Akari Therapeutics Plc

Previous wording

We are a clinical-stage biotechnology company focused on developing advanced therapies for autoimmune and inflammatory diseases involving the C5 and LTB4 pathways. Each of these pathways has scientifically well-supported causative roles in the diseases we are targeting. We believe that blocking early mediators of inflammation will prevent initiation and continual amplification of the processes that cause certain diseases. Our activities since inception have consisted of performing research and development activities and raising capital.

Current wording

We are a biotechnology company focused on developing advanced therapies for autoimmune and inflammatory diseases involving the C5 and LTB4 pathways. Each of these pathways has scientifically well-supported causative roles in the diseases we are targeting. We believe that blocking early mediators of inflammation will prevent initiation and continual amplification of the processes that cause certain diseases. Our activities since inception have consisted of performing research and development activities and raising capital.

Previous wording

Up until May 2024, we were conducting a clinical trial of subcutaneous nomacopan for the treatment of hematopoietic stem cell transplant-related thrombotic microangiopathy (“HSCT-TMA”) in pediatrics. Following completion of a portfolio prioritization review, we announced that our HSCT-TMA program will be suspended, as more fully described below. We are currently investigating long-acting PASylated-nomacopan (“PAS-nomacopan”) for treatment of Geographic Atrophy (“GA”) secondary to dry age-related macular degeneration (“dry AMD”) in preclinical studies and expect to hold a pre-investigational new drug application meeting in the third quarter of 2024.

Current wording

Up until May 2024, we were conducting a clinical trial of subcutaneous nomacopan for the treatment of hematopoietic stem cell transplant-related thrombotic microangiopathy (“HSCT-TMA”) in pediatrics. Following completion of a portfolio prioritization review, we announced that our HSCT-TMA program will be suspended, as more fully described below. We are currently investigating long-acting PASylated-nomacopan (“PAS-nomacopan”) for treatment of Geographic Atrophy (“GA”) secondary to dry age-related macular degeneration (“dry AMD”) in preclinical studies and expect to file an Investigational New Drug (“IND”) application in 2025.

Previous wording

On May 1, 2024, we announced the completion of a joint portfolio prioritization review pursuant to which the anticipated combined entity, following completion of the previously announced Merger (as defined below), will focus on Peak Bio’s antibody drug conjugate (“ADC”) platform technology and our PAS-nomacopan GA program. As a result, our HSCT-TMA program will be suspended, with enrollment in its currently active pediatric clinical study discontinued due to cost and timeline. Following closing of the Merger, we plan to work closely with the U.S. Food and Drug Administration to define the best path for this technology and consider the opportunity for partnership and licensing, specifically as it relates to the potential eligibility for a priority review voucher in connection with future marketing applications for nomacopan, including as a treatment for pediatric HSCT-TMA.

Current wording

In May 2024, we announced the completion of a joint portfolio prioritization review pursuant to which the anticipated combined entity, following completion of the previously announced Merger (as defined below), will focus on Peak Bio’s antibody drug conjugate (“ADC”) platform technology and our PAS-nomacopan GA program. As a result, our HSCT-TMA program was suspended, with enrollment in its pediatric clinical study discontinued due to cost and timeline. Following closing of the Merger, we plan to work closely with the U.S. Food and Drug Administration to define the best path for this technology and consider the opportunity for partnership and licensing, specifically as it relates to the potential eligibility for a priority review voucher in connection with future marketing applications for nomacopan, including as a treatment for pediatric HSCT-TMA.

Previous wording

On May 1, 2024, we began to implement a reduction-in-force of approximately 67% of our total workforce, as a result of the recently announced program prioritization under which our HSCT-TMA program was suspended. The reduction-in-force is part of an operational restructuring plan and includes the elimination of certain senior management positions. The purpose of the restructuring plan, including the reduction-in-force, is to reduce HSCT-TMA related operating costs, while supporting the execution of our long-term strategic plan.

Current wording

In May 2024, we began to implement 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 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 substantially completed by the end of the second quarter. The purpose of the restructuring plan, including the reduction-in-force, is to reduce HSCT-TMA related operating costs, while supporting the execution of our long-term strategic plan. For additional information, refer to the below discussion under the heading “Restructuring and Other Costs” and Note 2 to the notes to unaudited condensed consolidated financial statements included elsewhere in this Form 10-Q.

Previous wording

For additional information on the Merger, refer to Note 3 to our notes to unaudited condensed consolidated financial statements included elsewhere in this Form 10-Q.

Current wording

For additional information on the Merger, refer to Note 3 to the notes to unaudited condensed consolidated financial statements included elsewhere in this Form 10-Q.

Previous wording

During the three months ended March 31, 2024, our loss from operations totaled $6.0 million, a 30% increase, compared to a loss from operations of $4.6 million for the three months ended March 31, 2023. General and administrative expenses comprise the majority of our total operating expenses, as shown in the table below:

Current wording

During the three months ended June 30, 2024, our loss from operations totaled $7.4 million, a 61% increase, compared to a loss from operations of $4.6 million for the three months ended June 30, 2023. During the six months ended June 30, 2024, our loss from operations totaled $13.4 million, a 46% increase, compared to a loss from operations of $9.2 million for the six months ended June 30, 2023. Our total operating expenses are set forth by category in the table below:

Previous wording

During the three months ended March 31, 2024, total research and development expenses increased by approximately $0.5 million, or 32%, as compared to the three months ended March 31, 2023. The following sets forth research and development expenses for the three months ended March 31, 2024 and 2023 by category:

Current wording

During the three months ended June 30, 2024, total research and development expenses increased by approximately $1.8 million, or 117%, as compared to the three months ended June 30, 2023. During the six months ended June 30, 2024, total research and development expenses increased by approximately $2.3 million, or 72%, as compared to the six months ended June 30, 2023. The following sets forth research and development expenses for the three and six months ended June 30, 2024 and 2023 by category:

Previous wording

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 $0.4 million, or 233%, increase in expenses incurred during the 2024 period, as compared to 2023, is primarily due to increases in patient enrollment and related clinical trial costs. In May 2024, following the completion of a pipeline prioritization review, we determined to suspend our HSCT-TMA program. Accordingly, we expect future HSCT-TMA costs to decrease reflecting the winddown and closeout of the clinical study.

Current wording

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. Expenses incurred during the three months ended June 30, 2024 were consistent with the three months ended June 30, 2023. The $0.1 million, or 16%, decrease in expenses incurred during the three months ended June 30, 2024, as compared to 2023, is primarily due to suspension of our HSCT-TMA program in May 2024, as further described below. The $0.4 million, or 50%, increase in expenses incurred during the six months ended June 30, 2024, as compared to 2023, is primarily due to increases in patient enrollment and related clinical trial costs incurred during the first quarter of 2024, prior to suspension of the program. In May 2024, following the completion of a pipeline prioritization review, we determined to suspend our HSCT-TMA program. Accordingly, we expect future HSCT-TMA costs to decrease reflecting the winddown and closeout of the clinical trial.

Previous wording

These expenses include external expenses incurred related to the development and manufacturing of nomacopan for use in clinical trials and development of PAS-nomacopan. Such expenses primarily consist of payments to CMOs and other vendors for manufacturing of drug substances (including raw materials), drug product, supplies, and validation, quality assurance and manufacturing development activities. The $0.4 million, or 155%, increase in expenses incurred during the 2024 period, as compared to 2023, is primarily due to timing of manufacturing and development activities, including increased spending on the development of and preparation for manufacturing of PAS-nomacopan.

Current wording

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. Such expenses primarily consist of payments to CMOs and other vendors for manufacturing of drug substances (including raw materials), drug product, supplies, and validation, quality assurance and manufacturing development activities. The $1.7 million, or 295%, increase in expenses incurred during the three months ended June 30, 2024 and $2.1 million, or 249%, increase in expenses incurred during the six months ended June 30, 2024, each as compared to the corresponding periods in 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, as well as completion of PAS-nomacopan good manufacturing practice (“GMP”) drug substance manufacturing during the second quarter of 2024.

Previous wording

These expenses include external expenses, such as payments to contract vendors, which may be related to preclinical development activities and other unallocated expenses. The $0.3 million, or 46%, decrease in expenses incurred during the 2024 period, as compared to 2023, is primarily related to lower costs incurred related to preclinical studies and other development work investigating PAS-nomacopan for the treatment of GA.

Current wording

These expenses include external expenses, such as payments to contract vendors, which may be related to preclinical development activities and other unallocated expenses. The $0.2 million, or 41%, decrease in expenses incurred during the three months ended June 30, 2024 and $0.5 million, or 44%, decrease in expenses incurred during the six months ended June 30, 2024, each as compared to the corresponding periods in 2023, is primarily related to lower costs incurred related to preclinical studies and other development work investigating PAS-nomacopan for the treatment of GA.

Previous wording

These expenses include compensation and related costs associated with employees, independent consultants and staffing firms. The less than $0.1 million, or 9% decrease during the 2024 period, as compared to 2023, is primarily due to lower costs incurred with independent consultants.

Current wording

These expenses include compensation and related costs associated with employees, independent consultants and staffing firms. The $0.7 million, or 65%, decrease in expenses incurred during the three months ended June 30, 2024 and $0.7 million, or 42%, decrease in expenses incurred during the six months ended June 30, 2024, each as compared to the corresponding periods in 2023, is primarily due to the impact of the RIF which was announced in May 2024, along with lower costs incurred with independent consultants. Separation benefits paid to impacted employees are classified separately under “Restructuring and other costs” as discussed below.

Previous wording

During each of the three months ended March 31, 2024 and 2023, interest income was less than $0.1 million and not material. Amounts may fluctuate from period to period due to changes in average cash balances and prevailing interest rates.

Current wording

During the three and six months ended June 30, 2024 and 2023, interest income was less than $0.1 million. Interest income may fluctuate from period to period due to changes in average cash balances and prevailing interest rates.

Previous wording

During the three months ended March 31, 2024 and 2023, we recorded a change in the fair value of warrant liability, representing a non-cash warrant revaluation gain of approximately $0.6 million and $5.6 million, respectively, related to our liability-classified September 2022 Warrants, as more fully described in Note 4 and Note 6 of the notes to the condensed consolidated financial statements appearing elsewhere in this Form 10-Q. Due to the nature of and inputs in the model used to assess the fair value of our outstanding September 2022 Warrants, it is not abnormal 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. Changes in the fair value of the warrant liability and resulting warrant revaluation gains for each of the three months ended March 31, 2024 and 2023 was driven primarily by the decrease in our stock price of approximately 40% and 62% during each of the reporting periods, respectively.

Current wording

Change in fair value of warrant liability represents non-cash warrant revaluation gains or losses related to the remeasurement of our liability-classified September 2022 Warrants, as more fully described in Note 2 and Note 4 of the notes to the condensed consolidated financial statements appearing elsewhere in this Form 10-Q. Due to the nature of and inputs in the model used to assess the fair value of our outstanding September 2022 Warrants, it is not abnormal 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.

Previous wording

During the three months ended March 31, 2024 and 2023, we recorded a net foreign currency exchange loss of $0.2 million and less than $0.1 million, respectively. 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.

Current wording

During the three months ended June 30, 2024, we recorded a net foreign currency exchange gain of $0.1 million, as compared to a net foreign currency exchange loss for the three months ended June 30, 2023. During each of the six months ended June 30, 2024 and 2023, we recorded a net foreign currency exchange gain of 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.

Previous wording

During the three months ended March 31, 2024 and 2023, net other expense was less than $0.1 million and not material. Such expenses are not expected to be material to our future results of operations.

Current wording

During each of the three and six months ended June 30, 2024 and 2023, net other expense was less than $0.1 million and not material. Such expenses are not expected to be material to our future results of operations.

Previous wording

Net (Loss) Income Applicable to Ordinary Shareholders

Current wording

Net Loss Applicable to Ordinary Shareholders

Previous wording

As a result of the factors discussed above, net loss applicable to ordinary shareholders for the three months ended March 31, 2024 was $5.6 million, compared to net income applicable to ordinary shareholders for the three months ended March 31, 2023 of $1.0 million.

Current wording

As a result of the factors discussed above, net loss applicable to ordinary shareholders for the three months ended June 30, 2024 and 2023 was $7.6 million and $4.0 million, respectively. Net loss applicable to ordinary shareholders for the six months ended June 30, 2024 and 2023 was $13.1 million and $3.0 million, respectively.

Previous wording

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. At March 31, 2024, we had $1.3 million in cash and an accumulated deficit of $233.0 million. To date, we have not generated any revenue.

Current wording

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 June 30, 2024, we had $4.2 million in cash and an accumulated deficit of $240.6 million. To date, we have not generated any revenue.

Previous wording

Following the issuance of the May 2024 Notes, we currently do not have any firm 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 applications 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 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.

Current wording

We currently do not have any firm 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 applications 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 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.

Previous wording

As of the date of this report, our existing cash, which includes $1.0 million in gross proceeds received from the May 2024 Notes, is sufficient to fund our operations to the end of May 2024. Our Board has approved that we raise additional capital, and, with anticipated insider support, we intend to close a financing which we expect will enable us to fund our operations through the anticipated closing of the Merger in the third quarter of 2024. Further, closing of the Merger is contingent on the PIPE Investment (as defined in the Merger Agreement) which shall have been consummated simultaneously with, and conditioned only upon, the occurrence of the closing, and shall result in net proceeds to us of at least $10 million. 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, clinical funding arrangements, the sale or license of technology assets, and/or other strategic alternatives.

Current wording

As of the date of this report, we expect our existing cash to be sufficient to fund our operations into the fourth quarter of 2024. Further, closing of the Merger is contingent on the PIPE Investment (as defined in the Merger Agreement) which shall have been consummated simultaneously with, and conditioned only upon, the occurrence of the closing, and shall result in net proceeds to us of at least $10 million. 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, clinical funding arrangements, the sale or license of technology assets, and/or other strategic alternatives.

Previous wording

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 condensed consolidated financial statements, included elsewhere in this Form 10-Q (such condensed 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.

Current wording

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 condensed consolidated financial statements, included elsewhere in this Form 10-Q (such condensed consolidated financial statements, the “consolidated financial statements”) are issued. The accompanying condensed 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 condensed 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.

Previous wording

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 three months ended March 31, 2024, as compared to the 2023 period, was primarily due to deferrals of payables in order to preserve cash until additional capital is raised for working capital purposes.

Current wording

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 six months ended June 30, 2024, as compared to the 2023 period, was primarily due to the net impact of deferrals of payables in order to preserve cash until additional capital is raised for working capital purposes, partially offset by an increase in operating expenses.

Previous wording

Investment Activities. There were no investing activities during the three months ended March 31, 2024 and 2023.

Current wording

Investment Activities. There were no investing activities during the six months ended June 30, 2024 and 2023.

Previous wording

For the three months ended March 31, 2024, an aggregate of $1.7 million in net proceeds received from the March 2024 Private Placement, partially offset by $0.2 million in payments related to our short-term insurance premium financing arrangement; and

Current wording

For the six months ended June 30, 2024, an aggregate of $9.3 million in net proceeds received from debt and equity financings, 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 Notes, and (iii) $7.1 million in net proceeds from the May 2024 Private Placement, partially offset by $0.5 million in payments related to our short-term insurance premium financing arrangement; and

Previous wording

For the three months ended March 31, 2023, an aggregate of $3.2 million in net proceeds received from the March 2023 Registered Direct Offering.

Current wording

For the six months ended June 30, 2023, an aggregate of $3.5 million in net proceeds received from the March 2023 Registered Direct Offering.

Previous wording

During the three months ended March 31, 2024, there were no material changes outside the ordinary course of our business to our contractual obligations and cash requirements, as disclosed in our Form 10-K.

Current wording

During the six months ended June 30, 2024, there were no material changes outside the ordinary course of our business to our contractual obligations and cash requirements, as disclosed in our Form 10-K.