Akari Therapeutics Plc

Current report

Risk Factors Summary

Current report

Our business is subject to a number of risks and uncertainties, including those risks discussed at length below. These risks include, among others, the following principal risk factors that make an investment in our company speculative or risky. You are encouraged to carefully review our full discussion of the material risk factors relevant to an investment in our business, which follows the brief bulleted list of our principal risk factors set forth below:

Current report

We have a history of operating losses and cannot give assurance of future revenues or operating profits; investors may lose their entire investment.

Current report

Our auditor’s report on our consolidated financial statements states that our recurring operating losses, negative cash flows and dependence on additional financial support raises substantial doubt about our ability to continue as a going concern, which may have a detrimental effect on our ability to obtain additional funding.

Current report

There is no guarantee that our merger with Peak Bio will increase shareholder value or that Peak Bio will be successfully integrated into our operations or achieve its desired benefits.

Current report

Recent adjustments to our operating plans, including our pipeline prioritization and reduction-in-force may not be successful.

Current report

We will require 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.

Current report

Our business depends on the success of PAS-nomacopan, which is still under development. If we are unable to obtain marketing authorization for or successfully commercialize PAS-nomacopan, our business could be materially harmed.

Current report

If clinical trials or marketing authorization processes for PAS-nomacopan or any future product candidates are prolonged, delayed or suspended, we may be unable to commercialize PAS-nomacopan or any future product candidates on a timely basis.

Current report

The efficacy of PAS-nomacopan or any future product candidates may not be known until advanced stages of testing, after we have incurred significant product development costs which may not be recoverable.

Current report

Results of earlier preclinical studies or clinical trials may not be predictive of advancement to the next phase of development.

Current report

Long-term animal toxicity and long-term human safety studies of PAS-nomacopan could demonstrate that the administration of PAS-nomacopan results in serious adverse events.

Current report

Chronic dosing of patients with PAS-nomacopan could lead to an immune response that causes adverse reactions or impairs the activity of the drug.

Current report

Because PAS-nomacopan has not yet received marketing authorization, it is difficult to predict the time and cost of development and our ability to successfully complete clinical development and obtain the necessary marketing authorizations for commercialization.

Current report

We have obtained orphan drug designation for nomacopan in the United States for the use in bullous pemphigoid (“BP”), paroxysmal nocturnal hemoglobinuria (“PNH”), Guillain-Barré syndrome (“GBS”), hematopoietic stem cell transplantation-associated thrombotic microangiopathy (“HSCT-TMA”) and in the EU for GBS, PNH and BP but we may be unable to maintain the benefits associated with orphan drug designation or obtain orphan drug exclusivity upon potential approval of nomacopan in one or more of these orphan indications.

Current report

We have obtained fast track designation from the FDA for the treatment of HSCT-TMA, and may seek such designation in other indications. Such designation or a similar designation from other national or international regulatory agencies, may not lead to a faster development or regulatory review or approval process, and may not result in nomacopan or any other product candidates receiving marketing approval.

Current report

Even if we obtain FDA approval of PAS-nomacopan or any other future product candidates, we or our partners may never obtain approval or commercialize our product candidates outside of the United States and, conversely, even if we obtain marketing authorization of PAS-nomacopan or any other future product candidates in the EU, we or our partners may never obtain approval or commercialize our product candidates outside the EU.

Current report

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.

Current report

Our success depends in part on our ability to protect our intellectual property and our proprietary technologies.

Current report

We currently have no marketing, sales or distribution infrastructure with respect to PAS-nomacopan or other product candidates we may pursue following the Merger. If we are unable to develop our sales, marketing and distribution capability on our own or through collaborations with partners, we may not be successful in commercializing any approved drugs.

Current report

If physicians and patients do not adopt our products, if approved, or if the market size for indications for which any product candidate is approved is smaller than expected, we may be unable to achieve forecasted revenues, if any.

Current report

If product liability lawsuits are successfully brought against us or any of our collaborative partners, we may incur substantial liabilities and may be required to limit commercialization of our products.

Current report

If we fail to develop and commercialize other product candidates, we may be unable to generate revenues.

Current report

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.

Current report

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.

Current report

Ownership of our ADSs and/or ordinary shares involves a high degree of risk.

Current report

Risks Relating to Our Financial Position and Our Business

Current report

We have a history of operating losses and cannot give assurance of future revenues or operating profits; investors may lose their entire investment.

Current report

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 $10.0 million and $17.7 million for the years ended December 31, 2023 and 2022, respectively, and $13.1 million and $3.0 million for the six months ended June 30, 2024 and 2023, respectively. As of June 30, 2024, we have not yet generated revenues and had an accumulated deficit of $240.6 million. Losses have principally resulted from costs incurred for manufacturing, preclinical studies and clinical trial activities and general and administrative expenses. We have funded our operations primarily through the private placement and public offering of equity securities.

Current report

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 PAS-nomacopan, other product candidates we may pursue following the Merger, or other future product candidates receive marketing authorization, sales and marketing activities.

Current report

Our failure to become and remain profitable could depress the market price of the ADS representing our ordinary shares, and could impair our ability to raise capital, expand our business, diversify our product offerings or continue our operations. If we continue to suffer losses as we have in the past, investors may not receive any return on their investment and may lose their entire investment.

Current report

Our auditor’s report on our consolidated financial statements states that our recurring operating losses, negative cash flows and dependence on additional financial support raises substantial doubt about our ability to continue as a going concern, which may have a detrimental effect on our ability to obtain additional funding.

Current report

The report of our U.S. independent registered public accounting firm on our consolidated financial statements for the period ended December 31, 2023, includes an explanatory paragraph raising substantial doubt about our ability to continue as a going concern as a result of our recurring losses from operations and net capital deficiency. Our future is dependent upon our ability to obtain financing in the future. This opinion could materially limit our ability to raise funds. 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. If we fail to raise sufficient capital when needed, we will not be able to complete our business plan. As a result, we may have to liquidate our business and investors may lose their investment in our ADSs.

Current report

If the conditions to closing are not met, we may not be able to consummate our planned merger with Peak Bio.

Current report

In March 2024, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Peak Bio, Inc. (“Peak Bio”) and Pegasus Merger Sub, Inc. (“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 “Merger”), with Peak Bio surviving the Merger as our wholly-owned subsidiary. Consummation of the Merger is subject to various conditions, including, among others, (i) approval of the Merger Agreement and Merger by Peak Bio stockholders, (ii) Akari’s shareholders authorizing Akari’s board of directors to allot all Akari ordinary shares to be issued in connection with the Merger (to be represented by Akari ADSs), (iii) the absence of any law or order prohibiting consummation of the Merger, (iv) Akari’s Registration Statement on Form S-4 having been declared effective, (v) the Akari ADSs issuable to Peak Bio stockholders having been authorized for listing on the Nasdaq Stock Market, and (vi) private placement financings shall have been consummated simultaneously with, and conditioned only upon, the occurrence of the closing, and shall result in net proceeds to Akari of at least $10 million. We cannot guarantee that all of the closing conditions to the Merger will be satisfied or waived. If the closing conditions are not satisfied or waived, the Merger may not occur, or may be delayed and such delay may cause us to lose some or all of the intended benefits of the Merger.

Current report

There is no guarantee that our merger with Peak Bio will increase shareholder value or that Peak Bio will be successfully integrated into our operations or achieve its desired benefits.

Current report

The process of integrating our operations with Peak Bio could encounter unexpected costs and delays, which include:

Current report

failure to implement our business plans for the combined businesses;

Current report

unexpected losses of key employees, manufacturers or suppliers;

Current report

adverse effects on our or Peak Bio’s existing business relationships;

Previous report

Investing in our securities involves a high degree of risk. You should carefully consider the risks and uncertainties discussed within“Item 1A. Risk Factors” of our Form 10-K, together with all of the other information in this Form 10-Q, including the section “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our unaudited condensed consolidated financial statements and related notes, before deciding whether to purchase any of our ADSs.

Previous report

Except as discussed below, there have been no material changes to the risk factors from those previously disclosed in our Form 10-K.

Previous report

Our recent reduction in force undertaken to better align our workforce with the needs of our business and product pipeline prioritization may not achieve our intended outcome.

Previous report

On May 10, 2024, the Company issued unsecured convertible promissory notes to Samir R. Patel, M.D., the Company’s interim President and Chief Executive Officer, and Ray Prudo, M.D., the Company’s Chairman of the Board, each in the amount of $500,000 (the “Notes”), to provide operating cash to the Company, as unanimously approved by the Company’s board of directors (the “Board”), including a majority of disinterested directors of the Board. The Notes bear interest at an annual rate of 15%, which may be increased to 17% upon the occurrence of certain events of default as described therein. The Notes are repayable in full upon the earlier of (i) ten business days after the Company receives payment in respect of a research and development tax credit from HM Revenue and Customs, and (ii) November 10, 2024. The Notes are prepayable by the Company at any time, without premium or other penalty. In addition, at the election of the holder, at any time but not later than ten (10) Business Days prior to the closing of the transactions contemplated by that certain Agreement and Plan of Merger, dated as of March 4, 2024, by and between the Company, Pegasus Merger Sub, Inc., and Peak Bio, Inc., all or any portion of each Note may be converted into American Depository Shares of the Company at a conversion price equal to $1.59 (which is not less than the “Minimum Price” as specified by Nasdaq Rule 5635(d) as of the execution date of the Notes).

Previous report

The Notes contain customary events of default that would allow each of Drs. Patel and Prudo to declare the Notes that they hold immediately due and payable or, on the occurrence of certain specified customary defaults, the Notes will immediately and automatically become due and payable without and action or election by either of Drs. Patel and Prudo.

Previous report

The issuance of the Notes was made pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act of 1933, as amended.

Previous report

The description of the Notes is qualified in its entirety by reference to the Notes, which the Company intends to file with its Quarterly Report on Form 10-Q for the quarter ended June 30, 2024.