k) plan in an
amount equal to 100% of each participant’s contribution up to a maximum of 5% of the participant’s annual eligible cash compensation, subject to certain
other limits.
Additionally, we have adopted a defined contribution pension scheme which allows for U.K.-based employees to make salary deferral contributions and we
contribute 10% of employee compensation to the pension plan, subject to U.K. law.
Clawback Policy
In November 2023, our compensation committee adopted a formal clawback policy, which applies in the event we are required to prepare an accounting
restatement due to any material noncompliance with any financial reporting requirement under the U.S. federal securities laws. This policy requires us to
(subject to certain limited exceptions set forth in the clawback policy and permitted under the final clawback rules) recover from any of our current or
former executive officers who receive incentive-based compensation (including stock options and RSUs) after the effective date of the clawback policy and
during the three-year period preceding the date on which we are required to prepare an accounting restatement, the excess of what would have been paid to
such executive officer under the accounting restatement.
103
Outstanding Equity Awards at Fiscal End
The following table sets forth information regarding the outstanding equity held by our NEOs as of December 31, 2024.
Option Awards
Stock Awards
Name
Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable
Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable
Option
Exercise
Price
($)
Option
Expiration Date
Number of Shares
or Units of Stock
That Have Not
Vested
(#)
Market Value of
Shares or Units of
Stock That Have
Not Vested
($)(1)
Samir R. Patel
1,666,667
3,333,333
0.0012
12/29/2033
175,080,000
—
0.0015
9/30/2034
79,684,000
—
0.0013
10/31/2034
162,604,000
—
0.0006
11/30/2034
Torsten Hombeck
—
—
Rachelle Jacques
103,817,200
—
0.0124
5/1/2025
14,881,150
—
0.0124
5/1/2025
19,086,338
—
0.0016
5/1/2025
Wendy DiCicco
5,000,000
—
0.0017
12/6/2025
158,473,915
96,669
_____________________
(1)
Market Value is calculated based on a price per ADS of $1.22 (equivalent to $0.00061 per ordinary share), which was the closing price of our
ADSs on December 31, 2024.
(2)
Represents the unvested portion of a stock option award that vests in three equal installments of 1,666,667 ordinary shares on the annual general
meeting anticipated to be held June 30, 2025 and June 30, 2026, subject to Dr. Patel's continued employment with us through the applicable
vesting date.
(3)
All options (vested and unvested) previously held by Dr. Hombeck were either forfeited as of, or expired subsequent to, the date of Dr.
Hombeck’s termination of employment with us on June 30, 2023. No new awards were granted in 2024.
(4)
All options (vested and unvested) held by Ms. Jacques on her employment termination date of May 1, 2024 were allowed to expire on May 1,
2025. No new awards were granted to Ms. Jacques in 2024. In connection with Ms. Jacques's termination, she received accelerated vesting on
RSUs representing 276,000,000 ordinary shares, while a portion of RSUs representing 482,250,000 ordinary shares were forfeited.
(5)
In connection with Ms. DiCicco's departure in December 2024, her stock option award was allowed to expire on the one-year anniversary of her
departure date, December 6, 2025.
(6)
On March 3, 2025, we signed a Settlement Agreement and Mutual Release with Ms. DiCicco. In connection with the settlement, Ms. DiCicco's
RSU award will continue to vest through the first anniversary of the grant date (i.e., the award will vest 100% on May 1, 2025).
Equity Grant Timing
Our compensation committee has generally granted equity awards on an annual basis. During 2024, our compensation committee did not take into account
any material nonpublic information when determining the timing and terms of equity incentive awards, and we did not time the disclosure of material
nonpublic information for the purpose of affecting the value of executive compensation. During fiscal year 2024, we did not grant stock options to our
named executive officers during any period beginning four business days before and ending one business day after the filing or furnishing of a Form 10-Q,
10-K or 8-K that discloses material nonpublic information.
(2)
(3)
(4)
(5) (6)
104
Director Compensation
Directors who are also employees are not compensated separately for serving on our board of directors or any of its committees. Each of our non-employee
directors receives cash compensation for his or her services. In addition, to better align the interests of our board of directors with our shareholders, the
compensation committee considers and recommends to the board of directors long-term equity compensation in the form of stock options to our non-
employee directors. The compensation committee periodically conducts reviews of peer company director compensation practices, including before
considering changes to our director compensation program.
Under our director compensation program, each director receives an annual cash retainer for service on the board and for service on each committee of
which the director is a member. The chairperson of each committee receives a higher retainer for such service. These fees are typically paid quarterly in
arrears, with the exception of the chairman of the board of directors who is paid monthly. The fees paid to non-employee directors for service on the board
and for service on each committee of the board on which the director was a member during 2024 were as follows:
Member
Annual Fee
Chairperson
Annual Fee
Board of Directors
$
41,305
$
100,000
Audit Committee
$
7,875
$
18,375
Compensation Committee
$
5,570
$
11,139
Nominating and Corporate Governance Committee
$
5,570
$
11,139
A non-employee director may elect to receive annual cash payments in the form of fully-vested ordinary shares. During 2024, no director elected to receive
his or her annual cash retainer in shares.
Directors typically receive an initial grant of an option to purchase 5,000,000 ordinary shares (or 10,000,000 ordinary shares for the non-executive
chairman) or equivalent value of ADSs, upon being appointed to the board and on the date of each annual general meeting. The board reserves the
discretion to review and amend this amount.
These awards typically vest in full on the date of the next annual general meeting following the date of grant, subject to the non-employee director’s
continued service on the board of directors through such date, have a term of 10 years from date of grant, and accelerate upon a change of control.
The following table below sets forth information for the fiscal year ended December 31, 2024 regarding the compensation of our non-employee directors.
Fees Earned
or Paid
in Cash
($)(1)
Option
Awards
($)(2)
Total
($)
Hoyoung Huh, M.D.
13,770
529,857
543,627
Ray Prudo, M.D.
93,059
10,853
103,912
Samir R. Patel, M.D.
15,138
11,233
26,371
Robert Bazemore
15,104
6,527
21,631
James Neal
7,868
220,774
228,642
Sandip I. Patel
8,511
176,619
185,130
Abizer Gaslightwala
1,796
-
1,796
Michael Grissinger
63,203
5,427
68,630
Wa'el Hashad
47,609
5,427
53,036
Donald Williams
66,425
5,427
71,852
_____________________
(1)
Represents cash fees earned (paid and unpaid) for service as a non-employee director for 2024.
(2)
Represents the aggregate grant date fair value of option awards made to each listed director in 2024, as computed in accordance with FASB ASC
Topic 718, disregarding estimated forfeitures related to
(3)
(3)
(3)
105
service-based vesting. See Note 8 to our consolidated financial statements included elsewhere in this Form 10-K regarding assumptions we made
in determining the fair value of option awards. As of December 31, 2024, our non-employee directors held options to purchase our ordinary
shares as follows: Dr Huh: 704,400,000 shares; Dr. Prudo: 10,000,000 shares; Dr. Patel: 5,000,000 shares; Mr. Bazemore: 5,000,000 shares; Mr.
Neal: 293,500,000 shares; Mr. Patel: 234,800,000 shares; Mr. Grissinger: 5,000,000 shares; Mr. Hasad: 5,000,000 shares; and Mr. Williams:
5,000,000 shares. Mr. Gaslightwala did not hold any outstanding options as of December 31, 2024. Dr. Patel's options to purchase 5,000,000
shares were granted prior to his appointment as Interim CEO in May 2024. Messrs. Huh, Neal and Patel options were assumed from the
acquisition of Peak Bio Inc., which closed on November 14, 2024.
(3)
Former director.
106
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth, as of March 31, 2025 (except as otherwise indicated below), information we know about the beneficial ownership of our
ordinary shares by:
•
each person or entity, including any “group” as that term is used in Section 13(d)(3) of the Exchange Act, who is known by us to own
beneficially more than 5% of the issued and outstanding shares of our ordinary shares;
•
each of our current directors and director nominees;
•
each of our NEOs, as set forth in the Summary Executive Compensation Table set forth in Item 11 of this Form 10-K;
•
all of our current directors and executive officers as a group.
We have determined beneficial ownership in accordance with the rules of the SEC, and the information in the table below is not necessarily indicative of
beneficial ownership for any other purpose. The SEC has defined “beneficial” ownership of a security to mean the possession, directly or indirectly, of
voting power and/or investment power. In computing the percentage ownership of each person, ordinary shares subject to options, warrants, or rights held
by that person that are currently exercisable, or exercisable within 60 days after March 15, 2025, are deemed to be outstanding and beneficially owned by
that person. These shares, however, are not deemed outstanding for the purpose of computing the percentage ownership of any other person.
To our knowledge and except as indicated in the notes to this table and pursuant to applicable community property laws, each stockholder named in the
table has sole voting and investment power with respect to the shares set forth opposite such shareholders' name. The percentage of ownership is based on
57,752,981,523 ordinary shares issued and outstanding on March 31, 2025. All fractional share amounts have been rounded to the nearest whole number.
To our knowledge, except as noted below, no person or entity is the beneficial owner of more than 5% of the voting power of our ordinary shares.
Ordinary Shares
Ordinary Shares
Beneficially
Beneficially
Name and Address of Beneficial Owner (1)
Owned (2)
Owned (%)
5% Shareholders:
Hoyoung Huh and Affiliates
10,179,008,000
17.5%
PranaBio Investments LLC
6,725,112,667
11.5%
Ray Prudo and Affiliates
5,819,456,800
10.1%
Named Executive Officers and Directors:
Samir Patel
6,725,112,667
11.5%
Torsten Hombeck
400,000
*
Hoyoung Huh
10,179,008,000
17.5%
Ray Prudo
5,819,456,800
10.1%
Robert Bazemore
89,284,000
*
James Neal
254,424,000
*
Sandip Patel
1,179,182,000
2.0%
Abizer Gaslightwala
362,856,000
*
All current directors and executive officers as a group (8 individuals)
24,609,723,467
41.5%
_____________________
* Denotes less than 1% beneficial owner.
(3)
(4)
(5)
(4)
(3)
(5)
(6)
(7)
(8)
(9)
(10)
107
(1)
Except as otherwise noted, the address for each person listed above is c/o Akari Therapeutics, Plc, 22 Boston Wharf Road FL 7, Boston, MA
02210.
(2)
Our shareholders, named executive officers and directors may hold ordinary shares, ADSs or a combination of both. This column shows each
holder’s beneficial ownership assuming all shares were held as ordinary shares, which may not be the case. Our ADSs are listed on The Nasdaq
Capital Market under the trading symbol “AKTX.” Each ADS represents 2,000 ordinary shares.
(3)
Consists of (i) 9,391,708,000 shares held of record by Dr. Huh, (ii) 464,904,000 shares underlying options exercisable within 60 days of March
31, 2025 granted to Dr. Huh, (iii) 103,482,000 shares underlying warrants exercisable within 60 days of March 31, 2025 and (iv) 218,914,000
shares held of record by Hannol Ventures LLC (“Hannol”). Excludes up to 3,571,428,000 shares underlying warrants exercisable within 60 days
of March 31, 2025 issued to Dr. Huh which are subject to a 9.99% beneficial ownership limitation and with respect to which Dr. Huh disclaims
beneficial ownership to the extent that any exercise of such warrants would exceed such percentage. Dr. Huh is the sole member of Hannol and
exercises voting and dispositive power over the shares held of record by Hannol and may be deemed the beneficial owner of such shares. The
principal office address of Hannol is 16703 Early Riser Avenue, Suite 563, Land O Lakes, FL 34638.
(4)
Consists of (i) 91,396,000 shares held of record by Dr. Patel, (ii) 6,062,010,000 shares held of record by PranaBio Investments LLC
(“PranaBio”) and (iii) 571,706,667 options exercisable within 60 days of March 31, 2025 granted to Dr. Patel. Excludes up to (i) 96,774,000
shares underlying prefunded warrants exercisable within 60 days of March 31, 2025 to PranaBio and (ii) 3,855,918,000 shares underlying
warrants exercisable within 60 days of March 31, 2025 issued to Dr. Patel which are subject to a 9.99% beneficial ownership limitation and with
respect to which Dr. Patel disclaims beneficial ownership to the extent that any exercise of such warrants would exceed such percentage. Dr.
Patel is the manager of PranaBio and may be deemed the beneficial owner of the shares held of record by PranaBio. The principal office address
of PranaBio is 1701 Chicon Street, Austin, TX 78745.
(5)
Consists of (i) 4,969,980,600 shares held of record by Dr. Prudo, (ii) 10,000,000 shares underlying options exercisable within 60 days of March
31, 2025 granted to Dr. Prudo, (iii) 800,766,600 shares held of record by RPC Pharma Limited (“RPC”) and (iv) 38,709,600 ordinary shares held
of record by Praxis Trustees Limited as trustee of The Sonic Healthcare Holding Company (“Praxis”). Excludes up to 3,710,799,500 shares
underlying warrants exercisable within 60 days of March 31, 2025 issued to Dr. Prudo which are subject to a 9.99% beneficial ownership
limitation and with respect to which Dr. Prudo disclaims beneficial ownership to the extent that any exercise of such warrants would exceed such
percentage. Dr. Prudo controls the voting and investment decisions with respect to the shares held of record by RPC and Praxis and thereby may
be deemed the beneficial owner of such shares. The principal office address of RPC is c/o Landmark Fiduciare (Suisse) SA, 6 Place des Eaux-
Vives, P.O. Box 3461, Geneva, V8 1211, Switzerland. The principal office address of Praxis is P.O. Box 296, Regency Court, Glategny
Esplanade, St. Peter Port, Guernsey, GY1 4NA.
(6)
Represent shares held of record by Mr. Bazemore.
(7)
Consists of (i) 41,144,000 shares held of record by Mr. Neal, (ii) 193,710,000 shares underlying options exercisable within 60 days of March 31,
2025 and (iii) 19,570,000 shares underlying warrants exercisable within 60 days of March 31, 2025.
(8)
Includes (i) 903,714,000 shares held of record by Mr. Patel, (ii) 154,968,000 shares underlying options exercisable within 60 days of March 31,
2025, (iii) 12,500,000 shares held of record by TT Insurance Investment LLC (“TTI”), (iv) 27,802,000 ordinary shares held of record by
Innovative Lifesci Investments LLC (“Innovative Lifesci”), (v) 39,760,0000 ordinary shares held of record by Quest Bio LLC (“Quest”) and (vi)
40,438,000 ordinary shares held of record by Davis Island Ventures LLC (“Davis Island”). Mr. Patel, as the managing member of TTI,
Innovative Lifesci, Quest Bio and Davis Island, exercises voting and dispositive power with respect to the ordinary shares held by such entities
and therefore may be deemed to beneficially own the shares held of record by such entities. The principal office address of each of TTI,
Innovative Lifesci and Quest is 4631 W El Prado Blvd., Tampa, FL 33629.
108
(9)
Represent shares held of record by Mr. Gaslightwala.
(10)
Includes (i) 1,395,288,667 shares underlying options exercisable within 60 days of March 31, 2025, and (ii) 123,052,000 shares underlying
warrants exercisable within 60 days of March 31, 2025.
109
Equity Compensation Plan Information
We have three compensation plans under which our equity securities are authorized for issuance. The 2014 Equity Incentive Plan, the 2023 Equity
Incentive Plan and the Peak Bio Inc. Long Term Incentive Plan. The following table sets forth certain information relating to these equity compensation
plans as of December 31, 2024:
Number of
Number of
Securities to be
Weighted-Average
Securities Remaining
Issued Upon
Exercise Price of
Available For Future
Exercise of
Outstanding
Issuance Under
Outstanding Options,
Options, Warrants
Equity Compensation
Plan Category
Warrants and Rights
and Rights(2)
Plans
Equity compensation plans approved by shareholders
2014 Equity Incentive Plan
253,434,688
$
0.01
—
2023 Equity Incentive Plan
726,191,815
0.00
8,148,713,522
Peak Bio Inc. Long Term Incentive Plan
3,236,162,000
0.00
—
Total
4,215,788,503
$
0.01
8,148,713,522
Equity compensation plans not approved by shareholders
N/A
N/A
N/A
_____________________
(1)
Consists of our 2014 Plan and 2023 Plan and the awards granted under the incentive plan of Peak Bio Inc. assumed at closing of the
acquisition. As of December 31, 2024, new awards are only available for issuance under our 2023 Plan.
(2)
There were no RSUs outstanding and there was no impact to the calculation of the weighted-average exercise price.
(1)
110
Item 13. Certain Relationships and Related Transactions, and Director Independence.
Transactions with Related Persons
Since January 1, 2023, we have not entered into or engaged in any related party transactions, as defined by the SEC, with our directors, officers, and
shareholders who beneficially owned more than 5% of our outstanding ordinary shares (“5% holders”), as well as affiliates or immediate family members
of those directors, officers, and 5% holders, except with respect to the transactions described below.
Interim CEO Agreement
On December 12, 2024, our board of directors approved the appointment of Dr. Patel to Chief Executive Officer and principal executive officer, effective
December 16, 2024. There were no changes to Dr. Patel's revised compensation as provided for under the September 16, 2024 Interim CEO Amendment
Agreement, described below, following Dr. Patel's appointment as President and Chief Executive Officer on December 16, 2024.
On May 31, 2024, we and Dr. Patel entered into an Interim Chief Executive Officer Agreement, effective as of May 1, 2024 (the “Interim CEO
Agreement”). Pursuant to the Interim CEO Agreement, Dr. Patel served as our Interim President and Chief Executive Officer as an independent contractor
on an at-will basis. The Interim CEO Agreement could be terminated by us immediately for any reason. As the sole compensation for services provided
under the Interim CEO Agreement, Dr. Patel was paid $50,000 per month in the form of fully vested ordinary shares. On September 16, 2024, we entered
into an amendment to the Interim CEO Agreement (the “Amendment”), effective July 1, 2024, to revise Dr. Patel’s compensation in connection with the
services as Interim President and Chief Executive Officer. Pursuant to the Amendment, in lieu of receiving the stated monthly compensation of $50,000 in
the form of fully vested ordinary shares, Dr. Patel is paid in the form of fully vested NQSOs, with the number of ADSs underlying each such monthly
NQSOs grant equal to two times the number determined by dividing (i) $50,000 by (ii) the closing price of our ADSs on the Nasdaq Capital Market on the
last day of each month (or partial month) Dr. Patel serves as our Interim President and Chief Executive Officer.
During the year ended December 31, 2024, we recognized approximately $0.3 million in non-cash stock-based compensation costs pursuant to the Interim
CEO Agreement, as amended, pertaining to (i) NQSOs granted to Dr. Patel to purchase 422,368,000 ordinary shares at an exercise price of less than $0.01
per ordinary share with a grant date fair value of approximately $0.3 million, and (ii) 91,396,000 fully vested ordinary shares granted to Dr. Patel.
Notes Payable Due to Dr. Huh
Pursuant to the acquisition of Peak Bio, which closed on November 14, 2024, we assumed three notes payable due to Dr. Huh, our Chairman of the Board.
January 2024 Note
We assumed a note in the amount of $0.75 million owed to Dr. Huh, which was entered into in January 2024 (the “January 2024 Note”). The January 2024
Note has a maturity date of January 23, 2025, and carries an interest rate of 15% per annum. In connection with the closing of the acquisition, Dr. Huh
released Peak Bio of its rights to any security interest in all of the assets of Peak Bio and its subsidiaries.
As of the closing date, and as of December 31, 2024, the outstanding balance of the January 2024 Note was $0.75 million. We recognized interest expense
of less than $0.1 million subsequent to the acquisition date, through December 31, 2024. As of December 31, 2024, accrued interest of $0.1 million is
presented within accrued expenses in our consolidated balance sheets.
2021 Notes
111
We assumed a note in the amount of $0.9 million owed to Dr. Huh, which was entered into at various dates in 2021 (the “2021 Notes”). The 2021 Notes,
which matured at various dates in 2022, carried an interest rate of 1.0% per annum.
As of the closing date, and as of December 31, 2024, the outstanding balance of the 2021 Notes was $0.9 million. We recognized interest expense of less
than $0.1 million subsequent to the acquisition date, through December 31, 2024. As of December 31, 2024, accrued interest of $0.1 million is presented
within accrued expenses in our consolidated balance sheets.
In connection with the March 2025 Purchase Agreement, Dr. Huh's 2021 Notes and a portion of his January 2024 Note aggregating to $1.0 million were
cancelled, extinguished and paid in full for an equal amount of ordinary shares and warrants.
May 2024 Convertible Notes
On May 10, 2024, we entered into the May 2024 Notes For more information, see “Item 7. Management’s Discussion and Analysis of Financial Condition
and Results of Operations—Sources of Liquidity—May 2024 Convertible Notes.”
The Doctors Laboratory
We lease office space for its U.K. headquarters in London from The Doctors Laboratory (“TDL”) and has incurred expenses of approximately $0.1 million
plus VAT during each of the years ended December 31, 2024 and 2023, respectively. Dr. Ray Prudo, our Director, is the non-Executive Chairman of the
Board of Directors of TDL.
We received certain laboratory testing services for its clinical trials provided by TDL, including certain administrative services, and incurred expenses of
approximately $0.1 million during each of the years ended December 31, 2024 and 2023.
We recorded payable balances owed to TDL of less than $0.1 million as of December 31, 2024 and 2023.
Other
In November 2024, we assumed an amount due to an entity in which our Chairman, Dr. Hoyoung Huh, is a director. As of December 31, 2024, the
amounts due totaled less than $0.1 million and are included in accounts payable in our consolidated balance sheets.
Policies and Procedures for Related Person Transactions
Our board is committed to upholding the highest legal and ethical conduct in fulfilling its responsibilities and recognizes that related party transactions can
present a heightened risk of potential or actual conflicts of interest. Accordingly, as a general matter, it is our preference to avoid related party transactions.
In accordance with our Audit Committee Charter, members of the Audit Committee, all of whom are independent directors, review and approve all related
party transactions for which approval is required under applicable laws or regulations, including SEC and the Nasdaq Listing Rules. Current SEC rules
define a related party transaction for smaller reporting companies to include any transaction, arrangement, or relationship in which we are a participant and
the amount involved is the lesser of $120,000 or 1% of total assets, and in which any of the following persons has or will have a direct or indirect interest:
•
our executive officers, directors, or director nominees;
•
any person who is known to be the beneficial owner of more than 5% of our ordinary shares;
112
•
any person who is an immediate family member, as defined under Item 404 of Regulation S-K, of any of our executive officers, directors, or
director nominees or beneficial owners of more than 5% of our ordinary shares; or
•
any firm, corporation, or other entity in which any of the foregoing persons is employed or is a partner or principal or in a similar position or
in which such person, together with any other of the foregoing persons, has a 5% or greater beneficial ownership interest.
Under our code of business conduct and ethics, our directors, officers, and employees are expected to avoid any relationship, influence or activity that
would cause or even appear to cause a conflict of interest. Under our code of business conduct and ethics, a director is required to promptly disclose to our
board any potential or actual conflict of interest involving him or her. In accordance with our code of business conduct and ethics, the board will determine
an appropriate resolution on a case-by-case basis. All directors must recuse themselves from any discussion or decision affecting their personal, business,
or professional interests. In addition, the Audit Committee is responsible for reviewing with our primary counsel the results of their review of the
monitoring of compliance with our code of business conduct and ethics.
Director Independence
Our securities are listed on the Nasdaq Capital Market, and we use the standards of “independence” prescribed by rules set forth by Nasdaq. Under Nasdaq
rules, a majority of a listed company’s board of directors must be comprised of independent directors. In addition, Nasdaq rules require that, subject to
specified exceptions, each member of a listed company’s audit committee and compensation committee be independent and satisfy additional independence
criteria set forth in Rules 10A-3 and 10C-1, respectively, under the Exchange Act. Under the applicable Nasdaq rules, a director will only qualify as an
“independent director” if, in the opinion of our board, that person does not have a relationship which would interfere with the exercise of independent
judgment in carrying out the responsibilities of a director. Our board determined that each of Dr. Huh, Dr. Prudo, Mr. Bazemore, Mr. Neal, Mr. Patel, and
Mr. Gaslightwala are independent as defined under applicable rules of the Nasdaq, and, in the case of all members of the audit and compensation
committees, the independence requirements contemplated by Rule 10A-3 and Rule 10C-1 under the Exchange Act. Additionally, the board determined that
Mr. Grissinger, Mr. Hashad, and Mr. Williams, each of whom served on the board during 2023, were independent. As Dr. Patel is our President and Chief
Executive Officer, he is not independent.
113
Item 14. Principal Accounting Fees and Services.
Independent Registered Public Accounting Firm Fees
Our independent public accounting firm is BDO USA, P.C., New York, New York, PCAOB Auditor ID: 243.
The following table sets forth all fees paid or accrued by us for professional services rendered by BDO USA, P.C. during the years ended December 31,
2024 and 2023:
Fee Category
2024
2023
Audit Fees
$
527,845
$
344,384
Tax Fees
—
40,000
Total Fees
$
527,845
$
384,384
Audit Fees
Audit fees represent the aggregate fees for professional services rendered by our independent registered public accounting firm for: (i) the audit of our
annual consolidated financial statements, (ii) review of our interim financial statements filed on Form 10-Q that are customary under the standards of the
Public Company Accounting Oversight Board (United States), and (iii) issuance of consents in connection with the filing of registration statements and
related post-effective amendments.
Tax Fees
Tax fees consist of all services, except those services specifically related to the audit of the financial statements, performed by the independent registered
public accounting firm’s tax personnel, including tax compliance and reporting. Tax fees during the year ended December 31, 2023 primarily related to the
conduct of an IRS Section 382 study. No such services were provided by BDO during the year ended December 31, 2024.
Audit Committee Pre-Approval Policies and Procedures
Our audit committee has adopted policies and procedures relating to the approval of all audit and non-audit services that are to be performed by our
independent registered public accounting firm. This policy generally provides that we will not engage our independent registered public accounting firm to
render audit or non-audit services unless the service is specifically approved in advance by the audit committee, or the engagement is entered into pursuant
to the pre-approval procedures described below.
From time to time, the audit committee may pre-approve specified types of services that are expected to be provided to us by our independent registered
public accounting firm during the next 12 months. Any such pre-approval is detailed as to the particular service or type of services to be provided and is
also generally subject to a maximum dollar amount. All of the services described above under the headings “Audit Fees” and "Tax Fees" were pre-
approved by our audit committee.
114
PART IV
Item 15. Exhibits, Financial Statement Schedules.
(a)
(1) Financial Statements.
Page number in
this Report
Report of Independent Registered Public Accounting Firm (BDO USA, P.C.; New York, New York; PCAOB ID# 243)
F-2
Consolidated Balance Sheets at December 31, 2024 and 2023
F-5
Consolidated Statements of Operations and Comprehensive Loss for the years ended December 31, 2024 and 2023
F-6
Consolidated Statements of Shareholders’ Equity (Deficit) for the years ended December 31, 2024 and 2023
F-7
Consolidated Statements of Cash Flows for the years ended December 31, 2024 and 2023
F-8
Notes to Consolidated Financial Statements
F-9
(2) We are not filing any financial statement schedules as part of this Annual Report on Form 10-K because they are not applicable or the required
information is included in the financial statements or notes thereto.
(3) The list of Exhibits filed as part of this Annual Report on Form 10-K is set forth on the Exhibit Index below.
(b)
The list of Exhibits filed as part of this Annual Report on Form 10-K is set forth on the Exhibit Index below.
(c)
None.
Item 16. Form 10-K Summary
Not applicable.
115
Exhibit Index
Exhibit
Number
Description
2.1
Agreement and Plan of Merger, dated as of March 4, 2024, by and among Akari Therapeutics, Plc, Peak Bio, Inc. and Pegasus Merger
Sub, Inc. (incorporated by reference to Exhibit 2.1 to Registrant's Current Report on Form 8-K, as filed with the SEC on March 5,
2024).
2.2
Share Exchange Agreement, dated as of July 10, 2015, by and between Celsus Therapeutics Plc and RPC Pharma Limited (incorporated
by reference to Exhibit 2.1 to Registrant's Current Report on Form 8-K, as filed with the SEC on July 13, 2015).
3.1
Amended Articles of Association of Akari Therapeutics, Plc (incorporated by reference to the Exhibit 3.1 to Registrant’s Current Report
on Form 6-K, as filed with the SEC on July 7, 2023).
4.1
Form of Deposit Agreement among the Registrant, Deutsche Bank Trust Company Americas, as Depositary, and all Owners and
Holders from time to time of American Depositary Shares issued thereunder (incorporated by reference to the exhibit 99-a previously
filed with the Registrant’s Registration Statement on Form F-6 (No. 333-185197) filed on November 30, 2012).
4.2
Amendment to Deposit Agreement among the Registrant, Deutsche Bank Trust Company Americas, as Depositary, and all Owners and
Holders from time to time of American Depositary Shares issued thereunder (incorporated by reference to the registrant’s Post-Effective
Amendment No. 1 to Registration Statement on Form F-6 (No. 333-185197) filed on December 24, 2013).
4.3
Form of American Depositary Receipt; the Form is Exhibit A of Amendment No. 1 to the Deposit Agreement (incorporated by
reference to the exhibit previously filed with the Registrant’s Registration Statement on Form F-6 (No. 333-185197) filed on November
30, 2012).
4.4
Form of Amendment No. 2 to Deposit Agreement (incorporated by reference to the exhibit previously filed with the Registrant’s Post-
Effective Amendment on Registration Statement Form F-6 (File No. 333-185197) filed on September 9, 2015).
4.5
Form of Amendment No. 3 to Deposit Agreement (incorporated by reference to the exhibit previously filed with the Registrant’s Post-
Effective Amendment on Registration Statement Form F-6 (File No. 333-185197) filed on August 17, 2023).
4.6
Form of American Depositary Receipt; the Form is Exhibit A of Amendment No. 2 to the Deposit Agreement (incorporated by
reference to the exhibit previously filed with the Registrant’s Post-Effective Amendment on Registration Statement Form F-6 filed on
September 9, 2015).
4.7*
Description of the Akari Therapeutics Plc Securities Registered Under Section 12 of the Securities Exchange Act of 1934.
10.1
Relationship Agreement, dated as of July 10, 2015, by and between Celsus Therapeutics Plc and RPC Pharma Limited. (incorporated by
reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K, as filed with the SEC on July 13, 2015).
10.2
Form of Working Capital Agreement, by and between Volution Immuno Pharmaceuticals SA and the Shareholders named therein.
(incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K, as filed with the SEC on July 13, 2015).
10.3†
2014 Equity Incentive Plan (incorporated by reference to Exhibit 99.1 to the Registrant's Report on Form 6-K, as filed with the SEC on
June 24, 2014).
10.4†
Amended and Restated 2014 Equity Incentive Plan (incorporated by reference to Annex E to the Registrants Definitive Proxy Statement
on Schedule 14A, as filed with the SEC on August 3, 2015).
10.5†
2023 Equity Incentive Plan (incorporated by reference to Exhibit 4.8 to the Registrant’s Form S-8, as filed with the SEC on October 12,
2023).
10.6†
Form of ISO/NQ Stock Option Agreement Granted Under the 2023 Equity Incentive Plan (incorporated by reference to Exhibit 10.6 to
the Registrant's 2023 Form 10-K, as filed with the SEC on March 29, 2024).
10.7†
Form of Restricted Stock Unit Agreement Granted Under the 2023 Equity Incentive Plan (incorporated by reference to Exhibit 10.7 to
the Registrant's 2023 Form 10-K, as filed with the SEC on March 29, 2024).
10.8
Amended and Restated Non-Employee Director Compensation Policy (incorporated by reference to Exhibit 10.1 to the Registrant’s
Current Report on Form 8-K, as filed with the SEC on June 30, 2016).
116
10.9
Form of Securities Purchase Agreement dated as of June 28, 2019 between Akari Therapeutics, Plc and the investors listed therein
(incorporated by reference to Exhibit 10.1 to the Registrant’s Report on Form 6-K, as filed with the SEC on July 2, 2019).
10.10
Form of Warrant issued by Akari Therapeutics, Plc in connection with the July 2019 Registered Direct Offering (incorporated by
reference to Exhibit 10.2 to the Registrant’s Report on Form 6-K, as filed with the SEC on July 2, 2019).
10.11
Form of Placement Agent Warrant issued by Akari Therapeutics, Plc in connection with the July 2019 Registered Direct Offering
(incorporated by reference to Exhibit 4.6 to the Registrant’s Registration Statement on Form F-1, as filed with the SEC on August 6,
2019).
10.12
Form of Warrant issued by Akari Therapeutics, Plc in connection with the February 2020 Private Placement (incorporated by reference
to Exhibit 10.2 to the Registrant’s Report on Form 6-K, as filed with the SEC on March 4, 2020).
10.13
Registration Rights Agreement dated June 30, 2020 between the Company and Aspire Capital Fund, LLC (incorporated by reference to
Exhibit 4.1 to the Registrant’s Report on Form 6-K, as filed with the SEC on July 1, 2020).
10.14
Form of Warrant issued by Akari Therapeutics, Plc in connection with the July 2021 Private Placement (incorporated by reference to
Exhibit 10.2 to the Registrant’s Report on Form 6-K, as filed with the SEC on July 20, 2021).
10.15
Form of Warrant issued by Akari Therapeutics, Plc in connection with the December 2021 Registered Direct Offering (incorporated by
reference to Exhibit 10.2 to the Registrant’s Report on Form 6-K, as filed with the SEC on January 4, 2022).
10.16
Form of Warrant issued by Akari Therapeutics, Plc in connection with the March 2022 Registered Direct Offering (incorporated by
reference to Exhibit 10.2 to the Registrant’s Report on Form 6-K, as filed with the SEC on March 10, 2022).
10.17
Form of Series A Warrant issued by Akari Therapeutics, Plc in connection with the September 2022 Registered Direct Offering and
Concurrent Private Placement (incorporated by reference to Exhibit 10.2 to the Registrant’s Report on Form 6-K, as filed with the SEC
on September 14, 2022).
10.18
Form of Series B Warrant issued by Akari Therapeutics, Plc in connection with the September 2022 Registered Direct Offering and
Concurrent Private Placement (incorporated by reference to Exhibit 10.3 to Registrant’s Report on Form 6-K, as filed with the SEC on
September 14, 2022).
10.19
Form of Pre-Funded Warrant issued under the Securities Purchase Agreement dated as of September 20, 2023 between Akari
Therapeutics, Plc and the investors listed therein (incorporated by reference to Exhibit 10.2 to Registrant's Current Report on Form 8-K,
as filed with the SEC on September 21, 2023.
10.20
Form of Placement Agent Warrant issued under the Securities Purchase Agreement dated as of September 20, 2023 between Akari
Therapeutics, Plc and the investors listed therein (incorporated by reference to Exhibit 10.3 to Registrant's Current Report on Form 8-K,
as filed with the SEC on September 21, 2023.
10.21
Executive Employment Agreement between the Company and Rachelle Jacques dated June 1, 2022 (incorporated by reference to
Exhibit 10.11 to the Registrant’s Registration Statement on Form F-1, as filed with the SEC on October 12, 2022).
10.22
Stock Option Agreement between the Company and Rachelle Jacques dated June 1, 2022 (incorporated by reference to Exhibit 10.12 to
Registrant’s Registration Statement on Form F-1, as filed with the SEC on October 12, 2022).
10.23
Restricted Stock Unit Agreement between the Company and Rachelle Jacques dated June 1, 2022 (incorporated by reference to Exhibit
10.13 to Registrant’s Registration Statement on Form F-1, as filed with the SEC on October 12, 2022).
10.24†
Stock Option Agreement between the Company and Rachelle Jacques dated March 28, 2023 (incorporated by reference to Exhibit 10.24
to the Registrant's 2023 Form 10-K, as filed with the SEC on March 29, 2024).
10.25†*
Restricted Stock Unit Agreement between the Company and Rachelle Jacques dated June 1, 2023.
10.26†*
Consulting Agreement between the Company and Wendy DiCicco dated July 17, 2023.
10.27†*
Amendment No. 1 to Consulting Agreement between the Company and Wendy DiCicco dated September 1, 2023.
10.28†*
Consulting Agreement between the Company and Wendy F. DiCicco dated January 15, 2024.
117
10.29†*
Stock Option Agreement between the Company and Wendy F. DiCicco dated July 17, 2023.
10.30
Form of Voting and Support Agreement, dated as of March 4, 2024, by and among Akari, and certain stockholders of Peak Bio
(incorporated by reference to Exhibit 10.1 to Registrant's Current Report on Form 8-K, as filed with the SEC on March 5, 2024).
10.31
Form of Voting and Support Agreement, dated as of March 4, 2024, by and among Peak Bio and certain shareholders of Akari
(incorporated by reference to Exhibit 10.2 to Registrant's Current Report on Form 8-K, as filed with the SEC on March 5, 2024).
10.32
Form of Series C Warrant issued under the Securities Purchase Agreement dated as of June 4, 2024 between Akari Therapeutics, Plc
and the investors listed therein (incorporated by reference to Exhibit 4.1 to Registrant's Current Report on Form 8-K, as filed with the
SEC on June 4, 2024).
10.33
Form of Securities Purchase Agreement dated as of June 4, 2024 between Akari Therapeutics, Plc and the investors listed therein
(incorporated by reference to Exhibit 10.1 to the Registrant’s Report on Form 8-K, as filed with the SEC on June 4, 2024).
10.34
Form of Placement Agent Warrant issued under the Securities Purchase Agreement dated as of June 4, 2024 between Akari
Therapeutics, Plc and the investors listed therein (incorporated by reference to Exhibit 4.2 to Registrant's Current Report on Form 8-K,
as filed with the SEC on June 4, 2024).
10.35
Amendment No. 2 to Consulting Services Agreement, by and between the Company and Board Advantage LLC, dated April 26, 2024
(incorporated by reference to Exhibit 10.1 to Registrant’s Current Report on Form 8-K, as filed with the SEC on May 1, 2024).
10.36
Form of Convertible Promissory Note, dated May 10, 2024, by and between Akari Therapeutics, Plc and the purchasers party thereto
(incorporated by reference to Exhibit 10.3 to Registrant's Quarterly Report on Form 10-Q, as filed with the SEC on August 19, 2024).
10.37
Interim Chief Executive Officer Agreement, dated as of May 31, 2024, by and between the Company and Samir Patel, M.D.
(incorporated by reference to Exhibit 10.1 to Registrant's Current Report on Form 8-K, as filed with the SEC on June 5, 2024).
10.38
Amendment to Interim Chief Executive Officer Agreement, between Akari Therapeutics, Plc and Samir R. Patel, M.D., dated as of
September 16, 2024 (incorporated by reference to Exhibit 10.1 to Registrant’s Current Report on Form 8-K, as filed with the SEC on
September 18, 2024).
10.39
Side Letter Agreement, dated August 15, 2024, by and among Akari Therapeutics, Plc, Pegasus Merger Sub, Inc. and Peak Bio, Inc.
(incorporated by reference to Exhibit 10.3 to Registrant's Quarterly Report on Form 10-Q, as filed with the SEC on August 19, 2024).
10.40*
Separation Agreement, dated August 18, 2024, by and between Akari Therapeutics, Plc and Rachelle Jacques.
10.41
Form of Warrant Certificate of the Company (incorporated by reference to Exhibit 4.1 to of the Company’s Current Report on Form 8-K
filed with the SEC on November 7, 2022).
10.42
Form of Amended and Restated Warrant Agreement, dated as of October 31, 2022, by and between Ignyte Acquisition Corp. and
Continental Stock Transfer & Trust Company, as warrant agent (incorporated by reference to Exhibit 10.4 of the Company’s Current
Report on Form 8-K filed with the SEC on November 2, 2022).
10.43
Form of Convertible Note and Warrant Subscription Agreement, dated April 28, 2023, by and between Peak Bio, Inc. and the Investors
party thereto (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed with the SEC on May 1,
2023).
10.44
Form of Convertible Note, dated April 28, 2023 (incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-
K filed with the SEC on May 1, 2023).
10.45
Form of Warrant, dated April 28, 2023 (incorporated by reference to Exhibit 10.3 of the Company’s Current Report on Form 8-K filed
with the SEC on May 1, 2023).
10.46
Warrant, dated April 28, 2023, issued to Paulson Investment Company, LLC (incorporated by reference to Exhibit 10.5 of the
Company’s Current Report on Form 8-K filed with the SEC on May 1, 2023).
10.47
Form of Senior Secured Promissory Note, dated January 23, 2024, by and between Peak Bio, Inc. and the Hoyoung Huh (incorporated
by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed with the SEC on January 29, 2024).
19.1
Insider Trading Policy.
21.1*
List of Subsidiaries.
118
23.1*
Consent of Independent Registered Public Accounting Firm.
31.1*
Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as
Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*
Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as
Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*
Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002.
32.2*
Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002.
97*
Clawback Policy.
101.INS
Inline XBRL Instance Document–the instance document does not appear in the Interactive Data File as its XBRL tags are embedded
within the Inline XBRL document.
101.SCH
line XBRL Taxonomy Extension Schema With Embedded Linkbase Documents.
104
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).
* Filed herewith.
† Indicates management contract or compensatory arrangement.
119
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Report
to be signed on its behalf by the undersigned, thereunto duly authorized.
Akari Therapeutics, Plc
By:
Date: April 15, 2025
/s/ Samir R. Patel, M.D.
Samir R. Patel, M.D.
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Report has been signed below by the following persons on
behalf of the Registrant in the capacities and on the dates indicated.
Name
Title
Date
/s/ Samir R. Patel, M.D.
President and Chief Executive Officer
April 15, 2025
Samir R. Patel, M.D.
(principal executive officer)
/s/ Torsten Hombeck, Ph.D.
Chief Financial Officer
April 15, 2025
Torsten Hombeck, Ph.D.
(principal financial officer and principal accounting officer)
/s/ Hoyoung Huh, M.D., Ph.D.
Chairman
April 15, 2025
Hoyoung Huh, M.D., Ph.D.
/s/ Ray Prudo, M.D.
Director
April 15, 2025
Ray Prudo, M.D.
/s/ James Neal
Director
April 15, 2025
James Neal
/s/ Sandip I. Patel
Director
April 15, 2025
Sandip I. Patel
/s/ Robert Bazemore
Director
April 15, 2025
Robert Bazemore
/s/ Abizer Gaslightwala
Director
April 15, 2025
Abizer Gaslightwala
F-1
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm (BDO USA, P.C.; New York, New York; PCAOB ID# 243)
F-2
Consolidated Balance Sheets as of December 31, 2024 and 2023
F-5
Consolidated Statements of Operations and Comprehensive Loss for the Years ended December 31, 2024 and 2023
F-6
Consolidated Statements of Shareholders’ Equity (Deficit) for the Years ended December 31, 2024 and 2023
F-7
Consolidated Statements of Cash Flows for the Years ended December 31, 2024 and 2023
F-8
Notes to Consolidated Financial Statements
F-9
F-2
Report of Independent Registered Public Accounting Firm
Shareholders and Board of Directors
Akari Therapeutics, Plc
Boston, Massachusetts
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Akari Therapeutics, Plc (the “Company”) as of December 31, 2024 and 2023, the
related consolidated statements of operations and comprehensive loss, changes in shareholders’ equity (deficit), and cash flows for each of the years then
ended, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements
present fairly, in all material respects, the financial position of the Company at December 31, 2024 and 2023, and the results of its operations and its cash
flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.
Going Concern Uncertainty
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in
Note 1 to the consolidated financial statements, the Company has suffered recurring losses from operations, defaults on debt obligations and has a net
capital deficiency that raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to 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 Company’s management. Our responsibility is to express an opinion on the Company’s
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 Company 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 the 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
F-3
communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they
relate.
Valuation of Intangible Assets Related to In-process Research and Development (IPR&D)
As disclosed in Note 3 to the consolidated financial statements, the Company completed its acquisition of Peak Bio, Inc. in November 2024. As a result of
the acquisition, the Company recognized approximately $34.0 million of AKTX-101 IPR&D and $5.2 million of PHP 303 IPR&D, both valued using the
multi-period excess earnings method. Significant assumptions used in determining the fair value of the IPR&D include forecasted gross product sales,
discount rates and probability of clinical trial success and obtaining regulatory approval.
We identified the valuation of intangible assets related to acquired IPR&D as a critical audit matter. The principal considerations for our determination are
the significant judgments and subjectivity required in assessing the fair value of the acquired IPR&D and certain significant assumptions related to: (i) the
forecasted gross product sales for AKTX-101 IPR&D, and (ii) discount rates and probability of clinical trial success and obtaining regulatory approval for
both AKTX-101 and PHP 303 IPR&D. Auditing these elements involved especially challenging and subjective auditor judgment due to the nature and
extent of audit effort required to address this matter, including the involvement of professionals with specialized skills or knowledge.
The primary procedures we performed to address this critical audit matter included:
•
Evaluating the reasonableness of forecasted gross product sales for AKTX-101 IPR&D by comparing them against relevant life science
studies, market and industry data, and historical sales trend of comparable products.
•
Utilizing professionals with specialized skills and knowledge in valuation to assist in: (i) evaluating the reasonableness of the discount rates
used in the valuation models; (ii) developing independent estimates of the discount rates and comparing those to the discount rates selected by
management; and (iii) assessing the reasonableness of the probability of clinical trial success and obtaining regulatory approval used in the
valuation models.
Classification of Warrants
As described in Note 3 to the consolidated financial statements, in connection with the acquisition of Peak Bio, Inc., the Company assumed the April 2023
Peak Warrants issued to investors. The Company determined that the April 2023 Peak Warrants met the criteria for liability classification and recorded
them as derivative liabilities within its consolidated balance sheet.
In addition, as described in Note 7 to the consolidated financial statements, in November 2024 and in May 2024, the Company sold to certain investors its
American Depository Shares (“ADSs”) in private placement offerings. In connection with these offerings, the Company also issued registered warrants to
the investors (the “Series D Warrants” and “Series C Warrants”). The Company determined that the Series D Warrants and the Series C Warrants met all of
the criteria for equity classification and recorded them as a component of additional paid-in capital upon the closing of the transactions in November 2024
and May 2024.
We identified the evaluation of the consolidated financial statement classification for the April 2023 Peak Warrants, the Series D Warrants, and the Series
C Warrants as a critical audit matter. Our principal considerations included the existence of accounting complexities related to certain provisions of the
warrant agreements, including settlement provisions and derivative elements. Auditing these elements involved especially complex auditor judgment due to
the terms of the relevant agreements, including the extent of expertise needed.
The primary procedures we performed to address this critical audit matter included:
F-4
•
Evaluating the appropriateness of management’s conclusions through the review of: (i) the relevant terms of the warrant agreements, (ii) the
completeness and accuracy of the Company’s technical accounting analysis, and (iii) the appropriateness of application of the relevant
accounting literature.
•
Utilizing personnel with expertise in relevant technical accounting to assist in: (i) evaluating relevant terms of the warrant agreements in
relation to the appropriate accounting literature, and (ii) assessing the appropriateness of conclusions reached by the Company related to the
Series C Warrants and the April 2023 Peak Warrants.
Convertible Notes, Related Party
As described in Note 2 and Note 9 to the consolidated financial statements, the Company entered into unsecured convertible promissory notes with certain
related parties in May 2024 (the “May 2024 Notes”). In accounting for the issuance of the May 2024 Notes, the Company concluded that there were no
potential derivatives that should be accounted for separately.
We identified the accounting evaluation of the May 2024 Notes as a critical audit matter. The principal considerations for our determination were: (i) the
evaluation of the contract terms and conditions in accordance with the appropriate existing and recently adopted accounting literature, and (ii) the
evaluation of the potential derivatives that may require bifurcation from the debt instrument and evaluation of the appropriate accounting treatment.
Auditing these elements involved especially complex auditor judgment due to the terms of the relevant agreements, including the extent of expertise
needed.
The primary procedures we performed to address this critical audit matter included:
•
Utilizing personnel with expertise in relevant technical accounting to assist in: (i) evaluating relevant contract terms and conditions of the May
2024 Notes in relation to the relevant accounting literature, and (ii) assessing the appropriateness of conclusions reached by the Company with
respect to the evaluation of potential derivatives, bifurcation, and accounting treatment for the May 2024 Notes.
/S/ BDO USA, P.C.
We have served as the Company’s auditor since 2016.
New York, New York
April 15, 2025
F-5
AKARI THERAPEUTICS, PLC
Consolidated Balance Sheets
(amounts in thousands, except share and per share data)
December 31,
2024
2023
ASSETS
Current assets:
Cash
$
2,599 $
3,845
Restricted cash
60
—
Prepaid expenses
92
299
Other current assets
201
197
Total current assets
2,952
4,341
Goodwill
8,430
—
Other intangible assets
39,180
—
Patent acquisition costs, net
—
14
Total assets
$
50,562 $
4,355
LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT)
Current liabilities:
Accounts payable
$
12,407 $
1,671
Accrued expenses
3,137
1,566
Convertible notes
700
—
Convertible notes, related party
250
—
Notes payable
659
—
Notes payable, related party
1,651
—
Warrant liabilities
1,012
1,253
Other current liabilities
94
94
Total current liabilities
19,910
4,584
Other non-current liabilities
383
—
Deferred tax liability
8,040
—
Total liabilities
28,333
4,584
Commitments and contingencies (Note 10)
Shareholders’ equity (deficit):
Share capital of $0.0001 par value
Authorized: 245,035,791,523 and 45,122,321,523 ordinary shares at
December 31, 2024 and 2023, respectively; issued and outstanding:
53,186,919,523 and 13,234,315,298 at December 31, 2024 and 2023,
respectively
5,319
1,324
Additional paid-in capital
212,706
174,754
Capital redemption reserve
52,194
52,194
Accumulated other comprehensive loss
(738)
(1,040)
Accumulated deficit
(247,252)
(227,461)
Total shareholders’ equity (deficit)
22,229
(229)
Total liabilities and shareholders’ equity (deficit)
$
50,562 $
4,355
The accompanying notes are an integral part of these consolidated financial statements.
F-6
AKARI THERAPEUTICS, PLC
Consolidated Statements of Operations and Comprehensive Loss
(amounts in thousands, except share and per share data)
Year Ended
December 31,
2024
2023
Operating expenses:
Research and development
$
6,983
$
5,450
General and administrative
9,664
11,356
Merger-related expenses
3,273
—
Restructuring and other expenses
1,723
—
Total operating expenses
21,643
16,806
Loss from operations
(21,643)
(16,806)
Other income (expense):
Interest income
8
82
Interest expense
(244)
—
Change in fair value of warrant liabilities
2,085
6,599
Foreign currency exchange gains (losses), net
6
136
Other expense, net
(3)
(19)
Total other income, net
1,852
6,798
Net loss
$
(19,791)
$
(10,008)
Net loss per share –– basic and diluted
$
(0.00)
$
(0.00)
Weighted-average number of ordinary shares used in computing net loss per share
–– basic and diluted
23,888,010,485
9,788,980,193
Comprehensive loss:
Net loss
$
(19,791)
$
(10,008)
Other comprehensive income, net of tax:
Foreign currency translation adjustment
302
(269)
Total other comprehensive income, net of tax
302
(269)
Total comprehensive loss
$
(19,489)
$
(10,277)
The accompanying notes are an integral part of these consolidated financial statements.
F-7
AKARI THERAPEUTICS, PLC
Consolidated Statements of Changes in Shareholders’ Equity (Deficit)
(amounts in thousands, except share data)
Accumulate
d
Additional
Capital
Other
Total
Share Capital $0.0001 par value
Paid-in-
Redemptio
n
Comprehens
ive
Accumulated
Shareholde
rs’
Shares
Amount
Capital
Reserve
Income
(Loss)
Deficit
Equity
(Deficit)
Balance, December 31, 2022
7,444,917,123 $
745 $
167,076 $
52,194 $
(771 ) $
(217,453 ) $
1,791
Issuance of share capital related to financing,
net of issuance costs
5,666,034,700
567
6,394
—
—
—
6,961
Issuance of shares for services
80,000,000
8
134
—
—
—
142
Vesting of restricted shares
43,363,475
4
—
—
—
—
4
Stock-based compensation
—
—
1,150
—
—
—
1,150
Foreign currency translation
—
—
—
—
(269 )
—
(269 )
Net loss
—
—
—
—
—
(10,008 )
(10,008 )
Balance, December 31, 2023
13,234,315,298 $
1,324 $
174,754 $
52,194 $
(1,040 ) $
(227,461 ) $
(229 )
Issuance of share capital related to financing,
net of issuance costs
14,127,540,000
1,413
10,054
—
—
—
11,467
Issuance of share capital related to acquisition
of Peak Bio, Inc., net of issuance costs
25,227,884,000
2,523
25,606
—
—
—
28,129
Issuance of shares for services
334,396,000
33
238
—
—
—
271
Vesting of restricted shares
383,275,400
38
(10 )
—
—
—
28
Shares withheld for payroll taxes
(120,491,175 )
(12 )
(181 )
—
—
—
(193 )
Stock-based compensation
—
—
2,245
—
—
—
2,245
Foreign currency translation
—
—
—
—
302
—
302
Net loss
—
—
—
—
—
(19,791 )
(19,791 )
Balance, December 31, 2024
53,186,919,523 $
5,319 $
212,706 $
52,194 $
(738 ) $
(247,252 ) $
22,229
The accompanying notes are an integral part of these consolidated financial statements.
F-8
AKARI THERAPEUTICS, PLC
Consolidated Statements of Cash Flows
(amounts in thousands)
Year Ended
December 31,
2024
2023
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss
$
(19,791 )
$
(10,008 )
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization
14
4
Stock-based compensation
2,245
1,150
Issuance of shares for services
271
142
Change in fair value of warrant liabilities
(2,085 )
(6,599 )
Unrealized foreign currency exchange losses (gains)
255
(255 )
Change in assets and liabilities, net of acquisition of Peak Bio:
Prepaid expenses and other current assets
1,316
70
Accounts payable and accrued expenses
5,223
(936 )
Net cash used in operating activities
(12,552 )
(16,432 )
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash acquired in Peak Bio Acquisition
382
—
Net cash provided by investing activities
382
—
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of shares, net of issuance costs
11,815
7,016
Proceeds from issuance of convertible notes
1,000
—
Repayment of convertible notes
(750 )
—
Proceeds from issuance of restricted shares
26
—
Proceeds from employee vesting of restricted shares
2
4
Payments on short-term financing arrangement
(1,105 )
—
Net cash provided by financing activities
10,988
7,020
Effect of exchange rates on cash
(4 )
7
Net decrease in cash
(1,186 )
(9,405 )
Cash and restricted cash at beginning of period
3,845
13,250
Cash and restricted cash at end of period
$
2,659
$
3,845
Components of cash and restricted cash
Cash
$
2,599
$
3,845
Restricted cash
60
—
Total cash and restricted cash
$
2,659
$
3,845
SUPPLEMENTAL DISCLOSURES OF NON-CASH ACTIVITIES:
Financing costs in accounts payable and accrued expenses
$
348
$
55
Seller-financed purchases
$
1,105
$
—
Payroll taxes on stock-based compensation in accrued expenses
$
193
$
—
Issuance of ordinary shares for Peak Bio Acquisition
$
28,129
$
—
Warrants assumed in connection with Peak Bio Acquisition
$
1,844
$
—
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Cash paid for interest
$
143
$
—
The accompanying notes are an integral part of these consolidated financial statements.
F-9
AKARI THERAPEUTICS, PLC
Notes to Consolidated Financial Statements
Note 1. Description of Business
Business Overview
Akari Therapeutics, Plc, (the “Company” or “Akari”) is incorporated in the United Kingdom. The Company is developing next-generation antibody-drug
conjugates, or ADCs, through its proprietary technology platform that enables Akari to generate a range of ADC candidates and optimize them to target a
range of cancers. Since the Company’s acquisition of Peak Bio in November 2024, Akari has focused substantially all of its efforts on the ADC platform
and pipeline of novel anti-cancer payloads with mechanisms of action that differ from existing therapies and the application of those payloads against
clinically validated targets. Through its platform, the Company aims to establish a pipeline of ADC candidates that target and kill cancer cells and stimulate
the immune system, or bifunctional ADCs, all while overcoming the limitations inherent in existing therapies. The Company’s activities since inception
have consisted of performing research and development activities and raising capital.
The Company is subject to a number of risks similar to those of preclinical and clinical stage companies, including dependence on key individuals,
uncertainty of product development and generation of revenues, dependence on outside sources of capital, risks associated with clinical trials of products,
dependence on third-party collaborators for research and development operations, need for marketing authorization of products, risks associated with
protection of intellectual property, and competition with larger, better-capitalized companies.
To fully execute its business plan, the Company will need, among other things, to complete its research and development efforts, preclinical and regulatory
activities, and clinical trials. These activities may take several years and will require significant operating and capital expenditures in the foreseeable future.
There can be no assurance that these activities will be successful. If the Company is not successful in these activities it could delay, limit, reduce or
terminate its preclinical studies or other discovery and research activities.
Agreement and Plan of Merger with Peak Bio Inc.
On March 4, 2024, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Peak Bio, Inc. (“Peak Bio”) and Pegasus
Merger Sub, Inc., a Delaware corporation and a wholly-owned subsidiary of Akari (“Merger Sub”), pursuant to which, upon the terms and subject to the
conditions thereof, Merger Sub will be merged with and into Peak Bio (the “acquisition”), with Peak Bio surviving the Acquisition as a wholly-owned
subsidiary of Akari.
On November 14, 2024, the Company completed the previously announced strategic business combination contemplated by the Merger Agreement
(“Closing”), pursuant to which, Merger Sub merged with and into Peak Bio, with Peak Bio surviving the acquisition as a wholly owned subsidiary of
Akari.
At the Closing, the Company issued a total of 12,613,942 Akari American Depositary Shares (“Akari ADSs” or “ADSs”) which reflected the conversion of
each issued and outstanding share of Peak Bio Common Stock into the right to receive Akari ADSs representing a number of Akari Ordinary Shares equal
to 0.2935 (the “Exchange Ratio”). The Exchange Ratio was calculated in accordance with the terms of the Merger Agreement and is such that the total
number of shares of Akari ADSs issued in connection with the acquisition is approximately 48.4% of the outstanding shares of Akari on a fully diluted
basis.
At the Closing, each warrant to purchase capital stock of Peak Bio (“Peak Warrant”) that was outstanding immediately prior to the Closing was converted
into warrants to purchase a number of Akari Ordinary Shares or Akari ADSs, as determined by Akari (each, an “Adjusted Warrant”), on substantially
similar terms and conditions as were applicable to such Peak Warrant immediately prior to the Closing. The number of Akari Ordinary Shares (or the
number of Akari Ordinary Shares underlying Akari ADSs, as applicable) subject to each Adjusted Warrant is equal to the number of shares of Peak Bio
Common Stock issuable upon exercise of such Peak Warrant immediately prior to the Closing multiplied by the Exchange Ratio, with any fractional Akari
Ordinary Shares or Akari ADSs rounded down to the
F-10
nearest whole Akari Ordinary Share or Akari ADS, as applicable, and the exercise price with respect to each Akari Ordinary Share (or each Akari Ordinary
Share underlying Akari ADSs, as applicable) underlying such Adjusted Warrant equal to the exercise price of such Peak Warrant immediately prior to the
Closing divided by the Exchange Ratio.
Further, at the Closing, each option to acquire shares of Peak Bio Common Stock (“Peak Option”) that was outstanding and unexercised immediately prior
to the Closing, whether or not vested, was assumed and converted into an option to purchase a number of Akari ordinary shares or Akari ADSs, as
determined by Akari (each, an “Adjusted Option”). The number of Akari Ordinary Shares (or the number of Akari Ordinary Shares underlying Akari
ADSs, as applicable) subject to the Adjusted Option is equal to the product of (i) the total number of shares of Peak Common Stock subject to such Peak
Option immediately prior to the Closing multiplied by (ii) the Exchange Ratio, with any fractional Akari Ordinary Shares or Akari ADSs rounded down to
the nearest whole Akari Ordinary Share or Akari ADS, as applicable, and the exercise price per share of each Adjusted Option equal to the exercise price of
such Peak Option immediately prior to the Closing divided by the Exchange Ratio.
Liquidity and Financial Condition
The Company follows the provisions of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 205-40,
Presentation of Financial Statements—Going Concern, which requires management to assess the Company’s ability to continue as a going concern within
one year after the date the consolidated financial statements are issued.
The Company has incurred substantial losses and negative cash flows since inception and had an accumulated deficit of $247.3 million as of December 31,
2024. The Company’s cash balance of $2.6 million as of December 31, 2024 is not sufficient to fund its operations for the one-year period after the date
these consolidated financial statements are issued. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The
accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction
of liabilities in the normal course of business. The consolidated financial statements do not include any adjustments related to the recoverability and
classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of this uncertainty.
The Company anticipates incurring additional losses until such time, if ever, that it can generate significant sales of its product candidates currently in
research and development. The Company is subject to a number of risks and uncertainties similar to those of other companies of the same size within the
biotechnology industry, such as uncertainty of preclinical research outcomes, uncertainty of additional funding, and history of operating losses. Substantial
additional financing will be needed by the Company to fund its operations. Management is currently evaluating different strategies to obtain the required
funding for future operations. These strategies may include, but are not limited to: private placements and/or public offerings of equity and/or debt
securities, and strategic research and development collaborations and/or similar arrangements. There can be no assurance that these future funding efforts
will be successful.
ADS Ratio Change
Effective August 17, 2023, the Company changed the ratio of its ADSs to ordinary shares, par value $0.0001 per share, from one ADS representing 100
ordinary shares to a new ratio of one ADS representing 2,000 ordinary shares (the “ADS Ratio Change”). All ADS and per ADS amounts in the
accompanying consolidated financial statements and notes thereto have been retroactively adjusted for all impacted periods presented to reflect the ADS
Ratio Change.
Note 2. Summary of Significant Accounting Policies
Basis of presentation – The accompanying consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting
principles (“GAAP”) and assumes that the Company will continue to operate as a going concern.
F-11
Principles of consolidation – The consolidated financial statements include the accounts of the Company, Celsus Therapeutics, Inc., a Delaware
corporation, Volution Immuno Pharmaceuticals SA, a private Swiss company, Akari Malta Limited, a private Maltese company, Peak Bio, Inc, a Delaware
corporation, Peak Bio Co., Ltd, a private Republic of Korea corporation, and Peak Bio, Inc., a California corporation, each wholly-owned subsidiaries. All
intercompany transactions have been eliminated.
Foreign currency – The functional currency of the Company is U.S. dollars, as that is the currency of the primary economic environment in which the
Company operates as well as the currency in which it has been financed.
The reporting currency of the Company is U.S. dollars. The Company translates its non-U.S. operations’ assets and liabilities denominated in foreign
currencies into U.S. dollars at current rates of exchange as of the balance sheet date and income and expense items at the average exchange rate for the
reporting period. Translation adjustments resulting from exchange rate fluctuations are recorded as foreign currency translation adjustments, a component
of accumulated other comprehensive loss. Gains or losses from foreign currency transactions are included in foreign currency exchange gains/(losses), net.
Use of estimates – The preparation of the Company’s consolidated financial statements in conformity with U.S. GAAP requires management to make
estimates and assumptions that may affect the reported amounts of assets, liabilities, expenses and related disclosures. Significant estimates and
assumptions reflected in these consolidated financial statements include, but are not limited to, the valuation of share-based awards, the valuation of
warrant liabilities, the valuation of goodwill and indefinite-lived intangible assets, research and development prepayments, accruals and related expenses,
and the valuation allowance for deferred income taxes. The Company bases its estimates on historical experience, known trends and other market-specific
or other relevant factors that it believes to be reasonable under the circumstances. Estimates are periodically reviewed considering changes in
circumstances, facts and experience. Changes in estimates are recorded in the period in which they become known. Actual results may differ from those
estimates or assumptions.
Segment information – The Company manages its operations as a single operating segment, or reporting unit, for the purposes of assessing performance,
making operating decisions and allocating resources, resulting in a single reportable segment. The Company has determined that its Chief Operating
Decision Maker (“CODM”) is its Chief Executive Officer. The Company's CODM reviews the Company's financial information on a consolidated basis for
purposes of allocating resources and assessing financial performance. All of the Company's tangible assets are held in the United States. See Note 12,
Segment Information, for additional details.
Concentration of credit risk – Financial instruments that potentially expose the Company to concentrations of credit risk consist primarily of cash. The
Company generally maintains balances in various operating accounts at financial institutions in amounts that may exceed federally insured limits. The
Company has not experienced any losses related to its cash and does not believe that it is subject to unusual credit risk beyond the normal credit risk
associated with commercial banking relationships.
Fair value measurements – Certain assets and liabilities are carried at fair value under U.S. GAAP. Fair value is an exit price, representing the amount
that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-
based measurement that should be determined based on assumptions that market participants would use in pricing an asset or a liability. As a basis for
considering such assumptions, ASC 820, Fair Value Measurements and Disclosures (“ASC 820”) establishes a three-tier value hierarchy, which prioritizes
the inputs used in the valuation methodologies in measuring fair value:
•
Level 1 – quoted prices in active markets for identical assets and liabilities.
•
Level 2 – inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices in active markets for similar assets
or liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can
be corroborated by observable market data for substantially the full term of the assets or liabilities.
F-12
•
Level 3 – unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or
liabilities.
Determining which category an asset or liability falls within the hierarchy requires significant judgment. The Company evaluates its hierarchy disclosures
each reporting period. The fair value hierarchy also requires the Company to maximize the use of observable inputs and minimize the use of unobservable
inputs when measuring fair value.
The carrying values of the Company’s cash, prepaid expenses and other current assets, accounts payable and accrued expenses approximate their fair
values due to the short-term nature of these assets and liabilities. The Company’s liability-classified warrants are recorded at their estimated fair value. See
Note 4.
Business combinations – The Company includes the results of operations of the acquired business in the consolidated financial statements prospectively
from the acquisition date. The Company allocates the purchase consideration to the assets acquired and liabilities assumed in the acquired entity based on
their fair values at the acquisition date. The excess of the fair value of purchase consideration over the fair value of these assets acquired and liabilities
assumed in the acquired entity is recorded as goodwill. Management’s estimates of fair value are based upon assumptions believed to be reasonable, but
which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. During the measurement period, which is one
year from the acquisition date, we may record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill. Upon
the conclusion of the measurement period, any subsequent adjustments are recorded to earnings.
Transaction expenses are recognized separately from the business combination and are expensed as incurred. These charges primarily include direct third-
party professional fees for advisory and consulting services and other incremental costs related to the acquisition.
Cash – The Company considers all highly-liquid investments with original maturities of 90 days or less at the time of acquisition to be cash equivalents.
The Company had no cash equivalents as of December 31, 2024 or 2023.
Prepaid expenses – Payments made prior to the receipt of goods or services are capitalized until the goods or services are received.
Other current assets – Other current assets as of December 31, 2024 and 2023 were principally comprised of Value Added Tax (“VAT”) receivables.
Restricted cash – Restricted cash of $60,000 and $0 as of December 31, 2024 and 2023, respectively, is a restricted bank account established to secure the
Company’s credit cards.
Patent acquisition costs – Patent acquisition costs and related capitalized legal fees are amortized on a straight-line basis over the shorter of the legal or
economic life. The estimated useful life is 22 years. The Company expenses costs associated with maintaining and defending patents after their issuance in
the period incurred. Amortization expense for each of the years ended December 31, 2024 and 2023 was less than $0.1 million.
Goodwill and intangible assets – The Company recognized goodwill and other intangible assets comprised of in-process research and development
(“IPR&D”) during the year ended December 31, 2024, in connection with its acquisition of Peak Bio (Note 3), which closed on November 14, 2024.
The fair value of acquired IPR&D was capitalized and accounted for as an indefinite-lived intangible asset and is not subject to amortization. Subsequent to
the acquisition, the Company will assess goodwill and the IPR&D assets (collectively, the “Intangible Assets”) for impairment at least annually or
whenever changes in circumstances indicate the carrying amount may not be recoverable. Acquired IPR&D is subject to impairment testing until
completion or abandonment of the associated R&D efforts. If abandoned, the carrying value of the IPR&D asset is written off. Once the associated R&D
efforts are completed, the carrying value of the acquired IPR&D is reclassified as a finite-lived asset and amortized over its useful life. Incremental R&D
costs incurred subsequent to the acquisition are expensed as incurred.
F-13
For its Intangible Assets, the Company has the option to first assess qualitative factors to determine whether the fair value of its reporting unit is "more
likely than not" less than its carrying value. For IPR&D, the qualitative assessment focuses on key inputs, assumptions and rationale utilized in the
establishment of the carrying value. When performing a quantitative analysis, the Company uses its overall market capitalization as a basis to determine the
fair value of its reporting unit. When the carrying value of its reporting unit exceeds its fair value, an impairment charge is recorded in current earnings for
the difference up to the carrying value of the Intangible Assets recorded.
The Company manages its operations as a single operating segment for the purposes of assessing performance, making operating decisions and allocating
resources, resulting in a single reportable segment, or reporting unit. Subsequent to the Company's acquisition of Peak Bio, the fair market value of the
Company's ADSs experienced a significant decline. As a result, the Company performed a qualitative assessment as of December 31, 2024 to determine
whether its Intangible Assets were impaired.
In its qualitative assessment, the Company considered relevant facts and circumstances for its reporting unit, including (i) overall financial performance,
including recent fundraising activities and its strategic acquisition of Peak Bio (ii) industry and market conditions in which the Company operates, (iii)
changes in the reporting unit carrying value since prior year, (iv) macroeconomic conditions, and (v) changes in the fair market value of the Company's
ADSs.
Based on the results of its qualitative assessment, the Company concluded that it is not more likely than not that the fair value of its reporting unit is less
than its carrying value.
Accrued expenses – As part of the process of preparing the consolidated financial statements, the Company estimates accrued expenses. This process
involves identifying services that third parties have performed on the Company’s behalf and estimating the level of service performed and the associated
cost incurred on these services as of each balance sheet date in the Company’s consolidated financial statements. Examples of estimated accrued expenses
include contract service fees in conjunction with pre-clinical and clinical trials, professional service fees and contingent liabilities. In connection with these
service fees, the Company’s estimates are most affected by its understanding of the status and timing of services provided relative to the actual services
incurred by the service providers. If the Company does not identify certain costs that have been incurred, or it under or over-estimates the level of services
or costs of such services, the Company’s reported expenses for a reporting period could be understated or overstated. The date on which certain services
commence, the level of services performed on or before a given date, and the cost of services are often subject to the Company’s estimation and judgment.
The Company makes these judgments based upon the facts and circumstances known to it in accordance with U.S. GAAP. See Note 5.
Convertible notes and notes payable – The Company accounts for convertible promissory notes in accordance with ASC Topic 470-20, Debt with
Conversion and Other Options (“ASC 470-20”) and has not elected the fair value option as provided for within ASC Topics 815 and 825. Accordingly, the
Company evaluated the embedded conversion and other features within the May 2024 Notes (Note 9) to determine whether any of the embedded features
should be bifurcated from the host instrument and accounted for as a derivative at fair value. Based on management’s evaluation, the Company determined
that the May 2024 Notes were not issued at a substantial premium and none of the embedded features were required to be bifurcated and accounted for
separately. Accordingly, the May 2024 Notes are accounted for as a single liability measured at its amortized cost. Issuance costs incurred in connection
with the issuance of the May 2024 Notes were immaterial. Interest expense incurred on the May 2024 Notes was less than $0.1 million for the year ended
December 31, 2024. As of December 31, 2024, accrued interest of less than $0.1 million is included within “Accrued expenses” in the Company’s
consolidated balance sheets.
In November 2024, the Company assumed convertible promissory notes issued by Peak Bio in April 2023 in the principal amount of $0.7 million. The
Company evaluated the embedded conversion and other features within the April 2023 Convertible Notes (Note 6) to determine whether any of the
embedded features should be bifurcated from the host instrument and accounted for as a derivative at fair value. Based on management’s evaluation, the
Company determined that the April 2023 Convertible Notes were not issued at a substantial premium and none of the embedded features were required to
be bifurcated and accounted for separately. The April 2023 Convertible Notes are in default and the Company concluded their fair value approximates their
carrying value. Accordingly, the April 2023 Convertible Notes are accounted for at carrying value as of December 31, 2024. Subsequent to the acquisition
date, through December 31, 2024, interest expense of less than $0.1 million was recognized. As of December 31, 2024,
F-14
accrued interest of less than $0.1 million is included within “Accrued expenses” in the Company’s consolidated balance sheet.
Warrant liabilities – The Company accounts for ordinary share or ADS warrants as either equity instruments, liabilities or derivative liabilities in
accordance with ASC Topic 480, Distinguishing Liabilities from Equity (“ASC 480”) and/or ASC Topic 815, Derivatives and Hedging (“ASC 815”),
depending on the specific terms of the warrant agreement. Liability-classified warrants are recorded at their estimated fair values at issuance and are
remeasured each reporting period until they are exercised, terminated, reclassified or otherwise settled. Changes in the estimated fair value of liability-
classified warrants are recorded in “change in fair value of warrant liabilities” in the Company’s consolidated statements of operations and comprehensive
loss. Equity-classified warrants are recorded within “additional paid-in capital” in the Company's consolidated statements of shareholders' equity (deficit) at
the time of issuance and are not subject to remeasurement.
In connection with the sale of the ADSs in the September 2022 Registered Direct Offering, the Company issued to the investors registered Series A
warrants (“Series A Warrants”) to purchase an aggregate of 755,000 ADSs at $17.00 per ADS and registered Series B warrants (“Series B Warrants”) to
purchase an aggregate of 755,000 ADSs at $17.00 per ADS (collectively, the “September 2022 Warrants”).The Company determined that the September
2022 Warrants are not indexed to the Company’s own stock in the manner contemplated by ASC 815-40-15, Determining Whether an Instrument (or
Embedded Feature) Is Indexed to an Entity’s Own Stock. Accordingly, the Company classifies the September 2022 Warrants as a derivative liability in its
consolidated balance sheets. In September 2024, all outstanding Series A Warrants expired unexercised.
In connection with the acquisition of Peak Bio, the Company assumed warrants issued to investors to purchase an aggregate of 1,577,566 ADSs at $39.18
per ADS (“November 2022 Peak Bio Warrants”) and an aggregate of 1,187,013 ADSs at $2.04 per ADS (“April 2023 Peak Bio Warrants”). The Company
determined that the November 2022 Peak Bio Investor Warrants and the April 2023 Peak Bio Investor Warrants are not indexed to the Company’s own
stock in the manner contemplated by ASC 815-40-15, Determining Whether an Instrument (or Embedded Feature) Is Indexed to an Entity’s Own Stock.
Accordingly, the Company classifies the assumed warrants as derivative liabilities in its consolidated balance sheets.
Research and development expenses – Costs associated with research and development are expensed as incurred unless there is an alternative future use
in other research and development projects. Research and development expenses include, among other costs, salaries and personnel–related expenses, fees
paid for contract research services, fees paid to clinical research organizations, costs incurred by outside laboratories, manufacturers and other accredited
facilities in connection with clinical trials and preclinical studies.
Payments made prior to the receipt of goods or services to be used in research and development are capitalized until the goods or services are received. The
Company records expenses related to clinical studies and manufacturing development activities based on its estimates of the services received and efforts
expended pursuant to contracts with multiple contract research organizations and manufacturing vendors that conduct and manage these activities on its
behalf. The financial terms of these agreements are subject to negotiation, vary from contract to contract, and may result in uneven cash flows. There may
be instances in which payments made to the Company’s vendors will exceed the level of services provided and result in a prepayment of the expense.
Payments under some of these contracts depend on factors such as the successful enrollment of subjects and the completion of clinical study milestones. In
amortizing or accruing service fees, the Company estimates the time period over which services will be performed, enrollment of subjects, number of sites
activated and the level of effort to be expended in each period. If the actual timing of the performance of services or the level of effort varies from the
Company’s estimate, the Company will adjust the accrued or prepaid expense balance accordingly.
The Company accounts for research and development tax credits at the time its realization becomes probable as a credit to research and development
expenses in the consolidated statements of operations and comprehensive loss.
Merger-related expenses – Merger-related expenses include direct expenses incurred in connection with the acquisition of Peak Bio, as more fully
described in Note 3, and are comprised primarily of legal and professional fees and other incremental costs directly associated to the acquisition.
F-15
Restructuring and other expenses – In May 2024, the Company implemented a reduction-in-force of approximately 67% of its total workforce as a result
of the recently announced program prioritization under which the Company’s nomacopan HSCT-TMA program was suspended. The reduction-in-force
was part of an operational restructuring plan (the “May 2024 Plan”) which included the elimination of certain senior management positions and was
completed in the third quarter of 2024. The purpose of the restructuring plan, including the reduction-in-force, was to reduce HSCT-TMA related operating
costs, while supporting the execution of the Company’s long-term strategic plan. As of December 31, 2024, the Company does not expect to incur
additional restructuring-related expenses related to the May 2024 Plan.
The following table presents the restructuring reserve and accrual activity for the year ended December 31, 2024:
Severance and
Other
(In thousands)
Employee Benefit
Costs
Restructuring
Charges
Total
Balance at December 31, 2023
$
— $
— $
—
Restructuring charges
1,645
78
1,723
Cash payments
(910)
(78)
(988)
Non-cash stock-based compensation
(285)
—
(285)
Balance at December 31, 2024
$
450 $
— $
450
No restructuring activities existed for the year ended December 31, 2023.
Stock-based compensation expense – The Company measures all stock-based awards granted to employees, directors and non-employees based on the
estimated fair value on the date of grant and recognizes compensation expense of those awards over the requisite service period, which is generally the
vesting period of the respective awards. Forfeitures are accounted for as they occur. The Company classifies stock-based compensation expense in its
consolidated statements of operations and comprehensive loss in the same manner in which the award recipient’s payroll costs are classified or in which the
award recipient’s service payments are classified.
The fair value of each restricted ordinary share award is determined on the date of grant based on the fair value of the Company’s ordinary shares on that
same date. The fair value of each share option grant is determined on the date of grant using the Black-Scholes option pricing model, which requires inputs
based on certain assumptions, including the expected stock price volatility, the expected term of the award, the risk-free interest rate, and expected
dividends (See Note 8). The Company estimates its expected stock price volatility based on the historical volatility of its ADSs, considering the expected
term of the options. The expected term of the Company’s options has been determined utilizing the “simplified” method for awards that qualify as “plain-
vanilla” options. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve in effect at the time of grant of the award for time
periods approximately equal to the expected term of the award. The expected dividend yield is based on the fact that the Company has never paid cash
dividends on ordinary shares and does not expect to pay any cash dividends in the foreseeable future.
Leases – The Company accounts for its leases in accordance with ASC 842, Leases. In accordance with ASC 842, the Company records a right-of-use
(“ROU”) asset and corresponding lease liability on the balance sheet for all leases with terms longer than 12 months. Leases with an initial term of twelve
months or less are not recorded on the consolidated balance sheet and are recognized on a straight-line basis over the lease term. As of December 31, 2024
and 2023, the Company did not have any leases with a term longer than twelve months. Accordingly, no ROU assets and corresponding lease liabilities are
included in the Company’s consolidated balance sheets as of December 31, 2024 or 2023.
Income taxes – The Company accounts for income taxes in accordance with the accounting rules that require an asset and liability approach to accounting
for income taxes based upon the future expected values of the related assets and liabilities. Deferred income tax assets and liabilities are determined based
on the differences between the financial reporting and tax bases of assets and liabilities and for tax loss and credit carry forwards and are measured using
the expected tax rates estimated to be in effect when such basis differences reverse. A valuation allowance against deferred tax assets is recorded if, based
on the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.
F-16
The Company follows the provisions of ASC 740 “Accounting for Uncertainty in Income Taxes” (“ASC 740”), which prescribes recognition thresholds
that must be met before a tax position is recognized in the financial statements and provides guidance on de-recognition, classification, interest and
penalties, accounting in interim periods, disclosure, and transition. Under ASC 740, an entity may only recognize or continue to recognize tax positions that
meet a “more-likely-than-not” threshold. Interest and penalties related to uncertain tax positions are recognized as general and administrative expense. At
December 31, 2024 and 2023, the Company had no uncertain tax positions.
Comprehensive income (loss) - Comprehensive loss is defined as the change in equity of a business enterprise during a period from transactions and other
events and circumstances from non-owner sources. The Company’s other comprehensive loss is comprised of foreign currency translation adjustments.
Net loss per share – Basic net income (loss) per ordinary share is computed by dividing net income (loss) available to ordinary shareholders by the
weighted average number of ordinary shares outstanding during the period, which includes ordinary shares underlying pre-funded warrants, as such warrant
is exercisable, in whole or in part, for nominal cash consideration with no expiration date. Diluted net income (loss) per ordinary share is computed by
dividing the diluted net income (loss) available to ordinary shareholders by the weighted average number of ordinary shares, including potential dilutive
ordinary shares assuming the dilutive effect as determined using the treasury stock method.
For periods in which the Company has reported net losses, diluted net loss per ordinary share is the same as basic net loss per ordinary share, since dilutive
ordinary shares are not assumed to have been issued if their effect is anti-dilutive. The Company reported a net loss for each of the years ended December
31, 2024 and 2023.
The following potential dilutive securities, presented based on amounts outstanding at the end of each reporting period, have been excluded from the
calculation of diluted net loss per share because including them would have had an anti-dilutive impact:
As of December 31,
2024
2023
Stock options
3,963,964,688
651,237,400
Restricted stock units
—
385,954,925
Warrants
20,518,595,300
4,240,447,500
Convertible notes
406,236,000
—
Total
24,888,795,988
5,277,639,825
Loss contingencies, legal matters – Akari is involved from time to time in various claims, proceedings, and litigation, including those described in Note
10. The Company establishes reserves for specific legal proceedings when we determine that the likelihood of an unfavorable outcome is probable and the
amount of loss can be reasonably estimated.
New accounting pronouncements – From time to time, new accounting pronouncements are issued by the FASB and rules are issued by the SEC that the
Company has or will adopt as of a specified date. Unless otherwise noted, management does not believe that any other recently issued accounting
pronouncements issued by the FASB or guidance issued by the SEC had, or is expected to have, a material impact on the Company’s present or future
consolidated financial statements.
Recently Issued (Not Yet Adopted) Accounting Standards
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The objective of ASU 2023-09
is to enhance disclosures related to income taxes, including specific thresholds for inclusion within the tabular disclosure of income tax rate reconciliation
and specified information about income taxes paid. ASU 2023-09 is effective for public companies starting in annual periods beginning after December 15,
2024. The amendments should be applied on a prospective basis, with retrospective application permitted. The Company is currently assessing the impact
of ASU 2023-09 on its consolidated financial statements and related disclosures.
F-17
In February 2024, the FASB issued ASU 2024-03, Income Statement Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic
220-40). The objective of ASU 2024-03 is to require entities to provide enhanced disclosures of income statement expenses through disaggregation of
specific expense captions. ASU 2024-03 is effective for public companies starting in annual periods beginning after December 15, 2026 and in interim
periods beginning after December 15, 2027. The Company is currently evaluating ASU 2024-03 and the impact of the disclosures to its consolidated
financial statements.
Recently Adopted Provisions of U.S. GAAP
On January 1, 2024, the Company adopted ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The
objective of ASU 2023-07 is to require entities to provide enhanced disclosures on significant segment expenses. ASU 2023-07 is effective for public
companies in annual periods beginning after December 15, 2023, and interim periods beginning after December 15, 2024. Refer to Note 12, Segment
Information, for additional details.
Note 3. Agreement and Plan of Merger
On November 14, 2024, the Company completed its previously announced strategic combination contemplated by the Merger Agreement (the “Closing”),
pursuant to which, Merger Sub merged with and into Peak Bio, Inc. with Peak Bio surviving the acquisition as a wholly owned subsidiary of Akari. Peak
Bio, organized under the laws of Delaware, is a biotechnology company with a portfolio of potential therapies focused on cancer and immunological
diseases. The Company acquired all outstanding equity interests in Peak Bio, Inc., which includes Peak Bio’s therapeutic pipeline consisting of one clinical
stage and one pre-clinical stage asset supported by an intellectual property portfolio consisting of various granted and pending patents in various
jurisdictions worldwide.
Peak Bio's pipeline includes an ADC Platform for oncology and PHP-303 program for genetic disease, liver disease and inflammation, specifically for
Alpha-1 antitrypsin deficiency (AATD).
Per the terms of the Merger Agreement, at the Closing, the Company issued a total of 12,613,942 Akari ADSs which reflected the conversion of each
issued and outstanding share of Peak Bio Common Stock into the right to receive Akari ADSs representing a number of Akari Ordinary Shares equal to
0.2935 (the “Exchange Ratio”). The Exchange Ratio was calculated in accordance with the terms of the Merger Agreement and is such that the total
number of shares of Akari ADSs issued in connection with the acquisition is approximately 48.4% of the outstanding shares of Akari on a fully diluted
basis.
At the Closing, each Peak Warrant and Peak Option was converted into an Adjusted Warrant and Adjusted Option to purchase a number of Akari ordinary
shares or Akari ADSs, based on the Exchange Ratio. The Adjusted Warrants and the Adjusted Options have substantially similar terms and conditions as
were applicable to such Peak Warrants and Peak Options immediately prior to the Closing.
Consideration Paid
The following table summarizes the total consideration paid pursuant to the Merger Agreement, which was based on the closing market price of Akari's
ADS as of the November 14, 2024 acquisition date:
($ in thousands)
Number of ADSs
issued and issuable on
exercise
Consideration
Company ADSs issued to Peak Bio Inc. shareholders
12,613,942
$
28,129
Company ADSs issuable on exercise of November 2022 Peak Investor Warrants and April
2023 Peak Investor Warrants
2,764,569
1,844
Company ADSs issuable on exercise of Peak Bio Adjusted Options
1,618,081
—
Total consideration
16,996,592
$
29,973
F-18
The fair value of the 12,613,942 ADS issued in connection with the acquisition is based on the closing price of the Company's ADSs on the Closing Date
multiplied by the number of ADSs issued.
In connection with the acquisition of Peak Bio, the Company assumed (i) warrants issued to investors (“November 2022 Peak Warrants”) to purchase an
aggregate of 1,577,556 ADSs at $39.18 per ADS, and (ii) warrants issued to investors (“April 2023 Peak Warrants”) to purchase an aggregate of 1,187,013
ADSs at $2.04 per ADS. The assumed Peak Bio warrants are fully vested, and thus are included in the consideration transferred.
The Company determined that the November 2022 Peak Warrants and the April 2023 Peak Warrants are not indexed to the Company’s own stock in the
manner contemplated by the relevant accounting standard (Note 2). Accordingly, on the Closing of the acquisition, the Company classified these warrants
as derivative liabilities in its consolidated balance sheets.
The estimated fair value of the Adjusted Warrants of $1.8 million at the acquisition closing date was calculated using the Black Scholes Option Pricing
Model. The following assumptions were used to determine the fair value of the assumed warrants as of November 14, 2024:
Peak Bio Assumed Warrants
November 2022
April 2023
Stock (ADS) price
$
2.23
$
2.23
Exercise price
$
39.18
$
2.04
Expected term (in years)
3.0
3.5
Expected volatility
86.4%
84.1%
Risk-free interest rate
4.3%
4.3%
Expected dividend yield
—
—
The Company assumed Peak Bio's outstanding stock option awards and granted options to purchase 1,618,081 ADSs as replacement awards for the Peak
Bio Adjusted Options. The Company determined the Peak Bio Adjusted Options were not probable of vesting prior to the consummation of the Merger
Agreement. For this reason, the fair value of the replacement awards was not included as consideration transferred in the business combination. Instead, the
entire fair value of the adjusted options will be recognized as compensation cost in the post-combination period. The estimated fair value of the Adjusted
Options of $1.8 million at the acquisition closing date was calculated using the Black Scholes Option Pricing Model. The valuation assumptions used in the
Black Scholes Option Pricing Model include the Company’s stock price on the date of closing of $2.23, volatility ranging from 84.1% to 86.4%, an
expected dividend yield of 0.0%, an expected term ranging from 0.20 years to 5.32 years, and a risk-free interest rate ranging from 4.3% to 4.6%.
Total Assets Acquired and Liabilities Assumed
The acquisition of Peak Bio has been accounted for as a business combination using the acquisition method of accounting. The fair value of the purchase
price was allocated to the assets acquired and liabilities assumed at their respective fair values. Management estimated the fair value of the IPR&D
intangible assets using a multi-period excess earnings method. The significant assumptions used in the valuation are the probability of clinical trial success
and obtaining regulatory approval, forecasted gross sales from up-front and milestone payments, royalties and product sales, and the discount rate reflecting
the Company's weighted average cost of capital. This acquisition method requires, among other things, that assets acquired, and liabilities assumed in a
business combination be recognized at their fair values as of the acquisition date.
The following table summarizes the final fair values of assets acquired and liabilities assumed as of the acquisition date (in thousands):
F-19
Assets acquired
Cash and restricted cash
$
382
Prepaid expenses and other current assets
10
Acquired in-process research and development
39,180
Total assets acquired
39,572
Liabilities assumed
Accounts payable and accrued expenses
6,979
Convertible notes
700
Notes payable
659
Notes payable, related party
1,651
Deferred tax liability
8,040
Total liabilities assumed
18,029
Total assets acquired and liabilities assumed
21,543
Goodwill
8,430
Net assets acquired
$
29,973
Intangible assets of approximately $38.1 million and $9.5 million were recorded related to the value of IPR&D from Peak Bio's therapeutic pipeline,
consisting of two separate pipelines supported by intellectual property, and goodwill, respectively. The recognized goodwill is attributable primarily to the
expected synergies and other benefits from the merger and the deferred tax liability associated with the Company's acquired IPR&D, which is not
deductible for income tax purposes.
The fair value of IPR&D intangible assets were as follows (in thousands):
In-Process Research and Development
AKTX 101
$
34,000
PHP 303
5,180
Acquired intangible assets
$
39,180
The Company assumed convertible notes and notes payable with third parties, and notes payable with a related party, which are described in Note 6 and
Note 9, respectively.
Merger-related expenses, which were comprised primarily of regulatory, financial advisory and legal fees, totaled $3.3 million for the year ended
December 31, 2024 and were included in the consolidated statements of operations and comprehensive loss. The Company issued Paulson Investment
Company LLC (“Paulson”) an advisory fee in connection with the acquisition equal to 243,000,000 ordinary shares or 121,500 ADS equivalents for a value
of $270,945, based on the closing price of the Company's ADS on the Closing Date multiplied by the number of ADS issued.
Peak Bio’s operating results were consolidated with the Company's beginning on November 14, 2024. Therefore, the consolidated results of operations for
the year ended December 31, 2024 may not be comparable to the same period in 2023. Peak Bio’s results of operations included in the Company's
consolidated results of operations from the acquisition date to December 31, 2024 are presented in the table below (in thousands):
F-20
Operating expenses:
Research and development
$
7,230
General and administrative
104,756
Merger-related expenses
—
Restructuring and other expenses
—
Total operating expenses
111,986
Loss from operations
(111,986)
Other expense, net
(28,007)
Net loss
$
(139,993)
Pro Forma Financial Information (Unaudited)
The following table summarizes certain of the Company's supplemental pro forma financial information for the years ended December 31, 2024 and 2023,
as if the acquisition of Peak Bio had occurred as of January 1, 2023. The unaudited pro forma financial information for the years ended December 31, 2024
and 2023 reflect (i) the reversal of a gain recognized on Peak Bio's office lease termination and corresponding impairment of its right to use asset, (ii) the
reversal of fair value adjustments recognized on Peak Bio's warrant liabilities and derivative liability, and (iii) the reversal of interest and accretion expense
on Peak Bio's debt that was settled on the acquisition date. For the year ended December 31, 2024, transaction costs incurred by the Company and Peak Bio
were $3.2 million and $1.5 million, respectively. The unaudited pro forma financial information is for comparative purposes only and is not necessarily
indicative of what would have occurred had the acquisition been made at that date or of results which may occur in the future (in thousands).
Year Ended December 31,
2024
2023
As Reported
Pro Forma
As Reported
Pro Forma
Net loss
$
(19,791) $
(23,791)
$
(10,008) $
(19,851)
Note 4. Fair Value Measurements
Assets and Liabilities Measured at Fair Value on a Recurring Basis
The following table presents information about the Company’s financial liabilities measured at fair value on a recurring basis and indicates the level of the
fair value hierarchy used to determine such values:
December 31, 2024
(In thousands)
Total
Level 1
Level 2
Level 3
Liabilities
Warrant liability - November 2022 Peak Warrants
$
95 $
— $
— $
95
Warrant liability - April 2023 Peak Warrants
736
—
—
736
Warrant liability - Series B
181
—
—
181
Total warrant liabilities
$
1,012 $
— $
— $
1,012
December 31, 2023
(In thousands)
Total
Level 1
Level 2
Level 3
Liabilities
Warrant liability - Series A
$
15 $
— $
— $
15
Warrant liability - Series B
1,238
—
—
1,238
Total warrant liabilities
$
1,253 $
— $
— $
1,253
F-21
The Company’s Level 3 liabilities consist of the September 2022 Warrants, the November 2022 Peak Warrants and the April 2023 Peak Warrants, which
were determined to be liability-classified instruments. There were no transfers between Level 1, Level 2, and Level 3 during the years ended December 31,
2024 and 2023.
Changes in Level 3 Liabilities Measured at Fair Value on a Recurring Basis
The following table summarizes the activity in the warrant liabilities measured at fair value on a recurring basis using unobservable inputs (Level 3) during
the years ended December 31, 2024 and 2023:
Warrant Liabilities
(In thousands)
Series A
Series B
November 2022
Warrants
April 2023
Warrants
Total
Balance, December 31, 2022
$
1,812 $
6,040 $
— $
— $
7,852
Change in the fair value of liability
(1,797)
(4,802)
—
—
(6,599)
Balance, December 31, 2023
$
15 $
1,238 $
— $
— $
1,253
Assumption of Peak Bio warrants
—
—
213
1,631
1,844
Change in the fair value of liability
(15)
(1,056)
(119)
(895)
(2,085)
Balance, December 31, 2024
$
— $
182 $
94 $
736 $
1,012
Assumptions Used in Determining Fair Value of Liability-Classified Warrants
The fair value of the warrant liabilities is based on significant inputs not observable in the market, which represents a Level 3 measurement within the fair
value hierarchy. The fair value of the Series A Warrants, the Series B Warrants, the November 2022 Peak Warrants and the April 2023 Peak Warrants was
determined using the Black-Scholes Option Pricing Model, which uses various assumptions, including (i) fair value of the Company’s ADSs, (ii) exercise
price of the warrant, (iii) expected term of the warrant, (iv) expected volatility and (v) expected risk-free interest rate.
Below are the assumptions used for the fair value calculations of the Series A Warrants, Series B Warrants, November 2022 Peak Warrants and April 2023
Peak Warrants, as of December 31, 2024 and 2023:
December 31, 2024
December 31, 2023
Series B
November 2022
Warrants
April 2023
Warrants
Series A
Series B
Stock (ADS) price
$
1.22
$
1.22
$
1.22
$
3.12
$
3.12
Exercise price
$
17.00
$
39.18
$
2.04
$
17.00
$
17.00
Expected term (in years)
4.7
2.8
3.3
0.7
5.7
Expected volatility
85.0%
95.0%
90.0%
85.0%
95.0%
Risk-free interest rate
4.4%
4.3%
4.3%
5.1%
3.9%
Expected dividend yield
—
—
—
—
—
F-22
Note 5. Accrued Expenses
Accrued expenses consisted of the following:
December 31,
December 31,
(In thousands)
2024
2023
Employee compensation and benefits
$
473
$
187
External research and development expenses
178
635
Professional and consulting fees
1,305
669
Restructuring
450
—
Other
731
75
Total accrued expenses
$
3,137
$
1,566
Note 6. Convertible Notes and Notes Payable
September 2024 Note Payable
In November 2024, the Company assumed a promissory note issued by Peak Bio in September 2024 in the amount of $0.3 million (the “September 2024
Note”) to its former California landlord. Due to the short-term nature of the September 2024 Note, the Company concluded that its carrying value
approximated its fair value as of November 14, 2024. The note bears no interest and is payable over twenty equal monthly installments beginning on
November 1, 2024 and expiring on June 1, 2026.
The Company began making payments subsequent to the acquisition of Peak Bio. As of December 31, 2024, the outstanding balance on the September
2024 Note was $0.3 million. The installment due on December 1, 2024 was made in February 2025.
November 2023 Note Payable
In November 2024, the Company assumed a promissory note issued by Peak Bio in November 2023 in the amount of $0.4 million (the “November 2023
Note”) bearing interest at 6% per annum with a maturity date of December 31, 2024. Due to the short-term nature of the November 2023 Note, the
Company concluded that its carrying value approximated its fair value as of November 14, 2024. The Company recognized interest expense of less than
$0.1 million subsequent to the acquisition date, through December 31, 2024. As of December 31, 2024, accrued interest on the November 2023 Note of
less than $0.1 million is presented within “Accrued expenses” in the Company’s consolidated balance sheets.
As of December 31, 2024, the principal balance of $0.4 million plus accrued interest of less than $0.1 million was due for payment in order to settle the
November 2023 Note obligation. On February 28, 2025 (Note 13), the Company signed a Settlement Agreement and Release for full satisfaction of the
outstanding principal and accrued interest owed on the November 2023 Notes in the amount of $325,000.
April 2023 Convertible Notes
In November 2024, the Company assumed convertible promissory notes issued by Peak Bio in April 2023 in the principal amount of $0.7 million (the
“April 2023 Convertible Notes”). Due to the short-term nature of the April 2023 Convertible Notes, the Company concluded that its carrying value
approximated its fair value as of November 14, 2024. The April 2023 Convertible Notes bear interest at a default rate of 10% per annum and were
originally due in October 2023. The April 2023 Convertible Notes permitted the holder to convert the outstanding principal and accrued interest at any time
at a price of $0.001 per ordinary share of the Company, after giving effect to the Exchange Ratio. As of December 31, 2024, the outstanding balance of
$0.7 million was in default.
The Company evaluated the embedded conversion and other features within the April 2023 Convertible Notes to determine whether any of the embedded
features should be bifurcated from the host instrument and accounted for as a derivative at fair value. Based on management’s evaluation, the Company
determined that the April 2023
F-23
Convertible Notes were not issued at a substantial premium and none of the embedded features were required to be bifurcated and accounted for separately.
The April 2023 Convertible Notes are in default and the Company concluded their fair value approximates their carrying value. Accordingly, the April
2023 Convertible Notes are accounted for at carrying value as of December 31, 2024.
The Company recognized interest expense of less than $0.1 million subsequent to the acquisition date, through December 31, 2024. As of December 31,
2024, accrued interest on the April 2023 Notes of less than $0.1 million is presented within “Accrued expenses” in the Company’s consolidated balance
sheets.
Refer to Note 9 for notes payable, related party and convertible notes, related party.
Note 7. Shareholders’ Equity (Deficit)
Ordinary Shares
On November 7, 2024, the Company’s shareholders approved an increase to the number of authorized ordinary shares the Company can issue by
199,913,470,000 ordinary shares in addition to the number of shares outstanding on December 31, 2023. Accordingly, following November 7, 2024 and as
of December 31, 2024, the Company was authorized to issue up to 245,035,791,523 ordinary shares. As of December 31, 2023, the Company was
authorized to issue up to 45,122,321,523 ordinary shares.
Currently, each ADS represents 2,000 ordinary shares (the “ADS Ratio”). All ADS and per ADS amounts in the accompanying consolidated financial
statements reflect the ADS Ratio.
Merger with Peak Bio, Inc.
On November 14, 2024, the Company completed its previously announced strategic combination with Peak Bio (Note 3). In connection with the
acquisition, the Company issued 25,227,884,000 ordinary shares and assumed (i) November 2022 Peak Warrants to purchase an aggregate of 1,577,566
ADSs at $39.18 per ADS, and (ii) April 2023 Peak Warrants to purchase an aggregate of 1,187,013 ADSs at $2.04 per ADS.
The Company determined that the November 2022 Peak Warrants and the April 2023 Peak Warrants are not indexed to the Company’s own stock in the
manner contemplated by the relevant accounting standard (Note 2). Accordingly, on the Closing of the acquisition, the Company classified these warrants
as derivative liabilities in its consolidated balance sheets.
November 2024 Private Placement
In November 2024, the Company entered into a definitive purchase agreement with certain investors, Dr. Prudo and Dr. Patel, pursuant to which the
Company sold and issued in a private placement an aggregate of 3,426,804,000 ordinary shares (1,713,402 ADSs), and Series D Warrants (the “Series D
Warrants”) to purchase up to 1,713,402 ADSs, at a per unit price of $2.26 for aggregate gross proceeds of $3.2 million (the “November 2024 Private
Placement”). The Series D Warrants have 3-year terms ranging from December 2, 2027 to June 2, 2028 and have cashless exercise provisions in limited
circumstances.
At close of the November 2024 Private Placement, the Company incurred $204,000 in placement agent fees with Paulson Investment Company, LLC
(“Paulson”). Net proceeds from the November 2024 Private Placement were approximately $2.8 million after deducting placement agent fees and other
expenses. In April 2025, the Company issued 408,000,000 ordinary shares (204,000 ADSs) to Paulson in lieu of $204,000 in cash payment.
The Company determined that the Series D Warrants met all of the criteria for equity classification. Accordingly, upon closing of the November 2024
Private Placement, each of the Series D Warrants was recorded as a component of additional paid-in capital.
May 2024 Private Placement
F-24
In May 2024, the Company entered into a definitive purchase agreement with certain investors, Dr. Prudo and Dr. Patel, pursuant to which the Company
sold and issued in a private placement an aggregate of 8,059,508,000 ordinary shares (4,029,754 ADSs), and Series C Warrants (the “Series C Warrants”)
to purchase up to 4,029,754 ADS, at a per unit price of $1.885 per ADS and Series C Warrant for aggregate gross proceeds of approximately $7.6 million
(the “May 2024 Private Placement”). The Series C Warrants have 3-year terms ranging from May 31, 2027 to June 21, 2027 and have cashless exercise
provisions in limited circumstances. The Series C Warrants (other than those issued to Dr. Prudo and Dr. Patel) have an exercise price of $1.76 per ADS.
The Series C Warrants issued to Dr. Prudo and Dr. Patel have an exercise price of $1.79 per ADS. Net proceeds from the May 2024 Private Placement
were approximately $7.0 million after deducting placement agent fees and other expenses.
At close of the May 2024 Private Placement, the Company issued to Paulson, as placement agent for the May 2024 Private Placement, warrants to purchase
332,380 ADSs at an exercise price of $1.885 per ADS and a term expiring on May 31, 2029 (the “May 2024 Placement Agent Warrants”). The estimated
fair value of the May 2024 Placement Agent Warrants on the issuance date was approximately $0.4 million.
The Company determined that the Series C Warrants and May 2024 Placement Agent Warrants met all of the criteria for equity classification. Accordingly,
upon closing of the May 2024 Private Placement, each of the Series C Warrants and May 2024 Placement Agent Warrants was recorded as a component of
additional paid-in capital.
March 2024 Private Placement
In March 2024, the Company entered into a definitive purchase agreement with certain existing investors, pursuant to which the Company sold and issued
in a private placement an aggregate of 2,641,228,000 ordinary shares (1,320,614 ADSs) at $1.48 per ADS, for aggregate gross proceeds of approximately
$2.0 million (the “March 2024 Private Placement”). Net proceeds from the March 2024 Private Placement were approximately $1.7 million after deducting
placement agent fees and other expenses.
At close of the March 2024 Private Placement, the Company issued to Paulson, as placement agent for the March 2024 Private Placement, warrants to
purchase 132,061 ADSs at an exercise price of $1.85 per ADS (representing 125% of the purchase price per ADS sold in the March 2024 Private
Placement) and a term expiring on March 27, 2029 (the “March 2024 Placement Agent Warrants”). The estimated fair value of the March 2024 Placement
Agent Warrants on the issuance date was approximately $0.2 million.
The Company determined that the March 2024 Placement Agent Warrants met all of the criteria for equity classification. Accordingly, upon closing of the
March 2024 Private Placement, each of the March 2024 Placement Agent Warrants was recorded as a component of additional paid-in capital.
December 2023 Private Placement
In December 2023, the Company entered into purchase agreements to sell, in a private placement, to existing investors, Dr. Ray Prudo and Dr. Patel, (the
“December 2023 Private Placement”) an aggregate of 947,868 ADSs at $2.11 per ADS, for aggregate gross proceeds of approximately $2.0 million. Net
proceeds from the December 2023 Private Placement were approximately $1.8 million after deducting placement agent fees and other expenses.
September 2023 Private Placement
In September 2023, the Company entered into purchase agreements to sell in a private placement to existing investors and directors, including Dr. Prudo
and Ms. Rachelle Jacques, the Company’s then President and Chief Executive Officer (the “September 2023 Private Placement”) an aggregate of 551,816
ADSs at $3.30 per ADS, and pre-funded warrants (the “Pre-Funded Warrants”) to purchase up to 48,387 ADSs at a purchase price per Pre-Funded Warrant
of $3.10, for aggregate gross proceeds of approximately $2.0 million. The Pre-Funded Warrants are exercisable at an exercise price of $0.20 per ADS and
will not expire until exercised in full. The September 2023 Private Placement closed in October 2023 resulting in net proceeds of approximately $1.7
million after deducting placement agent fees and other expenses.
F-25
At close of the September 2023 Private Placement, the Company issued to Paulson, as placement agent for the September 2023 Private Placement, warrants
to purchase 42,550 ADSs at an exercise price of $4.13 per ADS (representing 125% of the purchase price per ADS sold in the September 2023 Private
Placement) and a term expiring on October 6, 2028 (the “October 2023 Placement Agent Warrants”). The estimated fair value of the October 2023
Placement Agent Warrants on the issuance date was approximately $0.1 million.
The Company determined that the Pre-Funded Warrants and October 2023 Placement Agent Warrants met all of the criteria for equity classification.
Accordingly, upon closing of the September 2023 Private Placement, each of the Pre-Funded Warrants and October 2023 Placement Agent Warrants were
recorded as a component of additional paid-in capital.
March 2023 Registered Direct Offering
On March 31, 2023, the Company entered into securities purchase agreements with certain accredited and institutional investors, including Dr. Prudo (the
“March 2023 Registered Direct Offering”) providing for the issuance of an aggregate of 1,333,333 ADSs in a registered direct offering at $3.00 per ADS,
resulting in gross proceeds of approximately $4.0 million. Net proceeds from the March 2023 Registered Direct Offering were approximately $3.5 million
after deducting placement agent fees and expenses.
Warrants
In connection with various financing transactions, the Company has issued warrants to purchase the Company’s ordinary shares represented by ADSs. The
Company accounts for such warrants as equity instruments or liabilities, depending on the specific terms of the warrant agreement. See Note 2 for further
details on the accounting policy related to the Company’s warrants.
F-26
The following table summarizes the Company’s outstanding warrants as of December 31, 2024 and 2023:
Number of Warrant ADSs
December 31,
December 31,
Weighted-Average
2024
2023
Exercise Price
Expiration Date
Equity-classified Warrants
2019 Investor Warrants
—
59,211 $
60.00
7/1/2024
2019 Placement Warrants
—
8,881 $
57.00
6/28/2024
2020 Investor Warrants
139,882
139,882 $
44.00
Feb-Mar 2025
2020 Placement Warrants
22,481
22,481 $
51.00
Feb-Mar 2025
July 2021 Placement Agent Warrants
19,919
19,919 $
46.40
7/7/2026
December 2021 Investor Warrants
107,775
107,775 $
33.00
1/4/2027
December 2021 Placement Agent
Warrants
8,622
8,622 $
35.00
12/29/2026
March 2022 Investor Warrants
186,020
186,020 $
28.00
3/10/2027
March 2022 Placement Agent Warrants
14,882
14,882 $
30.00
3/10/2027
October 2023 Investor Prefunded
Warrants
48,387
48,387 $
0.20
None
October 2023 Placement Agent Warrants
42,550
42,550 $
4.13
10/6/2028
March 2024 Placement Agent Warrants
132,061
— $
1.85
3/27/2029
May 2024 Investor Warrants
4,029,754
— $
1.77
May-Jun 2027
May 2024 Placement Agent Warrants
322,380
— $
1.89
5/31/2029
November 2024 Investor Warrants
1,713,402
— $
2.26
Dec 2027-Jun 2028
6,788,115
658,610
Liability-classified Warrants
September 2022 Series A Investor Warrants
—
755,000 $
17.00
9/14/2024
September 2022 Series B Investor Warrants
755,000
755,000 $
17.00
9/14/2029
November 2022 Peak Bio Warrants
1,577,556
— $
39.18
11/1/2027
April 2023 Peak Bio Warrants
1,187,013
— $
2.04
4/28/2028
3,519,569
1,510,000
Total outstanding
10,307,684
2,168,610
F-27
The following table summarizes the Company’s warrants activity for the year ended December 31, 2024:
Number of
Weighted-Average
Warrant ADSs
Exercise Price
Outstanding at December 31, 2023
2,168,610
$
21.97
Issued
6,197,597
1.91
Assumed
2,764,569
23.23
Expired
(823,092)
20.52
Outstanding at December 31, 2024
10,307,684
$
4.37
Note 8. Stock-Based Compensation
2023 Equity Incentive Plan
On November 7, 2024, the Company’s shareholders approved an increase in the number of shares available for the grant of awards under the 2023 Plan by
7,800,000,000 Ordinary Shares to an aggregate of 8,780,000,000 Ordinary Shares, plus such additional number of ordinary shares subject to awards
granted under the 2014 Plan, to the extent such awards are forfeited, cancelled, or expire unexercised. Accordingly, the total number of ordinary shares that
may ultimately be issued under rights granted under the 2023 Plan, including shares subject to outstanding grants under the 2014 Plan, shall not exceed
9,635,637,300 ordinary shares. In addition, if an award issued under the 2023 Plan is terminated or results in any shares not being issued, the unissued or
reacquired shares shall again be available for issuance under the 2023 Plan.
On June 30, 2023, the Company’s shareholders approved the 2023 Equity Incentive Plan (the “2023 Plan”), which provides for the grant of stock options,
both incentive stock options and nonqualified stock options, stock, with and without vesting restrictions, restricted stock units (“RSUs”) and stock
appreciation rights, to be granted to employees, directors and consultants. The Company is permitted to issue up to 980,000,000 ordinary shares under the
2023 Plan, plus such additional number of ordinary shares (up to 855,637,300 ordinary shares) subject to awards granted under the 2014 Equity Incentive
Plan (the “2014 Plan”), to the extent such awards are forfeited, cancelled, or expire unexercised.
As of December 31, 2024, the Company had 474,368,000 ordinary shares underlying outstanding equity awards under the 2023 Plan and 8,148,713,522
ordinary shares were available for future issuance under the 2023 Plan.
The 2023 and 2014 Plans provide that they be administered by the compensation committee of the board of directors. The exercise price for stock option
awards may not be less than 100% of the fair market value of the Company’s ordinary shares on the date of grant and the term of awards may not be greater
than ten years. The Company determines the fair value of its ordinary shares based on the quoted market price of its ADSs. Vesting periods are determined
at the discretion of the compensation committee. Awards granted to employees typically vest over two to four years and directors over one year.
2014 Equity Incentive Plan
Under the 2014 Plan the Company was authorized to grant stock options, restricted stock units and other awards, to employees, members of the board of
directors and consultants. Upon effectiveness of the 2023 Plan, no further awards are available to be issued under the 2014 Plan. As of December 31, 2023,
the Company had 253,434,688 ordinary shares underlying outstanding equity awards under the 2014 Plan, consisting of stock option awards.
F-28
Stock Options
The following is a summary of the Company’s stock option activity under the 2023 Plan and the 2014 Plan for the year ended December 31, 2024:
Stock
Options
Weighted-
Average
Exercise
Price
Weighted-
Average
Remaining
Contractual Life
(in years)
Aggregate
Intrinsic Value
(in thousands)
Outstanding at December 31, 2023
651,237,400 $
0.01
8.5 $
—
Granted
447,368,000
0.00
Assumed
3,236,162,000
0.00
Exercised
—
—
Forfeited
(319,302,712)
0.01
Expired
(51,500,000)
0.01
Outstanding at December 31, 2024 (1)
3,963,964,688 $
0.01
7.5 $
—
Exercisable at December 31, 2024
1,473,081,355 $
0.01
3.9 $
—
___________
(1)
Includes both vested stock options as well as unvested stock options for which the requisite service period has not been rendered but that are
expected to vest based on achievement of a service condition.
Pursuant to the Merger Agreement with Peak Bio, the Company assumed the outstanding options of Peak Bio. Based on the Exchange Ratio, the Company
assumed options to purchase 1,618,081 ADSs or 3,236,162,000 ordinary shares of the Company. The exercise price ranges from $27.43 per ADS to $2.73
per ADS. The assumed options, vested and unvested, will continue to be governed by the terms of the Peak Bio 2022 Long Term Incentive Plan, which was
assumed by the Company in connection with the closing of the acquisition.
The aggregate intrinsic value of options is calculated as the difference between the exercise price of the options and the fair value of the Company’s ADSs
for those options that had exercise prices lower than the fair value of the Company’s ordinary shares.
The weighted-average grant-date fair value per share of options granted during each of the years ended December 31, 2024 and 2023 was less than $0.01.
Option Valuation
The weighted-average assumptions that the Company used to determine the fair value of share options granted were as follows, presented on a weighted
average basis:
2024
2023
Expected volatility
83.0%
99.2%
Risk-free interest rate
3.9%
3.8%
Expected dividend yield
—
—
Expected term (in years)
5.0
6.0
Restricted Stock Units
The 2014 Plan provided, and the 2023 Plan provides, for the award of restricted stock units (“RSUs”). RSUs are granted to employees that are subject to
time-based vesting conditions that lapse between one year and four years from date of grant, assuming continued employment. Compensation cost for time-
based RSUs, which vest only on continued service, is recognized on a straight-line basis over the requisite service period based on the grant date fair of the
RSU's, which is derived from the closing price of the Company's ADS's on the date of grant.
F-29
The following table summarizes the Company’s restricted stock activity for the year ended December 31, 2024:
Time-based Awards
($ in thousands, except per share data)
Number of Shares
Weighted-Average
Grant Date
Fair Value
Nonvested shares at December 31, 2023
385,954,925
$
0.00
Granted
731,393,807
0.00
Forfeited
(482,249,417)
0.00
Vested
(635,099,315)
0.00
Nonvested shares at December 31, 2024
—
$
—
The fair value of time-based RSUs that vested during the years ended December 31, 2024 and 2023 was approximately $0.5 million and $0.2 million,
respectively.
During the year ended December 31, 2024, 276,000,000 ordinary shares underlying unvested time-based RSUs held by a former executive upon
termination of employment were accelerated, resulting in additional stock-based compensation expense of $0.3 million.
As of December 31, 2024, there were no ordinary shares underlying vested time-based RSUs. As of December 31, 2023, 28,151,775 ordinary shares
underlying vested time-based RSUs, which have been included in the consolidated statement of shareholders’ equity (deficit), were pending issuance.
Stock-Based Compensation Expense
The Company classifies stock-based compensation expense in the statement of operations in the same manner in which the award recipients’ payroll costs
are classified or in which the award recipients’ service payments are classified. Total stock-based compensation expense attributable to stock-based
payments made to employees, consultants and directors included in operating expenses in the Company's consolidated statements of operations and
comprehensive loss for the years ended December 31, 2024 and 2023, was as follows:
Year Ended
December 31,
($ in thousands)
2024
2023
Research and development
$
577 $
153
General and administrative
1,383
997
Restructuring and other costs
285
—
Total stock-based compensation expense
$
2,245 $
1,150
As of December 31, 2024, total unrecognized compensation cost related to unvested stock options and time-based RSUs was $1.1 million, which is
expected to be recognized over a weighted average period of 1.1 years.
Note 9. Related Party Transactions
Interim CEO Agreement
On December 12, 2024, the Company's board of directors approved the appointment of Dr. Patel to Chief Executive Officer and principal executive officer,
effective December 16, 2024. There were no changes to Dr. Patel's revised compensation as provided for under the September 16, 2024 Interim CEO
Amendment Agreement, described below, following Dr. Patel's appointment as President and Chief Executive Officer on December 16, 2024.
On May 31, 2024, the Company and Dr. Patel entered into an Interim Chief Executive Officer Agreement, effective as of May 1, 2024 (the “Interim CEO
Agreement”). Pursuant to the Interim CEO Agreement, Dr. Patel served as the Company’s Interim President and Chief Executive Officer as an independent
contractor on an at-will basis. The
F-30
Interim CEO Agreement could be terminated by the Company immediately for any reason. As the sole compensation for services provided under the
Interim CEO Agreement, Dr. Patel was paid $50,000 per month in the form of fully vested ordinary shares. On September 16, 2024, the Company entered
into an amendment to the Interim CEO Agreement (the “Amendment”), effective July 1, 2024, to revise Dr. Patel’s compensation in connection with the
services as Interim President and Chief Executive Officer. Pursuant to the Amendment, in lieu of receiving the stated monthly compensation of $50,000 in
the form of fully vested ordinary shares, Dr. Patel is paid in the form of fully vested non-qualified stock options to purchase ordinary shares (“NQSO”),
with the number of ADSs underlying each such monthly NQSOs grant to be equal to two times the number determined by dividing (i) $50,000 by (ii) the
closing price of the Company's ADSs on the Nasdaq Capital Market on the last day of each month (or partial month) Dr. Patel serves as the Company’s
Interim President and Chief Executive Officer.
During the year ended December 31, 2024, the Company recognized approximately $0.3 million in non-cash stock-based compensation costs pursuant to
the Interim CEO Agreement, as amended, pertaining to (i) NQSOs granted to Dr. Patel to purchase 422,368,000 ordinary shares at an exercise price of less
than $0.01 per ordinary share with a grant date fair value of approximately $0.3 million, and (ii) 91,396,000 fully vested ordinary shares granted to Dr.
Patel.
Notes Payable, Related Party
Pursuant to the acquisition of Peak Bio (Note 3), which closed on November 14, 2024, the Company assumed three notes payable due to Dr. Huh, the
Company's Chairman of the Board.
January 2024 Note
As a result of the business combination, the Company assumed a note in the amount of $0.75 million owed to Dr. Huh, which was entered into in January
2024 (the “January 2024 Note”). Prior to the March 2025 Private Placement, the January 2024 Note had a maturity date of January 23, 2025, and carries an
interest rate of 15% per annum. In connection with the closing of the acquisition, Dr. Huh released Peak Bio of its rights to any security interest in all of the
assets of Peak Bio and its subsidiaries.
As of the closing date, and as of December 31, 2024, the outstanding balance of the January 2024 Note was $0.75 million. The Company recognized
interest expense of less than $0.1 million subsequent to the acquisition date, through December 31, 2024. As of December 31, 2024, accrued interest of
$0.1 million is presented within accrued expenses in the consolidated balance sheets.
2021 Notes
As a result of the business combination, the Company assumed a note in the amount of $0.9 million owed to Dr. Huh, which was entered into at various
dates in 2021 (the “2021 Notes”). The 2021 Notes, which matured at various dates in 2022, carried an interest rate of 1.0% per annum.
As of the closing date, and as of December 31, 2024, the outstanding balance of the 2021 Notes was $0.9 million. The Company recognized interest
expense of less than $0.1 million subsequent to the acquisition date, through December 31, 2024. As of December 31, 2024, accrued interest of $0.1
million is presented within accrued expenses in the consolidated balance sheets.
In connection with the March 2025 Private Placement (Note 13), Dr. Huh's 2021 Notes and a portion of his January 2024 Note aggregating to $1.0 million
were cancelled, extinguished and paid in full for an equal amount of ordinary shares and warrants. On March 17, 2025, Dr. Huh's January 2024 Note was
amended to extend the maturity date to December 31, 2025 (Note 13).
Convertible Notes, Related Party
On May 10, 2024, the Company entered into unsecured convertible promissory notes (the “May 2024 Notes”) with Dr. Ray Prudo, the Company's
Chairman at the time, and its then Interim President and Chief Executive Officer and
F-31
director, Dr. Samir Patel, for an aggregate of $1.0 million in gross proceeds. The May 2024 Notes bear interest at 15% per annum, which may be increased
to 17% upon the occurrence of certain events of default as described therein, and the principal and all accrued but unpaid interest is due on the date that is
the earlier of (a) ten (10) business days following the Company’s receipt of a U.K. research and development tax credit from HM Revenue and Customs,
and (b) November 10, 2024. Provided, however, at any time or times from the date of the note and until the tenth business day prior to closing of the
acquisition, the note holders are entitled to convert any portion of the outstanding and unpaid amount, including principal and accrued interest, into
Company ADSs at a fixed conversion price equal to $1.59, representing the Nasdaq official closing price of the Company’s ADSs on the issuance date,
subject to certain restrictions. In October 2024, Drs. Prudo and Patel each elected to convert $125,000 of principal and accrued interest into the Company's
ADSs at a conversion price of $1.59 per ADS. These ordinary shares remain unissued as of December 31, 2024 and are expected to be issued during the
second quarter of 2025. The remaining unconverted aggregate principal balance of the May 2024 Notes, or $750,000, was repaid in cash with proceeds
from the Company's U.K. research and development tax credit from HM Revenue and Customs.
The Company recognized interest expense of less than $0.1 million during the year ended December 31, 2024. As of December 31, 2024, accrued interest
on the May 2024 Notes of less than $0.1 million is presented within “Accrued expenses” in the Company’s consolidated balance sheets.
The Doctors Laboratory
The Company leases office space for its U.K. headquarters in London from The Doctors Laboratory (“TDL”) and has incurred expenses of approximately
$0.1 million plus VAT during each of the years ended December 31, 2024 and 2023, respectively. Dr. Ray Prudo, the Company’s Director, is the non-
Executive Chairman of the Board of Directors of TDL.
The Company received certain laboratory testing services for its clinical trials provided by TDL, including certain administrative services, and incurred
expenses of approximately $0.1 million during each of the years ended December 31, 2024 and 2023.
The Company recorded payable balances owed to TDL of less than $0.1 million as of December 31, 2024 and 2023.
Other
In November 2024, the Company assumed an amount due to an entity in which the Company’s Chairman, Dr. Hoyoung Huh, is a director. As of December
31, 2024, the amounts due totaled less than $0.1 million and are included in accounts payable in the consolidated balance sheets.
Note 10. Commitments and Contingencies
Leases
The Company currently leases office space for both our U.K. and U.S. headquarters on a short-term basis. The lease for our U.K. headquarters, located in
London, expires in July 2025, unless terminated earlier with not less than three months notice. We lease our U.S. headquarters virtual office, located in
Boston, Massachusetts, on a month-to-month basis. The Company also leases laboratory space, located in San Francisco, California, which expires in
September 2025 and is cancellable anytime with 60 days notice. We are not party to any material lease agreements.
For each of the years ended December 31, 2024 and 2023, the Company incurred rent expense of approximately $0.2 million.
Employee Benefit Plans
The Company adopted an employee benefit plan under Section 401(k) of the Internal Revenue Code for its U.S.-based employees. The plan allows
employees to make contributions up to a specified percentage of their
F-32
compensation. Under the plan, the Company matches 100% of employees’ contributions up to 5% of annual eligible compensation contributed by each
employee, subject to Internal Revenue Code limitations.
The Company also adopted a defined contribution pension scheme which allows for U.K. employees to make contributions and provides U.K. employees
with a Company contribution of 10% of compensation, subject to U.K. law.
During the years ended December 31, 2024 and 2023, the Company charged less than $0.1 million and approximately $0.2 million to operating expenses,
respectively, which related to the Company's contributions to employee benefit plans.
Bayer Acquisition Agreement
In November 2024, the Company assumed an assignment, license, development and commercialization agreement dated March 17, 2017 with Bayer (the
“Bayer Acquisition Agreement”), to acquire from Bayer all right, title and interest in and to PHP-303, including each and every invention and any priority
rights relating to its patents.
Under the Bayer Acquisition Agreement, the Company is committed to pay certain development and regulatory milestones up to an aggregate amount of
$23,500,000 and high single digit royalties based on the sale of products developed based on the licensed compound. Royalties will be payable on a
licensed product-by-licensed product and country-by-country basis until the later of ten years after the first commercial sale of such licensed product in
such country and expiration of the last patent covering such licensed product in such country that would be sufficient to prevent generic entry.
Either party may terminate the Bayer Acquisition Agreement upon prior written notice for the other party’s material breach that remains uncured for a
specified period of time or insolvency. Bayer agreed not to assert any Bayer intellectual property rights that were included in the scope of the Bayer
Acquisition Agreement against the Company.
The Company incurred zero expenses under this agreement as no milestones have been achieved since inception, and no products were sold from inception
through December 31, 2024.
Legal Proceedings
In December 2024, the Company received demand letters from two individuals formerly serving the Company as consultants outlining claims relating to
wrongful termination. The wrongful termination claims included claims for unpaid wages, wages owed due to improper termination notice, unpaid
bonuses, severance, and the accelerated vesting of outstanding restricted stock unit awards as of the termination date. In March 2025, the Company entered
into a settlement agreement with one of the former consultants (Note 13). The events took place prior to December 31, 2024, and for this reason the
Company treated the March 2025 litigation settlement as a recognized subsequent event. As of December 31, 2024, the Company accrued $0.5 million in
aggregate representing the settlement amount and an estimate for the second individual's claims. In addition, the Company recognized stock-based
compensation expense of $0.2 million related to the continued vesting of restricted stock units as allowed under the settlement agreement.
On November 21, 2024, “Sabby” Volatility Warrant Master Fund Ltd. (“Sabby”) filed a lawsuit against the Company in New York state court for alleged
breach of contract. Sabby alleges that it validly exercised a warrant issued to Sabby in September 2022 and alleges that the Company breached the warrant
by not honoring Sabby's exercise request. The Company filed a motion to dismiss on February 3, 2025, which the court denied on March 25, 2025. The
case is currently in discovery. The Company denies Sabby's claim and intends to vigorously defend itself against the lawsuit. As of December 31, 2024, the
Company accrued its best estimate of potential losses relating to Sabby's lawsuit.
F-33
Note 11. Income Taxes
The components of net loss before income tax are as follows:
Year Ended December 31,
(In thousands)
2024
2023
Domestic (UK)
$
(19,424) $
(10,267)
Foreign
(367)
259
Net loss before income tax
$
(19,791) $
(10,008)
The components of income tax expense are as follows:
Year Ended December 31,
2024
2023
Current income taxes
Domestic (UK)
$
— $
—
U.S.
—
—
Foreign
—
—
Deferred income taxes
Domestic (UK)
—
—
U.S.
—
—
Foreign
—
—
Income tax expense
$
— $
—
Deferred tax assets and liabilities reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial
reporting and the amounts used for income tax purposes. Significant components of the Company's deferred tax assets and liabilities were as follows:
December 31,
(In thousands)
2024
2023
Deferred tax assets:
Net operating loss carryforwards
$
56,704
$
42,978
Accrued expenses
700
445
Capitalized research and development
1,023
440
Stock-based compensation
809
480
Intangibles
863
780
Tax credits
331
—
Other
6
18
Total gross deferred tax assets
60,436
45,141
Valuation allowance
(60,340)
(42,242)
Deferred tax assets, net of valuation allowance
$
96
$
2,899
Deferred tax liabilities:
In-process research and development
$
(8,040)
$
—
Revaluation of warrant liabilities
—
(2,895)
Other
(96)
(4)
Total deferred tax liabilities
(8,136)
(2,899)
Net deferred tax liabilities
$
(8,040)
$
—
During the years ended December 31, 2024 and 2023, the Company's valuation allowance increased by $18.1 million and $7.6 million, respectively,
primarily as a result of its U.S. operating loss, increases in accrued expenses and capitalized research and development costs.
F-34
In connection with the Company's acquired IPR&D assets, it recognized a deferred tax liability of $8.0 million because the Company does not have
sufficient indefinite-lived deferred tax assets to fully offset the indefinite-lived deferred tax liability. Management currently believes that since the
Company has a history of losses, it is more likely than not that the deferred tax assets relating to the loss carryforwards and other temporary differences will
not be realized in the foreseeable future. Therefore, the Company maintains a full valuation allowance against its net deferred tax assets as of December 31,
2024 and 2023.
The United Kingdom’s Finance Act 2021, which was enacted on June 10, 2021, maintained the corporate income tax rate at 19% up until the tax year
commencing April 1, 2023, at which point the rate rose to 25%. As of December 31, 2024, the Company used a 25% and 21% tax rate in respect of the
measurement of deferred taxes existing in the U.K. and the U.S., respectively, which reflects the currently enacted tax rates and the anticipated timing of
the reversing of the deferred tax balances.
F-35
The following is a reconciliation of income tax expense computed at the UK statutory rate (2024: 25.0%, 2023: 23.5% (pro-rated)) compared to the
Company’s income tax expense as reported in its consolidated statements of operations and comprehensive loss:
Year Ended December 31,
(In thousands)
2024
2023
Net loss before income tax
$
(19,791) $
(10,008)
Statutory income tax rate
25.00%
23.50%
Expected income tax benefit
(4,948)
(2,352)
Impact on income tax expense/(benefit)
Change in valuation allowance
7,434
7,617
Permanent differences
1
4
U.S. state income taxes, net of FBOS
949
1,394
Tax rate difference in foreign jurisdictions
(1,295)
(974)
Change in stock-based compensation
685
123
Change in operating losses
—
(94)
Change of tax rate from prior year
—
(6,635)
Sec. 382 limitation
1,035
—
Deferred tax adjustments
(4,158)
760
Non-deductible transaction costs
818
157
Revaluation of warrant liabilities
(521)
—
Income tax expense
$
—
$
—
As of December 31, 2024 and 2023, there were no known domestic or foreign uncertain tax positions and the Company has not identified any tax positions
for which it is reasonably possible that a significant change will occur during the next 12 months. The Company’s position is to record penalties and
interest on any uncertain tax position, if any, to general and administrative expense in the consolidated statements of operations.
As of December 31, 2024, the Company had cumulative U.K., U.S. federal, various U.S. state, Switzerland, and South Korea net operating loss
carryforwards (“NOLs”) of approximately $145.7 million, $38.1 million, $71.8 million, less than $0.3 million, and $87.0 million, respectively, available to
reduce U.K., U.S. federal, U.S. state, Switzerland, and South Korea taxable income, respectively. The U.K. NOLs do not expire. Of the $38.1 million of
U.S. federal NOLs, $37.1 million have an unlimited carryforward and the remaining NOLs are subject to expiration through 2037. Of the $71.8 million of
U.S. state NOLs, less than $0.3 million have an unlimited carryforward and the remaining NOLs are subject to expiration through 2044. The South Korea
NOLs are subject to expiration through 2039.
In general, an ownership change, as defined by Section 382 of the Internal Revenue Code (“Section 382”), results from transactions increasing the
ownership of certain shareholders or public groups in the stock of a corporation by more than 50% over a three-year period. Since inception, the Company
has raised capital through the issuance of capital stock on multiple occasions. These financings could result in a change of control as defined by Section
382. In the fourth quarter of 2024, the Company conducted a study to assess whether a change of control occurred. The Company concluded that it had
experienced a change of control, as defined by Section 382, and utilization of certain net operating loss carryforwards would be limited under Section 382.
The Company determined that the limitation would result in approximately $4.9 million of net operating loss carryforwards to expire unused, which is
reflected in the Company's consolidated financial statements. In addition, the merger of the Company with Peak Bio also resulted in approximately $6.4
million of Peak Bio net operating loss carryforwards to expire unused.
Research and development credits
The Company conducts extensive research and development activities and may benefit from the U.K. research and development tax relief regime, whereby
the Company can receive an enhanced U.K. tax deduction on its research and development activities. Qualifying expenditures comprise of chemistry and
manufacturing consumables, employment costs for research staff, clinical trials management, and other subcontracted research expenditures.
F-36
When the Company is loss-making for a period, it can elect to surrender taxable losses for a refundable tax credit. The losses available to surrender are
equal to the lower of the sum of the research and development qualifying expenditure and enhanced tax deduction and the Company’s taxable losses for the
period with the tax credit for December 31, 2024 available at a rate of 14.5%. The credit therefore gives a cash flow advantage to the Company at a lower
rate than would be available if the enhanced losses were carried forward and relieved against future taxable profits.
The Company accounts for research and development tax credits at the time its realization becomes probable (Note 2). Due to the uncertainty of the
approval of these tax credit claims and the potential that an election for a tax credit in the form of cash is not made, the Company did not record a
receivable for the 2024 tax year as of December 31, 2024.
Note 12. Segment Information
The Company manages its operations as a single operating segment for the purpose of assessing performance, making operating decisions and allocating
resources, resulting in a single reportable segment. The Company has determined that its CODM is its Chief Executive Officer. The Company’s CODM
reviews the Company’s financial information on a consolidated basis for the purpose of allocating resources and assessing financial performance.
The Company has assembled a portfolio of preclinical product candidates that aim to develop next-generation precision bi-functional ADCs for the
treatment of cancer. The Company has not generated any revenue since its inception and does not expect to generate any revenue from the sale of products
in the near future. The Company primarily incurs expenses in connection with the research and development of its product candidates as well as general
and administrative costs consisting of salaries and related costs for personnel in executive, finance and administrative functions, as well as consulting,
restructuring and merger-related expenses.
The key measure of segment profit or loss that the CODM uses to allocate resources and assess performance is the Company’s consolidated net loss, as
reported on the consolidated statements of operations and comprehensive loss. In addition, the CODM is regularly provided the following significant
segment expense categories which are reviewed against budgeted expectations to assist in resource allocation decision-making:
Year Ended December 31,
(In thousands)
2024
2023
HSCT-TMA (AK901) program expense
$
(1,896) $
(1,802)
BP (AK802) program expense
—
1,073
ADC preclinical development
(47)
—
Chemistry, manufacturing and control
(3,497)
(2,684)
Other external development expense
(837)
(1,498)
Internal and other research and development expense
(129)
(386)
General and administrative expense
(8,281)
(10,359)
Merger-related expense
(3,273)
—
Restructuring and other expense
(1,438)
—
Stock-based compensation expense
(2,245)
(1,150)
Other segment items (1)
1,852
6,798
Net loss
$
(19,791) $
(10,008)
F-37
(1) Other segment items include interest income, interest expense, change in fair value of warrant liabilities, net foreign currency exchange gains (losses) and other
expense, net as reported on the consolidated statements of operations and comprehensive loss.
Assets regularly provided to the CODM are consistent with those reported on the consolidated balance sheets with particular emphasis on the Company’s
available liquidity, including its cash and restricted cash. All of the Company’s tangible assets are held in the United States.
Note 13. Subsequent Events
The Company considers events or transactions that occur after the balance sheet date but prior to the issuance of the financial statements to provide
additional evidence relative to certain estimates or to identify matters that require additional disclosure. In some instances, such subsequent events may
require retroactive adjustment to information reported at the balance sheet date.
Settlement of the November 2023 Note Payable
On February 28, 2025, the Company signed a Settlement Agreement and Release for full satisfaction of the outstanding principal and accrued interest owed
on the November 2023 Note (Note 6) in the amount of $325,000. Payment was made in March 2025.
March 2025 Private Placement
On March 2, 2025, the Company entered into a securities purchase agreement (the “March 2025 Purchase Agreement”) with certain investors, including the
Company’s Chairman, Dr. Hoyoung Huh, director, President and Chief Executive Officer, Dr. Samir R. Patel, and all other members of the Company’s
board, pursuant to which the Company agreed to sell and issue in a private placement (the “March 2025 Offering”) an aggregate of 6,637,626 unregistered
ADSs, each representing 2,000 of the Company’s ordinary shares (the “Shares”), or prefunded warrants in lieu thereof (“Pre-Funded Warrants”), and, in
each case, Series A warrants to purchase ADSs (“Series A Warrants”) and Series B warrants to purchase ADSs (“Series B Warrants”), together with the
Pre-Funded Warrants and Series A Warrants, the “Warrants,” and together with the ADSs or Pre-Funded Warrants, the “Units”)). The Units consist of (i)
for investors committing less than $1.0 million in the March 2025 Offering (“Tier 1 Investors”) one ADS or Pre-Funded Warrant plus a Series A Warrant
to purchase one ADS and a Series B Warrant to purchase one ADS, (ii) for investors committing at least $1.0 million but less than $3.0 million in the
March 2025 Offering (“Tier 2 Investors”) one ADS or Pre-Funded Warrant plus a Series A Warrant to purchase 1.25 ADSs and a Series B Warrant to
purchase one ADS, and (iii) for investors committing $3.0 million or more in the March 2025 Offering (“Tier 3 Investors”), one ADS or Pre-Funded
Warrant plus a Series A Warrant to purchase 1.5 ADSs and a Series B Warrant to purchase one ADS. The purchase price per Unit for investors purchasing
ADSs is equal to $0.87 plus (a) $0.25 for Tier 1 Investors, (b) $0.28125 for Tier 2 Investors, or (c) $0.3125 for Tier 3 Investors (the “ADS Unit Purchase
Price”). The purchase price per Pre-Funded Warrant and accompanying Series A Warrant and Series B Warrant is equal to $0.67 (which represents the
ADS purchase price minus the $0.20 exercise price for such Pre-Funded Warrant) plus (a) $0.25 for Tier 1 Investors, (b) $0.28125 for Tier 2 Investors, or
(c) $0.3125 for Tier 3 Investors (the “Pre-Funded Unit Purchase Price”).
As part of the March 2025 Offering, Dr. Huh agreed to purchase $1 million of Units, with the purchase price thereof to be satisfied through his agreement
to cancel and extinguish $1.0 million of notes previously issued to him by the Company (the “Note Termination”) for an equal amount of ordinary shares
and warrants.
The gross proceeds from the March 2025 Offering are expected to be approximately $6.6 million, net of the $1.0 million from the Note Termination, before
deducting placement agent fees and other offering expenses payable by the Company.
The placement agent will be paid three percent (3%) of the total number of ADSs issued in the March 2025 Offering, including any of the ADSs issuable
upon exercise of the Pre-Funded Warrants (excluding the ADSs issued to Dr. Huh in respect to the Note Termination).
F-38
Legal Settlement
On March 3, 2025, the Company signed a Settlement Agreement and Mutual Release with a former consultant to settle the demand letter claims received in
December 2024 (Note 10). The agreement requires the Company to make a payment in the amount of $0.3 million in nine equal monthly installments
beginning in March 2025. In addition, the agreement allows for the terms of the restricted stock unit award to continue to govern, including the continued
vesting of the restricted stock units through the first anniversary of the grant (May 1, 2025).
Appointment of New President and Chief Executive Officer
On March 14, 2025, the Company entered into an Executive Offer of Employment Agreement (as amended by a subsequent Chief Executive Officer Letter
Agreement, dated March 18, 2025, the “Employment Agreement”) with Mr. Abizer Gaslightwala pursuant to which Mr. Gaslightwala will serve as the
President and Chief Executive Officer of the Company, effective on or around April 21, 2025. Mr. Gaslightwala will earn a base salary, which includes an
annual cash bonus target, and receive share-based payment compensation based on time service and the achievement of specific performance criteria.
Note Payable, Related Party
On March 17, 2025, Dr. Huh's January 2024 Note (Note 9) was amended to extend the maturity date to December 31, 2025.
1
ACTIVE/137283511.3
Exhibit 4.7
DESCRIPTION OF SECURITIES REGISTERED PURSUANT TO SECTION 12 OF THE
SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
The following description is a summary of the material terms of Akari Therapeutics, Plc’s (the “Company”) ordinary shares with a par value $0.0001 per
share and American Depositary Shares (the “ADSs”), each representing 2,000 ordinary shares. This description also summarizes relevant provisions of
English law. The following summary does not purport to be complete and is subject to, and is qualified in its entirety by reference to, the applicable
provisions of English law and the Company’s Amended and Restated Articles of Association (as amended from time to time) (the “Articles”), a copy of
which is incorporated by reference as Exhibit 3.1 to the Annual Report on Form 10-K, of which this Exhibit 4.7 is a part. Refer to the Articles and the
applicable provisions of English law for additional information.
DESCRIPTION OF SHARE CAPITAL
General
Our securities include (a) our ordinary shares, par value $0.0001 per share, and (b) our ADSs, each representing 2,000 ordinary shares. Our ordinary shares
are registered under the Exchange Act not for trading, but only in connection with the listing of the ADSs on The Nasdaq Stock Market (“Nasdaq”).
Our ADSs are listed on Nasdaq under the trading symbol “AKTX.”
The following is a description of certain of the rights of (i) the holders of ordinary shares and (ii) ADS holders. Ordinary shares underlying the outstanding
ADSs are held by Deutsche Bank Trust Company Americas, as depositary.
Issued Share Capital
Certain resolutions were passed by the Company’s shareholders at a general meeting on November 7, 2024 including in respect of a general authorization
of our directors for the purposes of section 551 of the Companies Act 2006 to allot shares in the Company and to grant rights to subscribe for or to convert
any security into shares in the Company up to an aggregate nominal amount of $5,546,667 until November 6, 2029 (unless otherwise renewed, varied or
revoked by the Company in general meeting) without seeking shareholder approval, subject to certain limitations.
This is in addition to all subsisting authorities to allot shares in the Company including pursuant to the resolutions passed by the Company’s shareholders at
the Company’s annual general meeting on June 30, 2023 in respect of: (i) a general authorization of our directors for the purposes of section 551 of the
Companies Act 2006 to allot shares in the Company and to grant rights to subscribe for or to convert any security into shares in the Company up to an
aggregate nominal amount of $3,500,000 until June 30, 2028 (unless otherwise renewed, varied or revoked by the Company in general meeting); and (ii)
empowering our directors pursuant to section 570 of the Companies Act 2006 to allot equity securities for cash pursuant to the section 551 authority
referred to above as if the statutory preemption rights under section 561(1) of the Companies Act and any pre-emption rights in the Articles did not apply to
such allotments for the same period.
As of December 31, 2024, the Company’s issued share capital was 53,186,919,523 with a nominal value of $0.0001 per share.
Ordinary Shares
In accordance with the Articles, the following summarizes the rights of holders of, and attaching to, the Company’s ordinary shares:
•
each holder of the Company’s ordinary shares is entitled to one vote per ordinary share on all matters to be voted on by shareholders generally;
2
ACTIVE/137283511.3
•
the holders of the Company’s ordinary shares shall be entitled to receive notice of, attend, speak and vote at the Company’s general meetings;
and
•
holders of the Company’s ordinary shares are entitled to receive such dividends as are recommended by the directors and declared by the
shareholders, to be justified by the distributable profits of the Company.
Articles of Association
A summary of certain key provisions of the Articles is set out below. The summary below is not a complete copy of the terms of the Articles. For further
information, please refer to the full version of the Articles filed as Exhibit 3.1 to the Annual Report on Form 10-K.
The Articles contain no specific restrictions on the Company’s purpose and therefore, by virtue of section 31(1) of the Companies Act 2006, the
Company’s purpose is unrestricted.
The Articles contain, among other things, provisions to the following effect:
Share Capital
The Company’s share capital currently consists of ordinary shares. The Board may, in accordance with section 551 of the Companies Act 2006, allot, grant
options over, issue warrants to subscribe, offer or otherwise deal with or dispose of any shares of the Company to such persons, at such times and generally
on such terms and conditions as they may determine, including issuing shares with such preferred or deferred rights as resolved by the Company in general
meeting.
Voting
Holders of ordinary shares have one vote for each ordinary share held on all matters submitted to a vote of shareholders. These voting rights may be
affected by the grant of any special voting rights to the holders of a class of shares with preferential rights that may be authorized in the future.
Modification of Rights
Subject to the Statutes and the Articles, whenever the Company’s share capital is divided into different classes of shares, all or any of the special rights or
privileges attached to any class may be varied or abrogated with the consent in writing of the holders of at least three-fourths in nominal value of that class
(excluding any shares of that class held as treasury shares) or with the sanction of a special resolution passed at a separate meeting of the holders of that
class, but not otherwise. The quorum at any such meeting is two or more persons holding, or representing by proxy, at least one-third in nominal value of
the issued shares in question.
Dividends
The Company in general meeting may declare dividends in respect of the profits of the Company available for distribution. The Board may, subject to the
provisions of the Companies Act 2006 and the Articles, from time to time, pay to the members such interim dividends as appear to the Board to be justified
by the distributable profits of the Company.
Any dividend which has remained unclaimed for a period of twelve (12) years from the date on which such dividend becomes due for payment will, if the
Board so resolve, be forfeited and cease to remain owing by the Company and will from then on belong to the Company absolutely. No dividend will bear
interest as against the Company.
Liquidation
If the Company is wound up, whether the liquidation is voluntary, under supervision or by the court, the liquidator may, with the authority of a special
resolution, divide among the members (excluding any holding shares or treasury
3
ACTIVE/137283511.3
shares) in specie the whole or part of the assets of the Company, whether or not the assets consist of property of one kind or of different kinds. For those
purposes the liquidator may set such value as he deems fair upon any one or more class or classes of property and may determine how such division will be
effected as between the members or different classes of members. If any such division is carried out otherwise than in accordance with the existing rights of
the members, every member will have the same right of dissent and other ancillary rights as if such resolution were a special resolution passed in
accordance with section 110, Insolvency Act 1986. The liquidator may, with the same authority, vest any part of the assets in trustees upon such trusts for
the benefit of members as the liquidator, with the same authority, thinks fit and the liquidation of the Company may be closed and the Company dissolved.
No member will be compelled to accept any shares in respect of which there is a liability.
Transfer of Ordinary Shares in Certificated Form
Each shareholder may transfer all or any of his or her shares which are in certificated form by means of an instrument of transfer in any usual form or in
any other form which the Board may approve. The instrument must be executed by or on behalf of the transferor and (except in the case of a share which is
fully paid up) by or on behalf of the transferee but need not be under seal.
Subject to applicable law, the Board may, refuse to register a transfer or a certified share unless the instrument of transfer:
•
is in respect of only one class of shares;
•
is in favor of not more than four joint transferees;
•
is duly stamped (if required);
•
is in compliance with all applicable rules and regulations; and
•
is lodged at the registered office of the Company or such other place as the Board may decide accompanied by the certificate for the shares to
which it relates (except in the case of a transfer by a recognized person to whom no certificate was issued) and such other evidence (if any) as the
Board may reasonably require to prove the title of the transferor and the due execution by him or her of the transfer or, if the transfer is executed
by some other person on their behalf, the authority of that person to do so.
The Board may in its absolute discretion and without giving any reasons, refuse to register any transfer of a certificated share which is not fully paid, but
this discretion may not be exercised in such a way as to prevent dealings in the shares from taking place on an open and proper basis.
Preemptive Rights
There are no rights of preemption under the Articles in respect of transfers of issued ordinary shares. In certain circumstances, our shareholders have
preemptive rights with respect to new issuances of equity securities. As set out in the section “Issued Share Capital”, the shareholders have approved by
resolution in general meeting or annual general meeting the disapplication of preemptive rights in connection with new issuances of equity securities up to
certain authorised amounts.
Alteration of Share Capital
The Company may, in accordance with the Companies Act 2006, by ordinary resolution:
•
consolidate and divide all or any of its share capital into shares of larger nominal value than its existing shares;
•
subdivide its shares, or any of them, into shares of smaller nominal value subject nevertheless to the Companies Act 2006 and all other statutes
and secondary legislation for the time being in force relating to companies to the extent that they apply to the Company (the “Statutes”) and
reclassify them, and so that the
4
ACTIVE/137283511.3
resolution by which any share is subdivided may determine that, as between the holders of the shares resulting from such subdivision, one or
more of the shares may have any such preferred or other special rights over or may have such deferred rights or be subject to any such
restrictions as compared with the others as the Company has power to attach to new shares; and
•
cancel any shares which, at the date of the passing of the resolution, have not been taken, or agreed to be taken, by any person, and diminish the
amount of its share capital by the amount of the shares so cancelled.
The Company may from time to time by special resolution reduce its share capital, any redenomination reserve, capital redemption reserve or share
premium account, and (if permitted by the Statutes) any other non distributable reserves in any manner authorized by the Statutes and diminish the amount
of its share capital by the amount of the shares so cancelled.
Board of Directors
Appointment of Directors
Our directors are categorized into three classes: Class A directors, appointed as director of the Company for a one-year term, Class B directors, appointed
as director of the Company for a two-year term, and Class C directors, appointed as director of the Company for a three-year term (in each case subject to
reappointment in accordance with the Articles). Unless otherwise determined by the Company in general meeting, the number of directors is not subject to
a maximum but must not be fewer than three directors. The chairman of the board shall be elected by the shareholders in general meeting.
The Company may from time to time by ordinary resolution increase or reduce the number of directors and may also determine in what rotation such
increased or reduced number is to go out of office. The Company may, by ordinary resolution, appoint any person to be a director, either to fill a casual
vacancy or as an additional director.
The Board and the Company in general meeting each have power at any time, and from time to time, to appoint any person to be a director, either to fill a
casual vacancy or as an additional director, but so that the total number of directors does not at any time exceed the maximum number, if any, fixed by or in
accordance with the Articles at any time. Subject to the provisions of the Statutes and of the Articles, any director so appointed by the directors holds office
only until the conclusion of the next following annual general meeting and is eligible for reappointment at that meeting. Any director who retires under this
regulation is not taken into account in determining the directors who are to retire by rotation at such meeting.
Each director shall retire at the next general meeting after the term of their office ends. A director retiring at a general meeting, if he or she is not re-
appointed, retains office until the meeting appoints someone in their place or, if it does not do so, until the end of that meeting. Subject to the provisions of
the Statutes, the directors to retire in every year include, so far as necessary to obtain the required number, any director who wishes to retire and not to offer
himself or herself for re-election. Any further directors so to retire are those who have been longest in office since their last appointment or reappointment
but, as between persons who became or were last re-appointed directors on the same day, those to retire are determined by the Board at the
recommendation of the chairman of the Board. A retiring director is eligible for re-appointment, subject as set out in the Articles.
In any two year period, a majority of the directors must stand for re-election or replacement. In the event that this majority has not been met and the number
of directors eligible for retirement by rotation under the provisions of the Articles are not met, any further directors so to retire are those who have been
longest in office since their last appointment or re-appointment but, as between persons who became or were last re-appointed directors on the same day,
those to retire are determined by the Board at the recommendation of the chairman of the Board. A retiring director is eligible for re-appointment, subject
as set out in the Articles.
Proceedings of Directors
Subject to the provisions of the Articles, the Board may regulate their proceedings as they deem appropriate. A director may, and the secretary at the
request of a director shall, at any time call a meeting of the directors.
5
ACTIVE/137283511.3
The quorum necessary for the transaction of the business of the board of directors may be fixed by the directors and, unless so fixed at any other number, is
a majority of the board of directors, to include (except in respect of any matter on which he is not eligible to vote) the chairman of the board. A meeting of
directors for the time being at which a quorum is present is competent to exercise all powers and discretions for the time being exercisable by the board.
Questions arising at any meeting are determined by a majority of votes. In case of an equality of votes, the chairman shall have a casting vote.
6
ACTIVE/137283511.3
General Meetings
The Company must convene and hold annual general meetings once a year in accordance with the Companies Act 2006. Under the Companies Act 2006,
an annual general meeting must be called by notice of at least 21 clear days and a general meeting must be called by notice of at least 14 clear days. The
notice is exclusive of the day on which it is served, or deemed to be served, and of the day for which it is given.
No business shall be transacted at any general meeting unless a quorum is present when the meeting proceeds to business, but the absence of a quorum
shall not preclude the choice or appointment of a chairperson of the meeting, which shall not be treated as part of the business of the meeting. Save as
otherwise provided by the Articles, two persons entitled to vote at the meeting each being a member or a proxy for a member or a representative of a
corporation which is a member, duly appointed as such in accordance with the Statutes, holding in the aggregate at least one-third (33 1/3 percent.) of the
Company's outstanding share capital, shall constitute a quorum. If at any time the Company only has one member, such member in person, by proxy or if a
corporation by its representative, shall constitute a quorum.
Borrowing Powers
Subject to the Articles and the Companies Act 2006, the Board may:
•
exercise all the powers of the Company to borrow money and to mortgage or charge its undertaking, property and uncalled capital, or any part of
it, and subject to the provisions of the Statutes, to issue debentures and other securities whether outright or as collateral security for any debt,
liability or obligation of the Company or of any third party;
•
secure or provide for the payment of any money to be borrowed or raised by a mortgage of or charge upon all or any part of the undertaking or
property of the Company, both present and future, and upon any capital remaining unpaid upon the shares of the Company whether called up or
not, or by any other security;
•
confer upon any mortgagees or persons in whom any debenture or security is vested such rights and powers as they think necessary or expedient;
•
vest any property of the Company in trustees for the purpose of securing any money so borrowed or raised and confer upon the trustees, or any
receiver to be appointed by them, or by any debenture holder, such rights and powers as the Board may think necessary or expedient in relation
to the undertaking or property of the Company or its management or realization, or the making, receiving, or enforcing of calls upon the
members in respect of unpaid capital, and otherwise;
•
make and issue debentures to trustees for the purpose of further security and the Company may remunerate any such trustees;
•
give security for the payment of any money payable by the Company in same manner as for the payment of money borrowed or raised.
Capitalization of Profits
The directors may, with the authority of an ordinary resolution of the Company:
•
resolve to capitalize any undivided profits (including profits standing to the credit of any reserve) of the Company, whether or not they are
available for distribution, or any sum standing to the credit of the Company's share premium account, redenomination reserve or capital
redemption reserve;
•
appropriate the profits or sum resolved to be capitalized to the members in proportion to the nominal amount of ordinary shares, whether or not
fully paid, held by them respectively, and apply such profits or sum on their behalf, either in or towards paying up the amounts, if any, for the
time being unpaid on any shares held by such members respectively, or in paying up in full shares or debentures of the Company of a nominal
7
ACTIVE/137283511.3
amount equal to such profits or sum, and allot and distribute such shares or debentures credited as fully paid up, to and amongst such members,
or as they may direct, in due proportion, or partly in one way and partly in the other;
•
resolve that any shares allotted under this regulation to any member in respect of a holding by him or her of any partly paid ordinary shares will,
so long as such ordinary shares remain partly paid, rank for dividends only to the extent that such partly paid ordinary shares rank for dividend;
•
make such provisions by the issue of fractional certificates or by payment in cash or otherwise as the Board of directors thinks fit for the case of
shares or debentures becoming distributable under this regulation in fractions; and
•
authorize any person to enter on behalf of all the members concerned into an agreement with the Company providing for the allotment to them
respectively, credited as fully paid up, of any shares or debentures to which they may be entitled upon such capitalization and any agreement
made under such authority being effective and binding on all such members.
Uncertificated Shares
Under and subject to the Uncertificated Securities Regulations 2001 (SI 2001/3755) (the “Uncertificated Securities Regulations”), the Board may permit
title to shares of any class to be evidenced otherwise than by certificate and title to shares of such a class to be transferred by means of a relevant system
and may make arrangements for a class of shares (if all shares of that class are in all respects identical) to become a participating class. Title to shares of a
particular class may only be evidenced otherwise than by a certificate where that class of shares is at the relevant time a participating class. The Board may
also, subject to compliance with the Uncertificated Securities Regulations, determine at any time that title to any class of shares may from a date specified
by the Board no longer be evidenced otherwise than by a certificate or that title to such a class shall cease to be transferred by means of any particular
relevant system.
In relation to a class of shares which is a participating class and for so long as it remains a participating class, no provision of the Articles shall apply or
have effect to the extent that it is inconsistent in any respect with:
•
the holding of shares of that class in uncertificated form;
•
the transfer of title to shares of that class by means of a relevant system; or
•
any provision of the Uncertificated Securities Regulations; and, without prejudice to the generality of this article, no provision of the Articles
shall apply or have effect to the extent that it is in any respect inconsistent with the maintenance, keeping or entering up by the operator so long
as that is permitted or required by the Uncertificated Securities Regulations, of an operator register of securities in respect of that class of shares
in uncertificated form.
Shares of a class which is at the relevant time a participating class may be changed from uncertificated to certificated form, and from certificated to
uncertificated form, in accordance with and subject as provided in the Uncertificated Securities Regulations.
If, under the Articles or the Statutes, the Company is entitled to sell, transfer or otherwise dispose of, forfeit, re-allot, accept the surrender of or otherwise
enforce a lien over an uncertificated share, then, subject to the Articles and the Statute, such entitlement shall include the right of the Board to: (i) require
the holder of the uncertificated share by notice in writing to change that share from uncertificated to certificated form within such period as may be
specified in the notice and keep it as a certificated share for as long as the Board requires; (ii) appoint any person to take such other steps, by instruction
given by means of a relevant system or otherwise, in the name of the holder of such share as may be required to effect the transfer of such share and such
steps shall be as effective as if they had been taken by the registered holder of that share; and (iii) take such other action that the Board considers
appropriate to achieve the sale, transfer, disposal, forfeiture, re-allotment or surrender of that share or otherwise to enforce a lien in respect of that share.
8
ACTIVE/137283511.3
Unless the Board determines otherwise, shares which a member holds in uncertificated form shall be treated as separate holdings from any shares which
that member holds in certificated form but a class of shares shall not be treated as two classes simply because some shares of that class are held in
certificated form and others in uncertificated form.
DESCRIPTION OF AMERICAN DEPOSITARY SHARES
Stock Exchange Listing
The Company’s ADSs have been listed on the Nasdaq Stock Market under the symbol “AKTX” since September 21, 2015.
American Depositary Shares
Deutsche Bank Trust Company Americas, as depositary, registers and delivers the ADSs. Each ADS represents ownership of 2,000 ordinary shares
deposited with Deutsche Bank AG, London Branch with principal office at Winchester House, 1 Great Winchester Street, London EC2N 2DB, U.K., as
custodian for the depositary. Each ADS also represents ownership of any other securities, cash or other property, which may be held by the depositary. The
depositary’s corporate trust office at which the ADSs will be administered is located at 1 Columbus Circle, New York, NY 10019, USA. The principal
executive office of the depositary is located at 1 Columbus Circle, New York, NY 10019, USA.
The Direct Registration System (“DRS”) is a system administered by The Depository Trust Company (“DTC”) pursuant to which the depositary may
register the ownership of uncertificated ADSs, which ownership shall be evidenced by periodic statements issued by the depositary to the ADS holders
entitled thereto.
The Company does not treat ADS holders as shareholders and accordingly, ADS holders, do not have shareholder rights. English law governs shareholder
rights. The depositary or its custodian is the holder of the ordinary shares underlying the ADSs. A holder of ADSs only has ADS holder rights. A deposit
agreement among the Company, the depositary and the ADS holder, and the beneficial owners of ADSs sets out ADS holder rights as well as the rights and
obligations of the depositary. The laws of the State of New York govern the deposit agreement and the ADSs.
Each holder of ADSs may hold their ADSs either (1) directly (a) by having an American Depositary Receipt (“ADR”) which is a certificate evidencing a
specific number of ADSs, registered in the name of the holder, or (b) by holding ADSs in the DRS, or (2) indirectly through each holder’s broker or other
financial institution. If one holds ADSs directly, then they are an ADS holder. The description set forth herein assumes that each holder holds their ADSs
directly. If a holder holds the ADSs indirectly, they must rely on the procedures of their broker or other financial institution to assert the rights of ADS
holders described in this section. Each holder of ADSs should consult with their broker or financial institution to find out what those procedures are.
The following is a summary of the material provisions of the deposit agreement.
Dividends and Other Distributions
The depositary has agreed to pay to ADS holders the cash dividends or other distributions it or the custodian receives on ordinary shares or other deposited
securities, after deducting its fees and expenses. The holder of ADSs receives these distributions in proportion to the number of ordinary shares their ADSs
represent as of the record date (which will be as close as practicable to the record date for our ordinary shares) set by the depositary with respect to the
ADSs.
●
Cash. The depositary converts any cash dividend or other cash distribution we pay on the ordinary shares or any net proceeds from the
sale of any ordinary shares, rights, securities or other entitlements into U.S. dollars if it can do so on a reasonable basis, and can
transfer the U.S. dollars to the United States. If that is not possible or lawful or if any government approval is needed and cannot be
obtained, the deposit agreement allows the depositary to distribute the foreign currency only to those ADS holders to whom it is
possible to do so. The depositary holds the foreign currency it cannot convert for the account of the ADS holders who have not been
paid. The depositary does
9
ACTIVE/137283511.3
not invest the foreign currency and is not liable for any interest.
●
Shares. The depositary may distribute additional ADSs representing any ordinary shares we distribute as a dividend or free distribution
to the extent reasonably practicable and permissible under law. The depositary only distributes whole ADSs. It will try to sell ordinary
shares which would require it to deliver a fractional ADS and distribute the net proceeds in the same way as it does with cash. If the
depositary does not distribute additional ADSs, the outstanding ADSs will also represent the new ordinary shares. The depositary may
sell a portion of the distributed ordinary shares sufficient to pay its fees and expenses in connection with that distribution.
●
Other Distributions. Subject to receipt of timely notice from us with the request to make any such distribution available to ADS
holders, and provided the depositary has determined such distribution is lawful and reasonably practicable and feasible and in
accordance with the terms of the deposit agreement, the depositary will send to ADS holders anything else we distribute on deposited
securities by any means it thinks is legal, fair and practical. If it cannot make the distribution in that way, the depositary has a choice: it
may decide to sell what we distributed and distribute the net proceeds in the same way as it does with cash; or, it may decide to hold
what we distributed, in which case ADSs will also represent the newly distributed property. However, the depositary is not required to
distribute any securities (other than ADSs) to ADS holders unless it receives satisfactory evidence from us that it is legal to make that
distribution. The depositary may sell a portion of the distributed securities or property sufficient to pay its fees and expenses in
connection with that distribution.
●
Rights to Purchase Additional Shares. If we offer holders of our ordinary shares any rights to subscribe for additional shares or any
other rights, the depositary may after consultation with us and having received timely notice as described in the deposit agreement of
such distribution by us, make these rights available to ADS holders. We must first instruct the depositary to make such rights available
to ADS holders and furnish the depositary with satisfactory evidence that it is legal to do so. If the depositary decides it is not legal and
practical to make the rights available but that it is practical to sell the rights, the depositary will use reasonable efforts to sell the rights
and distribute the net proceeds in the same way as it does with cash. The depositary allows rights that are not distributed or sold to
lapse. In that case, ADS holders receive no value for them. If the depositary makes rights available to ADS holders, it will exercise the
rights and purchase the shares on ADS holders’ behalf. The depositary will then deposit the shares and deliver ADSs to ADS holders.
The depositary only exercises rights if ADS holders pay it the exercise price and any other charges the rights require that ADS holders
to pay. U.S. securities laws may restrict transfers and cancellation of the ADSs represented by shares purchased upon exercise of
rights. For example, ADS holders may not be able to trade these ADSs freely in the United States. In this case, the depositary may
deliver restricted depositary shares that have the same terms as the ADSs described in this section except for changes needed to put the
necessary restrictions in place.
●
Elective Distributions in Cash or Shares. If we offer holders of our ordinary shares the option to receive dividends in either cash or
shares, the depositary, after consultation with us and having received timely notice as described in the deposit agreement of such
elective distribution by us, has discretion to determine to what extent such elective distribution will be made available to ADS holders.
We must first instruct the depositary to make such elective distribution available to ADS holders and furnish it with satisfactory
evidence that it is legal to do so. The depositary could decide it is not legal or reasonably practical to make such elective distribution
available to ADS holders, or it could decide that it is only legal or reasonably practical to make such elective distribution available to
some but not all holders of the ADSs. In such case, the depositary shall, on the basis of the same determination as is made in respect of
the ordinary shares for which no election is made, distribute either cash in the same way as it does in a cash distribution, or additional
ADSs representing ordinary shares in the same way as it does in a share distribution. The depositary is not obligated to make available
to ADS holders a method to receive the elective dividend in shares rather than in ADSs. There can be no assurance that ADS holders
will be given the opportunity to receive elective distributions on the same terms and conditions as the holders of ordinary shares.
10
ACTIVE/137283511.3
The depositary is not responsible if it decides that it is unlawful or impractical to make a distribution available to any ADS holders. We have no obligation
to register ADSs, shares, rights or other securities under the Securities Act. We also have no obligation to take any other action to permit the distribution of
ADSs, shares, rights or anything else to ADS holders. This means that ADS holders may not receive the distributions we make on our ordinary shares or
any value for them if it is illegal or impractical for us to make them available to ADS holders.
Deposit, Withdrawal and Cancellation
The depositary will deliver ADSs if an ADS holder or its broker deposit ordinary shares or evidence of rights to receive ordinary shares with the custodian.
Upon payment of its fees and expenses and of any taxes or charges, such as stamp taxes or stock transfer taxes or fees, the depositary will register the
appropriate number of ADSs in the names the ADS holder requests and will deliver the ADSs to or upon the order of the person or persons entitled thereto.
ADS holders may turn in ADSs at the depositary’s corporate trust office or by providing appropriate instructions to such holder’s broker. Upon payment of
its fees and expenses and of any taxes or charges, such as stamp taxes or stock transfer taxes or fees, the depositary will deliver the ordinary shares and any
other deposited securities underlying the ADSs to the holder or someone else designated by the ADS holder at the office of the custodian. Or, at an ADS
holder’s request, risk and expense, the depositary will deliver the deposited securities at its corporate trust office, if feasible.
The depositary may refuse to accept for surrender ADSs only in the case of (i) temporary delays caused by closing our transfer books or those of the
depositary or the deposit of our 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 depositary receipts or to the withdrawal of deposited
securities. Subject thereto, in the case of surrender of a number of ADSs representing other than a whole number of our ordinary shares, the depositary will
cause ownership of the appropriate whole number of our ordinary shares to be delivered in accordance with the terms of the deposit agreement and will, at
the discretion of the depositary, either (i) issue and deliver to the person surrendering such ADSs a new ADS representing any remaining fractional
ordinary share or (ii) sell or cause to be sold the fractional ordinary shares represented by the ADSs surrendered and remit the proceeds of such sale (net of
applicable fees and charges of, and expenses incurred by, the depositary and taxes and/or governmental charges) to the person surrendering the ADS.
Further, an ADR may be surrendered to the depositary for the purpose of exchanging the ADR for uncertificated ADSs. The depositary will cancel that
ADR and will send the holder a statement confirming that they are the owner of uncertificated ADSs. Alternatively, upon receipt by the depositary of a
proper instruction from a holder of uncertificated ADSs requesting the exchange of uncertificated ADSs for certificated ADSs, the depositary will execute
and deliver to the holder, an ADR evidencing those ADSs.
Voting Rights
ADS holders may instruct the depositary how to vote the number of deposited shares their ADSs represent. Otherwise, an ADS holder can exercise their
right to vote directly if the holder withdraws the ordinary shares their ADSs represent. However, an ADS holder may not know about the meeting enough
in advance to withdraw the ordinary shares.
If the Company asks an ADS holder for their instructions and upon timely notice from the Company, as described in the deposit agreement, the
depositary will notify the holder of the upcoming vote and arrange to deliver the Company’s voting materials to such ADS holder. The materials will (1)
describe the matters to be voted on and (2) explain how the ADS holder may instruct the depositary to vote the ordinary shares or other deposited
securities underlying the holder’s ADSs as they direct. The Company cannot assure holders of ADSs that they will receive the voting materials in time
to ensure that they can instruct the depositary to vote the ordinary shares underlying their ADSs. In addition, the depositary and its agents are not
responsible for failing to carry out voting instructions or for the manner of carrying out voting instructions. This means that an ADS holder may not be
able to exercise their right to vote and they may have no recourse if the ordinary shares underlying such ADSs are not voted as requested.
In order to give ADS holders a reasonable opportunity to instruct the depositary as to the exercise of voting rights relating to deposited securities, if the
Company requests the depositary to act, they are required to give the
11
ACTIVE/137283511.3
depositary 30 days’ advance notice of any such meeting and details concerning the matters to be voted upon sufficiently in advance of the meeting date,
and the depositary will mail the ADS holders a notice.
Fees and Expenses
ADS holders will be required to pay the following fees to the depositary under the terms of the deposit agreement::
Issuance of ADSs, including issuances resulting from a distribution of shares or
rights or other property
Up to $0.05 per ADS issued
Cancellation of ADSs, including in the case of termination of the Up to $0.05 per
ADS cancelled deposit agreement
Up to $0.05 per ADS cancelled
Distribution of cash dividends or other cash distributions
Up to $0.02 per ADS held
Distribution of ADSs pursuant to share dividends, free share distributions or
exercise of rights
Up to $0.05 per ADS held
Operation and maintenance costs in administering the ADSs
An annual fee of $0.02 per ADS held
Inspections of the relevant share register maintained by the local registrar and/or
performing due diligence on the central securities depository for England and
Wales
An annual fee of $0.01 per ADS held (such fee to be assessed
against holders of record as at the date or dates set by the
depositary as it sees fit and collected at the sole discretion of the
depositary by billing such holders for such fee or by deducting
such fee from one or more cash dividends or other cash
distributions)
Payment of Taxes
Each ADS holder is responsible for any taxes or other governmental charges payable on their ADSs or on the deposited securities represented by any of
their ADSs. The depositary may refuse to register any transfer of such holder’s ADSs or allow the holder to withdraw the deposited securities represented
by their ADSs until such taxes or other charges are paid. It may apply payments owed to the ADS holder or sell deposited securities represented by the
holder’s ADSs to pay any taxes owed and such holder will remain liable for any deficiency. If the depositary sells deposited securities, it will, if
appropriate, reduce the number of ADSs to reflect the sale and pay to the ADS holder any net proceeds, or send to such holder any property, remaining
after it has paid the taxes. Each ADS holder agrees to indemnify the Company, the depositary, the custodian and each of our and their respective agents,
directors, employees and affiliates for, and hold each of them harmless from, any claims with respect to taxes (including applicable interest and penalties
thereon) arising from any tax benefit obtained for the ADS holder.
Amendment and Termination
The Company may agree with the depositary to amend the deposit agreement and the ADRs without the ADS holder’s consent for any reason. If an
amendment adds or increases fees or charges, except for taxes and other governmental charges or expenses of the depositary for registration fees, facsimile
costs, delivery charges or similar items, or prejudices a substantial right of ADS holders, it will not become effective for outstanding ADSs until thirty (30)
days after the depositary notifies ADS holders of the amendment. At the time an amendment becomes effective, an ADS holder is considered, by virtue of
continuing to hold ADSs, to have agreed to the amendment and to be bound by the ADRs and the deposit agreement as amended.
The depositary will terminate the deposit agreement if we ask it to do so, in which case the depositary will give notice to the ADS holders at least 90 days
prior to termination. The depositary may also terminate the deposit agreement if the depositary has told us that it would like to resign and we have not
appointed a new depositary within 90 days. In such case, the depositary must notify ADS holders at least 30 days before termination. After termination, the
depositary and its agents will do the following under the deposit agreement but nothing else: collect
12
ACTIVE/137283511.3
distributions on the deposited securities, sell rights and other property and deliver ordinary shares and other deposited securities upon cancellation of ADSs
after payment of any fees, charges, taxes or other governmental charges. Six months or more after termination, the depositary may sell any remaining
deposited securities by public or private sale. After that, the depositary will hold the money it received on the sale, as well as any other cash it is holding
under the deposit agreement, for the pro rata benefit of the ADS holders that have not surrendered their ADSs. It will not invest the money and has no
liability for interest. The depositary’s only obligations will be to account for the money and other cash. After termination, our only obligations will be to
indemnify the depositary and to pay fees and expenses of the depositary that we agreed to pay.
Limitations on Obligations and Liability
Limits on the Company’s Obligations and the Obligations of the Depositary; Limits on Liability to Holders of ADSs
The deposit agreement expressly limits the Company’s obligations and the obligations of the depositary. It also limits the Company’s liability and the
liability of the depositary. The Company and the depositary:
●
are only obligated to take the actions specifically set forth in the deposit agreement without gross negligence or willful misconduct;
●
are not liable if either of us is prevented or delayed by law or circumstances beyond our control from performing our obligations under
the deposit agreement, including, without limitation, requirements of any present or future law, regulation, governmental or regulatory
authority or share exchange of any applicable jurisdiction, any present or future provisions of our memorandum and articles of
association, on account of possible civil or criminal penalties or restraint, any provisions of or governing the deposited securities or any
act of God, war or other circumstances beyond our control as set forth in the deposit agreement;
●
are not liable if either of us exercises, or fails to exercise, discretion permitted under the deposit agreement;
●
have no obligation to become involved in a lawsuit or other proceeding related to the ADSs or the deposit agreement on an ADS
holder’s behalf or on behalf of any other party;
●
may rely upon any documents we believe in good faith to be genuine and to have been signed or presented by the proper party;
●
disclaim any liability for any action/inaction in reliance on the advice or information of legal counsel, accountants, any person
presenting ordinary shares for deposit, holders and beneficial owners (or authorized representatives) of ADSs, or any person believed
in good faith to be competent to give such advice or information;
●
disclaim any liability for inability of any holder to benefit from any distribution, offering, right or other benefit made available to
holders of deposited securities but not made available to holders of ADSs; and
●
disclaim any liability for any indirect, special, punitive or consequential damages.
The depositary and any of its agents also disclaim any liability for any failure to carry out any instructions to vote, the manner in which any vote is cast or
the effect of any vote or failure to determine that any distribution or action may be lawful or reasonably practicable or for allowing any rights to lapse in
accordance with the provisions of the deposit agreement, the failure or timeliness of any notice from us, the content of any information submitted to it by us
for distribution to the ADS holders or for any inaccuracy of any translation thereof, any investment risk associated with the acquisition of an interest in the
deposited securities, the validity or worth of the deposited securities, the credit-worthiness of any third party, or for any tax consequences that may result
from ownership of ADSs, ordinary shares or deposited securities.
13
ACTIVE/137283511.3
In the deposit agreement, the Company and the depositary agree to indemnify each other under certain circumstances.
Requirements for Depositary Actions
Before the depositary will issue, deliver or register a transfer of an ADS, make a distribution on an ADS, or permit withdrawal of ordinary shares, the
depositary may require:
●
payment of stock transfer or other taxes or other governmental charges and transfer or registration fees charged by third parties for the
transfer of any ordinary shares or other deposited securities and payment of the applicable fees, expenses and charges of the
depositary;
●
satisfactory proof of the identity and genuineness of any signature or other information it deems necessary; and
●
compliance with regulations it may establish, from time to time, consistent with the deposit agreement, including presentation of
transfer documents.
The depositary may refuse to issue and deliver ADSs or register transfers of ADSs generally when the register of the depositary or our transfer books are
closed or at any time if the depositary or we think it is necessary or advisable to do so.
An ADS Holder’s Right to Receive the Shares Underlying such ADSs
ADS holders have the right to cancel their ADSs and withdraw the underlying shares at any time except:
●
when temporary delays arise because: (1) the depositary has closed its transfer books or we have closed our transfer books; (2) the
transfer of ordinary shares is blocked to permit voting at a shareholders’ meeting; or (3) we are paying a dividend on our ordinary
shares;
●
when an ADS holder owes money to pay fees, taxes and similar charges; or
●
when it is necessary to prohibit withdrawals in order to comply with any laws or governmental regulations that apply to ADSs or to the
withdrawal of ordinary shares or other deposited securities.
This right of withdrawal may not be limited by any other provision of the deposit agreement.
Direct Registration System
In the deposit agreement, all parties to the deposit agreement acknowledge that the DRS and Profile Modification System (“Profile”) will apply to
uncertificated ADSs upon acceptance thereof to DRS by DTC. DRS is the system administered by DTC pursuant to which the depositary may register the
ownership of uncertificated ADSs, which ownership shall be evidenced by periodic statements issued by the depositary to the ADS holders entitled thereto.
Profile is a required feature of DRS which allows a DTC participant, claiming to act on behalf of an ADS holder, to direct the depositary to register a
transfer of those ADSs to DTC or its nominee and to deliver those ADSs to the DTC account of that DTC participant without receipt by the depositary of
prior authorization from the ADS holder to register such transfer.
In connection with and in accordance with the arrangements and procedures relating to DRS/Profile, the parties to the deposit agreement understand that
the depositary will not verify, determine or otherwise ascertain that the DTC participant which is claiming to be acting on behalf of an ADS holder in
requesting registration of transfer and delivery described in the paragraph above has the actual authority to act on behalf of the ADS holder
(notwithstanding any requirements under the Uniform Commercial Code). In the deposit agreement, the parties agree that the depositary’s reliance on, and
compliance with, instructions received by the depositary through the DRS/Profile system and in accordance with the deposit agreement, shall not constitute
negligence or bad faith on the part of the depositary.
Pre-release of ADSs
14
ACTIVE/137283511.3
The deposit agreement permits the depositary to deliver ADSs before deposit of the underlying ordinary shares. This is called a pre-release of the ADSs.
The depositary may also deliver ordinary shares upon cancellation of pre-released ADSs (even if the ADSs are cancelled before the pre-release transaction
has been closed out). A pre-release is closed out as soon as the underlying ordinary shares are delivered to the depositary. The depositary may receive
ADSs instead of ordinary shares to close out a pre-release. The depositary may pre-release ADSs only under the following conditions: (1) before or at the
time of the pre-release, the person to whom the pre-release is being made represents to the depositary in writing that it or its customer (a) owns the ordinary
shares or ADSs to be deposited, (b) assigns all beneficial rights, title and interest in such ordinary shares or ADSs to the depositary for the benefit of the
owners, (c) will not take any action with respect to such ordinary shares or ADSs that is inconsistent with the transfer of beneficial ownership, (d) indicates
the depositary as owner of such ordinary shares or ADSs in its records, and (e) unconditionally guarantees to deliver such ordinary shares or ADSs to the
depositary or the custodian, as the case may be; (2) the pre-release is fully collateralized with cash or other collateral that the depositary considers
appropriate; and (3) the depositary must be able to close out the pre-release on not more than five business days’ notice. Each pre-release is subject to
further indemnities and credit regulations as the depositary considers appropriate. In addition, the depositary will normally limit the number of ADSs that
may be outstanding at any time as a result of pre-release to 30% of the aggregate number of ADSs then outstanding, although the depositary, in its sole
discretion, may disregard the limit from time to time, if it thinks it is appropriate to do so, including (1) due to a decrease in the aggregate number of ADSs
outstanding that causes existing pre-release transactions to temporarily exceed the limit stated above or (2) where otherwise required by market conditions.
The depositary may also set limits with respect to the number of ADSs and shares involved in pre-release transactions with any one person on a case-by-
case basis as it deems appropriate.
Exhibit 10.25
AKARI THERAPEUTICS, PLC
2023 EQUITY INCENTIVE PLAN
RESTRICTED STOCK UNIT AGREEMENT
PARTICIPANT:
Rachelle Jacques
NUMBER OF RSUs:
218,055,800
DATE OF GRANT:
June 30, 2023
Akari Therapeutics, Plc, a public limited company formed under the laws of England and Wales (the “Company”), is pleased to confirm that the
Participant has been granted a Restricted Stock Unit Award (this “Award”), effective as of the Date of Grant set forth above (the “Grant Date”). This
Award is subject to the terms and conditions of this Restricted Stock Unit Agreement (this “Agreement”) and is made under the Company’s 2023 Equity
Incentive Plan, as it may be amended from time to time (the “Plan”) or any successor plan, which is incorporated into and made a part of this Agreement.
Any capitalized terms used in this Agreement that are otherwise not defined herein shall have the same meaning prescribed under the Plan.
1. Acceptance of Terms and Conditions. By accepting this Award, the Participant agrees to be bound by the terms and conditions of this
Agreement, the Plan, and any and all conditions established by the Company in connection with Awards issued under the Plan, and understands that this
Award does not confer any legal or equitable right (other than those constituting the Award itself) against the Company or any of its Affiliates, directly or
indirectly, or give rise to any cause of action at law or in equity against the Company or its Subsidiaries.
2. Grant of Restricted Stock Units. Subject to the restrictions, limitations, terms and conditions specified in the Plan and this Agreement, the
Company hereby grants this Award to the Participant as of the Grant Date equal to the above-stated number of Restricted Stock Units (each, an “RSU” and
collectively, the “RSUs”), with each such RSU representing the right to receive one ordinary share, nominal value $0.0001 (a “Share”).
3. Vesting of Restricted Stock Units. Subject to the terms and conditions of this Agreement and the Plan, the RSUs shall vest as follows:
Vest Date
Number of Shares
12/31/2023
27,256,975
06/30/2024
27,256,975
12/31/2024
27,256,975
06/30/2025
27,256,975
12/31/2025
27,256,975
06/30/2026
27,256,975
12/31/2026
27,256,975
06/30/2027
27,256,975
218,055,800
In the event of the Participant’s termination of service with the Company and its Affiliates for any reason (whether as an Employee, Director or
Consultant), any then unvested RSUs shall be automatically forfeited and shall terminate without any consideration.
Notwithstanding the foregoing, any unvested RSUs shall become fully vested if (i) the Participant’s employment pursuant to that certain Executive
Employment Agreement by and between the Company and Participant dated as of February 28, 2022 (the “Executive Employment Agreement”) is
terminated by the Participant for Good Reason or by the Company without Cause, or terminates due to the Participant’s death or Disability or (ii) there
occurs a Change in Control of the Company (prior to any termination of the Participant’s employment ). For purposes of this Agreement, “Change in
Control”, “Cause”, “Good Reason” and “Disability” shall have the meanings ascribed to each such term in the Executive Employment Agreement.
4. No Dividends or Dividend Equivalents. The Participant shall not receive dividends or dividend equivalents on the RSUs.
5. Conversion of Vested Restricted Stock Units; Issuance of Shares. To the extent, if any, the RSUs are vested pursuant to the terms of this
Agreement or the Plan, conditionally upon the Company’s having received from the Executive in cash within 10 days of the relevant vesting date an issue
price for the relevant Shares equal to their nominal value (currently $0.0001 per Share), the Shares shall be issued to or in respect of the Participant as soon
as practicable thereafter, but not more than fifteen (15) days after the applicable vesting date. On the date Shares are to be so issued to or in respect of the
Participant with respect to a vested RSU, the Company shall promptly cause to be issued in book-entry form, registered in the Participant’s (or a
nominee’s) name, the appropriate number of Shares in payment of such vested RSUs. The value of RSUs shall be settled solely in Shares. Notwithstanding
anything herein to the contrary, the Company shall have no obligation to issue Shares in satisfaction of the RSUs unless such issuance and such payment
shall comply with all relevant provisions of law and the requirements of any stock exchange.
6. Tax Withholding Obligations. The Participant shall either, as the Participant elects: (i) deposit with the Company an amount of cash equal to
the amount determined by the Company to be required with respect to any minimum required withholding taxes (including income and employee FICA
and Medicare taxes), or the like under any federal, state or local statute, ordinance, rule or regulation in connection with the vesting or conversion of the
RSUs (the “Taxes”) or (ii) direct the Company to withhold a number of Shares otherwise deliverable in respect of RSUs having a fair market value
sufficient to satisfy the Participant’s Taxes. The Company shall not deliver any of the Shares due to Grantee upon vesting of the RSUs unless the
Participant has, within 10 days following the relevant vesting date, made the cash deposit or direction to withhold RSUs required herein or other proper
provision for required withholding of Taxes has been made. Notwithstanding the foregoing, the Participant acknowledges that the Participant is ultimately
liable and responsible for any all Taxes owed in connections with the issuance, vesting and settlement of the RSUs and recipient, holding and sale of Shares
issued in respect thereof, regardless of any action the Company or any of its Affiliates takes with respect to any tax withholdings.
7. Rights as Shareholder. The Participant shall have no rights as a shareholder of the Company in respect to the RSUs until and unless the RSUs
have vested and ownership of Shares represented by the RSUs have been transferred to (or on behalf of) the Participant.
8. Transferability. Except to the extent provided in the Plan in the case of the Participant’s death, the RSUs may neither be made subject to any
encumbrance nor transferred by means of sale, assignment, exchange, pledge, or otherwise.
9. Extraordinary Item. By voluntarily acknowledging and accepting this Award, the Participant acknowledges and understands that the RSUs are
not part of normal or expected compensation or salary for any purposes, including, without limitation, calculating any severance, resignation, termination,
redundancy, end of service payments, bonuses, service-based awards, pension or retirement benefits or similar payments.
10. No Guarantee of Continued Service. The Participant acknowledges and agrees that the vesting of RSUs pursuant to the Award Agreement is
earned only by continuing as an employee of the Company or an Affiliate. The Participant further acknowledges and agrees that nothing in the Award
Agreement, nor in the Plan which is incorporated in this Award Agreement by reference, shall confer upon the Participant any right with respect to
continuation as an employee with the Company or an Affiliate.
13. Consent to Transfer Personal Data. By entering into this Agreement, the Participant: (i) authorizes the Company and each of its Affiliates,
and any agent of the Company or any subsidiary or affiliate administering the Plan or providing Plan recordkeeping services, to disclose to the Company or
any of its Affiliates such information and data as the Company or any such Affiliate shall request in order to facilitate the grant of RSUs and the
administration of the Plan; and (ii) authorizes the Company and each Affiliate to store and transmit such information in electronic form for the purposes set
forth in this Agreement.
14. Amendment. The terms and provisions of this Agreement may be modified or amended as provided in the Plan.
15. Severability. If any provision of this Agreement is held to be invalid, illegal, or unenforceable by appropriate authority under the law of any
jurisdiction applicable to this Agreement, the same shall not affect, in any respect whatsoever, the validity, legality, or enforceability of any other provision
of this Agreement, and this Agreement shall continue, to the fullest extent permitted by law, as if such invalid, illegal, or unenforceable provision were
omitted and/or modified by such appropriate authority so as to preserve its validity, legality, or enforceability,
unless such omission or modification would substantially impair the rights or benefits under this Agreement of the Participant or the Company.
16. Recoupment of Award. If the RSUs or any cash or share payment the Participant receives pursuant to this Agreement are subject to recovery
under any law, government regulation or stock exchange listing requirement, the RSUs, and the cash or share payment, shall be subject to such deductions
and clawback as may be required to be made pursuant to such law, government regulation or stock exchange listing requirement (or any policy adopted by
the Company pursuant to any such law, government regulation or stock exchange listing requirement) and the Board of Directors in its reasonable good
faith discretion consistent with any such requirement, may require that Participant reimburse the Company all or part of any payment or transfer related to
this Award, the RSUs and any cash or share payment.
17. Construction. A copy of the Plan has been given to the Participant. To the extent that any provisions of this Agreement violates or is
inconsistent with any provisions of the Plan, the Plan provisions shall govern and any inconsistent provisions in this Agreement shall be of no force or
effect. The Participant acknowledges that the Plan may be amended, prospectively or retroactively in order to comply with the requirements of the Internal
Revenue Code, and the Participant agrees to comply with the terms of the Plan as so amended from time to time.
18. Interpretations. Any dispute, disagreement or question which arises under, or as a result of, or in any way relates to the interpretation,
construction or application of the terms of this Agreement or the Plan will be determined and resolved by the Committee or its authorized delegate. Such
determination or resolution by the Committee or its authorized delegate will be final, binding and conclusive on all persons for all purposes.
19. Successors and Assigns. This Agreement shall be binding upon and, subject to the conditions hereof, inure to the benefit of the Company, its
successors and assigns, and the Participant and his successors and assigns.
20. Entire Understanding. This Agreement embodies the entire understanding and agreement of the parties in relation to the subject matter
hereof, and no promise, condition, representation or warranty, expressed or implied, not herein stated, shall bind either party hereto.
21. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of England and Wales, without giving effect
to the conflict of law principles thereof. For the purpose of litigating any dispute that arises under this Agreement, the parties hereby consent to exclusive
jurisdiction in New York and agree that such litigation shall be conducted in the state courts of New York, New York or the federal courts of the United
States for the District of New York.
* * *
IN WITNESS WHEREOF, THE PARTIES HERETO HAVE CAUSED TIDS AGREEMENT TO BE EXECUTED EFFECTIVE AS OF THE
GRANT DATE.
PARTICIPANT
AKARI THERAPEUTICS, PLC
/s/ Rachelle Jacques
/s/ Wendy DiCicco
Signature
Signature
Name: Rachelle Jacques
Name: Wendy DiCicco
Address: On file with the Company
Title: Interim Chief Financial Officer
Exhibit 10.26
CONSULTING SERVICES
AGREEMENT
This Consulting Services Agreement ("Agreement") isentered into as of July 17, 2023 ("Effective Date") by and between Board Advantage LLC, with
an address of 948 Drovers Lane, Chester Springs, PA 19425 ("Consultant"), and Akari Therapeutics, Inc. located at 1460 Broadway, New York, NY 10036
("Akari"). Consultant and Akari are each referredto individually as a "Party" and together as the "Parties."
Akari is a biotechnology company focused on developing advanced therapies for autoimmune and inflammatory diseases. Akari wishes to
engage Consultant to provide Interim Chief Financial Officer services ("Services") upon request and, to that end, the Parties agree as follows:
1.
Consulting Services.
a.
Akari now engages Consultant to provide the Services for Akari. The Services shall include working on matters as requested and
directed by Rachelle Jacques, Chief Executive Officer.
b.
Consultant currently resides in Pennsylvania and will provide such services hereunder remotely at such times as reasonably requested
by Akari. Consultant will be available to travel as reasonably requested by Akari to provide such services and will provide Akari with
written project or status reports as request by Akari ("Reports"). The Consultant will allow Akari representatives to review and audit
the content, quality, and results of those Reports and the Services. The Consultant will also provide Akari with such writings,
specifications, drawings, models, and the like, as are appropriate to the nature of the Services. The Consultant will keep records of any
hours worked under this Agreement, and will make those records available to Akari upon its reasonable request.
c.
If Consultant needs to employ other personnel to assist in the performance of the Services under this Agreement, those personnel will
be approved by Akari in writing prior to being employed by Consultant. Such personnel must agree, in writing, to be bound by the
terms and conditions of this Agreement, unless Akari specifically waives that requirement.
2.
Compensation.
a.
Akari will pay Consultant a fee for Services performed under this Agreement at the rate of $32,000 per month for services up to 80
hours per month. Time exceeding 80 hours per month will require advance approval by the CEO. Compensation will be paid on the
30th day of each month in which services are rendered. This agreement will serve as documentation of the services to be performed by
the Consultant and no further invoices will be required by Akari during the term of this Agreement.
b.
Akari will pay you a performance milestone bonus in the amount of $70,000 (the “Performance Milestone Bonus”) upon achievement
as indicated:
Performance Milestone
1. $5 million guaranteed cash flow by 8/23/23
Bonus Payout Target
$25,000
2. Resolve NASDAQ non-compliance on minimum bid price and shareholders’
equity by 10/23/23
$25,000
3. Internal finance capability improvements by 12/31/23
$20,000
2
Payment of the Performance Milestone Bonus is expected to occur within30 days after the achievement of each milestone. For the
sake of clarity,in the event such milestones are not achieved in full, you shall not be eligible to receive the Performance Milestone
Bonus.
c.
Subject to approval of Akari’s board of directors (the “Board”), the Company will grant you an Option that will fully vest on the first
anniversary of the Grant Date to purchase 5,000,000 ordinary shares in the Company (which may be acquired through ADSs) (the
"Option"). The Option shall be made from a shareholder-approved Company equity grant plan and will be subject to the standard
terms and conditions of the Akari Therapeutics Plc 2023 Equity Incentive Plan and the applicable equity award agreement (the
“Equity Documents”). Should the Company terminate your engagement for any reason other than for cause prior to the full vesting
date, the Option will continue to vest through the first anniversary date of Grant or be accelerated, at the Company’s option. In the
event of any conflict, any shares or options shall be governed by the terms of the Equity Documents.
d.
If needed, Akari will pay for Consultant's reasonable traveling expenses, reasonable lodging and meal expenses relating directly to the
provision of the Services as confirmed by supporting documentation that Akari may require for approval. Consultant may not charge
an internal premium for or mark up such reasonable expenses. Akari will not pay for upgrades or for any travel or subsistence
expenses for spouses or travel companions. Any individual out-of-pocket expenses in excess of $25.00, and all expenses for travel are
subject to prior review and approval by Akari and will be reimbursed pursuant to Akari 's corporate policies for such expenses(which
require, among other things, the submission of original, itemized receipts for any expense of U.S. $25.00 or more).
e.
Invoices for expenses shall be submitted electronically to claire.craig@akaritx.com with a copy to rachelle.jacques@.akaritx.com
every 4 weeks and addressed to Akari Therapeutics, Inc.
3.
Developments.
a.
Akari may use any results or products of the Services without further payment or obligation. Similarly, if during the term of this
Agreement, the Consultant discloses any ideas to Akari that were conceived prior to the Term (as defined below in Sec. 7) or are
outside the scope of the Services under this Agreement, Akari will have no liability to the Consultant because of Akari 's use of such
ideas, except that this shall not be construed as a license under any valid patent now in existence or later issued.
b.
Any inventions, improvements, or ideas made or conceived by the Consultant in connection with or during the performance of the
Services shall be delivered to and be the property of Akari. The Consultant, without charge to Akari (other than reasonable payment
for time involved if this Agreement shall have terminated), shall execute, acknowledge, and deliver to Akari all papers,including
applications for patents, as are necessary for Akari to publish or protect said inventions, improvements, and ideas by patent or
otherwise in any and all countries, and to vest title to said patents, inventions, improvements, and ideas in Akari or its nominees, their
successors or assigns. The Consultant will assist Akari, as needed and at Akari 's expense, in any Patent Office proceeding or litigation
involving said inventions, improvements, or ideas. The Consultant will keep contemporaneous written records of work done under this
Agreement, and shall submit such records to Akari when requested or at the termination of this Agreement.
c.
Any copyrightable work created by consultant in connection with the performance of the Services shall be considered a work made for
hire, whether published or not. All rights in this work shall be the property of Akari as author and owner of the copyright.
4.
Confidentiality.
To carry out the Services, Consultant may receive certain information proprietary to Akari. Consultant agrees not to use such information to
his own or any other party's advantage, and will not disclose to any person or entity any confidential information of Akari, including but not
limited to financial data,
3
customer lists, projects, economic information, systems, plans, procedures, operations, techniques, patent applications, trade secrets, know-
how, inventions, technical data or specifications, testing methods,research and development activities, or marketing strategies. The foregoing
non-disclosure does not apply to information that (i) is already in the possession of Consultant without obligation of confidentiality (as
shown by written records not derived from Akari ), (ii) was in the public domain at the time it was disclosed to Consultant or subsequent to
disclosure becomes part of the public domain through no fault of Consultant, (iii) becomes known to Consultant without restriction from a
source other than Akari without breach of this Agreement and otherwise not in violation of Akari 's rights, or (iv) is disclosed pursuant to a
requirement of a governmental body, provided, however, that Consultant shall provide prompt notice thereof to enable Akari to seek a
protective order or otherwise prevent such disclosure. Information shall not be considered to be in public domain simply because one or
more of its component portions are in the public domain. Consultant will maintain the confidentiality of all protected health information (as
that term is defined in the Health Insurance Portability and Accountability Act of 1996, Public Law 104-191, and its implementing
regulations, 45 CFR Parts 160, 162 and 164).
5.
Independent Contractor.
During the term of this Agreement, all Consultant's activities are undertaken and performed as an independent contractor and not an
employee of Akari. Consultant shall not in any way represent themself to be an employee, partner,joint venturer, agent, or officer of or with
Akari. Consultant will be solely responsible for all federal, state, or local taxes, social security withholding, and other self-employment tax
obligations as to payments made to Consultant under this Agreement.
The relationship of the Consultant with the Company will at all times be that of an independent contractor and not an employee or agent.
Nothing in this Agreement will be construed to create a partnership, joint venture, agency or employment relationship between the Company
and the Consultant. Unless authorized by the Board, Consultant will not have the authority (and may not hold herself out as having authority)
to bind the Company and to make agreements or representations on the Company’s behalf.
Akari shall not provide any retirement, medical health insurance or similar plans or worker’s compensation or any other benefit whatsoever
to Consultant. Consultant shall have no claim against Akari hereunder or otherwise be eligible for or entitled to vacation pay, sick leave,
retirement benefits, social security, worker’s compensation, health or disability benefits,unemployment insurance benefits, or any other
employee benefit of any kind.
6.
Assignment and Subcontracting.
Consultant may not assign this Agreement or subcontract their obligations under it to another person or entity without Akari 's express
written permission.
7.
Term and Termination.
a.
Term. The term of this Agreement begins on the Effective Date and will continue in full force and effect for 6 months ("Term").
b.
Termination Without Cause. Either Party may terminate the Agreement at any time without cause on thirty (30) days' prior written
notice.
c.
Termination With Cause. Either Party may terminate this Agreement for cause upon five (5) days' prior written notice specifying the
reason for termination. However, the breaching Party shall have the opportunity to cure the breach to the satisfaction of the non-
breaching Party during the 5-day notice period.
d.
Effect of Termination. Upon termination of this Agreement, neither Party will have any further obligations under it, except that any
liabilities accrued through the date of termination and
4
Sections 3, 4, 5, 7(d), 8, 13, and 17 shall survive termination. In addition, Section 10 shall survive termination for a period of two (2)
years.
8.
Publicity.
Consultant will not originate any publicity, news release, or other public announcement, written or oral relating to this Agreement, to any
amendment to it, or to its performance without Akari 's prior written consent.
9.
Consulting or other Services for Competitor: Conflicting Obligations.
a.
Should Consultant intend to perform, during the term of the Agreement, consulting or other services for, or engage in or intend to
engage in an employment relationship with, companies whose businesses or proposed businesses in any way involve products or
services which would be competitive with Akari 's products or services, or those products or services proposed or in development by
Akari during the term of the Agreement, then the Consultant shall promptly notify Akari in writing, specifying the organization with
which they propose to consult, provide services or become employed by and provide information sufficient to allow Akari to
determine if such work would conflict with the terms of this Agreement, the interests of Akari or further services which Akari might
request of Consultant. If Akari determines that such work conflicts with the terms of this Agreement, Akari reserves the right to
terminate this Agreement immediately. In no event shall any of the Services be performed for Akari at the facilities of a third party or
using the resources of a third party. Notification by writing is only required in the event of potential engagement with a competitor.
b.
Consultant represents that they are under no obligation to any third party that prevents them from carrying out their duties and
obligations under this Agreement or which is inconsistent with this Agreement's provisions. Consultant represents that they have no
financial interest in the outcome of the Services and will avoid having any such financial interest during the term of this Agreement.
10.
Debarment.
Consultant represents that they have not been debarred by any relevant governmental or regulatory authority. Further, if Akari allows
Consultant to engage any other person or entity to perform any Services under this Agreement, Consultant represents that they will not
engage a person or entity if they have been debarred.
11.
Compliance with Laws.
Consultant shall comply with all applicable laws, rules, and regulations when performing the Services under this Agreement.
5
12.
Notices.
Any notice required or permitted under this Agreement shall be in writing and delivered by express mail or express delivery service to the
Party at the address indicated below or at such other address as the addressee may have last furnished in writing to the addressor. The notice
shall be effective upon receipt by the addressee.
If to Consultant:
Board Advantage LLC
[Street Address]
[City, State, Zip]
Attn: Wendy DiCicco
If to Akari:
Akari Therapeutics, Inc.
1460 Broadway
New York, NY 10036
Attn: Rachelle Jacques, CEO
13.
Governing Law.
This Agreement shall be governed by the laws of the Commonwealth of Massachusetts.
14.
Survivability.
If any part of this Agreement is found unenforceable by a court of competent jurisdiction, the remainder of the Agreement shall nevertheless
remain in full force and effect. Further, the unenforceable provision shall be construed by the court in such a manner asto give maximum
effect to its intended meaning.
15.
Entire Agreement.
This Agreement is the entire agreement between Akari and Consultant as to its subject matter, and supersedes all prior representations or
agreements, written or oral. This Agreement may be amended only by written instrument signed by both Parties.
16.
Counterparts.
This Agreement may be executed in two counterparts, and signature pages may be exchanged by facsimile or email.
In witness to their Agreement, the authorized representative of each party has signed it below.
AKARI THERAPEUTICS, INC.
BOARD ADVANTAGE LLC
By: /s/ Rachelle Jacques
By: /s/ Wendy F. DiCicco
Name: Rachelle Jacques
Name: Wendy F. DiCicco
Title: Chief Executive Officer
Title: Interim CFO
Date: July 17, 2023
Date: July 17, 2023
Exhibit 10.27
AMENDMENT NO. 1
TO
CONSULTING SERVICES AGREEMENT
This Amendment No. 1 (“Amendment”) is entered into as of September 1, 2023 ("Effective Date") by and between Board Advantage LLC, with an address
of 948 Drovers Lane, Chester Springs, PA 19425 ("Consultant"), and Akari Therapeutics, Inc. located at 22 Boston Wharf Road, Fl 7, Boston, MA 02210
("Akari"), and amends the Consulting Agreement dated July 17, 2023 between Akari and Consultant. Consultant and Akari are each referred to individually
as a "Party" and together as the "Parties.” Capitalized terms shall have the meanings ascribed in the Agreement unless otherwise noted herein.
WHEREAS Akari and Consultant desire to modify the Consulting Agreement;
NOW, THEREFORE, in consideration of the promises and mutual covenants set forth herein, the Parties agree as follows:
1.
The first sentence of Section 2 (Compensation) of the Agreement shall be updated and replaced with: “Akari will pay Consultant a fee for
Services performed under this Agreement at the rate of $40,000 per month for services up to 100 hours per month. Time exceeding 100 hours per
month will require advance approval by the CEO. Compensation will be paid in two (2) equal installments of $20,000 on the 15th and 30th day of
each month in which services are rendered. This agreement will serve as documentation of the services to be performed by the Consultant and no
further invoices will be required by Akari during the term of this Agreement.”
2.
Except as expressly set forth above, all other terms and conditions of the Agreement shall remain in full force and effect.
Agreed to and accepted by:
AKARI THERAPEUTICS, INC.
BOARD ADVANTAGE, LLC
By:
/s/ Rachelle Jacques
By:
/s/ Wendy DiCicco
Printed Name:
Rachelle Jacques
Printed Name:
Wendy DiCicco
Title
President and CEO
Title:
Interim CFO
Date:
09/27/23
Date:
09/27/23
1
Exhibit 10.28
CONSULTING SERVICES AGREEMENT
This Consulting Services Agreement ("Agreement") is entered into as of January 15, 2024 ("Effective Date") by and between Board Advantage
LLC, with an address of 948 Drovers Lane, Chester Springs, PA 19425 ("Consultant"), and Akari Therapeutics, Inc. located at 22 Boston Wharf Road FL
7, Boston, MA 02210 ("Akari"). Consultant and Akari are each referred to individually as a "Party" and together as the "Parties."
Akari is a biotechnology company focused on developing advanced therapies for autoimmune and inflammatory diseases. Akari wishes to
engage Consultant to provide Interim Chief Financial Officer services ("Services") upon request and, to that end, the Parties agree as follows:
1.
Consulting Services.
(a)
Akari now engages Consultant to provide the Services for Akari. The Services shall include working on matters as requested and
directed by Rachelle Jacques, Chief Executive Officer.
(b)
Consultant currently resides in Pennsylvania and will provide such services hereunder remotely at such times as reasonably requested
by Akari. Consultant will be available to travel as reasonably requested by Akari to provide such services and will provide Akari with
written project or status reports as request by Akari ("Reports"). The Consultant will allow Akari representatives to review and audit
the content, quality, and results of those Reports and the Services. The Consultant will also provide Akari with such writings,
specifications, drawings, models, and the like, as are appropriate to the nature of the Services. The Consultant will keep records of any
hours worked under this Agreement, and will make those records available to Akari upon its reasonable request.
(c)
If Consultant needs to employ other personnel to assist in the performance of the Services under this Agreement, those personnel will
be approved by Akari in writing prior to being employed by Consultant. Such personnel must agree, in writing, to be bound by the
terms and conditions of this Agreement, unless Akari specifically waives that requirement.
2.
Compensation.
(a)
Akari will pay Consultant a fee for Services performed under this Agreement at the rate of $40,000 per month for services up to 80
hours per month. Time exceeding 80 hours per month will require advance approval by the CEO. Compensation will be paid in two (2)
equal installments of $20,000 on the 15th and 30th day of each month in which services are rendered. This agreement will serve as
documentation of the services to be performed by the Consultant and no further invoices will be required by Akari during the term of
this Agreement.
(b)
If needed, Akari will pay for Consultant's reasonable traveling expenses, reasonable lodging and meal expenses relating directly to the
provision of the Services as confirmed by supporting documentation that Akari may require for approval. Consultant may not charge
an internal premium for or mark up such reasonable expenses. Akari will not pay for upgrades or for any travel or subsistence expenses
for spouses or travel companions. Any individual out-of-pocket expenses in excess of $25.00, and all expenses for travel are subject to
prior review and approval by Akari and will be reimbursed pursuant to Akari 's corporate policies for such expenses (which require,
among other things, the submission of original, itemized receipts for any expense of U.S. $25.00 or more).
(c)
Invoices for expenses shall be submitted electronically to accountspayable@akaritx.com every 4 weeks and addressed to Akari
Therapeutics, Inc.
2
3.
Developments.
(a)
Akari may use any results or products of the Services without further payment or obligation. Similarly, if during the term of this
Agreement, the Consultant discloses any ideas to Akari that were conceived prior to the Term (as defined below in Sec. 7) or are
outside the scope of the Services under this Agreement, Akari will have no liability to the Consultant because of Akari 's use of such
ideas, except that this shall not be construed as a license under any valid patent now in existence or later issued.
(b)
Any inventions, improvements, or ideas made or conceived by the Consultant in connection with or during the performance of the
Services shall be delivered to and be the property of Akari. The Consultant, without charge to Akari (other than reasonable payment for
time involved if this Agreement shall have terminated), shall execute, acknowledge, and deliver to Akari all papers, including
applications for patents, as are necessary for Akari to publish or protect said inventions, improvements, and ideas by patent or
otherwise in any and all countries, and to vest title to said patents, inventions, improvements, and ideas in Akari or its nominees, their
successors or assigns. The Consultant will assist Akari, as needed and at Akari 's expense, in any Patent Office proceeding or litigation
involving said inventions, improvements, or ideas. The Consultant will keep contemporaneous written records of work done under this
Agreement, and shall submit such records to Akari when requested or at the termination of this Agreement.
(c)
Any copyrightable work created by consultant in connection with the performance of the Services shall be considered a work made for
hire, whether published or not. All rights in this work shall be the property of Akari as author and owner of the copyright.
4.
Confidentiality.
To carry out the Services, Consultant may receive certain information proprietary to Akari. Consultant agrees not to use such information to his own or any
other party's advantage, and will not disclose to any person or entity any confidential information of Akari, including but not limited to financial data,
customer lists, projects, economic information, systems, plans, procedures, operations, techniques, patent applications, trade secrets, know-how, inventions,
technical data or specifications, testing methods, research and development activities, or marketing strategies. The foregoing non-disclosure does not apply
to information that (i) is already in the possession of Consultant without obligation of confidentiality (as shown by written records not derived from Akari ),
(ii) was in the public domain at the time it was disclosed to Consultant or subsequent to disclosure becomes part of the public domain through no fault of
Consultant, (iii) becomes known to Consultant without restriction from a source other than Akari without breach of this Agreement and otherwise not in
violation of Akari 's rights, or (iv) is disclosed pursuant to a requirement of a governmental body, provided, however, that Consultant shall provide prompt
notice thereof to enable Akari to seek a protective order or otherwise prevent such disclosure. Information shall not be considered to be in public domain
simply because one or more of its component portions are in the public domain. Consultant will maintain the confidentiality of all protected health
information (as that term is defined in the Health Insurance Portability and Accountability Act of 1996, Public Law 104-191, and its implementing
regulations, 45 CFR Parts 160, 162 and 164).
5.
Independent Contractor.
During the term of this Agreement, all Consultant's activities are undertaken and performed as an independent contractor and not an employee of Akari.
Consultant shall not in any way represent themself to be an employee, partner, joint venturer, agent, or officer of or with Akari. Consultant will be solely
responsible for all federal, state, or local taxes, social security withholding, and other self-employment tax obligations as to payments made to Consultant
under this Agreement.
The relationship of the Consultant with the Company will at all times be that of an independent contractor and not an employee or agent. Nothing in this
Agreement will be construed to create a partnership, joint venture, agency or employment relationship between the Company and the Consultant. Unless
authorized by the Board, Consultant will
3
not have the authority (and may not hold herself out as having authority) to bind the Company and to make agreements or representations on the
Company’s behalf.
Akari shall not provide any retirement, medical health insurance or similar plans or worker’s compensation or any other benefit whatsoever to Consultant.
Consultant shall have no claim against Akari hereunder or otherwise be eligible for or entitled to vacation pay, sick leave, retirement benefits, social
security, worker’s compensation, health or disability benefits, unemployment insurance benefits, or any other employee benefits of any kind.
6.
Assignment and Subcontracting.
Consultant may not assign this Agreement or subcontract their obligations under it to another person or entity without Akari's express written permission.
7.
Term and Termination.
(a)
Term. The term of this Agreement begins on the Effective Date and will continue in full force and effect through May 31, 2024
("Term").
(b)
Termination Without Cause. Either Party may terminate the Agreement at any time without cause on thirty (30) days' prior written
notice.
(c)
Termination With Cause. Either Party may terminate this Agreement for cause upon five (5) days' prior written notice specifying the
reason for termination. However, the breaching Party shall have the opportunity to cure the breach to the satisfaction of the non-
breaching Party during the 5-day notice period.
(d)
Effect of Termination. Upon termination of this Agreement, neither Party will have any further obligations under it, except that any
liabilities accrued through the date of termination and Sections 3, 4, 5, 7(d), 8, 13, and 17 shall survive termination. In addition,
Section 10 shall survive termination for a period of two (2) years.
8.
Publicity.
Consultant will not originate any publicity, news release, or other public announcement, written or oral relating to this Agreement, to any amendment to it,
or to its performance without Akari 's prior written consent.
9.
Consulting or other Services for Competitor: Conflicting Obligation.
(a)
Should Consultant intend to perform, during the term of the Agreement, consulting or other services for, or engage in or intend to
engage in an employment relationship with, companies whose businesses or proposed businesses in any way involve products or
services which would be competitive with Akari 's products or services, or those products or services proposed or in development by
Akari during the term of the Agreement, then the Consultant shall promptly notify Akari in writing, specifying the organization with
which they propose to consult, provide services or become employed by and provide information sufficient to allow Akari to
determine if such work would conflict with the terms of this Agreement, the interests of Akari or further services which Akari might
request of Consultant. If Akari determines that such work conflicts with the terms of this Agreement, Akari reserves the right to
terminate this Agreement immediately. In no event shall any of the Services be performed for Akari at the facilities of a third party or
using the resources of a third party. Notification by writing is only required in the event of potential engagement with a competitor.
(b)
Consultant represents that they are under no obligation to any third party that prevents them from
4
carrying out their duties and obligations under this Agreement or which is inconsistent with this Agreement's provisions. Consultant
represents that they have no financial interest in the outcome of the Services and will avoid having any such financial interest during
the term of this Agreement.
10.
Debarment.
Consultant represents that they have not been debarred by any relevant governmental or regulatory authority. Further, if Akari allows Consultant to engage
any other person or entity to perform any Services under this Agreement, Consultant represents that they will not engage a person or entity if they have
been debarred.
11.
Compliance with Laws.
Consultant shall comply with all applicable laws, rules, and regulations when performing the Services under this Agreement.
12.
Notices.
Any notice required or permitted under this Agreement shall be in writing and delivered by express mail or express delivery service to the Party at the
address indicated below or at such other address as the addressee may have last furnished in writing to the addressor. The notice shall be effective upon
receipt by the addressee.
If to Consultant:
Board Advantage LLC
[Street Address]
[City, State, Zip]
Attn: Wendy DiCicco
If to Akari:
Akari Therapeutics, Inc.
22 Boston Wharf Road FL 7
Boston, MA 02210
Attn: Rachelle Jacques, CEO
13.
Governing Law.
This Agreement shall be governed by the laws of the Commonwealth of Massachusetts.
14.
Survivability.
If any part of this Agreement is found unenforceable by a court of competent jurisdiction, the remainder of the Agreement shall nevertheless remain in full
force and effect. Further, the unenforceable provision shall be construed by the court in such a manner as to give maximum effect to its intended meaning.
15.
Entire Agreement.
This Agreement is the entire agreement between Akari and Consultant as to its subject matter, and supersedes all prior representations or agreements,
written or oral. This Agreement may be amended only by written instrument signed by both Parties.
5
16.
Counterparts.
This Agreement may be executed in two counterparts, and signature pages may be exchanged by facsimile or email.
In witness to their Agreement, the authorized representative of each party has signed it below.
AKARI THERAPEUTICS, INC.
BOARD ADVANTAGE, LLC
By:
/s/ Rachelle Jacques
By:
/s/ Wendy DiCicco
Name:
Rachelle Jacques
Name:
Wendy DiCicco
Title
President and CEO
Title:
Interim CFO
Date:
01/12/2024
Date:
01/12/2024
1
Exhibit 10.29
STOCK OPTION AGREEMENT
United States Participants (NSO)
AGREEMENT made as of the date of the grant set forth in Exhibit A (the “Effective Date”) by and between Akari Therapeutics, Plc, a company
formed under the laws of England and Wales, and having a place of business at 22 Boston Wharf Road, Floor 7, Boston, MA 02210, USA (the
“Company”) and the individual whose name and address appears under his or her signature below (the “Participant”).
WHEREAS, the Company desires to grant to the Participant an Incentive Stock Option (“Option”) within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended (the “Code”) to purchase ordinary shares, $0.0001 par value per share (the “Shares”), under and for the
purposes set forth in and subject to the terms of the Company’s 2023 Equity Incentive Plan, including any amendments thereto (the “Plan”) which is
attached hereto as Exhibit C; and
WHEREAS, the Company and the Participant understand and agree that any terms used and not defined herein have the same meanings as set
forth in the Plan;
NOW, THEREFORE, in consideration of the mutual covenants hereinafter set forth and for other good and valuable consideration, the parties
hereto agree as follows:
1.
GRANT OF OPTION.
The Company hereby grants to the Participant, as of the Effective Date, the right and option to purchase all or any part of an aggregate of the
number of Shares set forth in Exhibit A, on the terms and conditions and subject to all the limitations set forth herein, under United States
securities and tax laws, and in the Plan.
If “ISO” is selected on Exhibit A hereto, this Option is intended to qualify as an Incentive Stock Option (“ISO”) as defined in Section 422 of the
Code. Nevertheless, to the extent that any such ISO exceeds the $100,000 rule under Section 422(d) of the Code, the number of shares subject to
this Option in excess of such amount shall be treated as a Non-Qualified Option (“NQO”) pursuant to Section 6(a) of the Plan and the tax rules
applicable to ISOs.
2.
EXERCISE PRICE.
The exercise price of the Shares shall be the price set forth in Exhibit A, subject to adjustment, as provided in the Plan, in the event of a stock
split, reverse stock split or other events affecting the holders of Shares after the date hereof (the “Exercise Price”).
3.
EXERCISABILITY OF OPTION; ACCELERATION.
(a) This Option shall become exercisable (and the Shares issued upon exercise shall be vested) as set forth in Exhibit A, provided the
Participant is an employee, director or consultant of the Company or of an Affiliate (as defined in the Plan) on the applicable vesting
date.
(b) Notwithstanding the foregoing, in the event of a Change of Control (as defined below), the Option shall vest fully and be exercisable
immediate prior to a Change of Control for purposes of Paragraph 22(b) of the Plan unless this Option has otherwise expired or been
terminated pursuant to its terms or the terms of the Plan.
(i)
“Change of Control” means the occurrence of any of the following events: (A) The approval by shareholders of the Company of
a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would
result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the surviving entity) more than fifty percent (50%) of
the total voting power represented by the voting securities of the Company or such surviving entity outstanding immediately
2
after such merger or consolidation; (B) The approval by the shareholders of the Company of a plan of complete liquidation
of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company’s
assets.
4.
TERM OF OPTION.
(a) This Option shall terminate on the date set forth in Exhibit A (the “Option Expiration Date”) but shall be subject to earlier termination as
provided herein or in the Plan.
(b) If the Participant ceases to be an employee, director or consultant of the Company or of an Affiliate for any reason other than the death or
Disability (as defined in the Plan) of the Participant, or termination of the Participant for Cause (as defined in the Plan) (the
“Termination Date”), the Option to the extent then vested and exercisable pursuant to Section 3 hereof as of the Termination Date,
and not previously terminated in accordance with this Agreement, may be exercised within 12 months after the Termination Date, or
on or prior to the Option Expiration Date, whichever is earlier, but may not be exercised thereafter except as set forth below. In such
event, the unvested portion of the Option shall not be exercisable and shall expire and be cancelled on the Termination Date.
(c) Notwithstanding the foregoing, in the event of the Participant’s Disability or death within three months after the Termination Date, the
Participant or the Participant’s Survivors (as defined in the Plan) may exercise the Option within one year after the Termination Date,
but in no event after the Option Expiration Date.
(d) In the event the Participant’s service is terminated by the Company or an Affiliate for Cause, the Participant’s right to exercise any
unexercised portion of this Option even if vested shall cease immediately as of the time the Participant is notified his or her service is
terminated for Cause, and this Option shall thereupon terminate. Notwithstanding anything herein to the contrary, if subsequent to the
Participant’s termination, but prior to the exercise of the Option, the Participant breaches in any material respect any agreement
between Participant and the Company (including, but not limited to, any assignment of intellectual property, confidentiality, non-
disclosure, non-competition or non-solicitation agreement(s)), then the Participant shall immediately cease to have any rights to
exercise this Option and this Option shall thereupon terminate. The Company agrees that in the event of conflict between this
Agreement and Section 13.c of the Plan, this Agreement shall control with respect to any determination made subsequent to
termination.
(e) In the event of the Disability of the Participant, as determined in accordance with the Plan, the Option shall be exercisable within one year
after the Participant’s termination of service due to Disability or, if earlier, on or prior to the Option Expiration Date. In such event,
the Option shall be exercisable:
(i)
to the extent that the Option has become exercisable but has not been exercised as of the date of the Participant’s termination of
service due to Disability; and
(ii) in the event rights to exercise the Option accrue periodically, to the extent of a pro rata portion through the date of the
Participant’s termination of service due to Disability of any additional vesting rights that would have accrued on the next
vesting date had the Participant not become Disabled. The proration shall be based upon the number of days accrued in the
current vesting period prior to the date of the Participant’s termination of service due to Disability.
(f) In the event of the death of the Participant while an employee, director or consultant of the Company or of an Affiliate, the Option shall be
exercisable by the Participant’s Survivors within one year after the date of death of the Participant or, if earlier, on or prior to the
Option Expiration Date. In such event, the Option shall be exercisable:
(i)
to the extent that the Option has become exercisable but has not been exercised as of the date of death; and
(ii) in the event rights to exercise the Option accrue periodically, to the extent of a pro rata portion through the date of death of any
additional vesting rights that would have accrued on the next vesting date had the Participant not died. The proration shall
be based upon
3
the number of days accrued in the current vesting period prior to the Participant’s date of death.
5.
METHOD OF EXERCISING OPTION.
(a) Subject to the terms and conditions of this Agreement, the Option may be exercised by written notice to the Company or its designee, in
substantially the form of Exhibit B attached hereto (or in such other form acceptable to the Company, which may include electronic
notice). Such notice shall state the number of Shares with respect to which the Option is being exercised and shall be signed by the
person exercising the Option (which signature may be provided electronically in a form acceptable to the Company).
(b) Payment of the Exercise Price for such Shares shall be made in accordance with Section 9 of the Plan.
(c) The Company shall deliver such Shares as soon as practicable after the notice shall be received, provided, however, that the Company may
delay issuance of such Shares until completion of any action or obtaining of any consent, which the Company deems necessary under
any applicable law (including, without limitation, state securities or “blue sky” laws).
(d) The Shares as to which the Option shall have been so exercised shall be registered in the Company’s share register in the name of the
person so exercising the Option (or, if the Option shall be exercised by the Participant and if the Participant shall so request in the
notice exercising the Option, shall be registered in the Company’s share register in the name of the Participant and another person
jointly, with right of survivorship) and shall be delivered as provided above to or upon the written order of the person exercising the
Option.
(e) In the event the Option shall be exercised, pursuant to Section 4 hereof, by any person other than the Participant, such notice shall be
accompanied by appropriate proof of the right of such person to exercise the Option.
(f) All Shares that shall be purchased upon the exercise of the Option as provided herein shall be fully paid and nonassessable.
6.
PARTIAL EXERCISE.
Exercise of this Option to the extent above stated may be made in part at any time and from time to time within the above limits, except that no
fractional share shall be issued pursuant to this Option.
7.
NON‑ASSIGNABILITY.
(a) The Option shall not be transferable by the Participant otherwise than by will or by the laws of descent and distribution; or, if this Option is
an NQO, then it may also be transferred pursuant to a qualified domestic relations order as defined by the Code or Title I of the
Employee Retirement Income Security Act or the rules thereunder and may be exercised only by Optionee or his permitted assigns.
The terms of the Plan and this Option Agreement shall be binding upon the executors, administrators, heirs of Optionee.
(b) Except as provided above in Section 7(a), the Option shall be exercisable, during the Participant’s lifetime, only by the Participant (or, in
the event of legal incapacity or incompetency, by the Participant’s guardian or representative) and shall not be assigned, pledged or
hypothecated in any way (whether by operation of law or otherwise) and shall not be subject to execution, attachment or similar
process.
(c) Any attempted transfer, assignment, pledge, hypothecation or other disposition of the Option or of any rights granted hereunder contrary to
the provisions of this Section 7, or the levy of any attachment or similar process upon the Option shall be null and void.
4
8.
NO RIGHTS AS STOCKHOLDER UNTIL EXERCISE.
The Participant shall have no rights as a stockholder with respect to Shares subject to this Agreement until registration of the Shares in the
Company’s share register in the name of the Participant. Except as is expressly provided in the Plan with respect to certain changes in the
capitalization of the Company, no adjustment shall be made for dividends or similar rights for which the record date is prior to the date of such
registration.
9.
ADJUSTMENTS.
The Plan contains provisions covering the treatment of Options in a number of contingencies such as stock splits and mergers. Provisions in the
Plan for adjustment with respect to stock subject to Options and the related provisions with respect to successors to the business of the Company
are hereby made applicable hereunder and are incorporated herein by reference.
10. TAXES.
(a) The Participant acknowledges that any income or other taxes due from him or her with respect to this Option or the Shares issuable
pursuant to this Option shall be the Participant’s responsibility.
(b) The Participant acknowledges and agrees that:
(i)
the Participant was free to use professional advisors of his or her choice in connection with this Agreement, has received advice
from his or her professional advisors in connection with this Agreement, understands its meaning and import, and is entering
into this Agreement freely and without coercion or duress;
(ii) the Participant has not received and is not relying upon any advice, representations or assurances made by or on behalf of the
Company or any Affiliate or any employee of or counsel to the Company or any Affiliate regarding any tax or other effects
or implications of the Option, the Shares or other matters contemplated by this Agreement; and
(iii) neither the Administrator, the Company, its Affiliates, nor any of its officers or directors, shall be held liable for any applicable
costs, taxes, or penalties associated with the Option if, in fact, the Internal Revenue Service were to determine that the
Option constitutes deferred compensation under Section 409A of the Code.
(c) The Participant agrees that the Company may withhold from the Participant’s remuneration, if any, the minimum statutory amount of
federal, state and local withholding taxes attributable to such amount that is considered compensation includable in such person’s
gross income. At the Company’s discretion, the amount required to be withheld may be withheld in cash from such remuneration, or
in kind from the Shares otherwise deliverable to the Participant on exercise of the Option. The Participant further agrees that, if the
Company does not withhold an amount from the Participant’s remuneration sufficient to satisfy the Company’s income tax
withholding obligation, the Participant will reimburse the Company on demand, in cash, for the amount under-withheld.
(d) If the Option granted to Optionee herein is an ISO, and if Optionee sells or otherwise disposes of any of the Shares acquired pursuant to the
ISO on or before the later of (i) the date two years after the date such Optionee was granted the ISO, or (ii) the date one year after the
date of exercise, the Optionee shall immediately notify the Company in writing of such disposition. Optionee agrees that Optionee
may be subject to income tax withholding by the Company on the compensation income recognized by the Optionee.
11. PURCHASE FOR INVESTMENT.
(a) Unless the offering and sale of the Shares to be issued upon the particular exercise of the Option shall have been effectively registered
under the Securities Act, the Company shall be under no obligation to issue the Shares covered by such exercise unless the Company
has determined that such exercise and issuance would be exempt from the registration requirements of the Securities Act and until the
following conditions have been fulfilled:
5
(i)
The person(s) who exercise the Option shall warrant to the Company, at the time of such exercise, that such person(s) are
acquiring such Shares for their own respective accounts, for investment, and not with a view to, or for sale in connection
with, the distribution of any such Shares, in which event the person(s) acquiring such Shares shall be bound by the
provisions of the following legend which shall be endorsed upon any certificate(s) evidencing the Shares issued pursuant to
such exercise:
“The shares represented by this certificate have been taken for investment and they may not be sold or otherwise
transferred by any person, including a pledgee, unless (1) either (a) a Registration Statement with respect to such
shares shall be effective under the Securities Act of 1933, as amended, or (b) the Company shall have received an
opinion of counsel satisfactory to it that an exemption from registration under such Act is then available, and (2)
there shall have been compliance with all applicable state securities laws;” and
(ii) If the Company so requires, the Company shall have received an opinion of its counsel that the Shares may be issued upon such
particular exercise in compliance with the Securities Act without registration thereunder. Without limiting the generality of
the foregoing, the Company may delay issuance of the Shares until completion of any action or obtaining of any consent,
which the Company deems necessary under any applicable law (including without limitation state securities or “blue sky”
laws).
12. RESTRICTIONS ON TRANSFER OF SHARES.
(a) The Participant agrees that in the event the Company proposes to offer for sale to the public any of its equity securities and such Participant
is requested by the Company and any underwriter engaged by the Company in connection with such offering to sign an agreement
restricting the sale or other transfer of Shares, then it will promptly sign such agreement and will not transfer, whether in privately
negotiated transactions or to the public in open market transactions or otherwise, any Shares or other securities of the Company held
by him or her during such period as is determined by the Company and the underwriters, not to exceed 180 days following the closing
of the offering, plus such additional period of time as may be required to comply with Marketplace Rule 2711 of the National
Association of Securities Dealers, Inc. or similar rules thereto (such period, the “Lock-Up Period”).
(i)
Such agreement shall be in writing and in form and substance reasonably satisfactory to the Company and such underwriter and
pursuant to customary and prevailing terms and conditions.
(ii) Notwithstanding whether the Participant has signed such an agreement, the Company may impose stop-transfer instructions with
respect to the Shares or other securities of the Company subject to the foregoing restrictions until the end of the Lock-Up
Period.
(b) The Participant acknowledges and agrees that neither the Company, its shareholders nor its directors and officers, has any duty or
obligation to disclose to the Participant any material information regarding the business of the Company or affecting the value of the
Shares before, at the time of, or following a termination of the service of the Participant by the Company, including, without
limitation, any information concerning plans for the Company to make a public offering of its securities or to be acquired by or
merged with or into another firm or entity.
13. NO OBLIGATION TO MAINTAIN RELATIONSHIP.
(a) The Participant acknowledges that:
(i)
the Company is not by the Plan or this Option obligated to continue the Participant as an employee, director or Consultant of the
Company or an Affiliate;
(ii) the Plan is discretionary in nature and may be suspended or terminated by the Company at any time;
6
(iii) the grant of the Option is a one-time benefit which does not create any contractual or other right to receive future grants of
options, or benefits in lieu of options;
(iv) all determinations with respect to any such future grants, including, but not limited to, the times when options shall be granted,
the number of shares subject to each option, the option price, and the time or times when each option shall be exercisable,
will be at the sole discretion of the Company;
(v) the Participant’s participation in the Plan is voluntary;
(vi) the value of the Option is an extraordinary item of compensation which is outside the scope of the Participant’s employment or
consulting contract, if any; and
(vii) the Option is not part of normal or expected compensation for purposes of calculating any severance, resignation, redundancy,
end of service payments, bonuses, long-service awards, pension or retirement benefits or similar payments.
14. NOTICES.
(a) Any notices required or permitted by the terms of this Agreement or the Plan shall be given by recognized courier service, facsimile,
registered or certified mail, return receipt requested, addressed as follows:
(i)
If to the Company:
Akari Therapeutics, PLC
22 Boston Wharf Road, Floor 7
Boston, MA 02210
Attention: Chief Executive Officer
(ii) If to the Participant, at the address set forth below;
or to such other address or addresses of which notice in the same manner has previously been given.
(b) Any such notice shall be deemed to have been given upon the earlier of receipt, one business day following delivery to a recognized courier
service or three business days following mailing by registered or certified mail.
15. GOVERNING LAW.
This Agreement shall be governed by and construed in accordance with the laws of England and Wales, without giving effect to the conflict of
law principles thereof. For the purpose of litigating any dispute that arises under this Agreement, the parties hereby consent to exclusive
jurisdiction in New York and agree that such litigation shall be conducted in the state courts of New York, New York or the federal courts of the
United States for the District of New York.
16. BENEFIT OF AGREEMENT.
Subject to the provisions of the Plan and the other provisions hereof, this Agreement shall be for the benefit of and shall be binding upon the
heirs, executors, administrators, successors and assigns of the parties hereto.
17. ENTIRE AGREEMENT.
(a) This Agreement, including Exhibit A, which is expressly incorporated herein and made a part hereof, embodies the entire agreement and
understanding between the parties hereto with respect to the subject matter hereof and supersedes all prior oral or written agreements
and understandings relating to the subject matter hereof.
(b) No statement, representation, warranty, covenant or agreement not expressly set forth in this Agreement shall affect or be used to interpret,
change or restrict, the express terms and provisions
7
of this Agreement, provided, however, in any event, this Agreement shall be subject to and governed by the Plan.
18. MODIFICATIONS AND AMENDMENTS.
The terms and provisions of this Agreement may be modified or amended as provided in the Plan.
19. WAIVERS AND CONSENTS.
Except as provided in the Plan, the terms and provisions of this Agreement may be waived, or consent for the departure therefrom granted, only
by written document executed by the party entitled to the benefits of such terms or provisions. No such waiver or consent shall be deemed to be
or shall constitute a waiver or consent with respect to any other terms or provisions of this Agreement, whether or not similar. Each such waiver
or consent shall be effective only in the specific instance and for the purpose for which it was given, and shall not constitute a continuing waiver
or consent.
20. RECOUPMENT OF AWARD.
If the Option or any cash or share payment the Participant receives pursuant to this Agreement are subject to recovery under any law,
government regulation or stock exchange listing requirement, the Option, and the cash or share payment, shall be subject to such deductions and
clawback as may be required to be made pursuant to such law, government regulation or stock exchange listing requirement (or any policy
adopted by the Company pursuant to any such law, government regulation or stock exchange listing requirement) and the Board of Directors in
its reasonable good faith discretion consistent with any such requirement, may require that you reimburse the Company all or part of any
payment or transfer related to this Award, the Option and any cash or share payment.
21. DATA PRIVACY.
By entering into this Agreement, the Participant:
(i) authorizes the Company and each Affiliate, and any agent of the Company or any Affiliate administering the Plan or providing
Plan recordkeeping services, to disclose to the Company or any of its Affiliates such information and data as the Company
or any such Affiliate shall request in order to facilitate the grant of options and the administration of the Plan; and
(ii) authorizes the Company and each Affiliate to store and transmit such information in electronic form for the purposes set forth in
this Agreement.
IN WITNESS WHEREOF, THE PARTIES HERETO HAVE CAUSED THIS AGREEMENT TO BE EXECUTED AS OF THE EFFECTIVE
DATE.
PARTICIPANT
AKARI THERAPEUTICS, PLC
/s/ Wendy DiCicco
/s/ Rachelle Jacques
Signature
Signature
Name:
Wendy DiCicco
Name:
Wendy DiCicco
Address:
Title:
President and CEO
[City, State, Zip]
[Street Address]
8
Exhibit A
Terms of Option Grant
1.
Date of Grant:
July 17, 2023
2.
Maximum Number of Shares for
which this Option is exercisable:
5,000,000
3.
Exercise price per Share:
$0.00171
4.
Option Expiration Date:
July 17, 2033
5.
Vesting Start Date:
July 17, 2023
6.
Type of Option:
☐
Incentive Stock Option (“ISO”)
☒
Non-Statutory Stock Option (“NSO”)
7.
Vesting Schedule:
This Option shall become exercisable (and the Shares issued upon exercise shall be vested) as follows provided the Participant is an Employee,
director or Consultant of the Company or of an Affiliate on the applicable vesting date, except as otherwise set forth in Section 3(b) of the Stock
Option Agreement:
Vesting Date
% Vested
# Vested
July 17, 2024
100%
5,000,000
Notwithstanding the foregoing, should the Company terminate the Participant for any reason other than for cause prior to the full vesting date,
the Option will continue to vest through the first anniversary date of Grant or be accelerated, at the Company’s option.
9
Exhibit B
NOTICE OF EXERCISE OF STOCK OPTION
[Form for Shares registered in the United States]
To: Akari Therapeutics, Plc
IMPORTANT NOTICE: This form of Notice of Exercise may only be used at such time as the Company has filed a Registration Statement with
the Securities and Exchange Commission under which the issuance of the Shares for which this exercise is being made is registered and such
Registration Statement remains effective.
Ladies and Gentlemen:
I hereby exercise my Stock Option to purchase _________ shares (the “Shares”) of the ordinary shares, $0.0001 par value per share, of Akari
Therapeutics, Plc (the “Company”), at the exercise price of $________ per share, pursuant to and subject to the terms of the Stock Option Agreement
dated _______________, 20__.
I understand the nature of the investment I am making and the financial risks thereof. I am aware that it is my responsibility to have consulted
with competent tax and legal advisors about the relevant national, state and local income tax and securities laws affecting the exercise of the Option and the
purchase and subsequent sale of the Shares.
I am paying the option exercise price for the Shares as follows:
Please issue the Shares (check one):
☐ to me; or
☐ to me and ____________________________, as joint tenants with right of survivorship,
at the following address:
My mailing address for shareholder communications, if different from the address listed above, is:
Very truly yours,
Participant (signature)
Print Name
Date
10
Exhibit C
AKARI THERAPEUTICS, PLC
2023 EQUITY INCENTIVE PLAN
(See attached)
Exhibit 10.40
CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THIS EXHIBIT BECAUSE IT IS BOTH NOT
MATERIAL AND IS THE TYPE THAT THE REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL. INFORMATION
THAT WAS OMITTED HAS BEEN NOTED IN THIS DOCUMENT WITH A PLACEHOLDER IDENTIFIED BY THE MARK
“[***]”.
1
ACTIVE/136885911.1
August 18, 2024
PERSONAL AND CONFIDENTIAL
Rachelle Jacques [***]
Re: Separation Agreement
Dear Rachelle,
This letter confirms your separation from employment with Akari Therapeutics, plc (the
“Company”). This letter also proposes an agreement between you and the Company. Entitlements and Obligations
Your employment with the Company ended on May 1, 2024 (the “Separation Date”). By signing below you acknowledge
that the Company has:
•
paid you all salary accrued to you through the last day of your employment;
•
paid you for all accrued but unused vacation time due to you through the last day of your employment;
•
provided you with the right to continue group health plan coverage after your employment ends under the law
known as “COBRA,” which will be described in a separate written notice;
•
reimbursed you for any outstanding, reasonable business expenses that you have incurred
on the Company’s behalf through the end of your employment;
•
acknowledged your continuing right to indemnification and directors’ and officers’ liability insurance coverage
pursuant to Section 4.9 of your Executive Employment Agreement dated as of February 28, 2022 (the
“Employment Agreement”); and
•
paid you all compensation in lieu of notice in accordance with Section 5.5 of your Employment Agreement.
For your part, you are subject to continuing obligations under your Employment Agreement, including your obligations to
maintain the confidentiality of Company confidential information, return Company documents and other property and
restrictive covenant obligations. A copy of the
Exhibit 10.40
CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THIS EXHIBIT BECAUSE IT IS BOTH NOT
MATERIAL AND IS THE TYPE THAT THE REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL. INFORMATION
THAT WAS OMITTED HAS BEEN NOTED IN THIS DOCUMENT WITH A PLACEHOLDER IDENTIFIED BY THE MARK
“[***]”.
2
ACTIVE/136885911.1
Employment Agreement is enclosed as Exhibit B.
3
ACTIVE/136885911.1
Agreement
The remainder of this letter proposes an agreement (the “Agreement”) between you and the Company. The purpose of this
Agreement is to establish an amicable arrangement for ending your employment relationship, including resolving all
differences and disputes and releasing the Company and related persons or entities from any claims and permitting you to
receive certain Settlement Payments and Equity terms, all as described herein.
You acknowledge that you are entering into this Agreement knowingly and voluntarily. It is customary in employment
separation agreements for the departing employee to release the employer from any possible claims, even if the employer
believes, as is the case here, that no such claims exist. By proposing and entering into this Agreement, the Company is not
admitting in any way that it violated any legal obligation that it owed to you.
With those understandings, you and the Company agree as follows:
1.
Separation from Employment
Your employment with the Company ended effective on the Separation Date. The Settlement Payment (Section 2), the
Equity provisions (Section 3) and the other terms set forth herein are being provided to you as part of an agreement
between you and the Company to settle fully and finally all issues and/or differences between you and the Company,
including without limitation regarding your employment with the Company and any other matters with respect to the
Company including any claims related to the Employment Agreement. For the avoidance of doubt, by entering into this
Agreement you are waiving any right you had or may have had to payments, benefits or acceleration, other than as
specifically set forth herein.
You confirm that you resigned from any and all other positions that you held with the Company as an officer, director or
otherwise effective on the Separation Date (except that your resignation as a director was effective May 7, 2024). You
acknowledge that you were fully paid for all wages then due to you. If you apply for unemployment compensation
benefits under state law, the Company shall not dispute your eligibility for such benefits. This shall not affect the
Company’s obligation to respond truthfully to governmental agency requests for information related to unemployment
compensation eligibility.
You must immediately cease holding yourself out as a current employee of the Company in all forums and on all
platforms including but not limited to, LinkedIn. Notwithstanding the foregoing and subject to Sections 8 and 9 below,
you may continue to truthfully reference your professional history with the Company.
2.
Settlement Payment
In exchange for you entering into, not revoking and complying with this Agreement:
(a) One-Time Payment. The Company shall pay you an amount equal to the gross amount of
$450,000 (“Settlement Payment”). The Company shall pay you the Settlement Payment the earlier of (i) within thirty (30)
days of the closing date of the transactions contemplated by that certain
4
ACTIVE/136885911.1
Agreement and Plan of Merger, by and among Akari Therapeutics, plc, Peak Bio, Inc. and Pegasus
Merger Sub, Inc., dated as of March 4, 2024 (the “Closing Date”), and (ii) December 2, 2024.
(b)
Tax Treatment. The Company shall make deductions, withholdings and tax reports with respect to payments under
this Agreement that it reasonably determines to be required. Payments under this Agreement shall be in amounts net of
any such deductions or withholdings. Nothing in this Agreement shall be construed to require the Company to make any
payments to compensate you for any adverse tax effect associated with any payments or benefits or for any deduction or
withholding from any payment or benefit.
3.
Equity
In exchange for you entering into, not revoking and complying with this Agreement and notwithstanding anything to the
contrary in any other policy, plan or agreement, you and the Company agree as follows:
(a)
Stock Options. You shall have the right to exercise any and all options that you hold to purchase ordinary shares,
nominal value of $0.0001 per share (the “par value”) of the Company (“Ordinary Shares”) that vested on or before the
Separation Date (the “Vested Options”), pursuant to and subject to the terms of any and all applicable stock option plans
and agreements. You acknowledge and agree that all options that you hold to purchase Ordinary Shares that were
unvested on the Separation Date (the “Unvested Options”) have been forfeited and are no longer in effect.
(b)
Vesting and Forfeiture of Restricted Stock Units (“RSUs”). You and the Company hereby acknowledge and agree
that as of the Separation Date all outstanding unvested RSUs held by you were held in abeyance pending resolution of this
Separation Agreement and, effective as of the Effective Date, (i) vesting of a portion of your RSUs representing
276,000,000 Ordinary Shares of the Company) (the “Accelerated Ordinary Shares”) accelerated in full and (ii) a portion of
your RSUs representing 482,250,000 Ordinary Shares were forfeited in its entirety for no consideration. The Company
shall provide that the Accelerated Ordinary Shares shall be “net settled” for required withholding taxes and remit the
required taxes to the taxing authorities in accordance with applicable law. You agree to promptly pay the par value for the
resulting “net” number of Ordinary Shares upon which you will receive the corresponding number of Company American
Depository Shares (“ADSs”)(such ADSs the “Accelerated ADSs”). The Company’s calculation of the “net” number of
Ordinary Shares, par value to be paid and the resulting number of ADSs described in this paragraph and paragraph (c)(i)
below will be provided to you prior to your execution of this Agreement.
(c) Previously-Vested RSUs; Private Placement Transaction.
(i) Previously-Vested RSUs. Pursuant to RSUs which vested prior to the Separation Date, you
were issued 14,000 ADSs and were recently issued or will be issued Ordinary Shares representing 15,418 ADSs
and 52,295 ADSs, respectively. No par value or taxes are due with respect to the 14,000 ADSs. The par value
but not the withholding taxes has been paid with respect to the 15,418 ADSs; the par value and
5
ACTIVE/136885911.1
withholding taxes are due with respect to the 52,295 ADS. The Company shall provide
6
ACTIVE/136885911.1
that the Ordinary Shares with respect to the 15, 418 ADSs and the 52,295 ADSs will be “net settled” for required
withholding taxes and will remit those required taxes to the taxing authorities. You agree to promptly pay the par
value for the resulting “net” number of Ordinary Shares (with appropriate credit for the par value you previously
paid with resect to the 15,418 ADSs) upon which you will receive the corresponding number of ADSs (such
ADSs, together with the 14,000 ADSs referred to above, the “Private Placement ADSs”).
(ii) Private Placement. The Company will offer you the opportunity to engage in a private
placement transaction (the “Private Placement Transaction”) under which the Company would purchase the
Private Placement ADSs from you. The terms and conditions of the Private Placement Transaction shall be
negotiated and agreed to by you and the Company in good faith.
(d)
Lock Up. During the period beginning on August 18, 2024 through and including August 19, 2025 (such period, the
“Lock-Up Period”), you will not, without the prior written consent of the Company, directly or indirectly, (i) offer, sell,
assign, transfer, pledge, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell,
grant any option, right or warrant for the sale of, or otherwise dispose of or transfer, or announce the intention to otherwise
dispose of or transfer, any of the Accelerated ADSs or the Private Placement ADSs (together, the “Shares”), (ii) enter into
any swap, hedge or similar agreement or arrangement that transfers, in whole or in part, directly or indirectly, the
economic risk of ownership of the Shares, or (iii) engage in any short selling of the Shares. The restrictions set forth in this
Section 3(d) shall not apply to
(1) the Private Placement Transaction; (2) any transfers to any stockholder, partner or member of, or owner of a similar
equity interest in, you, as the case may be, if, in any such case, such transfer is not for value, (3) any transfer made by you
to another corporation, partnership, limited liability company or other business entity so long as the transferee is an
affiliate (as defined in Rule 405 promulgated under the Securities Act) of the Investor and such transfer is not for value, or
(4) the transfer of Shares pursuant to a bona fide third-party tender offer, merger, consolidation or other similar transaction
made to all holders of the Company’s common stock involving a change of control of the Company (including, without
limitation, the entry into any lock-up, voting or similar agreement pursuant to which the undersigned may agree to
transfer, sell, tender or otherwise dispose of common stock or other such securities in favor of any such transaction, or
vote any securities in favor of such transaction); provided that in the event that the tender offer, merger, consolidation or
other such transaction is not completed, the Shares shall remain subject to the restrictions contained in this Agreement. For
purposes of this Agreement, “change of control” shall mean the consummation of (1) any bona fide third-party tender
offer approved by the board of directors of the Company, for any and all of the Company’s outstanding voting securities
or (2) any merger, consolidation or other similar transaction, in one transaction or a series of related transactions, in each
case, approved by the board of directors of the Company and the result of which is that any “person” (as defined in
Section 13(d)(3) of the Exchange Act), or group of persons, other than the Company, becomes the beneficial owner (as
defined in Rules 13d-3 and 13d-5 of the Exchange Act) of at least 50% of the outstanding voting securities of the
Company; provided, further, that a “change of control” shall not include the transactions contemplated by that
7
ACTIVE/136885911.1
certain Agreement and Plan of Merger, by and among Akari Therapeutics, plc, Peak Bio, Inc. and Pegasus Merger Sub,
Inc., dated as of March 4, 2024.
8
ACTIVE/136885911.1
4.
Continuing Obligations
You acknowledge that your obligations under the Employment Agreement shall continue in effect, including without
limitation your obligations to maintain the confidentiality of Confidential Information as defined in the Employment
Agreement, to return documents and other property of the Company.
5.
Return of Property
You confirm that you have, or within five business days of execution of this Agreement will have, returned to the
Company all Company property, including, without limitation, computer equipment, keys and access cards, credit cards
and any documents (including electronic documents as well as hard copies) containing information concerning the
Company, its business or its business relationships. You also commit to deleting and finally purging any duplicates of files
or documents that may contain Company information from any computer or other device that remains your property after
the Separation Date. In the event that you discover that you continue to retain any such property, you shall return it to the
Company immediately.
6.
Confidential Information
You understand and agree that you have been employed in a position of confidence and trust and have had access to
information concerning the Company that the Company treats as confidential and the disclosure of which could negatively
affect the Company’s interests (“Confidential Information”). Confidential Information includes, without limitation,
confidential financial information; business forecasts; inventions; improvements and other intellectual property; trade
secrets; know-how; designs, processes or formulae; confidential software; marketing or sales information or plans;
customer lists; and business plans, prospects and opportunities. You agree that you shall not use or disclose any
Confidential Information at any time without the written consent of the Company.
7.
Releases of Claims
(a)
Your Release of Claims. In consideration for, among other terms, the Settlement Payment, the Equity provisions and
other terms set forth in this Agreement to which you acknowledge you would not be entitled absent this Agreement,
including the release of claims, you voluntarily release and forever discharge the Company, its affiliated and related
entities, its and their respective predecessors, successors and assigns, its and their respective employee benefit plans and
fiduciaries of such plans, and the current and former officers, directors, shareholders, employees, attorneys, accountants
and agents of each of the foregoing in their official and personal capacities (collectively referred to as the “Released
Parties”) generally from all claims, demands, debts, damages and liabilities of every name and nature, known or unknown
(“Claims”) that, as of the date when you sign this Agreement, you have, ever had, now claim to have or ever claimed to
have had against any or all of the Released Parties. This release includes, without limitation, your release of all Claims:
9
ACTIVE/136885911.1
•
relating to your employment by and termination of employment with the Company;
•
of wrongful discharge or violation of public policy;
•
of breach of contract;
•
of defamation or other torts;
•
of retaliation or discrimination under federal, state or local law (including, without limitation, Claims of
discrimination or retaliation under the Age Discrimination in Employment Act, the Americans with Disabilities Act,
Title VII of the Civil Rights Act of 1964) and Massachusetts General Laws Chapter 151B
•
under any other federal or state statute (including, without limitation, Claims under the Worker Adjustment and
Retraining Notification Act, the Fair Labor Standards Act, the Family and Medical Leave Act and the Massachusetts
Family and Medical Leave Law);
•
for wages, bonuses, incentive compensation, commissions, stock, stock options, vacation pay or any other
compensation or benefits, regardless of whether based on the Massachusetts Wage Act, M.G.L. c. 149, §§148-150C,
or any other law or agreement; and
•
for damages or other remedies of any sort, including, without limitation, compensatory damages, punitive damages,
injunctive relief and attorney’s fees;
10
ACTIVE/136885911.1
provided, however, that this release shall not affect your rights under this Agreement or under any “employee benefit
plan,” as that term is defined in Section 3(3) of the Employee Retirement Income Security Act, 29 U.S.C. §1002(3).
You agree not to accept damages of any nature, other equitable or legal remedies for your own benefit or attorney’s fees or
costs from any of the Released Parties with respect to any Claim released by this Agreement. As a material inducement to
the Company to enter into this Agreement, you represent that you have not assigned any Claim to any third party.
(b)
Release of the Company’s Claims. In consideration for, among other terms, your release of Claims pursuant to the
preceding subsection, the Company voluntarily releases and forever discharges you generally from all Claims that, as of
the date when the Company signs this Agreement, the Company has, ever had, now claims to have or ever claimed to have
had against you, including, without limitation, all Claims relating to your employment by and termination of employment
with the Company; provided that the Company does not release you from any civil Claim that is based on conduct that
also satisfies the elements of a criminal offense (“Excepted Claim”). The undersigned Company representative has no
knowledge or reason to believe that the Company has any Excepted Claim against you. If any Released Party hereafter
initiates any form of litigation against you based on any Claim that arose before the Company signed this Agreement, your
release of that Released Party pursuant to the preceding subsection shall be of no further force or effect; provided that this
shall not affect your release of other Released Parties.
8.
Confidentiality of Agreement-Related Information
You agree, to the fullest extent permitted by law and subject to Section 12 of this Agreement, to keep all Agreement-
Related Information completely confidential. “Agreement-Related Information” means any allegations of wrongful
conduct by the Company or any of its representatives, the negotiations leading to this Agreement and the existence and
terms of this Agreement. Notwithstanding the foregoing, you may disclose Agreement-Related Information to your
spouse, your attorney and your financial advisors, and to them only provided that they first
11
ACTIVE/136885911.1
agree for the benefit of the Company to keep Agreement-Related Information confidential. You represent that during the
period since this Agreement was proposed to you, you have not made any disclosures that would have been contrary to the
foregoing obligation if it had then been in effect. Nothing in this section shall be construed to prevent you from disclosing
Agreement-Related Information to the extent required by a lawfully issued subpoena or duly issued court order; provided
that you provide the Company with advance written notice and a reasonable opportunity to contest such subpoena or court
order.
9.
Non-Disparagement
Subject to Section 12 of this Agreement, you agree to comply with your, and the Company agrees to comply with its,
obligations under Section 11 (Non-Disparagement) of the Employment Agreement.
10.
Representations Concerning Affiliation with the Company and Activities for the Company
You shall not represent that you are employed by, engaged as a consultant for or in any other service relationship
(collectively, an “Affiliation”) with the Company or any of its affiliates. Without limiting the foregoing, you shall ensure
that at no time will your resume, CV, social media profiles and pages (including without limitation any LinkedIn or
Facebook profile), website, email signature or business card indicate that you have any Affiliation with the Company or
any affiliate. In addition, you agree that any statements that you make in social media, in resumes and otherwise about
your activities on behalf of the Company and any affiliates shall be fully accurate.
11.
Future Cooperation
Subject to Section 12, the provisions of Section 6 (Cooperation) of the Employment Agreement shall continue to apply as
if set forth in full herein.
12.
Protected Disclosures and Other Protected Actions
Nothing contained in this Agreement, any other agreement with the Company, or any Company policy limits your ability,
with or without notice to the Company, to: (i) file a charge or complaint with any federal, state or local governmental
agency or commission (a “Government Agency”), including without limitation, the Equal Employment Opportunity
Commission, the National Labor Relations Board or the Securities and Exchange Commission (the “SEC”); (ii)
communicate with any Government Agency or otherwise participate in any investigation or proceeding that may be
conducted by any Government Agency, including by providing non-privileged documents or information; (iii) exercise
any rights under Section 7 of the National Labor Relations Act, which are available to non-supervisory employees,
including assisting co-workers with or discussing any employment issue as part of engaging in concerted activities for the
purpose of mutual aid or protection; (iv) discuss or disclose information about unlawful acts in the workplace, such as
harassment or discrimination or any other conduct that you have reason to believe is unlawful; or
(v) testify truthfully in a legal proceeding. Any such communications and disclosures must not violate applicable law and
the information disclosed must not have been obtained through a
12
ACTIVE/136885911.1
communication that was subject to the attorney-client privilege (unless disclosure of that
13
ACTIVE/136885911.1
information would otherwise be permitted consistent with such privilege or applicable law). If a Government Agency or
any other third party pursues any claim on your behalf, you waive any right to monetary or other individualized relief
(either individually or as part of any collective or class action), but the Company will not limit any right you may have to
receive an award pursuant to the whistleblower provisions of any applicable law or regulation for providing information to
the SEC or any other Government Agency.
In addition, for the avoidance of doubt, pursuant to the federal Defend Trade Secrets Act of 2016, you shall not be held
criminally or civilly liable under any federal or state trade secret law or under this Agreement for the disclosure of a trade
secret that (a) is made (i) in confidence to a federal, state, or local government official, either directly or indirectly, or to
an attorney; and (ii) solely for the purpose of reporting or investigating a suspected violation of law; or (b) is made in a
complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal.
13.
Other Provisions
(a)
Termination of Payment Obligation or Return of Payments. If you materially breach any of your obligations under
this Agreement, in addition to any other legal or equitable remedies it may have for such breach, the Company shall have
the right to terminate its payments to you under Section 2 and forfeit the acceleration rights under Section 3(a) of this
Agreement. To the extent that any such amounts have been paid or accelerated, you shall return any such amounts to the
Company. The termination of such payments in the event of your breach will not affect your continuing obligations under
this Agreement.
(b)
Absence of Reliance. In signing this Agreement, you are not relying upon any promises or representations made by
anyone at or on behalf of the Company.
(c)
Enforceability. If any portion or provision of this Agreement (including, without limitation, any portion or provision
of any section of this Agreement) shall to any extent be declared illegal or unenforceable by a court of competent
jurisdiction, then the remainder of this Agreement, or the application of such portion or provision in circumstances other
than those as to which it is so declared illegal or unenforceable, shall not be affected thereby, and each portion and
provision of this Agreement shall be valid and enforceable to the fullest extent permitted by law.
(d)
Waiver. No waiver of any provision of this Agreement shall be effective unless made in writing and signed by the
waiving party. The failure of a party to require the performance of any term or obligation of this Agreement, or the waiver
by a party of any breach of this Agreement, shall not prevent any subsequent enforcement of such term or obligation or be
deemed a waiver of any subsequent breach.
(e)
Jurisdiction; Jury Trial Waiver. You and the Company hereby agree that the Superior Court of the Commonwealth
of Massachusetts and the United States District Court for the District of Massachusetts shall have the exclusive
jurisdiction to consider any matters related to this Agreement, including without limitation any claim of a violation of this
Agreement. With respect to any such court action, you submit to the jurisdiction of such courts and you acknowledge that
venue in such courts is proper. Each party to this Agreement irrevocably waives any and all rights
14
ACTIVE/136885911.1
to a trial by jury in any legal proceeding arising out of or relating to this Agreement.
(f)
Relief. You agree that it would be difficult to measure any harm caused to the Company that might result from any
breach by you of your promises set forth in Sections 5–11 not including the Release of Claims (the “Specified Sections”).
You further agree that money damages would be an inadequate remedy for any breach of any of the Specified Sections.
Accordingly, you agree that if you breach, or propose to breach, any portion of your obligations under any of the Specified
Sections, the Company shall be entitled, in addition to all other remedies it may have, to an injunction or other appropriate
equitable relief to restrain any such breach, without showing or proving any actual damage to the Company and without
the necessity of posting a bond.
(g)
Governing Law; Interpretation. This Agreement shall be interpreted and enforced under the laws of the
Commonwealth of Massachusetts, without regard to conflict of law principles. In the event of any dispute, this Agreement
is intended by the parties to be construed as a whole, to be interpreted in accordance with its fair meaning, and not to be
construed strictly for or against either you or the Company or the “drafter” of all or any portion of this Agreement.
(h)
Entire Agreement. This Agreement constitutes the entire agreement between you and the Company. This Agreement
supersedes any previous agreements or understandings between you and the Company, including without limitation, any
offer letter or employment agreement, any agreement with respect to equity, bonuses or commissions, or any previously
proposed severance arrangement; provided, however, that any obligations and provisions under the Employment
Agreement specifically preserved in this Agreement and the Company’s equity plan(s) and the agreements related to your
awards shall remain in full force and effect subject to the terms of this Agreement.
(i)
Authorization; No Conflicts; Enforcement. The Company has the requisite corporate power and authority to enter
into and perform its obligations under this Agreement. The execution, delivery and performance of this Agreement by the
Company do not and will not conflict with or violate any agreement to which the Company is a party or by which any
property or asset of the Company is bound or affected. In the event the Company breach or proposes to breach this
Agreement, you shall be entitled, in addition to all other remedies you may have, to injunctive or other appropriate
equitable relief, and to reimbursement of reasonable attorneys fees and costs incurred by you in enforcing this Agreement.
(j)
Time for Consideration; Effective Date. You acknowledge that you have knowingly and voluntarily entered into this
Agreement and that the Company advises you to consult with an attorney before signing this Agreement. By entering into
this Agreement, you acknowledge that you have been given the opportunity to consider this Agreement for forty five (45)
days from your receipt of this Agreement before signing it (the “Consideration Period”) and have also been provided the
information included as Exhibit A. To accept this Agreement, you must return a signed original or a signed PDF copy of
this Agreement or DocuSign so that it is received by the Company or its counsel at Goodwin Procter, LLP at or before the
expiration of the Consideration Period. If you sign this Agreement before the end of the Consideration Period, you
acknowledge that such decision was entirely voluntary and that you had the opportunity to consider this Agreement for the
entire Consideration Period. For the period of seven (7) days from the date when you sign this Agreement, you have the
right to revoke this Agreement by written notice to
15
ACTIVE/136885911.1
Jennifer Merrigan Fay at Goodwin Procter, LLP, provided that such notice is delivered so that it is received at or
before the expiration of the seven (7) day revocation period. This Agreement
16
ACTIVE/136885911.1
shall not become effective or enforceable during the revocation period. This Agreement shall become effective on the first
business day following the expiration of the revocation period (the “Effective Date”).
(k)
Successors. This Agreement shall be binding upon and inure to the benefit of the Company and its successors and
assigns. This Agreement shall be binding upon you and inure to your benefit and to the benefit of your successors
(including your estate in the event of your death prior to receipt of all amounts due under this Agreement.
(l)
Counterparts. This Agreement may be executed in separate counterparts. When both counterparts are signed, they
shall be treated together as one and the same document.
[Signature Page Follows]
ACTIVE/136885911.1
Sincerely,
AKARI THERAPEUTICS, PLC
18
ACTIVE/136885911.1
By: /s/ Dr. Raymond Prudo, M.D.
Dr. Raymond Prudo, M.D.
Board Chair
Date
Enclosure - Employment Agreement
You are advised to consult with an attorney before signing this Agreement and you have, in fact, been represented by
counsel in connection with this Agreement. This is a legal document. Your signature will commit you to its terms. By
signing below, you acknowledge that you have carefully read and fully understand all of the provisions of this Agreement
and that you are knowingly and voluntarily entering into this Agreement.
By: /s/ Rachelle Jacques
Rachelle Jacques
Date
19
ACTIVE/136885911.1
Exhibit A Decisional Unit
Description
Selected Roles
Title
Age
Chief Executive Officer
52
Chief Medical Officer
71
Chief Operating Officer
54
Associate Director, Clinical Operations
45
Clinical Project Manager
48
Senior Clinical Trial Associate/TMF Specialist
37
Business Development Analyst
35
Director, People Experience
30
Non-Selected Roles
Title
Age
Chief Scientific Officer
55
Head of CMC
57
UK Finance Director
58
Senior Preclinical Development Scientist
47
20
ACTIVE/136885911.1
Exhibit B
See attached.
1
AKARI THERAPEUTICS PLC INSIDER
TRADING POLICY
Akari Therapeutics, Plc (the “Company”) has adopted the following policy regarding trading by Company personnel in the
Company’s securities (the “Insider Trading Policy,” or this “Policy”). This Policy applies to all Company personnel, including
directors, officers, employees and consultants of the Company and its subsidiaries. This Policy also applies to certain family
members, other members of a person’s household and entities controlled by Company personnel, as described in Section IV
below.
•
The Need for an Insider Trading Policy
This Policy has been developed:
•
to educate all Company personnel as to the federal securities laws and the rules of the Securities and Exchange
Commission (the “SEC”) on insider trading in public company securities;
•
to set forth requirements that apply to Company personnel and other persons covered by this Policy who seek to
trade in the Company’s securities;
•
to protect the Company and its personnel from legal liability; and
•
to preserve the reputation for integrity and ethical conduct of the Company and its personnel.
Because the Company is a public company, transactions in the Company’s securities are subject to the federal
securities laws and regulations adopted by the SEC. These laws and regulations make it illegal for an individual to buy
or sell securities of the Company while aware of material non-public information.
The SEC takes insider trading very seriously and devotes significant resources to uncovering the activity and to
prosecuting offenders. Liability may extend not only to the individuals who trade while in possession of material non-
public information but also to their “tippers,” people who leak material non-public information to individuals who
then trade based on that information. The Company and “controlling persons” of the Company may also be liable for
violations by Company employees.
•
What is Material Non-Public Information?
Definition.
Material non-public information is any information (positive or negative) that:
•
is not generally known to the public, and
•
which, if publicly known, would likely affect either the market price of the Company’s securities or a person’s
decision to buy, sell or hold the Company’s securities.
Examples. Common examples of information that will frequently be regarded as material include,
2
but are not limited to:
▪
quarterly or annual earnings results;
▪
projections of future financial results;
▪
earnings or losses;
▪
developments in litigation or licensing matters involving the Company;
▪
news of a pending or proposed merger, acquisition or tender offer;
▪
news of a pending or proposed acquisition or disposition of a significant asset;
▪
news of a pending or proposed joint venture;
▪
a company restructuring;
▪
significant transactions with officers, directors or greater than 5% shareholders;
▪
financing transactions;
▪
changes in dividend policies, the declaration of a stock split or the offering of additional securities;
▪
establishment of a stock repurchase program;
▪
changes in pricing or cost structure of Company products or services;
▪
changes in management;
▪
changes in auditors or notification that the auditor’s reports may no longer be relied upon;
▪
significant new products or discoveries;
▪
results, interim or final, of clinical trials;
▪
approval of or adverse actions with respect to the Company’s clinical trials by the FDA in the U.S. or an equivalent
regulatory authority in another country;
▪
impending bankruptcy or financial liquidity problems;
▪
internal financial information which departs from what the market expects;
▪
the gain or loss of a significant customer or supplier, major contract, license, registration or
collaboration;
▪
the execution, amendment or termination of a material contract; or
▪
other items that require the filing of a Current Report on Form 8-K (or Form 6-K) with the SEC.
Twenty-Twenty Hindsight.
In determining whether information is material, the SEC and other regulators will view the information after-the-fact
with the benefit of hindsight.
As a result, in determining whether any information is material, we will and you should carefully consider whether
regulators and others might view the information as being material in hindsight, with the benefit of all relevant
information that later becomes available.
For example, if there is a significant change in the Company’s stock price following release of certain information, that
information will likely be determined to have been material when viewed with the benefit of hindsight.
In addition to addressing the relevant statutes and regulations in this area, we are adopting this Policy to avoid even
the appearance of improper conduct on the part of anyone employed by or associated with the Company and certain
related persons, not just members of senior management.
3
•
The Consequences of Insider Trading
The consequences of insider trading violations can be severe:
For individuals who trade while in possession of material non-public information (or tip information to others):
•
a civil penalty of up to three times the profit gained or loss avoided;
•
a criminal fine (no matter how small the profit) of up to $5 million; and
•
a jail term of up to 20 years.
These penalties can apply even if the individual is not a member of the Board of Directors or an officer of the
Company. Moreover, if an employee violates this Policy, he or she may also be subject to Company-imposed
sanctions, including termination for cause.
For a Company (as well as possibly any supervisory person) that fails to take appropriate steps to prevent illegal
trading:
•
a civil penalty of the greater of $1 million or three times the profit gained or loss avoided as a result
of the employee’s violation; and
•
a criminal penalty of up to $25 million.
Any of the above consequences, including an SEC investigation that does not result in prosecution, can tarnish the
Company’s or an individual’s reputation and irreparably damage a career.
•
Our Policy
General Prohibition on Trading.
Company personnel and Related Persons (as defined below in this Section IV) may not buy or sell securities of the
Company while in possession of material non-public information or engage in any other action to take advantage
of, or pass on to others, that information, subject to the specific exceptions noted below in this Section IV under
the caption “Exceptions for Certain Transactions.”
Transactions by Family Members, Others in Your Household and Entities You Control.
The restrictions in this Policy also apply to:
(1) immediate family members who reside with you;
(2) others living in your household (whether or not related to you);
(3)family members who do not live in your household but whose transactions in the Company’s securities
are directed by you or are subject to your influence or control (e.g., parents or children who consult with you
before they trade in the Company’s securities);
(4) all other persons who execute trades on your behalf; and
(5)any entities that you influence or control, including any corporations, limited liability companies,
partnerships or trusts.
4
Each person or entity identified in clauses (1) – (5), is a “Related Person”).
SEC regulations specifically provide that any material non-public information about the Company communicated
to any spouse, parent, child or sibling is considered to have been communicated under a duty of trust or
confidence; and that any trading in the Company’s securities by such family members while they are aware of
such information may, therefore, violate insider trading laws and regulations.
Company personnel are expected to be responsible for the compliance of all Related Persons with this Policy.
This means that, to the extent such Related Persons of Company personnel intend to trade in the Company’s
securities, the Related Persons need to comply with the black- out periods and all other restrictions in this Policy.
Furthermore, you should not participate in any investment club (i.e., groups of people who pool their money to
make investments) that may invest in the Company’s securities.
Other Companies’ Non-public Information.
This Policy also applies with equal force to information relating to any other company, including our customers or
suppliers, obtained by Company personnel during the course of their service to or employment by the Company.
Specifically, no Company personnel who, in the course of work on behalf of the Company, learns of material non-
public information about a company with which the Company does business may trade in the other company’s
securities until the information becomes public or is no longer material.
Personal or Independent Reasons Are Not Exceptions.
Transactions in the Company’s securities that may be necessary or justifiable for independent reasons (such as
the need to raise money for an emergency expenditure) are no exception. Even the appearance of an improper
transaction must be avoided to preserve our reputation for adhering to the highest standards of conduct.
Policy Administrator.
This Policy shall be administered by the Company’s General Counsel (the “Policy Administrator”), and if such
person is not available, then the Company’s Chief Financial Officer shall serve as the alternate Policy
Administrator.
When Information Becomes Public.
This Policy applies to material non-public information about the Company, which means that trading is permitted
once the information becomes known to the public (unless some other Company policy or legal obligation
restricts trading at that time).
Because the Company’s shareholders and the investing public should be afforded time to receive and absorb
information, as a general rule you should not engage in any transactions until the beginning of the first business
day after material information has been released.
Thus, if an announcement is made before the market opens on a Monday, Tuesday generally would be the first
day on which you may trade.
5
If an announcement is made before the market opens on a Friday, Monday generally would be the first day on
which you may trade.
However, if the information released is complex, such as a major financing or other significant transaction, it may
be necessary to allow additional time for the information to be absorbed by the investing public. In such
circumstances, you will be notified by the Policy Administrator regarding a suitable waiting period before trading.
In addition, we have established specified black-out periods, as described below.
Prohibited Trading Periods.
While it is never permissible to trade based on material non-public information, we are implementing the
following procedures to help prevent inadvertent violations of this Policy and avoid even the appearance of an
improper transaction (which could result, for example, where Company personnel engage in a trade while
unaware of a pending major development).
•
Company Wide Black-Out Periods Applicable to All Company Personnel.
All Company personnel and Related Persons are prohibited from trading in any of the Company’s
securities during the following periods:
•
from the time each such individual becomes aware of the material information (the black-out start
times often vary), until the beginning of the first business day after the day the Company has made
a public announcement of material information, including earnings releases, unless the information
released is complex, in which case it may be necessary to extend this period and the Policy
Administrator will notify you of any such extension of the black-out period; and
•
during other specified periods when significant developments or announcements are anticipated, as
notified by the Policy Administrator.
You will be notified by e-mail when you may not trade in the Company’s securities during periods when
significant developments or announcements are anticipated, in which event you will also be notified
when trading restrictions are lifted. Of course, even during periods when trading is permitted, no one,
including persons
or entities who do not fall within the definition of Related Persons, should trade in the Company’s
securities if he or she possesses material non-public information.
•
Additional Black-Out Periods Applicable to the Board of Directors, Executive Officers, Financial Team
Members, and Designated Employees.
In addition to being subject to the trading procedures applicable to all Company personnel (above),
members of the Company’s Board of Directors, its Executive Officers, its Financial Team Members, and
Designated Employees (each as defined below) and Related Persons of such individuals are also subject
to additional trading procedures and restrictions during the following periods:
•
the periods from five (5) days prior to the close of each fiscal quarter until the beginning of the first
business day after the release of the Company’s financial results for each quarter (provided that the
Company intends to prepare and file
6
financial statements for such quarter) and, in the case of the fourth quarter, financial results for the year
end; and
•
any other periods as determined by the Company.
The Company’s “Executive Officers” comprise the individuals holding the positions listed on Exhibit A
hereto, which list shall be amended from time to time.
The Company’s “Financial Team Members” comprise the individuals holding the positions listed on Exhibit B
hereto, which list shall be amended from time to time.
The Company’s “Designated Employees” comprise the individuals holding the positions listed on Exhibit C
hereto, which list shall be amended from time to time.
The Policy Administrator may, from time to time, amend the list of and/or designate other employees as
Executive Officers, Financial Team Members, or Designated Employees, in which case the Policy
Administrator shall notify the affected individuals.
Treatment of Certain Transactions.
•
Distributions, Gifts and Other Transfers for No Consideration. All Company personnel and Related
Persons are required to obtain pre-clearance pursuant to the procedures outline below. In addition
to other transactions, bona fide gift transactions must be reported on Form 4 by directors and
officers subject to Section 16 of the Securities Exchange Act of 1934, as amended (such subject
persons, “Section 16 Persons”, and such act, the “Exchange Act”), within two (2) business days of
such transaction. Whether a gift is “bona fide” may depend on various circumstances surrounding
the gift. Accordingly, you are encouraged to consult with the Policy Administrator when
contemplating a gift.
•
Mutual Funds. Transactions in mutual funds that are invested in the Company’s
securities are not transactions subject to this Policy.
•
Transactions Involving Company Equity Plans. Except as otherwise noted below, this Policy does
not apply to the following transactions:
•
Stock Option Exercises. This Policy does not apply to the exercise of an employee stock option
acquired pursuant to the Company’s equity plans, or to the exercise of a tax withholding right
pursuant to which a person has
elected to have the Company withhold shares subject to an option to satisfy tax withholding
requirements. This Policy does apply, however, to any sale of stock as part of a broker-assisted
cashless exercise of an option, or any other market sale of stock for the purpose of generating
the cash needed to pay the exercise price and or taxes upon the exercise of an option.
•
Restricted Stock Awards and Restricted Stock Unit Awards. This Policy does not apply to the
vesting of restricted stock or restricted stock units, or the exercise of a tax withholding right
pursuant to which a person elects to have the Company withhold shares of stock to satisfy tax
withholding requirements upon the vesting of any restricted stock or restricted stock unit. This
Policy does apply, however, to any market sale of restricted stock or shares received upon
vesting
7
of restricted stock units.
•
Employee Stock Purchase Plan. This Policy does not apply to purchases of the Company’s
securities under an employee stock purchase plan adopted by the Company. This Policy does
apply, however, to subsequent sales or other transfers of such securities.
•
401(k) Plan. To the extent the Company offers its securities as an investment option in the
Company’s 401(k) plan, the trading restrictions in this Policy do not apply to the purchase of
stock through the Company’s 401(k) plan resulting from periodic contributions of money to the
plan through regular payroll deduction elections; however, the trading restrictions do apply to
elections made under the 401(k) plan to (a) increase or decrease the percentage of periodic
contributions that will be allocated to the Company stock fund, (b) make an intra-plan transfer
of an existing account balance into or out of the Company stock fund, (c) borrow money against
a 401(k) plan account if the loan will result in a liquidation of some or all of a Company stock
fund balance and
(d) pre-pay a plan loan if the pre-payment will result in allocation of loan proceeds to the
Company stock fund.
•
Other Transactions with the Company. Any other purchase of the Company’s securities from
the Company or sales of the Company’s securities to the Company are not subject to this
Policy.
•
Rule 10b5-1 Trading Plans.
Rule 10b5-1 of the Exchange Act provides an affirmative defense from insider trading liability under
the federal securities laws for certain qualifying pre-arranged transactions. Notwithstanding the
restrictions and prohibitions on trading in the Company’s securities set forth in this Policy, persons
subject to this Policy are permitted to effect transactions in the Company’s securities pursuant to a
pre- arranged written trading plan with another person instructing that other person to purchase or
sell the Company’s securities for their account, provided that the pre- arranged written trading plan
was entered into when they were not in possession of material nonpublic information or during any
applicable Company-imposed black- out period and which complies with the other requirements
under Rule 10b5-1 (a “Trading Plan”), as described below and in Appendix A.
A Trading Plan is a binding, written contract, instruction or plan between you and your broker that:
(i) specifies the price, amount, and date of trades to be executed for the your account in the future;
or (ii) provides a written formula or algorithm, or computer program, that your broker will follow to
determine the amount, price and timing of the Company’s securities to be purchased or sold; or (iii)
did not permit you to exercise any subsequent influence over how, when, or whether the purchases
or sales are made, provided that any person who does exercise such influence must not be in
possession of material nonpublic information. Any such Trading Plan must also comply with the
parameters set forth on Appendix A attached hereto.
•
Other Transactions. This Policy does not apply to any other purchase of the Company’s securities
from the Company or sales of the Company’s securities to the
8
Company with prior approval by the Policy Administrator or the Company’s Board of Directors.
Pre-Clearance of All Acquisitions, Sales and Other Transfers by Certain Company Personnel.
In order to ensure compliance with this Policy and with any Section 16 reporting requirements, all transactions in
the Company’s securities (including acquisitions, sales, gifts and other transfers, whether or not for value),
including the execution of Trading Plans (as defined below), by members of the Company’s Board of Directors,
Executive Officers, Financial Team Members, Designated Employees and Related Persons, must be pre-cleared by
the Policy Administrator, in addition to other certain transactions as provided in this Policy.
If you are (i) a member of one of the groups listed above and you contemplate a transaction in the Company’s
securities or (ii) are otherwise contemplating any certain transaction for which this Policy requires pre-clearance
pursuant to the procedures under this Section IV, you must contact the Policy Administrator or other designated
individual prior to executing the transaction. The Policy Administrator will use his or her reasonable best efforts
to provide approval or disapproval within two business days. Upon contacting the Policy Administrator, you must
not trade, give or effect any other transfer without consideration in Company securities until receiving the
requested pre-clearance to execute the contemplated transaction.
Neither the Company nor the Policy Administrator shall be liable for any delays that may occur due to the pre-
clearance process.
If the transaction is pre-cleared by the Policy Administrator, it must be executed by the end of the second
business day after receipt of pre-clearance.
Notwithstanding receipt of pre-clearance of a transaction, if you become aware of material non- public
information about the Company after receiving the pre-clearance but prior to the execution of the transaction,
you must not execute the transaction.
The responsibility for determining whether you are in possession of material non-public information rests with
you, as discussed below in Section V.
If you are a Section 16 Person, promptly following execution of any transaction, gift or of the certain transactions
subject to specified treatment under this Section IV, but in no event later than the end of the first business day
after such execution, you must notify the Policy Administrator and provide details regarding the transaction
sufficient to complete the required Section 16 filing.
Unless otherwise instructed, in writing, by the Policy Administrator, employees of the Company who are not
Directors, members of Executive Officers, Financial Team Members or Designated Employees are also required
to, pre-clear transactions in the Company’s securities in the same manner as set forth above. Such employees are
not, however, required to notify the Policy Administrator following execution of the transaction.
Please note that pre-clearance does not provide Company personnel with immunity from investigation or suit,
for which it is the responsibility of the individual to comply with the federal securities regulations.
•
Individual Responsibility
Persons subject to this Policy have ethical and legal obligations to maintain the confidentiality of
9
information about the Company and to not engage in transactions in the Company’s securities while in possession of
material non-public information.
Each individual is responsible for making sure that he or she complies with this Policy, and that any Related Person,
whose transactions are subject to this Policy, also comply with this Policy.
In all cases, the responsibility for determining whether an individual is in possession of material non- public
information rests with that individual, and any action on the part of the Company, the Policy Administrator or any
other employee or director pursuant to this Policy (or otherwise) does not in any way constitute legal advice or
insulate an individual from liability under applicable securities laws.
You may be subject to legal penalties and disciplinary action by law enforcement officials and/or the Company for any
conduct prohibited by this Policy or applicable securities laws, as described in Section III above.
Tipping Information to Others.
Company personnel must not disclose non-public information about the Company to others outside the
Company who do not have an obligation to maintain the confidentiality of such information.
If the outsider trades on such information, penalties for insider trading may apply in these situations whether or
not you derive any monetary benefit from the other person’s trading activities.
Material non-public information is often inadvertently disclosed or overheard in casual, social conversations.
Please take care to avoid such disclosures.
Prevention of Insider Trading by Others.
If you become aware of a potential insider trading violation, you must immediately advise our Policy
Administrator and/or report the matter using the Company’s anonymous whistleblower reporting procedures.
You should also take steps, where appropriate, to prevent persons under your supervision and/or control from
using material non-public information for trading purposes.
Moreover, Company-imposed sanctions, including termination for cause, could result if an employee fails to
comply with this Policy.
Confidentiality.
Serious problems could be caused for the Company by the unauthorized disclosure of internal information about
the Company, whether or not for the purpose of facilitating improper trading in the Company’s securities.
Company personnel should not discuss internal Company matters or developments (whether or not you think
such information is material) with anyone outside of the Company (including, but not limited to, family, friends,
business associates, investors and expert consulting firms), except as required in the performance of regular
corporate duties.
This prohibition applies specifically (but not exclusively) to inquiries about the Company that may be made by the
financial press, investment analysts or others in the financial community and also includes posting material non-
public information on any social media outlets such as Facebook or Twitter.
It is important that all such communications on behalf of the Company be made only through an
10
authorized officer under carefully controlled circumstances. (see Company Communication Policy)
Unless you are expressly authorized to the contrary, if you receive any inquiries of this nature, you should decline
comment and refer the inquirer to the Company’s CEO, Executive Chairman, COO or General Counsel.
•
Additional Prohibited Transactions
Because we believe it is generally improper and inappropriate for Company personnel to engage in short-term or
speculative transactions involving the Company’s securities, it is our policy that Company personnel and Related
Persons not engage in any of the following activities, except in each case in limited circumstances with prior approval
of the Policy Administrator:
•
trading in the Company’s securities on a short-term basis. Any shares of Company common stock purchased in
the open market must be held for a minimum of six months and ideally longer;
•
short sales of the Company’s securities;
•
the placement of any standing or limit orders on Company securities;
•
use of the Company’s securities to secure a margin or other loan;
•
transactions in straddles, collars or other similar risk reduction or hedging devices; and
•
transactions in publicly-traded options relating to the Company’s securities (i.e., options that are not granted by
the Company).
•
Post-Separation Transactions
This Policy will no longer apply after separation from service with the Company.
However, if an individual is in possession of material non-public information when he or she leaves the Company, that
individual may not trade in the Company’s securities until that information has become public or is no longer
material, and it would be prudent for the individual, if he or she is subject to a black-out period upon separation of
service, to refrain from trading until those restrictions no longer apply to Company personnel.
•
Company Assistance
Any person who has any questions about specific transactions or this Policy in general may obtain additional guidance
from the Policy Administrator.
Remember, however, the ultimate responsibility for adhering to this Policy and avoiding improper transactions rests
with you. In this regard, please use your best judgment when considering a transaction in the Company’s securities.
•
Certifications
As a condition to employment, all employees will be required to certify their understanding of and intent to comply
with this Policy. Members of the Board of Directors, Executive Officers, and other personnel may be required to
certify compliance on an annual basis.
11
As of December 6, 2023:
Exhibit A “Executive Officers”
All of the Company’s Executive Officers, comprising its:
1.
Chief Executive Officer
2.
Chief Operating Officer
3.
Chief Financial Officer
4.
General Counsel & Secretary
Exhibit B
“Financial Team Members”
All members of the Company’s financial team, including its:
1.
Chief Financial Officer
2.
Financial Officer (UK)
3.
Accounting Manager
Exhibit C
“Designated Employees”
Certain additional Company personnel, including its:
1.
Chief Scientific Officer
2.
Medical Director
3.
Head of Clinical Development
4.
Vice President, Worldwide Regulatory Affairs
5.
European Head of Regulatory Affairs
12
Certification Under Insider Trading Policy
The undersigned hereby certifies that he/she has been provided with a copy of, has read, understands, and agrees to
comply with, the Company’s Insider Trading Policy.
Date:
Signature
Name:
(Please Print)
Title:
13
APPENDIX A
Trading Plan Parameters
Conditions for Entry Into Trading Plans. Any Trading Plan must be entered into (i) in good faith and not as part of a plan or scheme to
evade the prohibitions of Rule 10b5-1 and (ii) at a time when a person is not in possession of material nonpublic information about
the Company or the securities subject to such plan. With respect to any Section 16 Person, the Trading Plan must also include a
representation by such officer or director certifying to such conditions in the preceding sentence. In addition to the condition that a
Trading Plan be entered into in good faith, Rule 10b5-1 requires the applicable person continue to act in good faith with respect to
the Trading Plan during its duration. A Trading Plan also must not permit you to exercise any subsequent influence over how, when,
or whether the purchases or sales are made. Entering into or altering a corresponding or hedging transaction or position with respect
to the securities under a Trading Plan is likewise prohibited.
As noted above, those who undertake transactions subject to a Trading Plan have an affirmative defense against any claim by the SEC
against you for insider trading if your trade was made under a Trading Plan that was entered into when you were not aware of
material nonpublic information. The rules regarding Trading Plans are complex and those who transact subject to one must fully
comply with such rules. Any subject to this Policy should consult with their legal advisor before proceeding.
Pre-Clearance of New Trading Plans.
To comply with this Policy, any Trading Plan must be pre-approved by the Policy Administrator, be documented in writing and be
established during a trading window. The Policy Administrator may refuse to approve a Trading Plan as he or she deems appropriate
including, without limitation, if he or she determines that such plan does not satisfy the requirements of Rule 10b5-1. The Policy
Administrator may consult with the Company’s legal counsel before approving a Trading Plan. If the Policy Administrator does not
approve a person’s proposed Trading Plan, such person must adhere to pre-clearance procedures and trading windows set forth in
these Trading Procedures until such time as a Trading Plan is approved.
Transactions effected pursuant to a pre-cleared Trading Plan will not require further pre- clearance at the time of the transaction if
the plan specifies the dates, prices and amounts of the contemplated trades, or establishes a formula for determining the dates,
prices and amounts.
Modification or Termination of Trading Plans.
Any deviation from, or alteration to, the specifications of an approved Trading Plan (including, without limitation, the amount, price
or timing of a purchase or sale), or termination of an approved Trading Plan, must be reported immediately to the Policy
Administrator.
To comply with these Trading Procedures, any modification or termination of a prior Trading Plan requires pre- approval by the Policy
Administrator, must occur during a trading window and while such such Trading Plan participant is not aware of material, nonpublic
information. Any such modification must also comply with the other requirements of the rules regarding Trading Plans, including, if
applicable, a new cooling off period described below.
You should understand that frequent modifications or terminations of a Trading Plan, even if the applicable cooling-off periods are
observed, may call into question the conditions that you entered into the Trading Plan in good faith and not as part of a plan or
scheme to evade the prohibitions of Rule 10b5-1. Frequent modifications or terminations therefore may jeopardize the availability of
the Rule 10b5-1 affirmative defense against insider
14
trading allegations.
Cooling-off Periods for Trades under Trading Plans. No trades may occur under a Trading Plan until the expiration of the applicable
cooling-off period described below. The applicable cooling-off period varies based on the status of the person.
•
Section 16 Persons: the cooling-off period ends on the later of (x) ninety (90) days after adoption of the Trading Plan; or (y)
two (2) business days following disclosure of the Company’s financial results in a Quarterly Report on Form 10-Q or an
Annual Report on Form 10-K covering the fiscal quarter in which the plan was adopted or modified, but in no event later
than one hundred twenty (120) days after adoption of the plan.
•
All persons other than Section 16 Persons: the cooling-off period ends thirty (30) days after adoption of the Trading Plan.
A new cooling-off period is required following the entry into a new Trading Plan and any of the following modifications to an existing
Trading Plan will be considered termination of such existing plan and the entry into a new Trading Plan, necessitating a new cooling
off period: any modification or change to the amount, price, or timing of the purchase or sale of the securities (which includes a
modification or change to a written formula or algorithm, or computer program that affects the amount, price, or timing of the
purchase or sale of the securities) underlying a Trading Plan as well as any modification, such as the substitution or removal of a
broker that is executing trades pursuant to a Trading Plan, that changes the price or date on which purchases or sales are to be
executed.
Prohibition on Multiple Outstanding Trading Plans. A person entering into a Trading Plan must have no outstanding Trading Plans for
purchases or sales of the Company’s securities on the open market (and shall not subsequently enter into any additional such plan),
subject to the following exceptions:
•
Series of contracts treated as a single plan: A series of separate contracts with different broker-dealers or other agents
acting on behalf of such person to execute trades thereunder may be treated as a single plan so long as the contracts when
taken together meet the conditions under Rule 10b5-1; provided that any modification of any individual contract in such a
series will be treated as a modification of each other contract in that series and a modification of the Trading Plan, which
modification may be considered a termination of the existing Trading Plan, necessitating a new cooling off period as
described above, provided that, the substitution of a broker-dealer or other agent acting on behalf of such person for
another broker dealer that is executing trades under such a Trading Plan shall not be considered a modification as long as
the purchase or sales instructions applicable to the substitute and substituted broker are identical with respect to the prices
of the Company’s securities to be purchased or sold, dates of the purchases or sales to be executed, and amounts of
securities to be purchased or sold.
•
Overlapping plans: There may be multiple concurrent Trading Plans if trading under such plans does not overlap such that
trading under a later commencing plan may not be authorized until all trades under the earlier commencing Trading Plan are
completed or expired without execution, provided that, the trades under the later commencing plan must comply with the
applicable cooling-off period described above, treating the termination date of the earlier-commencing plan as the date of
adoption of the later- commencing plan from which the cooling-off period commences. Any trades under a later-
commencing plan that occur during the applicable cooling-off period negate the ability of such later-commencing plan to
rely on the Rule 10b5-1 affirmative defense.
•
“Sell-to-cover” tax withholding plans: A separate contract, instruction or plan for purposes of “sell-to- cover” transactions
will not be considered an outstanding Trading Plan if such separate contract, instruction or
15
plan authorizes such person’s broker or other agent to sell only such of the Company’s securities as are necessary to satisfy
tax withholding obligations arising exclusively from the vesting of compensatory awards (e.g. restricted stock units) and such
person does not otherwise exercise control over the timing of such sales. The foregoing “sell-to-cover” transaction
exemption does not apply to sales incident to the exercise of option awards. A subject person may, however, enter into a
valid Trading Plan that provides instructions for, in addition to other trades, sell-to-cover transactions to satisfy tax
withholding obligations arising from the exercise of option awards1
16
“Single Trade” Trading Plans. A Trading Plan designed to effect the open-market purchase or sale of the total amount of the
Company’s securities subject to that plan as a single transaction cannot be entered into if the applicable person adopted a contract,
instruction or plan similarly designed to effect an open market purchase or sale in a single transaction in the prior 12 month period
and such contract, instruction or plan would otherwise qualify for the affirmative defense under Rule 10b5-1. The prohibition on
more than one “single trade” Trading Plan within a 12 month period does not prohibit sell-to-cover transactions described in the
immediately preceding bullet.
Disclosure of Trading Plans. The Company will disclose certain information regarding Trading Plans and any “non- Rule 10b5–1 trading
arrangement” (as defined in Item 408 of Regulation S-K2) entered into, terminated or modified by Section 16 Persons in the
Company’s Quarterly Reports on Form 10-Q and Annual Reports on Form 10-K during the fiscal quarter covered by the applicable
report, such as the date of the plan or arrangement’s adoption, the duration of such plan or arrangement and the number of the
Company’s securities to be purchased or sold under such plan or arrangement, provided that, no disclosure shall be made with
respect to pricing terms of such plan or arrangement. Section 16 Persons, by acknowledging their understanding of, and intent to
comply with, these Trading Procedures, agree to cooperate with the Company to provide any necessary information related to such
disclosure.
If you are a Section 16 Person, a Trading Plan’s compliance with Section 16 of the Exchange Act require special care because Section
16 Persons may not even be aware that a reportable transaction under a Trading Plan has taken place and may not be able to comply
with the SEC’s requirement to report on Form 4 purchases or sales of the Company’s securities within two business days after the
execution of the applicable transaction. Forms 4 and 5 include a mandatory checkbox indicating whether the transaction reportable
thereunder was intended to satisfy the affirmative defense conditions under a Trading Plan. Therefore, for Section 16 Persons, a
transaction executed according to a Trading Plan is not permitted unless the Trading Plan requires that your broker notify the
Company before the close of business on the day of the execution of the transaction.
1 As long as a Trading Plan satisfies the Rule 10b5-1’s conditions, a plan may provide for both sell-to-cover transactions and other planned trades.
2 Item 408(c) of Regulation S-K defines “non-Rule 10b5–1 trading arrangement” as an arrangement where: (1) the covered person asserts that at a time
when they were not aware of material nonpublic information about the security or the issuer of the security they had adopted a written arrangement
for trading the securities; and (2) the trading arrangement: (i) specified the amount of securities to be purchased or sold and the price at which and the
date on which the securities were to be purchased or sold;(ii) included a written formula or algorithm, or computer program, for determining the
amount of securities to be purchased or sold and the price at which and the date on which the securities were to be purchased or sold; or (iii) did not
permit the covered person to exercise any subsequent influence over how, when, or whether to effect purchases or sales; provided, in addition, that
any other person who, pursuant to the trading arrangement, did exercise such influence must not have been aware of material nonpublic information
when doing so.
Exhibit 21.1
Subsidiaries of Akari Therapeutics, Plc
The following table sets forth the name and jurisdiction of incorporation of our subsidiaries:
Name of Subsidiary
Jurisdiction of Incorporation
Celsus Therapeutics Inc.
Delaware
Morria Biopharma Ltd.
Israel
Volution Immuno Pharmaceuticals SA
Switzerland
Akari Malta Limited
Malta
Peak Bio Inc.
Delaware
Peak Bio Co., Ltd.
Republic of Korea
Ignyte Korea Co., Ltd.
Republic of Korea
Peak Bio CA, Inc.
California
Exhibit 23.1
Consent of Independent Registered Public Accounting Firm
We hereby consent to the incorporation by reference in the Registration Statements on Forms F-3 (Nos. 333-198107, 333-220052, 333-237389, 333-
251673, 333-258918 and 333-275119), Form S-3 (No. 333-281995) and Forms S-8 (Nos. 333-198109, 333-207444, 333-230998, 333-272301 and 333-
274954) of Akari Therapeutics, Plc (the Company) of our report dated April 15, 2025, relating to the consolidated financial statements which appear in this
Annual Report on Form 10-K. Our report contains an explanatory paragraph regarding the Company’s ability to continue as a going concern.
/s/ BDO USA, P.C.
New York, New York
April 15, 2025
Exhibit 31.1
CERTIFICATION OF THE PRINCIPAL EXECUTIVE OFFICER UNDER
SECTION 302 OF THE SARBANES-OXLEY ACT
I, Samir Patel, certify that:
1.
I have reviewed this annual report on Form 10-K of Akari Therapeutics, Plc;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this
report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects
the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The company’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-
15(f)) for the company and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision,
to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the
annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial
reporting; and
5.
The company’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting,
to the company’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal
control over financial reporting.
Date: April 15, 2025
/s/ Samir R. Patel, M.D.
Samir R. Patel, M.D.
President, Chief Executive Officer, and Director
(Principal Executive Officer)
Exhibit 31.2
CERTIFICATION OF THE PRINCIPAL FINANCIAL OFFICER UNDER
SECTION 302 OF THE SARBANES-OXLEY ACT
I, Torsten Hombeck, certify that:
1.
I have reviewed this annual report on Form 10-K of Akari Therapeutics, Plc;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this
report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects
the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The company’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-
15(f)) for the company and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision,
to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the
annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial
reporting; and
5.
The company’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting,
to the company’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal
control over financial reporting.
Date: April 15, 2025
/s/ Torsten Hombeck
Torsten Hombeck
Chief Financial Officer
(Principal Financial Officer)
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Akari Therapeutics, Plc (the “Company”) on Form 10-K for the year ended December 31, 2024, as filed
with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned officer of the Company certifies, pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to such officer’s knowledge:
1.
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or
78o(d)); and
2.
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the
Company.
Date: April 15, 2025
/s/ Samir R. Patel, M.D.
Samir R. Patel, M.D.
President, Chief Executive Officer, and Director
(Principal Executive Officer)
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Akari Therapeutics, Plc (the “Company”) on Form 10-K for the year ended December 31, 2024, as filed
with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned officer of the Company certifies, pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to such officer’s knowledge:
1.
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or
78o(d)); and
2.
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the
Company.
Date: April 15, 2025
/s/ Torsten Hombeck
Torsten Hombeck
Chief Financial Officer
(Principal Financial Officer)
Exhibit 97
Akari Therapeutics, Plc
Executive Officer Clawback Policy
Approved by the Board of Directors on November 27, 2023 (the “Adoption Date”)
I.
Purpose
This Executive Officer Clawback Policy describes the circumstances under which Covered Persons of Akari Therapeutics, Plc, a public company with
limited liability incorporated under the laws of England and Wales, and any of its direct or indirect subsidiaries (collectively, the “Company”) will be
required to repay or return Erroneously-Awarded Compensation to the Company.
This Policy and any terms used in this Policy shall be construed in accordance with all applicable SEC regulations promulgated to comply with Section 954
of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, including, without limitation, Rule 10D-1 promulgated under the Securities
Exchange Act of 1934, as amended (the “Exchange Act”), and the rules adopted by Nasdaq.
Each Covered Person shall sign an Acknowledgement and Agreement to the Clawback Policy in the form attached hereto as Exhibit A as a condition to his
or her participation in any of the Company’s incentive-based compensation programs;provided, that, this Policy shall apply to each Covered Person,
irrespective of whether such Covered Person shall have failed, for any reason, to have executed such acknowledgment and agreement.
II.
Definitions
For purposes of this Policy, the following capitalized terms shall have the respective meanings set forth below:
(a)
“Accounting Restatement” means an accounting restatement (i) due to the material noncompliance of the Company with any financial
reporting requirement under the securities laws, including any required accounting restatement to correct an error in previously issued
financial restatements that is material to the previously issued financial statements (a “Big R” restatement), or (ii) that corrects an error that is
not material to previously issued financial statements, but would result in a material misstatement if the error were corrected in the current
period or left uncorrected in the current period (a “little r” restatement). Notwithstanding the foregoing, none of the following changes to the
Company’s financial statements represent error corrections and shall not be deemed an Accounting Restatement: (a) retrospective application
of a change in accounting principle; (b) retrospective revision to reportable segment information due to a change in the structure of the
Company’s internal organization; (c) retrospective reclassification due to a discontinued operation; (d) retrospective application of a change
in reporting entity, such as from a reorganization of entities under common control; and (e) retrospective revision for share splits, reverse
share splits, share dividends or other changes in capital structure.
(b)
“Board” means the Board of Directors of the Company.
(c)
“Clawback-Eligible Incentive Compensation” means, in connection with an Accounting Restatement, any Incentive-Based Compensation
Received by a Covered Person (regardless of whether such Covered Person was serving at the time that Erroneously-Awarded Compensation
is required to be repaid) (i) on or after the Nasdaq Effective Date, (ii) after beginning service as a Covered Person, (iii) while the Company
has a class of securities listed on a national securities exchange or national securities association and (iv) during the Clawback Period.
(d)
“Clawback Period” means, with respect to any Accounting Restatement, the three completed fiscal years immediately preceding the
Restatement Date and any transition period (that results from a change in the Company’s fiscal year) of less than nine months within or
immediately following those three completed fiscal years. For avoidance of doubt, compensation received during the year ended December
31, 2023 shall be the earliest compensation subject to this Policy, but this Policy may apply to awards granted in prior years (e.g., a
performance share unit granted in 2021 that is earned based on 2021-2023 performance, if the relevant financial metrics are attained on or
after the October 2, 2023, which is the effective date of the listing standards). As an example for the application of the Clawback Period, if
the Company determines in November
2028 that a restatement is required and files a restatement in January 2029, this Policy would apply to Incentive-Based Compensation
Received during 2025, 2026 and 2027.
(e)
“Committee” means the Compensation Committee of the Board.
(f)
“Covered Person” means any person who is, or was at any time, during the Clawback Period, an Executive Officer. For the elimination of
doubt, Covered Person may include a former Executive Officer who left the Company, retired or transitioned to a non-Executive Officer role
(including after serving as an Executive Officer in an interim capacity) during the Clawback Period, and this Policy applies regardless of
whether the Covered Person was at fault for an accounting error that resulted in, or contributed to, the Accounting Restatement.
(g)
“Erroneously-Awarded Compensation” means the amount of Clawback-Eligible Incentive Compensation that exceeded the amount of
Incentive-Based Compensation that otherwise would have been Received had it been determined based on the restated amounts set forth in
the Accounting Restatement. This amount must be computed without regard to any taxes paid.
(h)
“Executive Officer” means the Company’s president, principal financial officer, principal accounting officer (or if there is no such
accounting officer, the controller), any vice-president in charge of a principal business unit, division, or function (such as sales,
administration, or finance), any other officer who performs a policy-making function, or any other person (including an officer of the
Company’s parent(s) or subsidiaries) who performs similar policy-making functions for the Company. For the sake of clarity, at a minimum,
all persons who are executive officers pursuant to Item 401(b) of Regulation S-K shall be deemed “Executive Officers”.
(i)
“Financial Reporting Measures” means measures that are determined and presented in accordance with the accounting principles used in
preparing the Company’s financial statements, and all other measures that are derived wholly or in part from such measures, including,
without limitation, measures that are “non-GAAP financial measures” for purposes of Exchange Act Regulation G and Item 10(e) of
Regulation S-K, as well other measures, metrics and ratios that are not non-GAAP measures. For purposes of this Policy, Financial Reporting
Measures shall include share price and total shareholder return (and any measures that are derived wholly or in part from share price or total
shareholder return). A Financial Reporting Measure need not be presented within the Company’s financial statements or included in a
Company filing with the SEC.
(j)
“Incentive-Based Compensation” has the meaning set forth in Section III below.
(k)
“Nasdaq” means The Nasdaq Stock Market LLC.
(l)
“Nasdaq Effective Date” means October 2, 2023.
(m)
“Policy” means this Executive Officer Clawback Policy, as the same may be amended or restated from time to time.
(n)
“Received” means Incentive-Based Compensation received, or deemed to be received, in the Company’s fiscal period during which the
Financial Reporting Measure specified in the Incentive-Based Compensation award is attained, even if the payment or grant occurs after such
fiscal period.
(o)
“Repayment Agreement” has the meaning set forth in Section V below.
(p)
“Restatement Date” means the earlier of (i) the date the Board, a committee of the Board or the officers of the Company authorized to take
such action if Board action is not required, concludes, or reasonably should have concluded, that the Company is required to prepare an
Accounting Restatement and (ii) the date that a court, regulator or other legally authorized body directs the Company to prepare an
Accounting Restatement.
(q)
“RSUs” means restricted share units.
(r)
“SARs” means share appreciation rights.
(s)
“SEC” means the U.S. Securities and Exchange Commission.
III.
Incentive-Based Compensation
“Incentive-Based Compensation” means any compensation that is granted, earned or vested based wholly or in part upon the attainment of a Financial
Reporting Measure.
For purposes of this Policy, specific examples of Incentive-Based Compensation include, but are not limited to:
•
Non-equity incentive plan awards that are earned based, wholly or in part, based on satisfaction of a Financial Reporting Measure-based
performance goal;
•
Bonuses paid from a “bonus pool,” the size of which is determined, wholly or in part, based on satisfaction of a Financial Reporting
Measure-based performance goal;
•
Other cash awards based on satisfaction of a Financial Reporting Measure-based performance goal;
•
Restricted shares, RSUs, performance share units, share options and SARs that are granted or become vested, wholly or in part, on
satisfaction of a Financial Reporting Measure-based performance goal; and
•
Proceeds Received upon the sale of shares acquired through an incentive plan that were granted or vested based, wholly or in part, on
satisfaction of a Financial Reporting Measure-based performance goal.
For purposes of this Policy, Incentive-Based Compensation excludes:
•
Base salaries (except with respect to any salary increases earned, wholly or in part, based on satisfaction of a Financial Reporting Measure-
based performance goal);
•
Bonuses paid solely at the discretion of the Committee or Board that are not paid from a “bonus pool” that is determined by satisfying a
Financial Reporting Measure-based performance goal;
•
Bonuses paid solely upon satisfying one or more subjective standards or completion of a specified employment period;
•
Non-equity incentive plan awards earned solely upon satisfying one or more strategic measures or operational measures; and
•
Equity awards that vest solely based on the passage of time or satisfaction of one or more non-Financial Reporting Measures.
IV.
Determination and Calculation of Erroneously-Awarded Compensation
In the event of an Accounting Restatement, the Committee shall determine the amount of any Erroneously-Awarded Compensation for each Executive
Officer in connection with such Accounting Restatement and shall promptly thereafter provide each Executive Officer with a written notice containing the
amount of Erroneously-Awarded Compensation and a demand for repayment, return, or forfeiture thereof, as applicable.
(a)
Cash Awards. With respect to cash awards, the Erroneously-Awarded Compensation is the difference between the amount of the cash award
(whether payable as a lump sum or over time) that was Received and the amount that should have been Received applying the restated
Financial Reporting Measure.
(b)
Cash Awards Paid From Bonus Pools. With respect to cash awards paid from bonus pools, the Erroneously-Awarded Compensation is the
pro rata portion of any deficiency that results from the aggregate bonus pool that is reduced based on applying the restated Financial
Reporting Measure.
(c)
Equity Awards. With respect to equity awards, if the shares, options, RSUs, performance share units, SARS or other equity awards are still
held at the time of recovery, the Erroneously-Awarded Compensation is the number of such securities Received in excess of the number that
should have been Received applying the restated Financial Reporting Measure (or the value in excess of that number). If the restricted shares,
options, RSUs, PSUs, SARs or other equity awards have been exercised, vested, settled, or otherwise been converted into the underlying
shares, but the underlying shares have not been sold, the Erroneously-Awarded Compensation is the number of shares underlying the excess
shares, options, SARs, RSUs, PSUs or other equity awards (or the value thereof). If the underlying shares have already been sold.
(d)
Compensation Based on ADS Price or Total Shareholder Return. For Incentive-Based Compensation based on (or derived from) ADS
price or total shareholder return, where the amount of Erroneously-Awarded Compensation is not subject to mathematical recalculation
directly from the information in the applicable Accounting Restatement, the amount shall be determined by the Committee based on a
reasonable estimate of the effect of the Accounting Restatement on the ADS price or total shareholder return upon which the Incentive-Based
Compensation was Received (in which case, the Committee shall maintain documentation of such determination of that reasonable estimate
and provide such documentation to Nasdaq in accordance with applicable listing standards).
V.
Recovery of Erroneously-Awarded Compensation
Once the Committee has determined the amount of Erroneously-Awarded Compensation recoverable from the applicable Covered Person, the Committee
shall take action to recover the Erroneously-Awarded Compensation reasonably promptly. The Company’s obligation to recover Erroneously-Awarded
Compensation is not dependent on if or when the restated financial statements pursuant to the applicable Accounting Restatement are filed with the SEC.
Unless otherwise determined by the Committee, the Committee shall pursue the recovery of Erroneously-Awarded Compensation as set forth below:
(a)
Cash Awards. With respect to cash awards, the Committee shall either (i) require the Covered Person to repay the Erroneously-Awarded
Compensation in a lump sum in cash (or such property as the Committee agrees to accept with a value equal to such Erroneously-Awarded
Compensation) or (ii) if approved by the Committee, offer to enter into a Repayment Agreement. If the Covered Person accepts such offer
and signs the Repayment Agreement within a reasonable time as determined by the Committee, the Company shall countersign such
Repayment Agreement.
(b)
Unvested Equity Awards. With respect to those equity awards that have not yet vested, the Committee shall take such action as is necessary
to cancel, or otherwise cause to be forfeited, the awards in the amount of the Erroneously-Awarded Compensation.
(c)
Vested Equity Awards. With respect to those equity awards that have vested or been exercised and the underlying shares have not been
sold, the Committee shall take such action as is necessary to cause the Covered Person to deliver and surrender the underlying shares in the
amount of the Erroneously-Awarded Compensation.
In the event that the Covered Person has sold the underlying shares, the Committee shall either (i) require the Covered Person to repay the
Erroneously-Awarded Compensation in a lump sum in cash (or such property as the Committee agrees to accept with a value equal to such
Erroneously-Awarded Compensation) or (ii) if approved by the Committee, offer to enter into a Repayment Agreement. If the Covered
Person accepts such offer and signs the Repayment Agreement within a reasonable time as determined by the Committee, the Company shall
countersign such Repayment Agreement.
(d)
Repayment Agreement. “Repayment Agreement” means a written agreement (in a form reasonably acceptable to the Committee) with the
Covered Person that provides for the Covered Person’s the repayment of the Erroneously-Awarded Compensation as promptly as possible
without unreasonable economic hardship to the Covered Person.
(e)
Effect of Non-Repayment.To the extent that a Covered Person fails to repay all Erroneously-Awarded Compensation to the Company when
due (as determined in accordance with this Policy), the Company shall take all actions reasonable and appropriate to recover such
outstanding Erroneously-Awarded Compensation from the applicable Covered Person.
The Committee shall have broad discretion to determine the appropriate means of recovery of Erroneously-Awarded Compensation based on
all applicable facts and circumstances and taking into account the time value of money and the cost to shareholders of delaying recovery.
However, in no event may the Company accept an amount that is less than the amount of Erroneously-Awarded Compensation in
satisfaction of a Covered Person’s obligations hereunder.
VI.
Discretionary Recovery
Notwithstanding anything herein to the contrary, the Company shall not be required to take action to recover Erroneously-Awarded Compensation if any
one of the following conditions are met and the Committee (or in lieu of such a committee, a majority of the independent directors serving on the Board)
determines that recovery would be impracticable:
(i)
The direct expenses paid to a third party to assist in enforcing this Policy against a Covered Person would exceed the amount to be recovered,
after the Company has made a reasonable attempt to recover the applicable Erroneously-Awarded Compensation, documented such attempts
and provided such documentation to Nasdaq;
(ii)
Recovery would violate home country law where that law was adopted prior to November 28, 2022, provided that, before determining that it
would be impracticable to recover any amount of Erroneously-Awarded Compensation based on violation of home country law, the
Company has obtained an opinion of home country counsel, acceptable to Nasdaq, that recovery would result in such a violation and a copy
of the opinion is provided to Nasdaq; or
(iii)
Recovery would likely cause an otherwise tax-qualified retirement plan, under which benefits are broadly available to employees of the
Company, to fail to meet the requirements of 26 U.S.C. 401(a)(13) or 26 U.S.C. 411(a) and regulations thereunder, which rules generally
restrict the ability of a plan to distribute any portion of a participant's accrued benefit without the participant's consent.
VII.
Reporting and Disclosure Requirements
The Company shall file all disclosures with respect to this Policy in accordance with the requirements of the federal securities laws, including the
disclosure required by the applicable filings required to be made with the SEC.
VIII. Effective Date
This Policy shall apply to all Incentive-Based Compensation Received on or after the Nasdaq Effective Date.
IX.
No Indemnification
The Company shall not indemnify any Covered Person against the loss of Erroneously-Awarded Compensation and shall not pay, or reimburse any
Covered Persons for premiums, for any insurance policy to fund such Covered Person’s potential recovery obligations.
X.
Administration
The Committee has the sole discretion to administer this Policy and ensure compliance with Nasdaq listing rules and any other applicable law, regulation,
rule or interpretation of the SEC or Nasdaq promulgated or issued in connection therewith. The Committee shall, subject to the provisions of this Policy,
make such determinations and interpretations and take such actions as it deems necessary, appropriate or advisable. All determinations and interpretations
made by the Committee shall be final, binding and conclusive.
XI.
Amendment; Termination
The Board may amend this Policy from time to time in its discretion and shall amend this Policy as it deems necessary, including as and when it determines
that it is legally required by any federal securities laws, SEC rule or the rules of any national securities exchange or national securities association on which
the Company’s securities are then listed. The Board may terminate this Policy at any time. Notwithstanding anything in this Section XI to the contrary, no
amendment or termination of this Policy shall be effective if such amendment or termination would (after taking into account any actions taken by the
Company contemporaneously with such amendment or termination) cause the Company to violate any federal securities laws, SEC rule, or the rules of any
national securities exchange or national securities association on which the Company’s securities are then listed. The Committee may delegate
implementation and enforcement of this Policy to the Company’s management, including, without limitation, the calculation of Erroneously-Awarded
Compensation.
XII.
Other Recoupment Rights; No Additional Payments
The Committee intends that this Policy will be applied to the fullest extent of the law. The Committee may require that any employment agreement, equity
award agreement or any other agreement entered into on or after the Adoption Date shall, as a condition to the grant of any benefit thereunder, require a
Covered Person to agree to abide by the terms of this Policy; provided, that, his Policy shall apply to all Covered persons irrespective of any such explicit
agreement. Any right of recoupment under this Policy is in addition to, and not in lieu of, any other rights under applicable law, regulation or rule or any
similar policy in any employment agreement, equity plan, equity award agreement or similar arrangement and any other legal remedies available to the
Company. However, this Policy shall not provide for recovery of Incentive-Based Compensation that the Company has already recovered pursuant to
Section 304 of the Sarbanes-Oxley Act or other recovery obligations.
XIII. Successors
This Policy shall be binding and enforceable against all Covered Persons and their beneficiaries, heirs, executors, administrators or other legal
representatives.
Exhibit A
ACKNOWLEDGEMENT AND AGREEMENT
TO THE
EXECUTIVE OFFICER CLAWBACK POLICY
OF
AKARI THERAPEUTICS, PLC
By signing below, the undersigned acknowledges and confirms that the undersigned has received and reviewed a copy of Akari Therapeutics, Plc’s
Executive Officer Clawback Policy (the “Policy”). Capitalized terms used but not otherwise defined in this Acknowledgement Form (this
“Acknowledgement Form”) shall have the meanings ascribed to such terms in the Policy.
By signing this Acknowledgement Form, the undersigned acknowledges and agrees that the undersigned is and will continue to be subject to the Policy and
that the Policy will apply both during and after the undersigned’s employment with the Company. Further, by signing below, the undersigned agrees to
abide by the terms of the Policy, including, without limitation, by returning any Erroneously-Awarded Compensation (as defined in the Policy) to the
Company to the extent required by, and in a manner permitted by, the Policy.
Signature
Name
Date