UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 20-F

 

 

 

☑	REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

 

☐	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended                 

OR

 

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                  to                 

OR

 

☐	SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report                     

Commission file number                     

 

 

ACCUSTEM SCIENCES LIMITED

(Exact name of Registrant as specified in its charter)

 

 

Not Applicable

(Translation of Registrant’s name into English)

England and Wales

(Jurisdiction of incorporation or organization)

107 Cheapside, 9^th Floor

London EC2V 6DN United Kingdom

(Address of principal executive offices)

Keeren Shah

55 Park Lane

London W1K 1NA United Kingdom

Telephone: +44 (0) 20 7066 1000

(Name, telephone, e-mail and/or facsimile number and address of company contact person)

Securities registered or to be registered pursuant to Section 12(b) of the Act.

Not Applicable

(Title of Class)

Securities registered or to be registered pursuant to Section 12(g) of the Act.

 

Title of each class

American Depositary Shares, each representing two ordinary shares, nominal value £0.01 per share

Ordinary shares, nominal value £0.01 per share*

* Not for trading, but only in connection with the registration of American Depositary Shares.

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.

Not Applicable

(Title of Class)

 

 

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.

Ordinary shares, nominal value £0.01 per share: 204,193,543 as of March 9, 2021

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  ☐    Yes  ☑    No

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.    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 (§ 229.405 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 file, a non-accelerated filer, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.:

 

Large accelerated filer

☐

Accelerated filer

☐

Non-accelerated filer

☐

Emerging growth company

☑

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, 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.  ☐

† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

Indicate by check mark which basis for accounting the registrant has used to prepare the financing statements included in this filing:

 

U.S. GAAP  ☐		International Financial Reporting Standards as issued				Other  ☐
		by the International Accounting Standards Board   ☑

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.    ☐  Item 17     ☐  Item 18

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  ☐

 

 

 

ACCUSTEM SCIENCES LIMITED

 

 

FORM 20-F

 

 

TABLE OF CONTENTS

 

INTRODUCTION			1
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS			6
PART I			7
ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS			7
ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE			9
ITEM 3. KEY INFORMATION			9
ITEM 4. INFORMATION ON THE COMPANY			30
ITEM 4A. UNRESOLVED STAFF COMMENTS			41
ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS			41
ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES			48
ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS			52
ITEM 8. FINANCIAL INFORMATION			54
ITEM 9. THE OFFER AND LISTING			55
ITEM 10. ADDITIONAL INFORMATION			55
ITEM 11. QUANTITIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK			73
ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES			73
PART II			83
ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES			83
ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS			83
ITEM 15. CONTROLS AND PROCEDURES			83
ITEM 16. RESERVED			83
ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT			83
ITEM 16B. CODE OF ETHICS			83
ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES			83
ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES			83
ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS			83
ITEM 16F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT			84
ITEM 16G. CORPORATE GOVERNANCE			84
ITEM 16H. MINE SAFETY DISCLOSURE			84
PART III			84
ITEM 17. FINANCIAL STATEMENTS			84
ITEM 18. FINANCIAL STATEMENTS			84
ITEM 19. EXHIBITS			84

 

i

INTRODUCTION

On October 30, 2020, Tiziana Life Sciences plc a London-listed biotechnology company focused on innovative therapeutics for oncology, inflammation and infectious diseases, completed the demerger and spin-off (which we refer to as the “Demerger”), into a separate business, AccuStem Sciences Limited, of its StemPrintER^™ and SPARE operations, a novel biology-based genomic predictor of distant recurrence in breast cancer. Through the Demerger process, as discussed below, Tiziana declared a dividend in specie (a distribution to shareholders of the shares of another company) equal to the book value of its shareholding in StemPrintER Sciences Limited, the entity within its group which holds all of the assets and intellectual properly relating to StemPrintER^™ and SPARE and £1 million in cash. The dividend in specie was satisfied by the transfer of StemPrintER Sciences Limited to the Company and in consideration for this transfer, the Company issued Ordinary Shares, credited as fully paid, to Tiziana shareholders. This registration statement is filed to register those Ordinary Shares under the Exchange Act. Unless otherwise indicated, “AccuStem”, “the Company”, “we”, “us” and “our” refer to AccuStem Sciences Limited.

References to “U.K. Pounds Sterling”, “pence”, “£” or “p” are to the lawful currency of the United Kingdom and references to “U.S. dollars”, “$” or “cents” are to the lawful currency of the United States.

Reference to “the Ordinary Shares” are references to AccuStem’s ordinary shares, nominal value £0.01 per share, and references to “the ADSs” are to AccuStem’s American Depositary Shares (each representing two Ordinary Shares), which are evidenced by American Depositary Receipts, or ADRs. The following definitions apply throughout this registration statement:

 

“Admission”		admission of the Ordinary Shares to listing on the standard segment of the Official List and to trading on the Main Market;
“ADSs”		American Depositary Shares;
“affiliate” or “affiliates”		an affiliate of, or person affiliated with, a person; a person that, directly or indirectly, or indirectly through one or more intermediaries, controls or is controlled by, or is under common control with, the person specified;
“AGM”		an annual general meeting of the Company;
“Articles” or “Articles of Association”		the articles of association of the Company in force from time to time;
“Audit Committee”		the audit committee of the Board;
“Brexit”		the formal exit from the EU by the U.K. on January 31, 2020;
“CE marking” or “CE mark”		European conformity marking which is a mandatory conformity mark for products placed on the market in the EEA which ensures that the products conform with the essential requirements of the applicable European regulations and directives;
“CLIA”		U.S. Clinical Laboratory Improvement Amendments of 1988;
“Change of Control”		following any acquisition, the acquisition of Control of the Company by any person or party (or by any group of persons or parties who are acting in concert);
“Companies Act”		the U.K. Companies Act 2006;

 

1

“Company” or “AccuStem”		AccuStem Sciences Limited, a company incorporated in England and Wales with company number 12647178;
“Control”		(i) the power (whether by way of ownership of shares, proxy, contract, agency or otherwise) to: (a) cast, or control the casting of, more than 50% of the maximum number of votes that might be cast at a general meeting of the Company; or (b) appoint or remove all, or the majority, of the Directors or other equivalent officers of the Company; or (c) give directions with respect to the operating and financial policies of the Company with which the Directors or other equivalent officers of the Company are obliged to comply; and/or (ii) the holding beneficially of more than 50% of the issued shares of the Company (excluding any issued shares that carry no right to participate beyond a distribution of either profits or capital), but excluding in the case of each of (i) and (ii) above any such power or holding that arises as a result of the issue of Ordinary Shares by the Company in connection with the acquisition;
“CREST” or “CREST System”		the system for the paperless settlement of trades in securities and the holding of uncertificated securities operated by Euroclear in the system for the paperless settlement of trades in securities and the holding of uncertificated securities operated by Euroclear in accordance with the CREST Regulations;
“CREST Regulation”		the Uncertificated Securities Regulations 2001 (SI 2001 No 3755);
“Demerger”		the demerger of the Company from Tiziana Life Sciences plc on October 30, 2020;
“Demerger Agreement”		the agreement between the Company and Tiziana, dated October 5, 2020, pursuant to which Tiziana declared a dividend in specie on the Ordinary Shares equal to the book value (of approximately £3.07 million) of Tiziana’s shareholding in StemPrintER Sciences Limited, the entity within the Group which holds all of the assets and intellectual property relating to StemPrintER and SPARE and £1 million in cash, as amended on October 30, 2021;
“Demerger Record Time”		7:00 a.m. on October 30, 2020;
“Depositary”		JPMorgan Chase Bank, N.A.
“Directors”, “Board” or “Board of Directors”		the directors of the Company, whose names appear in “Item 1.A.—Directors and Senior Management” of this registration statement, or the board of directors from time to time of the Company, as the context requires, and “Director” is to be construed accordingly;
“EEA”		the European Economic Area, comprising the EU, Iceland, Norway and Liechtenstein;
“EMA”		the European Medicines Agency;
“EN ISO 13485”		specifies requirements for a quality management system where an organisation needs to demonstrate its ability to provide medical devices and related services that consistently meet customer requirements and regulatory requirements applicable to medical devices and related services;
“ER+”		oestrogen receptor positive;

 

2

“Exchange Act”		U.S. Securities Exchange Act of 1934, as amended;
“EU” or “European Union”		the European Union first established by the treaty made at Maastricht on February 7, 1992;
“Euroclear”		Euroclear U.K. & Ireland Limited (a company incorporated in England and Wales with company number 02878738, being the operator of CREST);
“EUWA”		European Union (Withdrawal) Act 2018;
“FCA”		the U.K. Financial Conduct Authority or any successor thereof, the single U.K. statutory regulator under FSMA;
“FDA”		the U.S. Food and Drug Administration;
“FSMA”		the U.K. Financial Services and Markets Act 2000;
“FTC”		U.S. Federal Trade Commission;
“GDPR”		General Data Protection Regulation (EU) 2016/679;
“general meeting”		a general meeting of the shareholders of the Company or a class of shareholders of the Company, as the context requires;
“Group”		AccuStem and its wholly-owned subsidiary, StemPrintER Sciences Limited;
“HER2-”		human epidermal growth factor receptor 2 negative;
“HIPAA”		U.S. Health Insurance Portability and Accountability Act of 1996;
“HMRC”		Her Majesty’s Revenue and Customs;
“IEO/University of Milan”		Istituto Europeo di Oncologia, Fondazione FIRC per l’Oncologia Molecolare and the University of Milan;
“IFRS”		International Financial Reporting Standards, as issued by the International Accounting Standards Board;
“IVDs”		In vitro medical devices;
“IVD Directive”		In Vitro Diagnostic Medical Device Directive 98/79/EC;
“IVDR”		In Vitro Diagnostic Medical Device Regulation (EU) 2017/746;
“LDT”		lab developed test;
“License”		the exclusive license agreement dated June 24, 2014 between Tiziana and IEO/University of Milan, which was assigned to the Company on October 30, 2020, pursuant to which the Company holds a worldwide, royalty-bearing, exclusive licence under certain patents and a worldwide, royalty-bearing, non-exclusive license under certain know-how, respectively, of IEO/University of Milan to develop and commercialize licensed products in connection with a multi-gene prognostic tool;

 

3

“Listing Rules”		the listing rules made by the FCA under section 73A of FSMA;
“LN-”		lymph node negative;
“London Stock Exchange”		London Stock Exchange plc (a company registered in England and Wales with company number 2075721);
“Main Market”		the main market for listed securities of the London Stock Exchange;
“Market Abuse Regulation”		Market Abuse Regulation (EU) 596/2014;
“Medicaid”		a national health insurance programme administered by the Centers for Medicaid and Medicare Services of the U.S. Federal Government which assists with healthcare costs of Americans with limited income and/or resources;
“Medicare”		a national health insurance programme administered by the Centers for Medicaid and Medicare Services of the U.S. Federal Government which provides health care insurance for Americans aged 65 and older who have contributed to the fund via the payroll tax during the course of their working lives;
“U.K. Market Abuse Regulation”		the Market Abuse Regulation, which forms part of retained law by virtue of the EUWA;
“Medical Device Directive”		Medical Device Directive 93/42/EEC;
“Medical Device Regulation” or “MDR”		EU Medical Device Regulation (EU) 2017/745;
“MHRA”		U.K. Medicines and Healthcare products Regulatory Agency;
“mRNA”		messenger ribonucleic acid;
“Nasdaq”		the Nasdaq Global Market operated by NASDAQ, Inc.;
“Nomination Committee”		the nomination committee of the Board;
“Official List”		the official list maintained by the FCA pursuant to Part VI of FSMA;
“Order”		the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005;
“Ordinary Resolution”		resolution of shareholders requiring a simple majority of not less than 50%;
“Ordinary Shares”		ordinary shares of nominal value 1 pence each in the capital of the Company;
“R&D”		research and development;

 

4

“Registrar”		Link Market Services, a trading name of Link Market Services Limited, of The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU, or any other registrar appointed by the Company from time to time;
“Regulation S”		Regulation S under the Securities Act;
“Remuneration Committee”		the remuneration committee of the Board;
“SaMD”		software as a medical device;
“SEC”		U.S. Securities and Exchange Commission;
“Securities Act”		U.S. Securities Act of 1933, as amended;
“Senior Managers”		the members of the senior management team of the Company, the name(s) of which are appear in Item 1.A.—“Directors and Senior Management”;
“Shareholder”		a holder of Ordinary Shares;
“Special Resolution”		a resolution of shareholders requiring a majority of not less than 75%;
“Standard Listing”		a standard listing under Chapter 14 of the Listing Rules;
“Takeover Code”		the City Code on Takeovers and Mergers;
“Tiziana”		Tiziana Life Sciences plc (Nasdaq: TLSA / LSE: TILS), a public limited company incorporated in England and Wales with company number 03508592;
“Transition Period”		the transition period following Brexit during which the U.K. continued to follow all EU rules between January 31, 2020 and December 31, 2020;
“U.K. Corporate Governance Code”		the U.K. Corporate Governance Code issued by the Financial Reporting Council (or successor bodies thereto) in the U.K. from time to time;
“U.K. MDR 2002”		the U.K. Medical Devices Regulations 2002, as amended by 2019 No. 791;
“uncertificated” or “uncertificated form”		in relation to a share or other security, a share or other security, title to which is recorded in the relevant register of the share or other security concerned as being held in uncertificated form (i.e., in CREST) and title to which may be transferred by using CREST;
“United Kingdom” or “U.K.”		the United Kingdom of Great Britain and Northern Ireland;
“United States” or “U.S.”		the United States of America, its possessions or territories, any State of the United States of America and the district of Columbia or any area subject to its jurisdiction or any political subdivision thereof; and
“VAT”		(i) within the EU, any tax imposed by any Member State in conformity with the Directive of the Council of the European Union on the common system of value added tax (2006/112/EC), and (ii) outside the EU, any tax corresponding to, or substantially similar to, the common system of value added tax referred to in paragraph (i) of this definition.

 

5

References to a “company” in this registration statement shall be construed so as to include any company, corporation or other body corporate, wherever and however incorporated or established.

All references to legislation or regulation in this registration statement are to the legislation of England and Wales unless the contrary is indicated. Any reference to any provision of any legislation or regulation shall include any amendment, modification, supplement, re-enactment or extension thereof. Words importing the singular shall include the plural and vice versa, and words importing the masculine gender shall include the feminine or neutral gender.

For the purpose of this registration statement, “subsidiary” and “subsidiary undertaking” have the meanings given by the Companies Act.

In this registration statement any reference to any EU directive, EU regulation, EU decision, EU tertiary legislation or provision of the EEA agreement (an “EU Matter”) which forms part of domestic law by application of the EUWA shall be read as a reference to that EU Matter as it forms (by virtue of the EUWA) part of retained EU law and as modified by domestic law from time to time. For the purposes of this paragraph, (i) “domestic law” shall have the meaning given in the EUWA; and (ii) any other words and expressions shall, unless the context otherwise provides, have the meanings given in the EUWA.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This registration statement contains forward-looking statements that involve substantial risks and uncertainties. All statements contained in this registration statement, other than statements of historical fact, including statements regarding our strategy, future operations, future financial position, future revenues, projected costs, prospects, plans and objectives of management, are forward-looking statements. The words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “target,” “potential,” “would,” “could,” “should,” “continue” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. The forward-looking statements in this registration statement include, among other things, statements about:

 

•

the success, cost and timing of our clinical development of our products, including the progress of, and results from, our preclinical and clinical trials of StemPrintER™ and SPARE products, our discovery programs and other potential product candidates;

 

•

our ability to obtain and maintain regulatory approval of our product candidates, and any related restrictions, limitations or warnings in the label of any of our product candidates, if approved;

 

•

our ability to compete with companies currently marketing or engaged in the development of treatments for indications that our product candidates are designed to target;

 

•

our plans to pursue research and development of other future product candidates;

 

•

the potential advantages of our product candidates and those being developed;

 

•

the rate and degree of market acceptance and clinical utility of our product candidates;

 

•

the success of our collaborations and partnerships with third parties;

 

•

our estimates regarding the potential market opportunity for our product candidates;

 

•

our sales, marketing and distribution capabilities and strategy;

 

•

our ability to establish and maintain arrangements for manufacture of our product candidates;

 

•

our intellectual property position;

 

6

•

our expectations related to the use of capital;

 

•

the effect of the COVID-19 pandemic, including mitigation efforts and economic effects, on any of the foregoing or other aspects of our business operations, including but not limited to our preclinical studies and future clinical trials;

 

•

our estimates regarding expenses, future revenues, capital requirements and needs for additional financing;

 

•

the impact of government laws and regulations; and

 

•

our competitive position.

Forward-looking statements reflect our current views with respect to future events, are based on assumptions and are subject to risks, uncertainties and other important factors. We operate in a very competitive and rapidly changing environment. New risks emerge from time to time. We cannot assure you that our plans, intentions or expectations will be achieved. Our actual results, performance or achievements could differ materially from those contemplated, expressed or implied by the forward-looking statements contained in this registration statement as described in “Item 3.D.—Risk Factors”, “Item 4—Information on the Company” and “Item 5—Operating and Financial Review and Prospects”. Given these risks, uncertainties and other important factors, you should not place undue reliance on these forward-looking statements. All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements set forth in this registration statement. Also, these forward-looking statements represent our estimates and assumptions only as of the date such forward-looking statements are made. Except as required by law, we assume no obligation to update any forward-looking statements publicly, whether as a result of new information, future events or otherwise.

PART I

 

ITEM 1.

IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

A. Directors and Senior Management

The following table sets forth the names and positions of our senior management and Directors, all of whom can be reached at our business address of 107 Cheapside, 9th Floor, London EC2V 6DN United Kingdom:

 

NAME		POSITION
Senior Management
Keeren Shah		Finance Director*
* Not a statutory Director of the Company
Non-Employee Directors
Gabriele Cerrone (3)		Chairman
Dr. Kunwar Shailubhai, Ph.D., M.B.A.		Director
Willy Simon (1) (2) (3)		Director
John Brancaccio (1) (2)		Director

 

(1)	Member of the Audit Committee.

(2)	Member of the Remuneration Committee.

(3)	Member of the Nomination Committee.

Executive Officers

Keeren Shah serves as our Finance Director. Ms. Shah currently also serves as the Finance Director of Tiziana and OKYO Pharma Limited and Rasna Therapeutics Inc., having previously served as the Group Financial Controller

 

7

for both businesses from June 2016 to July 2020. Prior to joining the Company, Ms. Shah spent 10 years at Visa, Inc. as a Senior Leader in its finance team where she was responsible for key financial controller activities, financial planning and analysis, and core processes as well as leading and participating in key transformation programmes and Visa Inc.’s initial public offering. Before joining Visa, Ms. Shah has also held a variety of finance positions at other leading companies including Arthur Andersen and BBC Worldwide. She holds a Bachelor of arts with honours in Economics and is a member of the Chartered Institute of Management Accountants.

Non-Employee Directors

Gabriele Cerrone has a successful track record and extensive experience in the financing and restructuring of micro-cap biotechnology companies. He has founded ten biotechnology companies in oncology, infectious diseases and molecular diagnostics, and has taken seven of these companies to the Nasdaq Market and two to the Main Market and AIM Market in London. Mr. Cerrone co-founded Cardiff Oncology, Inc. (Nasdaq: CRDF), an oncology company and served as its Co-Chairman; he was a co-founder and served as Chairman of both Synergy Pharmaceuticals, Inc. (Nasdaq: SGYP) and Callisto Pharmaceuticals, Inc. (OTCMKTS: CLSP), and was a Director of and led the restructuring of Siga Technologies, Inc. (Nasdaq: SIGA). Mr. Cerrone also co-founded FermaVir Pharmaceuticals, Inc. and served as Chairman of the Board until its merger in September 2007 with Inhibitex, Inc. Mr. Cerrone served as a director of Inhibitex, Inc. until its $2.5bn sale to Bristol Myers Squibb Co in 2012. Mr. Cerrone is the Executive Chairman and Founder of dual-listed Tiziana Life Sciences plc (Nasdaq:TLSA, LSE: TILS) an oncology focused therapeutics company; Co-Founder of Rasna Therapeutics Inc. (OTCMKTS: RASP), a company focused on the development of therapeutics for leukaemias; Co-Founder of Hepion Pharmaceuticals, Inc. (Nasdaq: HEPA); Executive Chairman and Co-Founder of Gensignia Life Sciences, Inc., a molecular diagnostics company focused on oncology using microRNA technology; Non-Executive Chairman and Founder of OKYO Pharma Limited; and founder of BioVitas Capital Ltd.

Kunwar Shailubhai, Ph.D., M.B.A. serves as Chief Executive Officer and Chief Scientific Officer of Tiziana and is also an Executive Director of the Company. Dr. Shailubhai brings more than 25 years of experience within the life science industry, combined with a distinguished track record of success in translating drugs from concept through commercialisation to market. He also currently serves as CEO of Rasna Therapeutics, Inc., a developer of therapeutics to address the high unmet need that exists for AML and other forms of leukaemia. As co-founder, EVP and CSO of Synergy Pharmaceuticals, Inc. (Nasdaq: SGYP) he led the non-clinical, CMC and clinical development of Trulance^™ from inception to approval by the FDA. Earlier, from 2003 until 2008, Dr. Shailubhai served as Senior Vice President, Drug Discovery and from 2001 to 2003, he held the position of Vice President, Drug Discovery at Synergy, where he pioneered therapeutic applications of GC-C agonists in a variety of human diseases such as Asthma, COPD and cholesterol lowering. Prior to Synergy, he was with Monsanto Company, serving as Group Leader, Cancer Prevention and previously served as a Senior Staff Fellow at the National Institutes of Health, and as an Assistant Professor at the University of Maryland. Dr. Shailubhai received his Ph.D. in microbiology from the University of Baroda, India, and his MBA from the University of Missouri, St. Louis.

Willy Jules Simon is a banker and worked at Kredietbank N.V. and Citibank London before serving as an executive member of the Board of Generale Bank NL from 1997 to 1999 and as the chief executive of Fortis Investment Management from 1999 to 2002. He acted as chairman of Bank Oyens & van Eeghen from 2002 to 2004. From 2004 until 2012, he served as a non-executive director of Redi & Partners Ltd., a fund of funds. He was previously chairman of AIM-traded Velox3 plc (formerly 24/7 Gaming Group Holdings plc) until 2015 and had been a director of Playlogic Entertainment Inc., a Nasdaq OTC listed company, and Frasia Holdings S.A. Mr. Simon is also currently a director of Rasna Therapeutics, Inc., OKYO Pharma Limited, African Metals Limited, Bever Holding N.V. and Ducat Maritime Limited.

Mr. Brancaccio, retired CPA, is a financial executive with extensive international and domestic experience in pharmaceutical and biotechnology for privately and publicly held companies. From 2000 to 2002, Mr. Brancaccio was the Chief Financial Officer/Chief Operating Officer of Eline Group, an entertainment and media company. From May 2002 until March 2004, Mr. Brancaccio was the Chief Financial Officer of Memory Pharmaceuticals Corp., a biotechnology company. From April 2004 until May 2017, Mr. Brancaccio was the Chief Financial Officer of Accelerated Technologies, Inc., an incubator for medical device companies. Mr. Brancaccio is also currently a director of Cardiff Oncology, Inc., Rasna Therapeutics, Inc., OKYO Pharma Limited and Hepion Pharmaceuticals, Inc.

 

8

B. Advisers

Our principal United States legal advisers are Orrick, Herrington & Sutcliffe LLP, located at 51 West 52nd Street, New York, NY 10166 and our principal United Kingdom legal advisers are Orrick, Herrington & Sutcliffe (UK) LLP, located at 107 Cheapside, London EC2V 6DN, United Kingdom.

C. Auditors

Mazars LLP has been our auditor since our incorporation on June 5, 2020; its address is Tower Bridge House, St Katharine’s Way, London E1W 1DD, United Kingdom. Mazars is registered to perform audits in the U.K. by the Institute of Chartered Accountants in England and Wales and is a registered auditor with the PCAOB.

 

ITEM 2.

OFFER STATISTICS AND EXPECTED TIMETABLE

Not applicable.

 

ITEM 3.

KEY INFORMATION

A. SELECTED FINANCIAL DATA

We derived the selected consolidated financial data as of and for the period from incorporation on June 5, 2020 to December 31, 2020 from our audited financial statements included elsewhere in this registration statement. We present our consolidated financial statements in accordance with International Financial Reporting Standards, as issued by the International Accounting Standards Board (“IFRS”).

The summary financial data below should be read together with those financial statements as well as “Item 5.—Operating and Financial Review and Prospects.” Our historical results for any prior period are not necessarily indicative of results to be expected in any future period, and our interim period results are not necessarily indicative of results to be expected for a full year or any other interim period.

Consolidated Income Statement Data

 

		December 31, 2020
Revenue		£	—
Administrative expenses			(40,689	)
Operating result			(40,689	)
Finance income/(expense)			—
Profit before taxation			(40,689	)
Income tax			—
Profit for the period and total comprehensive income for the period			(40,689	)

Consolidated Balance Sheet Data

 

		As at December 31, 2020
ASSETS
Current Assets
Cash receivable		£	1,151,383
Non-Current Assets
Intangible asset in process research & development			2,073,930
Total assets			3,225,313

 

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		As at December 31, 2020
LIABILITIES
Related party payable			9,892
Other payable			30,797
Total liabilities			40,689
EQUITY AND LIABILITIES
Equity attributable to owners
Ordinary Share capital			2,041,935
Share premium			55,571
Merger reserve			1,127,807
Retained earnings			(40,689	)
Total equity attributable to shareholders			3,184,624
Total equity and liabilities			3,225,313

B. CAPITALIZATION AND INDEBTEDNESS

The table below sets forth our cash and cash equivalents and shows our capitalization as of February 28, 2021. You should read this table in conjunction with our audited consolidated financial statements included in this registration statement, together with the accompanying notes and the other information appearing under the heading “Item 5.— Operating and Financial Review and Prospects”.

 

		As of December 31, 2020
Cash and cash equivalents		£	1,151,383
Shareholders’ equity:
Share capital, nominal value £0.01 par value per ordinary share; 204,193,543 shares issued and outstanding			2,041,935
Share premium			55,571
Merger reserve			1,127,807
Retained earnings			(40,689	)
Total Capitalization			3,184,624

C. REASONS FOR THE OFFER AND USE OF PROCEEDS

Not applicable.

D. RISK FACTORS

Holding Ordinary Shares and ADSs carries a significant degree of risk, including risks in relation to our business strategy, risks relating to taxation and risks relating to the ADSs. However, as the risks which we face relate to events and depend on circumstances that may or may not occur in the future, you should consider the risks and uncertainties described below.

The risks referred to below are those risks which we believe to be the material risks relating to our company. However, there may be additional risks that we do not currently consider to be material or of which we are not currently aware that may adversely affect our business, financial condition, results of operations or prospects. If any of the risks referred to in this registration statement were to occur, our results of operations, financial condition and prospects could be materially adversely affected. If that were to be the case, the trading price of the Ordinary Shares and/or the level of dividends or distributions (if any) received from the Ordinary Shares could decline significantly.

Risks Specific to the Development of the Business

We do not have collaborations in place with institutions for utility studies and there is no guarantee that we will be able to demonstrate prospective clinical utility of the StemPrintER^™ and SPARE products

Following the completion of the initial retrospective validation studies in two spatial and temporal independent cohorts in respect of the StemPrinter^™ and SPARE products, we are likely to run clinical utility studies to support

 

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applications for reimbursement, which are necessary for successful commercialization and to provide further evidence to support marketing claims. We have not yet identified which institutions will carry out the utility studies and have not yet entered into the relevant agreements with these institutions. There is a risk that we will not be able to secure these collaborations, which would impact our ability to proceed to the utility study stage. Whilst the utility studies are not a source of continuing revenue, such studies do provide a short-term revenue stream from sales of the tests run on the StemPrintER^™ and SPARE products.

Furthermore, we may not be able to demonstrate the clinical utility of the StemPrintER^™ and SPARE products in a real-world setting, which would impact our ability to secure reimbursement. If such reimbursement is not achieved, it will make commercialization of the StemPrintER^™ and SPARE products significantly more challenging and would impact our ability to generate revenue and, accordingly, result in a material adverse impact on our business, financial condition and results of operations and those of our wholly-owned subsidiary, StemPrintER Sciences Limited (which we refer to collectively as the “Group”).

There are risks associated with the process of establishing a U.S. Clinical Laboratory Improvement Amendments of 1988 (“CLIA”) certified laboratory and in offering StemPrintER^™ and SPARE products as laboratory developed tests (“LDTs”) which are outside our control

The StemPrintER^™ and SPARE products do not as yet have status as LDTs and we do not yet have a CLIA-certified laboratory.

We may be able to generate revenue from offering the StemPrintER^™ and SPARE products as LDTs. However, there are inherent risks associated with offering the StemPrintER^™ and SPARE products as LDTs that are outside our control, including test uptake, which would have an impact on the amount of revenue we could generate.

We are dependent on other third parties who provide certain resources and services to us, as we have limited resources in the short-term

We rely in part on external resources to conduct the research, development, supply of supplies and clinical testing of our StemPrintER^™ and SPARE products, including in relation to our laboratory systems which rely on software developed by external manufacturers. The future development of the StemPrintER^™ and SPARE products and other products will partly depend upon the performance of these third parties. We cannot guarantee that the relevant third parties will be able to carry out their obligations under the relevant arrangements. In the future, we may depend on external resources in marketing, sales and distribution of its products. We cannot guarantee that we will be able to assign competent partners to conduct these tasks or that these tasks can be completed on the basis of terms which are beneficial to us. Additionally, whilst the Directors are responsible for making decisions on our behalf, the Directors will rely to a certain extent on the advice of external professional advisors. There is no guarantee that we will receive the correct advice from such advisors.

Disagreements between us and any third parties could lead to delays in our research and development (“R&D”) program and/or commercialization plans. If any third parties were to terminate their relationships with us, we would be required to obtain development and/or commercialization services from other third parties or develop the relevant functions internally, which could have an adverse effect on our business, results of operations and financial condition.

We are subject to research and product development risk

We may not be able to develop new products or to identify specific market needs that can be addressed by tests or solutions developed us. Product development will be a key ongoing activity for us. However, there can be no guarantee that further products will be developed, successfully launched, or accepted by the market. All new product development has an inherent level of risk and can be a lengthy process and suffer unforeseen delays, cost overruns and setbacks, such as difficultly recruiting patients into clinical trials. The nature of the medical device industry may mean new products may become obsolete as a result of competition or regulatory changes which could have a material adverse effect on our business, results of operations and financial condition.

 

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In addition, R&D may be subject to various requirements, such as research subject protection for individuals participating in clinical evaluations of new products, institutional review board oversight, regulatory authorizations, and design control requirements. Failure to comply with requirements could result in penalties, delay, or prevent commercialization of products.

We are subject to risks associated with medical and technological change and obsolescence

Demand for our products could be adversely impacted by the development of alternative technology and alternative medicines. There can be no assurance that the technology and products currently being developed by us will not be rendered obsolete. As a result, there is the possibility that new technology or products may be superior to, or render obsolete, the technology and products that we are currently developing. Any failure of ours to ensure that our products remain up to date with the latest advances may have a material adverse impact on our competitiveness and financial performance. Our success will depend, in part, on our ability to develop and adapt to these technological changes and industry trends and failure to do so could have a material adverse effect on our business, results of operations and financial condition.

Risks Relating to Intellectual Property

Our rights to develop and commercialize our product candidates are subject to the terms and conditions of licenses granted to us by others. If we fail to comply with our obligations under our existing and any future intellectual property licenses with third parties, we could lose license rights that are important to our business

We are reliant upon licenses and sublicenses from Istituto Europeo di Oncologia, Fondazione FIRC per l’Oncologia Molecolare and the University of Milan (“IEO/University of Milan”) to certain patent rights and proprietary technology that are important or necessary to the development of our technology and product candidates, including the patents and know-how relating to manufacture.

On June 24, 2014, Tiziana entered into an exclusive licence agreement with IEO/University of Milan (the “License”), pursuant to which it obtained a worldwide, royalty-bearing, exclusive licence under certain patents and a worldwide, royalty-bearing, non-exclusive licence under certain know-how, respectively, of IEO/University of Milan to develop and commercialize licensed products in connection with a multi-gene prognostic tool. The License was assigned to us as part of the arrangements contained in the Demerger Agreement on October 30, 2020. Pursuant to the terms of the License, we are obliged to use commercially reasonable efforts in connection with the development and commercialization of the licensed products, including in accordance with specified diligence milestones. If the Company fails to meet its obligations under the License or if the License is terminated for any reason, it could negatively impact the Company’s business and strategic goals. The License may also be terminated for other reasons including breach and insolvency.

IEO/University of Milan have not provided the level of assurances and representations that are usually expected of similar options or licences, and generally the rights are granted on an ‘as is’ basis. Although it is appreciated that as an academic institution IEO/University of Milan is not in the habit of providing warranties, but generally it does leave us commercially exposed. Furthermore, our liability under the License is not capped.

IEO/University of Milan may terminate the License immediately if we de-list from a public stock exchange, among other things, meaning that the IEO/University of Milan may trigger this termination right if we were to be taken private following admission of our Ordinary Shares to the London Stock Exchange, which could impact our value.

If we are unable to obtain and maintain patent protection for our product candidates and technology, or if the scope of our patent protection is not sufficiently broad, our competitors could develop and commercialize similar products and technology

Our success depends, in large part, on our ability to seek, obtain and maintain patent protection in the United States, U.K. and other countries with respect to our product candidates and technology. Our licensors have sought, and we intend to seek, to protect our proprietary position by filing patent applications in the United States, the U.K. and elsewhere, related to certain technologies and our product candidates, StemPrintER^™ and SPARE, that are important to our business.

 

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Our current patent portfolio contains a limited number of patent applications, which are in-licensed from third parties. If we are unable to assert any such patents to prevent others from reproducing our technology and product candidates, or are unable to identify patentable aspects of our R&D output before it is too late to obtain patent protection, failure to do so could have a material adverse effect on our business, results of operations and financial condition.

Our intellectual property is open to challenge

No assurance can be given that any current or future trademark, design right or patent applications will result in registered trademarks, design rights or patents, that the scope of any patent, design or trademark protection or the protection provided by copyright or database rights or the right to bring actions for breach of confidentiality will exclude competitors or provide competitive advantages to us, that any of our owned or licensed-in patents, design rights or trademarks will be held valid if challenged or that third parties will not claim rights or ownership of the patents, design rights, trademarks or other intellectual property rights held by us.

If we cannot successfully enforce our intellectual property rights, this could have a material adverse effect on our business, financial condition and prospects. We may be subject to claims in relation to the infringement of patents, design rights, trademarks or other intellectual property rights owned by third parties. Adverse judgments against us may give rise to significant liabilities in monetary damages, legal fees and/or an inability to manufacture, market or sell products either at all or in particular territories.

Our strategy involves generating commercially valuable intellectual property that can be protected

We intend to augment our intellectual property portfolio. No assurance can be given that any future patent applications will result in granted patents, that the scope of any patent protection will exclude competitors or provide competitive advantages to us, that any of our patents will be held valid if challenged or that third parties will not claim rights in or ownership of the patents and other proprietary rights held by us. Should we fail to successfully obtain additional patent protection in respect its technology and products could have a material adverse effect on our business, results of operations and financial condition.

Market and Competitive Risks

We operate in a competitive market and may face competition from competitors involved in multi-gene prognostic assay for the prediction of risk of recurrence in luminal ER+/HER2- breast cancer patients

We may face competition from competitors involved in developing a multi-gene prognostic assay for the prediction of risk of recurrence in luminal ER+/HER2- breast cancer patients. Some of our competitors may have access to greater research, development, marketing, financial and personnel resources which may provide commercial advantages to those competitors. New products may be more effective, cheaper or more effectively marketed than StemPrintER^™ and SPARE. A substantial increase in competition for any of these reasons could require us to, for example, increase our marketing or capital expenditure or require us to change our business model to remain competitive, which may have an adverse impact on our business including our profitability and/or financial condition.

The market opportunities for our product candidates may be smaller than we anticipate

We are focusing our R&D efforts on a multi-gene prognostic tool for predicting the recurrence of certain breast cancers. Our understanding 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 our prognostic assay, is based on estimates. These estimates may prove to be incorrect and new studies may reduce the estimated incidence or prevalence of these diseases. The number of patients in the United States, the U.K., the EU and elsewhere may turn out to be lower than expected, may not be otherwise amenable to assessment with our product candidates or patients may become increasingly difficult to identify and access, all of which would adversely affect our business, financial condition, results of operations and prospects.

 

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Further, there are several factors that could contribute to making the actual number of patients who receive our potential products, if and when approved, less than the potentially addressable market, such as the lack of widespread availability of, and limited reimbursement for, new therapies in many underdeveloped markets.

The future commercial success of our product candidates will depend upon the degree of each product candidates’ market acceptance by physicians, patients, third-party payors and others in the medical community

We have no product authorised for marketing; our product candidates are at the validation study stage of development, and we may never have a product that is commercially successful. The commercial success of our product candidates will depend, in part, on their acceptance by physicians, patients and third-party payors as medically necessary, cost-effective and safe. If these products do not achieve an adequate level of acceptance, we may not generate significant product revenue and may not become profitable. Even if some product candidates achieve market acceptance, the market may not prove to be large enough to generate significant revenues. The degree of market acceptance of our product candidates, if approved for commercial sale, will depend on several factors, including, but not limited to:

 

•

the effectiveness and safety of our product candidates as demonstrated in clinical trials;

 

•

the potential and perceived advantages of our product candidates over alternative prognostic tools;

 

•

the availability and cost of use relative to alternative prognostic tools;

 

•

changes in the standard of care for the targeted indications for any product candidate;

 

•

the willingness of physicians to use, and the target patient population to try, new prognostic tools;

 

•

product labelling or product insert requirements of the FDA, the U.K. Medicines and Healthcare products Regulatory Agency (“MHRA”), the European Medicines Agency (“EMA”) or other regulatory authorities, including any limitations or warnings contained in a product’s approved labelling;

 

•

the timing of market introduction of competitive products;

 

•

sales, distribution and marketing support;

 

•

publicity concerning our product candidates or competing products and treatments;

 

•

potential product liability claims;

 

•

any restrictions on the use of our products together with other medications; and

 

•

favourable third-party payor coverage and adequate reimbursement.

Even if a potential product displays favourable clinical properties and safety profile in preclinical studies and clinical trials, market acceptance of the product will not be fully known until after it is launched.

 

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The insurance coverage and reimbursement status of newly approved products is uncertain. Failure to obtain or maintain adequate coverage and reimbursement for our approved product candidates could limit our ability to market those products

We expect that coverage and adequate reimbursement by government and private payors will be essential for most patients to be able to afford our approved product candidates. Accordingly, sales of our product candidates will depend substantially, both domestically and abroad, on the extent to which the costs of our product candidates will be paid by health maintenance, managed care, pharmacy benefit and similar healthcare management organisations, or will be reimbursed by government authorities, private health coverage insurers and other third-party payors. Coverage and reimbursement by a third-party payor may depend upon several factors, including the third-party payor’s determination that use of a product is:

 

•

a covered benefit under our health plan;

 

•

safe, effective and medically necessary;

 

•

appropriate for the specific patient;

 

•

cost-effective; and

 

•

neither experimental nor investigational.

Obtaining coverage and reimbursement for a product from third-party payors is a time-consuming and costly process that could require us to provide to the payor supporting scientific, clinical and cost-effectiveness data. We may not be able to provide data sufficient to gain acceptance with respect to coverage and reimbursement. If coverage and reimbursement are not available, or are available only at limited levels, we may not be able to successfully commercialize our product candidates. Even if coverage is provided, the approved reimbursement amount may not be adequate to realise a sufficient return on our investment.

Market acceptance and sales of our products will depend significantly on the availability of adequate coverage and reimbursement from third-party payors and may be affected by existing and future healthcare reform measures.

Regulatory Risks

Our failure to maintain compliance of its future clinical laboratory operations with applicable laws could result in substantial civil or criminal penalties

The operation of a clinical laboratory by us will be in a highly regulated environment which, among other things, will require maintaining compliance with CLIA certification and state clinical laboratory licensing requirements. Failure to maintain compliance with these requirements may result in a range of enforcement actions, including certificate or license suspension, limitation, or revocation, directed plan of action, onsite monitoring, civil monetary penalties and criminal sanctions. Such failure may also result in significant adverse publicity. Any of these consequences could limit or entirely prevent our continued operation and therefore impact our financial performance.

We are subject to various health regulatory laws pertaining to fraud and abuse and related matters, and any failure to comply with such laws could result in substantial civil or criminal penalties

Our employees, independent contractors, consultants, and collaborators may engage in misconduct or other improper activities, including non-compliance with regulatory standards and requirements, which could cause significant liability for us and harm our operations and reputation. We are exposed to the risk that our employees, independent contractors, consultants, and collaborators may engage in fraud or other misconduct to comply with manufacturing standards we have established, to comply with federal and state healthcare fraud and abuse laws and regulations and similar laws and regulations established and enforced by comparable non-U.S. regulatory authorities, to report financial information or data accurately or to disclose unauthorized activities to us. Such misconduct could also involve the improper use of information obtained in the course of clinical trials, which could result in regulatory sanctions and serious harm to our reputation. It is not always possible to identify and deter misconduct, and the precautions we will take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or

 

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lawsuits stemming from a failure to comply with such laws, standards or regulations. If any such actions are instituted against us, or our key employees, independent contractors, consultants, or collaborators, and we are not successful in defending ourself or asserting our rights, those actions could have a significant impact on our business and results of operations, including the imposition of significant criminal, civil and administrative sanctions including monetary penalties, damages, fines, disgorgement, individual imprisonment, additional reporting requirements and oversight if we become subject to a corporate integrity agreement or similar agreement to resolve allegations of non-compliance with these laws, reputational harm, and we may be required to curtail or restructure our operations.

Our failure to prevent a data breach would result in serious reputational damage to us and may result in civil or criminal lawsuits and associated penalties

We take our responsibility to maintain patient confidentiality and protect patient data extremely seriously. By its nature, the de-identified data that is being processed is highly sensitive and includes genetic and demographic information, the processing of which is subject to the most onerous obligations of applicable data protection legislation. If, due to a technical oversight, human error or malicious action by an employee or third party, the privacy, security or integrity of the data were compromised, we may be obliged to report such breach once we became aware of it under applicable laws and regulations such as HIPAA, GDPR, DPA 2018 or other U.S. state, U.K. or EU member state specific laws as well as the data privacy laws of other countries such as Japan, Singapore, Hong Kong and China. Depending on the nature and extent of the breach, we may become subject to a regulatory investigation, which would divert time and financial resources from the day-to-day operation of the business and may result in civil or criminal lawsuits and financial fines and penalties as well as adverse publicity. If third parties and/or customers of ours become aware of such breaches, they may opt to cancel existing contracts or not enter new contracts with us, reducing revenue. We may also be required to personally inform the patients whose data was released or accessed as a result of a data breach, which may increase the severity of the reputational damage and may lead to patients revoking their consent for the data to be used by us. In addition, patients may have the right to bring claims for compensation for such breaches which might be brought by way of class or representative actions and claim significant sums as damages. To mitigate the risk of a data breach or related issue, we will employ technical security measures to protect data and work closely with our data providers to ensure that each party understands its obligations to protect personal data.

Risks Specific to our Current Size and Headcount

We are reliant upon the expertise and continued service of a small number of key individuals of our management, Board of Directors and scientific advisors

We rely on the expertise and experience of a small number of key individuals of its management, Directors and scientific advisors to continue to develop and manage our business. The retention of their services cannot be guaranteed. Accordingly, the departure of these key individuals could have a negative impact on our operations, financial condition, our ability to execute our business strategy and future prospects.

Going forwards, we will rely, in part, on the recruitment of appropriately qualified personnel, including personnel with a high level of scientific and technical expertise in the industry. We may be unable to find a sufficient number of appropriately highly trained individuals to satisfy its growth rate which could affects its ability to develop products as planned.

In addition, if we fail to succeed in pre-clinical or clinical studies, it may make it more challenging to recruit and retain appropriately qualified personnel. Our inability to recruit key personnel or the loss of the services of key personnel or consultants may impede the progress of our R&D objectives as well as the commercialization of our lead and other products, which could have a material adverse effect on our business, results of operations and financial condition.

 

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We will need to expand our organization and may experience difficulties in managing this growth, which could disrupt our operations

As we mature, we expect to expand our full-time employee base and to hire more scientists, technicians and other skilled or experienced personnel. The management may need to divert a disproportionate amount of its attention away from the day-to-day activities and devote a substantial amount of time toward managing these growth activities. We may not be able to effectively manage the expansion of our operations, which may result in weaknesses in our infrastructure, operational mistakes, loss of business opportunities, loss of employees and reduced productivity among remaining employees. Our expected growth could require significant capital expenditures and may divert financial resources from other projects, such as the development of additional products or technologies. If the management is unable to effectively manage our growth, our expenses may increase more than expected, the ability to generate and/or grow revenues could be reduced, and we may not be able to implement our business strategy. Our future financial performance and our ability to commercialize products and compete effectively will depend, in part, on our ability to effectively manage any future growth.

Risks Specific to the Future Financing of the Business

We need substantial additional funding to complete the development of its product candidates, which may not be available on acceptable terms, if at all. Failure to obtain this necessary capital when needed may force us to delay, limit or terminate certain of our product development, research operations or future commercialization efforts, if any

Our operations have consumed substantial amounts of cash since inception, and we expect our expenses to increase in connection with our ongoing activities, particularly as we continue the R&D of, initiate further clinical trials of and seek marketing approval for, our product candidates. In addition, if we obtain marketing approval for our product candidates, we expect to incur significant expenses related to product sales, marketing, manufacturing and distribution.

Furthermore, we expect to incur additional costs associated with operating as a public reporting company in the United States.

If we are unable to obtain adequate funding on a timely basis, we may be required to significantly curtail, delay or discontinue our R&D programmes of our product candidates or any future commercialization efforts, be unable to expand our operations or be unable to otherwise capitalize on our business opportunities, as desired, which could harm our business and potentially cause a discontinuation of operations.

We may need to raise additional funding to take advantage of future opportunities

We may need to raise additional funding to take advantage of future opportunities. Such additional funding may not be available or, if available, may not be on terms that are favorable to us or our shareholders. If we are unable to obtain additional funding as required, we may be required to reduce the scope of our operations or anticipated expansion.

Risks Related to Being a Newly Independent, Public Company

We have no history of operating as a separate, U.S. public company.

Our historical financial information is not necessarily representative of the results that we would have achieved as a separate, U.S. public company and may not be a reliable indicator of our future results. Prior to the Demerger, in which Tiziana contributed its StemPrintER operations to us to operate as a separate, independent business, our operations were conducted by Tiziana as part of its broader corporate organization, rather than as a separate company. Tiziana performed various corporate functions for us. Our historical financial results reflect corporate expenses for such functions that are likely to be less than the expenses we would have incurred had we operated as a separate company, and our future expenses for these functions likely will increase. We will also incur additional expenses to comply with our obligations as a public company in the U.S.

 

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Risks Related to Legal, Political and Economic Uncertainty

The relationship of the U.K. with the EU could impact our ability to operate efficiently in certain jurisdictions or in certain markets

The U.K. formally exited the EU on January 31, 2020 (“Brexit”). Under the terms of its departure, the U.K. entered a transition period during which it continued to follow all EU rules until December 31, 2020 (the “Transition Period”). On December 30, 2020, the U.K. and EU signed the Trade and Cooperation Agreement, which includes an agreement on free trade between the two parties.

There is considerable uncertainty resulting from a lack of precedent and the complexity of the U.K. and EU’s intertwined legal regimes as to how Brexit (following the Transition Period) will impact the medical devices industry in Europe. Since a significant proportion of the regulatory framework in the U.K. applicable to our business and product candidates is derived from EU directives and regulations, Brexit could materially impact the regulatory regime with respect to the development, manufacture, importation, approval and commercialization of our product candidates in the U.K. or the EU. The impact will largely depend on the model and means by which the U.K.’s relationship with the EU is governed post-Brexit and the extent to which the U.K. chooses to diverge from the EU regulatory framework. For example, following the Transition Period, the U.K. will no longer be covered by the centralized procedures for obtaining EU-wide marketing authorizations and our product candidates will therefore require a separate marketing authorization for such products to be marketed in the U.K.. It is also unclear as to whether the relevant authorities in the EU and the U.K. are adequately prepared for the additional administrative burden caused by Brexit. Any delay in obtaining, or an inability to obtain, any marketing approvals, as a result of Brexit or otherwise, would prevent us from, or delay commercialization of, product candidates in the U.K. and/or the EEA and restrict our ability to generate revenue and achieve and sustain profitability.

If any of these outcomes occur, we may be forced to restrict or delay efforts to seek regulatory approval in the U.K. for our product candidates, which could significantly and materially harm our business. There is a degree of uncertainty regarding the overall impact that Brexit will have on process to obtain regulatory approval in the U.K. for product candidates.

Further, the U.K.’s withdrawal from the EU has resulted in the relocation of the EMA from the U.K. to the Netherlands. This relocation has caused, and may continue to cause, disruption in the administrative and medical scientific links between the EMA and the MHRA, including delays in granting clinical trial authorisation or marketing authorization, disruption of importation and export of medical devices. The cumulative effects of the disruption to the regulatory framework may add considerably to the development lead time to marketing authorization and commercialization of product candidates in the EU and/or the U.K.. Brexit may also result in a reduction of funding to the EMA once the U.K. no longer makes financial contributions to EU institutions, such as the EMA. If funding to the EMA is so reduced, it could create delays in the EMA issuing regulatory approvals for the Company’s product candidates and, accordingly, have a material adverse effect on our business, financial condition, results of operations or prospects.

Risks Related to our Business Operations

Risks relating to managing growth, employee matters and other risks relating to our business

Growth may place significant demands on our management and resources. We expect to experience growth in the number of our employees and the scope of our operations in connection with the continued development and, in due course, the potential commercialisation of our products.

This potential growth will place a significant strain on our management and operations, and we may have difficulty managing this future potential growth.

We are highly dependent on our current Directors and the Senior Manager (together, the “Persons Discharging Managerial Responsibility” (“PDMR”)) and their services are critical to the successful implementation of our product development and regulatory strategies. Whilst suitable contracts of employment or engagement are in place including six to 12 months’ notice periods for all PDMRs, they may give notice to terminate their employment with us at any time. The loss of the services of any of the PDMRs and our inability to find suitable replacements could harm our business, prospects, financial condition, results of operations and ability to achieve the successful development or commercialisation of our products.

 

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Challenges in identifying and retaining key personnel could impair our ability to conduct and grow our operations effectively

Our ability to compete in the highly competitive medical device industry depends upon our ability to attract and retain highly qualified management and sales teams. We are intending to recruit our own commercial team and expand our existing central infrastructure team. Many of the other pharmaceutical companies and academic institutions that we compete against for qualified personnel have greater financial and other resources, different risk profiles and a longer history in the industry than it does. We might not be able to attract or retain these key persons on conditions that are economically acceptable. Our inability to attract and retain these key persons could have a material adverse effect on our business, prospects, financial conditions and results of operation.

We may become subject to product liability claims

We face an inherent risk of product liability and associated adverse publicity as a result of the clinical testing of our products and sales of our products once marketing approval is received from relevant regulatory authorities.

Criminal or civil proceedings might be filed against us by study subjects, patients, relevant regulatory authorities, pharmaceutical companies, and any other third party using or marketing our products. Any such product liability claims may include allegations of defects in manufacturing or design, negligence, strict liability, a breach of warranties and a failure to warn of dangers inherent in the product.

If we cannot successfully defend ourself against product liability claims, we may incur substantial liabilities or be required to limit commercialization of our products, if approved. Even if we successfully defends ourself against such product liability claims it could require significant financial and management resources. Regardless of the merits or eventual outcome, product liability claims may result in:

 

•

decreased demand for our products due to negative public perception;

 

•

injury to our reputation;

 

•

withdrawal of clinical study participants or difficulties in recruiting new study participants;

 

•

initiation of investigations by regulators;

 

•

costs to defend or settle the related litigation;

 

•

diversion of management’s time and our resources;

 

•

substantial monetary awards to patients, study participants or subjects;

 

•

product recalls, withdrawals or labelling, marketing or promotional restrictions;

 

•

loss of revenues from product sales; or

 

•

the inability to commercialize any our products, if approved.

Although we will maintain levels of insurance customary for our sector to cover our current and future business operations, any claim that may be brought against us could result in a court judgment or settlement in an amount that is not covered, in whole or in part, by our insurance or that is in excess of the limits of our insurance coverage. Our insurance policies also have various exclusions, and we may be subject to a product liability claim for which we have no coverage. In such cases, we would have to pay any amounts awarded by a court or negotiated in a settlement that exceed our coverage limitations or that are not covered by our insurance, and we may not have, or be able to obtain, sufficient capital to pay such amounts.

 

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If we or our partners, licensees and subcontractors were unable to obtain and maintain appropriate insurance coverage at an acceptable cost, or to protect ourself or themselves in any way against actions for damages, this would seriously affect the marketing of our products and, more generally, be detrimental to our business, prospects, results of operations or financial condition.

Risks Relating to Taxation

We may be classified as a passive foreign investment company for United States federal income tax purposes

We may be classified as a passive foreign investment company for U.S. federal income tax purposes. If we are so classified, we may, but are not obliged to, provide to U.S. holders of Ordinary Shares the information that would be necessary in order for such persons to make a qualified electing fund election with respect to the Ordinary Shares for any year in which we are a passive foreign investment company.

Changes in tax law and practice may impact shareholders and the Group

The tax treatment of shareholders and the Group are subject to changes in tax laws or tax authority practices in the United Kingdom or any other relevant jurisdiction. Any change may reduce any net return derived by investors from a shareholding in us.

You should not rely on the general guide to taxation set out in this registration statement and should seek their own specialist advice. The tax rates referred to in this registration statement are those currently applicable and they are subject to change.

We may not be able to make returns for shareholders in a tax efficient manner

We intend to structure the Group, including any company or business acquired, to maximise returns for shareholders in as fiscally efficient a manner as is practicable. We have made certain assumptions regarding taxation. However, if these assumptions are not borne out in practice, taxes may be imposed with respect to any of the Group’s assets, or the members of the Group may be subject to tax on income, profits, gains or distributions in a particular jurisdiction or jurisdictions in excess of taxes that were anticipated. This could alter the post-tax returns for shareholders (or shareholders in certain jurisdictions). The level of return for shareholders may also be adversely affected. Any change in laws or tax authority practices could also adversely affect any post-tax returns of capital to shareholders or payments of dividends (if any, of which we do not envisage the payment, at least in the short to medium term). In addition, we may incur costs in taking steps to mitigate any such adverse effect on the post-tax returns for Shareholders.

Risks Related to Our Ordinary Shares and ADSs

We do not expect that an active trading market will develop for our ADSs, which will make it difficult for you to sell your ADSs

While we intend for our Ordinary Shares to be admitted to a Standard Listing and to trade on the Main Market of the London Stock Exchange later in 2021, the ADSs registered hereunder constitute the first opportunity to receive our ADSs in the United States. No public market has previously existed for our ADSs or our Ordinary Shares and we do not anticipate a public market for the ADSs or the Ordinary Shares developing in the near term. We do not intend to apply to have our ADSs listed on any stock exchange or over-the-counter trading market in the United States, which will make it difficult for holders to sell their ADSs; instead, holders may withdraw the underlying Ordinary Shares and trade those Ordinary Shares on the Main Market of the London Stock Exchange, when such shares are admitted to trading later in 2021.

 

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There is currently no market for our Ordinary Shares, and a market for our Ordinary Shares may not develop, which would adversely affect the liquidity and price of our Ordinary Shares

There is currently no market for our Ordinary Shares. Although our current intention is that our Ordinary Shares should trade on the Main Market of the London Stock Exchange, we cannot assure you that we will do so. If we do proceed with a listing on the Main Market of the London Stock Exchange, an active trading market for our Ordinary Shares may not develop or, if developed, may not be maintained. You may be unable to sell the Ordinary Shares underlying your ADSs unless a market can be established and maintained, and if we subsequently obtain a listing on an exchange in addition to, or in lieu of, the Main Market of the London Stock Exchange, the level of liquidity of the Ordinary Shares may decline.

The market price of our Ordinary Shares, when and if they are admitted to a Standard Listing and to trading of the Main Market of the London Stock Exchange, may be highly volatile

The market price of our Ordinary Shares, when and if they are admitted for trading on the Main Market of the London Stock Exchange, is likely to be volatile. Stock markets in general, and for biopharmaceutical companies in particular, have experienced extreme volatility that has often been unrelated to the operating performance of particular companies. As a result of this volatility, you may not be able to sell the Ordinary Shares underlying your ADSs.

Further issuances of Ordinary Shares may be dilutive

We may decide to offer additional shares in the future for capital raising or other purposes. Shareholders who do not take up or who are not eligible to take such an offer will find their proportionate ownership and voting interests in us to be reduced. An additional offering could also have a material adverse effect on the market price of the Ordinary Shares as a whole.

Economic conditions and current economic weakness

Any economic downturn either globally or locally in any area in which we operate may have an adverse effect on the demand for our services. A more prolonged economic downturn may restrict our ability to generate a profit.

In addition, although signs of economic recovery have been perceptible in certain countries, the sustainability of a global economic upturn is not yet assured. If economic conditions remain uncertain this might have an adverse impact on our operations and business results.

Our ability to pay dividends in the future is not certain

We cannot guarantee that we will have sufficient cash resources to pay dividends in the future. The declaration, payment and amount of any future dividends are subject to the shareholders’ discretion , or in the case of interim dividends, the Board’s discretion, and will depend upon our earnings, financial position, cash requirements, availability or profits, any dividends and profits that we receive from our subsidiary companies, as well as provisions for relevant laws or generally accepted accounting principles from time to time.

We are likely to have a number of outstanding options which, if exercised, could have a material dilutive effect on existing shareholders

Whilst we currently have no outstanding options over Ordinary Shares, options may be issued in connection with our proposed admission to a Standard Listing and to trading of the Main Market of the London Stock Exchange. Such convertible instruments would have a material dilutive effect on shareholders when and if they are exercised.

Pre-emption rights for U.S. and other non-U.K. holders of Ordinary Shares may be unavailable

In the case of certain increases in the Company’s issued share capital, existing holders of Ordinary Shares are generally entitled to pre-emption rights to subscribe for such shares, unless shareholders waive such rights by a resolution at a shareholders’ meeting. U.S. holders of ordinary shares in U.K. companies are customarily excluded from exercising any such pre-emption rights they may have, unless a registration statement under the Securities Act is effective with respect to those rights, or an exemption from the registration requirements thereunder is available.

 

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Any exemption from the registration requirements of the Securities Act or applicable non-U.S. securities law may not be available to enable U.S. or other non-U.K. holders to exercise such pre-emption rights or, if available, the Company may not utilize any such exemption.

Shareholders may be unable to enforce judgments obtained in U.S. courts

The Company is incorporated and registered in England and Wales under the Companies Act. Service of process upon our Directors and officers, all of whom reside outside the United States, may be difficult to obtain within the United States. Furthermore, since all of our directly owned assets and those of our Directors are located outside the United States, any judgment obtained in the United States against it or them may not be enforceable outside of the United States, including without limitation judgments based upon the civil liability provisions of the U.S. federal securities laws or the laws of any state or territory within the U.S. In addition, an award or awards of punitive damages in actions brought in the U.S. or elsewhere may be unenforceable in the U.K.. Shareholders may also have difficulties enforcing, in original actions brought in courts in jurisdictions outside the U.S., liabilities under U.S. securities laws.

Holders of ADSs are not treated as holders of our Ordinary Shares

After purchasing an ADS, you will become a holder of ADSs with rights to the underlying shares in a company incorporated under English law. Holders of ADSs are not treated as holders of our Ordinary Shares, unless they withdraw the Ordinary Shares underlying their ADSs in accordance with the deposit agreement and applicable laws and regulations. The Depositary is the holder of the Ordinary Shares underlying the ADSs. Holders of ADSs therefore do not have any rights as holders of our Ordinary Shares, other than the rights that they have pursuant to the deposit agreement. See “Item 12.D.—American Depositary Shares.”

Holders of ADSs may be subject to limitations on the transfer of their ADSs and the withdrawal of the underlying ordinary shares

ADSs are transferable on the books of the Depositary. However, the Depositary may close its books at any time or from time to time when it deems expedient in connection with the performance of its duties. The Depositary may refuse to deliver, transfer or register transfers of ADSs generally when our books or the books of the Depositary are closed, or at any time if we or the Depositary think it is advisable to do so because of any requirement of law, government or governmental body, or under any provision of the deposit agreement, or for any other reason, subject to the right of ADS holders to cancel their ADSs and withdraw the underlying ordinary shares. Temporary delays in the cancellation of your ADSs and withdrawal of the underlying ordinary shares may arise because the depositary has closed its transfer books or we have closed our transfer books, the transfer of ordinary shares is blocked to permit voting at a shareholders’ meeting or we are paying a dividend on our ordinary shares. In addition, ADS holders may not be able to cancel their ADSs and withdraw the underlying ordinary shares when they owe money for fees, taxes and similar charges and 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. See “Item 12.D.—American Depositary Shares.”

You will not have the same voting rights as the holders of our Ordinary Shares and may not receive voting materials in time to be able to exercise your right to vote

Except as described in this registration statement and the deposit agreement, holders of the ADSs will not be able to exercise voting rights attaching to the Ordinary Shares represented by the ADSs. Under the terms of the deposit agreement, holders of the ADSs may instruct the Depositary to vote the Ordinary Shares underlying their ADSs. Otherwise, holders of ADSs will not be able to exercise their right to vote unless they withdraw the Ordinary Shares underlying their ADSs to vote them in person or by proxy in accordance with applicable laws and regulations and our Articles of Association. Even so, ADS holders may not know about a meeting far enough in advance to withdraw those Ordinary Shares. If we ask for the instructions of holders of the ADSs, the Depositary, upon timely notice from us, will notify ADS holders of the upcoming vote and arrange to deliver our voting materials to them. Upon our request, the Depositary will mail to holders a shareholder meeting notice that contains, among other things, a statement as to the manner in which voting instructions may be given. We cannot guarantee that ADS holders will

 

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receive the voting materials in time to ensure that they can instruct the depositary to vote the ordinary shares underlying their ADSs. A shareholder is only entitled to participate in, and vote at, the meeting of shareholders, provided that it holds our Ordinary Shares as of the record date set for such meeting and otherwise complies with our Articles of Association. In addition, the Depositary’s liability to ADS holders for failing to execute voting instructions or for the manner of executing voting instructions is limited by the deposit agreement. As a result, holders of ADSs may not be able to exercise their right to give voting instructions or to vote in person or by proxy and they may not have any recourse against the Depositary or us if their Ordinary Shares are not voted as they have requested or if their Ordinary Shares cannot be voted.

You may not receive distributions on our Ordinary Shares represented by the ADSs or any value for them if it is illegal or impractical to make them available to holders of ADSs

The Depositary has agreed to pay to you any cash dividends or other distributions it or the custodian receives on our Ordinary Shares or other deposited securities after deducting its fees and expenses. You will receive these distributions in proportion to the number of our Ordinary Shares your ADSs represent. However, in accordance with the limitations set forth in the deposit agreement, it may be unlawful or impractical to make a distribution available to holders of ADSs. We have no obligation to take any other action to permit distribution on the ADSs, ordinary shares, rights or anything else to holders of the ADSs. This means that you may not receive the distributions we make on our ordinary shares or any value from them if it is unlawful or impractical to make them available to you. These restrictions may have an adverse effect on the value of your ADSs.

ADSs holders may not be entitled to a jury trial with respect to claims arising under the deposit agreement, which could result in less favorable outcomes to the plaintiff(s) in any such action

The deposit agreement provides that, to the fullest extent permitted by law, holders and beneficial owners of ADSs irrevocably waive the right to a jury trial of any claim they may have against us or the depositary arising out of or relating to the ADSs or the deposit agreement.

If this jury trial waiver provision is not permitted by applicable law, an action could proceed under the terms of the deposit agreement with a jury trial. If we or the depositary opposed a jury trial demand based on the waiver, the court would determine whether the waiver was enforceable based on the facts and circumstances of that case in accordance with the applicable state and federal law. To our knowledge, the enforceability of a contractual pre-dispute jury trial waiver in connection with claims arising under the federal securities laws has not been finally adjudicated by the U.S. Supreme Court. However, we believe that a contractual pre-dispute jury trial waiver provision is generally enforceable, including under the laws of the State of New York, which govern the deposit agreement, by a federal or state court in the City of New York, which has non-exclusive jurisdiction over matters arising under the deposit agreement. In determining whether to enforce a contractual pre-dispute jury trial waiver provision, courts will generally consider whether a party knowingly, intelligently and voluntarily waived the right to a jury trial. We believe that this is the case with respect to the deposit agreement and the ADSs. It is advisable that you consult legal counsel regarding the jury waiver provision before entering into the deposit agreement.

If you or any other holders or beneficial owners of ADSs bring a claim against us or the Depositary in connection with matters arising under the deposit agreement or the ADSs, including claims under federal securities laws, you or such other holder or beneficial owner may not be entitled to a jury trial with respect to such claims, which may have the effect of limiting and discouraging lawsuits against us and/or the depositary. If a lawsuit is brought against us and/or the depositary under the deposit agreement, it may be heard only by a judge or justice of the applicable trial court, which would be conducted according to different civil procedures and may result in different outcomes than a trial by jury would have had, including results that could be less favorable to the plaintiff(s) in any such action, depending on, among other things, the nature of the claims, the judge or justice hearing such claims, and the venue of the hearing.

No condition, stipulation or provision of the deposit agreement or ADSs serves as a waiver by any holder or beneficial owner of ADSs or by us or the Depositary of compliance with the U.S. federal securities laws and the rules and regulations promulgated thereunder.

 

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Our principal shareholder has a significant holding in the company which may give them influence in certain matters requiring approval by shareholders, including approval of significant corporate transactions in certain circumstances

As of December 31, 2020, Gabriele Cerrone and Planwise Group Limited, a company in which Mr. Cerrone has a beneficial interest, held an aggregate of approximately 37.12 per cent. of our Ordinary Shares. Accordingly, Mr. Cerrone and Planwise Group Limited may, as a practical matter, be able to influence certain matters requiring approval by shareholders, including approval of significant corporate transactions in certain circumstances. Such concentration of ownership may also have the effect of delaying or preventing any future proposed change in control of the Company. The trading price of the Ordinary Shares, when and if admitted to a Standard Listing and to trading of the Main Market of the London Stock Exchange, could be adversely affected if potential new investors are disinclined to invest in us because they perceive disadvantages to a large shareholding being concentrated in the hands of a single shareholder. The interests of Tiziana and holders that acquire ADSs may not be aligned. Tiziana may make acquisitions of, or investments in, other businesses in the same sectors as us. These businesses may be, or may become, competitors of us. In addition, funds or other entities managed or advised by Tiziana may be in direct competition with us on potential acquisitions of, or investments in, certain businesses.

We are an “emerging growth company”, and there are reduced disclosure requirements applicable to emerging growth companies

We are an “emerging growth company” as defined in the SEC’s rules and regulations and we will remain an emerging growth company until the earlier to occur of (1) the last day of 2025, (2) the last day of the fiscal year in which we have total annual gross revenues of at least $1.07 billion, (3) the last day of the fiscal year in which we are deemed to be a “large accelerated filer”, under the rules of the U.S. Securities and Exchange Commission,

or SEC, which means the market value of our equity securities that is held by non-affiliates exceeds $700 million as of the prior June 30^th, and (4) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period. For so long as we remain an emerging growth company, we are permitted and intend to rely on exemptions from certain disclosure requirements that are applicable to other public companies that are not emerging growth companies. These exemptions include:

 

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not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act;

 

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not being required to comply with any requirement that has or may be adopted by the Public Company Accounting Oversight Board (PCAOB) regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements;

 

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being permitted to provide only two years of audited financial statements in this initial registration statement, in addition to any required unaudited interim financial statements, with correspondingly reduced “Management’s Discussion and Analysis of Financial Condition and Results of Operations” disclosure;

 

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reduced disclosure obligations regarding executive compensation; and

 

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an exemption from the requirement to seek nonbinding advisory votes on executive compensation or golden parachute arrangements.

We may choose to take advantage of some, but not all, of the available exemptions. We have taken advantage of reduced reporting burdens in this registration statement. In particular, we have not included all of the executive compensation information that would be required if we were not an emerging growth company. We cannot predict whether you will find our ADSs less attractive if we rely on certain or all of these exemptions.

In addition, the JOBS Act provides that an emerging growth company may take advantage of an extended transition period for complying with new or revised accounting standards. This allows an emerging growth company to delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We are considering whether we will take advantage of the extended transition period for complying with new or revised accounting standards. Since IFRS makes no distinction between public and private companies for purposes of compliance with new or revised accounting standards, the requirements for our compliance as a private company and as a public company are the same.

 

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We are not, and do not intend to become, regulated as an “investment company” under the Investment Company Act and if we were deemed an “investment company” under the Investment Company Act, applicable restrictions could make it impractical for us to continue our business as contemplated and could have a material adverse effect on our business

The Investment Company Act and the rules thereunder contain detailed parameters for the organization and operation of investment companies. Among other things, the Investment Company Act and the rules thereunder limit or prohibit transactions with affiliates, impose limitations on the issuance of debt and equity securities and impose certain governance requirements. We have not been and do not intend to become regulated as an investment company, and we intend to conduct our activities so that we will not be deemed to be an investment company under the Investment Company Act. In order to ensure that we are not deemed to be an investment company, we may be limited in the assets that we may continue to own and, further, may need to dispose of or acquire certain assets at such times or on such terms as may be less favorable to us than in the absence of such requirement. If anything were to happen which would cause us to be deemed to be an investment company under the Investment Company Act (such as significant changes in the value of our Founded Entities or a change in circumstance that results in a reclassification of our interests in our Founded Entities for purposes of the Investment Company Act), the requirements imposed by the Investment Company Act could make it impractical for us to continue our business as currently conducted, which would materially adversely affect our business, results of operations and financial condition. In addition, if we were to become inadvertently subject to the Investment Company Act, any violation of the Investment Company Act could subject us to material adverse consequences, including potentially significant regulatory penalties and the possibility that certain of our contracts could be deemed unenforceable.

As a foreign private issuer, we are exempt from a number of rules under the U.S. securities laws and are permitted to file less information with the SEC than a U.S. company. This may limit the information available to holders of ADSs or our ordinary shares

We are a “foreign private issuer”, as defined in the SEC’s rules and regulations and, consequently, we are not subject to all of the disclosure requirements applicable to public companies organized within the United States. For example, we are exempt from certain rules under the Exchange Act, that regulate disclosure obligations and procedural requirements related to the solicitation of proxies, consents or authorizations applicable to a security registered under the Exchange Act, including the U.S. proxy rules under Section 14 of the Exchange Act. In addition, our officers and Directors are exempt from the reporting and “short-swing” profit recovery provisions of Section 16 of the Exchange Act and related rules with respect to their purchases and sales of our securities. Moreover, while we currently make annual and semi-annual filings with respect to our listing on the LSE, we will not be required to file periodic reports and financial statements with the SEC as frequently or as promptly as U.S. domestic issuers and will not be required to file quarterly reports on Form 10-Q or current reports on Form 8-K under the Exchange Act. Accordingly, there will be less publicly available information concerning our company than there would be if we were not a foreign private issuer.

We may lose our foreign private issuer status in the future, which could result in significant additional cost and expense

While we currently qualify as a foreign private issuer, the determination of foreign private issuer status is made annually on the last business day of an issuer’s most recently completed second fiscal quarter and, accordingly, the next determination will be made with respect to us on June 30, 2021.

In the future, we would lose our foreign private issuer status if we to fail to meet the requirements necessary to maintain our foreign private issuer status as of the relevant determination date. For example, if more than 50 per cent. of our securities are held by U.S. residents and more than 50 per cent. of the members of our executive committee or members of our Board of Directors are residents or citizens of the United States, we could lose our foreign private issuer status.

The regulatory and compliance costs to us under U.S. securities laws as a U.S. domestic issuer may be significantly more than costs we incur as a foreign private issuer. If we are not a foreign private issuer, we will be required to file periodic reports and registration statements on U.S. domestic issuer forms with the SEC, which are more detailed

 

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and extensive in certain respects than the forms available to a foreign private issuer. We would be required under current SEC rules to prepare our financial statements in accordance with U.S. GAAP, rather than IFRS, and modify certain of our policies to comply with corporate governance practices associated with U.S. domestic issuers. Such conversion of our financial statements to U.S. GAAP will involve significant time and cost. In addition, we may lose our ability to rely upon exemptions from certain corporate governance requirements on U.S. stock exchanges that are available to foreign private issuers such as the ones described above and exemptions from procedural requirements related to the solicitation of proxies.

We will incur increased costs as a result of operating as a U.S. public company, and our management will be required to devote substantial time to new compliance initiatives

As a U.S. public company, and particularly after we are no longer an emerging growth company, we will incur significant legal, accounting and other expenses that we will not incur as a public company listed on the LSE. In addition, the Sarbanes-Oxley Act of 2002, and rules subsequently implemented by the SEC have imposed various requirements on public companies, including establishment and maintenance of effective disclosure and financial controls and corporate governance practices. Our management and other personnel will need to devote a substantial amount of time to these compliance initiatives. Moreover, these rules and regulations will increase our legal and financial compliance costs and will make some activities more time-consuming and costly. For example, we expect that these rules and regulations may make it more difficult and more expensive for us to obtain director and officer liability insurance.

Pursuant to Section 404, we will be required to furnish a report by our management on our internal control over financial reporting, including an attestation report on internal control over financial reporting issued by our independent registered public accounting firm. However, while we remain an emerging growth company, we will not be required to include an attestation report on internal control over financial reporting issued by our independent registered public accounting firm. To achieve compliance with Section 404 within the prescribed period, we will be engaged in a process to document and evaluate our internal control over financial reporting, which is both costly and challenging. In this regard, we will need to continue to dedicate internal resources, potentially engage outside consultants and adopt a detailed work plan to assess and document the adequacy of internal control over financial reporting, continue steps to improve control processes as appropriate, validate through testing that controls are functioning as documented and implement a continuous reporting and improvement process for internal control over financial reporting. Despite our efforts, there is a risk we will not be able to conclude within the prescribed timeframe that our internal control over financial reporting is effective as required by Section 404. This could result in an adverse reaction in the financial markets due to a loss of confidence in the reliability of our financial statements.

If we are unable to maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results or prevent fraud. As a result, shareholders could lose confidence in our financial and other public reporting, which would harm our business

Effective internal controls over financial reporting are necessary for us to provide reliable financial reports and, together with adequate disclosure controls and procedures, are designed to prevent fraud. Any failure to implement required new or improved controls, or difficulties encountered in their implementation could cause us to fail to meet our reporting obligations. In addition, any testing by us conducted in connection with Section 404, or any subsequent testing by our independent registered public accounting firm, may reveal deficiencies in our internal controls over financial reporting that are deemed to be material weaknesses or that may require prospective or retroactive changes to our financial statements or identify other areas for further attention or improvement. Inferior internal controls could also cause you to lose confidence in our reported financial information.

Our management will be required to assess the effectiveness of these controls annually. However, for as long as we are an emerging growth company, our independent registered public accounting firm will not be required to attest to the effectiveness of our internal controls over financial reporting pursuant to Section 404. We could be an emerging growth company for up to five years. An independent assessment of the effectiveness of our internal controls over financial reporting could detect problems that our management’s assessment might not. Undetected material weaknesses in our internal controls over financial reporting could lead to financial statement restatements and require us to incur the expense of remediation.

 

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Our disclosure controls and procedures may not prevent or detect all errors or acts of fraud

Upon completion of this registration, we will become subject to certain reporting requirements of the Exchange Act. Our disclosure controls and procedures are designed to reasonably assure that information required to be disclosed by us in reports we file or submit under the Exchange Act is accumulated and communicated to management, recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC. We believe that any disclosure controls and procedures or internal controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by an unauthorized override of the controls. Accordingly, because of the inherent limitations in our control system, misstatements or insufficient disclosures due to error or fraud may occur and not be detected.

We may be unable to use net operating loss and tax credit carryforwards and certain built-in losses to reduce future U.K. tax liabilities

As a U.K. incorporated and tax resident entity, we are subject to U.K. corporate taxation on its tax-adjusted trading profits. Due to the nature of our business, we have generated losses since inception and therefore we have not paid any U.K. corporation tax. Subject to numerous utilization criteria and restrictions (including those that limit the percentage of profits that can be reduced by carried forward losses and those that can restrict the use of carried forward losses where there is a change of ownership of more than half the ordinary shares of the company and a major change in the nature, conduct or scale of the trade), we expect these to be eligible for carry forward and utilization against future U.K. operating profits.

Future changes to tax laws could materially adversely affect our company and reduce net returns to our shareholders

The tax treatment of the company is subject to changes in tax laws, regulations and treaties, or the interpretation thereof, tax policy initiatives and reforms under consideration and the practices of tax authorities in jurisdictions

in which we operate, as well as tax policy initiatives and reforms related to the Organisation for Economic Co-Operation and Development, Base Erosion and Profit Shifting Project, the European Commission’s state aid investigations and other initiatives. Such changes may include (but are not limited to) the taxation of operating income, investment income, dividends received or (in the specific context of withholding tax) dividends paid. We are unable to predict what tax reform may be proposed or enacted in the future or what effect such changes would have on our business, but such changes, to the extent they are brought into tax legislation, regulations, policies or practices, could affect our financial position and overall or effective tax rates in the future in countries where we have operations, reduce post-tax returns to our shareholders, and increase the complexity, burden and cost of tax compliance.

Tax authorities may disagree with our positions and conclusions regarding certain tax positions, resulting in unanticipated costs, taxes or non-realization of expected benefits

A tax authority may disagree with tax positions that we have taken, which could result in increased tax liabilities. For example, HM Revenue & Customs, (“HMRC”), the Internal Revenue Service or another tax authority could challenge our allocation of income by tax jurisdiction and the amounts paid between certain of our Founded Entities pursuant to our intercompany arrangements and transfer pricing policies, including amounts paid with respect to our intellectual property development. Similarly, a tax authority could assert that we are subject to tax in a jurisdiction where we believe we have not established a taxable connection, often referred to as a “permanent establishment” under international tax treaties, and such an assertion, if successful, could increase our expected tax liability in one

 

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or more jurisdictions. A tax authority may take the position that material income tax liabilities, interest and penalties are payable by us, in which case, we expect that we might contest such assessment. Contesting such an assessment may be lengthy and costly and if we were unsuccessful in disputing the assessment, the implications could increase our anticipated effective tax rate, where applicable.

Shareholder protections found in provisions under the U.K. City Code on Takeovers and Mergers (the “Takeover Code”), will not apply if our securities are no longer admitted to trading on a regulated market or a multilateral trading facility in the United Kingdom or on any stock exchange in the Channel Islands or the Isle of Man and our place of management and control is considered to change to outside the United Kingdom

We intend to re-register as a public limited company incorporated in England and Wales in the near future and have our Ordinary Shares admitted to trading on the Main Market of the London Stock Exchange. Accordingly, if and when we proceed with an admission to trading on the Main Market of the London Stock Exchange, we will become subject to the Takeover Code and, as a result, our shareholders are entitled to the benefit of certain takeover offer protections provided under the Takeover Code. The Takeover Code provides a framework within which takeovers of companies are regulated and conducted. If, at the time of a takeover offer, we have de-listed from the Main Market of the London Stock Exchange (and do not maintain a listing of securities on any other regulated market or a multilateral trading facility in the United Kingdom or on any stock exchange in the Channel Islands or the Isle of Man) and the Panel on Takeovers and Mergers determine that we do not have our place of central management and control in the United Kingdom, then the Takeover Code may not apply to us and our shareholders would not be entitled to the benefit of the various protections that the Takeover Code affords. In particular, we would not be subject to the rules regarding mandatory takeover bids. The following is a brief summary of some of the most important rules of the Takeover Code:

 

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when any person acquires, whether by a series of transactions over a period of time or not, an interest in shares which (taken together with shares already held by that person and an interest in shares held or acquired by persons acting in concert with him or her) carry 30 per cent. or more of the voting rights of a company that is subject to the Takeover Code, that person is generally required to make a mandatory offer to all the holders of any class of equity share capital or other class of transferable securities carrying voting rights in that company to acquire the balance of their interests in the company;

 

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when any person who, together with persons acting in concert with him or her, is interested in shares representing not less than 30 per cent. but does not hold more than 50 per cent. of the voting rights of a company that is subject to the Takeover Code, and such person, or any person acting in concert with him or her, acquires an additional interest in shares which increases the percentage of shares carrying voting rights in which he or she is interested, then such person is generally required to make a mandatory offer to all the holders of any class of equity share capital or other class of transferable securities carrying voting rights of that company to acquire the balance of their interests in the company;

 

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a mandatory offer triggered in the circumstances described in the two paragraphs above must be in cash (or be accompanied by a cash alternative) and at not less than the highest price paid within the preceding 12 months to acquire any interest in shares in the company by the person required to make the offer or any person acting in concert with him or her;

 

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in relation to a voluntary offer (i.e. any offer which is not a mandatory offer), when interests in shares representing 10 per cent. or more of the shares of a class have been acquired for cash by an offeror (i.e., a bidder) and any person acting in concert with it in the offer period and the previous 12 months, the offer must be in cash or include a cash alternative for all shareholders of that class at not less than the highest price paid for any interest in shares of that class by the offeror and by any person acting in concert with it in that period. Further, if an offeror acquires for cash any interest in shares during the offer period, a cash alternative must be made available at not less than the highest price paid for any interest in the shares of that class;

 

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if the offeror acquires an interest in shares in an offeree company (i.e., a target) at a price higher than the value of the offer, the offer must be increased to not less than the highest price paid for the interest in shares so acquired;

 

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the offeree company must obtain competent advice as to whether the terms of any offer are fair and reasonable and the substance of such advice must be made known to all the shareholders, together with the opinion of the board of directors of the offeree company;

 

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special or favorable deals for selected shareholders are not permitted, except in certain circumstances where independent shareholder approval is given and the arrangements are regarded as fair and reasonable in the opinion of the financial adviser to the offeree;

 

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all shareholders must be given the same information;

 

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each document published in connection with an offer by or on behalf of the offeror or offeree must state that the directors of the offeror or the offeree, as the case may be, accept responsibility for the information contained therein;

 

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profit forecasts, quantified financial benefits statements and asset valuations must be made to specified standards and must be reported on by professional advisers;

 

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misleading, inaccurate or unsubstantiated statements made in documents or to the media must be publicly corrected immediately;

 

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actions during the course of an offer by the offeree company, which might frustrate the offer are generally prohibited unless shareholders approve these plans. Frustrating actions would include, for example, lengthening the notice period for directors under their service contract or agreeing to sell off material parts of the target group;

 

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stringent and detailed requirements are laid down for the disclosure of dealings in relevant securities during an offer, including the prompt disclosure of positions and dealing in relevant securities by the parties to an offer and any person who is interested (directly or indirectly) in 1 per cent. or more of any class of relevant securities; and

 

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employees of both the offeror and the offeree company and the trustees of the offeree company’s pension scheme must be informed about an offer. In addition, the offeree company’s employee representatives and pension scheme trustees have the right to have a separate opinion on the effects of the offer on employment appended to the offeree board of directors’ circular or published on a website.

The rights of our shareholders may differ from the rights typically offered to shareholders of a U.S. corporation

The Company is incorporated under the laws of England and Wales. 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. See “Articles of Association—Differences in Corporate Law” in this registration statement for a description of the principal differences between the provisions of the Companies Act applicable to us and, for example, the Delaware General Corporation Law relating to shareholders’ rights and protections.

The principal differences include the following:

 

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under English law and our Articles of Association, each shareholder present at a meeting has only one vote when voting by a show of hands unless demand is made for a vote on a poll, in which case each holder gets one vote per share owned. The Company usually conducts all of its shareholder votes on a poll. Under U.S. law, each shareholder typically is entitled to one vote per share at all meetings;

 

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under English law, it is only on a poll that the number of shares determines the number of votes a holder may cast. You should be aware, however, that the voting rights of ADSs are also governed by the provisions of a deposit agreement with our depositary bank;

 

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under English law, subject to certain exceptions and disapplications, each shareholder generally has preemptive rights to subscribe on a proportionate basis to any issuance of ordinary shares or rights to subscribe for, or to convert securities into, ordinary shares for cash. Under U.S. law, shareholders generally do not have preemptive rights unless specifically granted in the certificate of incorporation or otherwise;

 

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under English law and our Articles of Association, certain matters require the approval of 75 per cent. of the shareholders who vote (in person or by proxy) on the relevant resolution (or on a poll of shareholders representing 75 per cent. of the ordinary shares voting (in person or by proxy)), including amendments to the Articles of Association. This may make it more difficult for us to complete certain corporate transactions deemed advisable by our Board of Directors. Under U.S. law, generally only majority shareholder approval is required to amend the certificate of incorporation or to approve other significant transactions;

 

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in the U.K., takeovers may be structured as takeover offers or as schemes of arrangement. Under English law, for so long as we continue to be subject to the Takeover Code, a bidder seeking to acquire us by means of a takeover offer would need to make an offer for all of our outstanding ordinary shares/ADSs. If acceptances are not received for 90 per cent. or more of the ordinary shares/ADSs under the offer, under English law, the bidder cannot complete a “squeeze out” to obtain 100 per cent. control of us. Accordingly, acceptances of 90 per cent. of our outstanding ordinary shares/ADSs will likely be a condition in any takeover offer to acquire us, not 50 per cent. as is more common in tender offers for corporations organized under Delaware law. By contrast, a scheme of arrangement, the successful completion of which would result in a bidder obtaining 100 per cent. control of us, requires the approval of a majority of shareholders voting at the meeting and representing 75 per cent. of the ordinary shares voting for approval;

 

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under English law and our Articles of Association, shareholders and other persons whom we know or have reasonable cause to believe are, or have been, interested in our shares may be required to disclose information regarding their interests in our shares upon our request, and the failure to provide the required information could result in the loss or restriction of rights attaching to the shares, including prohibitions on certain transfers of the shares, withholding of dividends and loss of voting rights. Comparable provisions generally do not exist under U.S. law; and

 

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the quorum requirement for a shareholders’ meeting is a minimum of two shareholders entitled to vote at the meeting and present in person or by proxy or, in the case of a shareholder which is a corporation, represented by a duly authorized officer. Under U.S. law, a majority of the shares eligible to vote must generally be present (in person or by proxy) at a shareholders’ meeting in order to constitute a quorum. The minimum number of shares required for a quorum can be reduced pursuant to a provision in a company’s certificate of incorporation or bylaws, but typically not below one-third of the shares entitled to vote at the meeting.

 

ITEM 4.

INFORMATION ON THE COMPANY

A. HISTORY AND DEVELOPMENT OF THE COMPANY

We operate a genomics-based personalized medicine business, particularly focused on breast cancer patients. Our pre-clinical product candidate is StemPrintER^™, a multi-gene prognostic assay intended for the prediction of the risk of distant recurrence in luminal, ER+/HER2-negative breast cancer patients, based on the detection of 20 stem cell markers normalised to four housekeeping genes. StemPrintER^™ has been evaluated in an initial retrospective validation study using a consecutive cohort of approximately 2,400 patients with breast cancer. In that validation study, StemPrintER^™ showed superiority to Oncotype DX^® in predicting recurrence in ER+/HER2- postmenopausal breast cancer patients. Our next generation derivative risk model, SPARE, combines StemPrintER^™ with two clinical markers, namely lymph nodal status and tumour size, in a more refined risk model.

We aim to commercialize the StemPrintER^™ and SPARE platform technology. The Company was incorporated in England and Wales on June 5, 2020 as a private company with limited liability under the Companies Act with indefinite life and company number 12647178, we intend to re-register as a public limited company if and when we may apply to have our shares traded on the London Stock Exchange. The Company was created in connection with its Demerger (spin-off) from Tiziana Life Sciences plc, a company admitted to a Standard Listing and to trading on both the Main Market of the London Stock Exchange and Nasdaq.

On October 5, 2020, we entered into a Demerger Agreement with Tiziana pursuant to which Tiziana declared a dividend in specie equal to the book value (of approximately £3.07 million) of Tiziana’s shareholding in StemPrintER Sciences Limited, the entity in the Tiziana group which held all of the assets and intellectual property relating to StemPrintER^™ and SPARE and £1.0 million in cash.

 

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The dividend in specie was satisfied by the transfer by Tiziana to us of the shares in StemPrintER Sciences Limited. In return for this transfer, we allotted Ordinary Shares in to Tiziana shareholders on a one for one basis. You are receiving Ordinary Shares, in the form of ADSs, as a result of this transfer.

The Demerger was conditional upon, among other things, Court approval of a capital reduction which was approved by special resolution of shareholders on October 2, 2020. The Court sanctioned the related capital reduction on October 27, 2020 and the Demerger became effective on October 30, 2020.

The objective of the Demerger was to maximise value to the shareholders of Tiziana through the further commercialization of StemPrintER^™ and its assets and intellectual property. The demerger will allow the Company to continue these commercialization efforts as a separate listed company with cash reserves of approximately £1,000,000. Subject to our Ordinary Shares being admitted to a Standard Listing and to trading on the Main Market of the London Stock Exchange, Tiziana has agreed, pursuant to the terms of the Supplemental Demerger Agreement, to invest not less than £2,000,000 in our equity securities.

Tiziana will continue to provide certain limited management and administrative services to the Company for a 12-month period following the completion of the demerger. Tiziana and the Company have entered into a Demerger Agreement which sets out certain agreements that govern certain aspects of the relationship between Tiziana and the Company and their respective subsidiaries following the Demerger, details of the Demerger Agreement are more fully outlined in “Item 5.A.—Material Contracts”.

Our principal capital expenditures are devoted to conducting research and development of our product candidate, as further discussed in “Item 5.A.—Operating Results”.

The Company’s legal name is AccuStem Sciences Limited. Our registered office is situated at 107 Cheapside, 9^th floor, London EC2V 6DN, United Kingdom, and our telephone number is +44 (0) 20 7066 1000. We have one wholly owned subsidiary: StemPrintER Sciences Limited, a private company incorporated in England and Wales with limited liability under the Companies Act. Our website address is www.accustem.com. The reference to our website is an inactive textual reference only and information contained in, or that can be accessed through, our website or any other website cited in this registration statement is not part of hereof.

B. BUSINESS OVERVIEW

Overview and Market Opportunity

Endocrine receptor positive (ER+) breast cancers constitute the majority of breast cancer cases (~75-80%) and display remarkable variability in clinical behaviour. This heterogeneity makes prognosis and therapy response often challenging to predict using the standard clinicopathological features of the tumour. Although the overall prognosis for this group of patients is good, a significant proportion (>20%) of these patients will experience distant recurrence in the first 10 years post-surgery. For ER+ patients who also have a negative HER2 status (HER2-), the standard of care is endocrine therapy with the addition of adjuvant chemotherapy in those patients considered to be at risk of recurrence according to clinicopathological parameters.

However, it has become apparent that these parameters are often insufficient to predict risk of recurrence in ER+/HER2- breast cancer patients, and, as a consequence, a significant proportion of these patients are either over- or under-treated. Multigene prognostic tests can assist decision making on treatments, differentiating low risk patients who could be safely be spared chemotherapy from higher risk patients who might benefit from chemotherapy or prolonged endocrine treatments. We anticipate this in vitro prognostic test to be used in conjunction with clinical evaluation to identify those patients at increased risk for early and/or late metastasis.

StemPrintER^™ is designed to help physicians distinguish ER+/HER2- patients. StemPrintER^™ has a novel biological basis in the stem cell biology and interrogates the intrinsic content and aggressiveness of cancer stem cells of the primary tumour. The assay uses a reliable real-time quantitative reverse transcription polymerase chain reaction (qRT-PCR), formalin-fixed, paraffin-embedded (FFPE) platform for testing.

StemPrintER^™ has been initially developed and clinically validated in a retrospective validation study using a consecutive cohort of approximately 2,400 patients with breast cancer. Subsequently, StemPrintER^™ has been further validated in an independent retrospective cohort of more than 800 ER+/HER2- postmenopausal patients from the TransATAC trial.

 

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Scientific Background

The identification and development of multi-gene assays for accurate prognostication of individual breast cancer patients has represented an expanding area of research for more than a decade. In this context, it has become progressively clear that biomarkers for the prediction of clinical outcome should be able to interrogate the underlying biology of the tumours of individual breast cancer patients. The increasingly recognised relevance of cancer stem cells to breast cancer heterogeneity and disease course suggests that the knowledge of the “degree of stemness” of a breast cancer might substantially advance individualised patient management.

StemPrintER^™ was developed to be a novel genomic predictor based on a cluster of 20 stem cell genes whose high expression levels were capable of identifying a homogeneous group of patients with adverse clinical outcome in the meta-analysis of four distinct public breast cancer datasets.

Based on existing published research, several of the 20 stem cell genes display evident connection to metastatic dissemination through their role in matrix degradation, migration, invasion and engraftment (e.g., MMP1, SNF, MIEN1, PHLDA2, EPB41L5).

For other genes (RACGAP1, H2AFZ, H2AFJ, APOBEC3B, CENPW, TOP2A CDK1), it was considered possible, or even probable, that they were significant in the establishment of cancer stem cells phenotypes and might be linked to involvement in genomic instability, which could be reasonably hypothesized based on their role in processes, such as DNA replication and repair, chromatin remodelling and mitotic control of chromosome segregation.

A final set of genes, whose putative role in metastasis is less obvious, might be linked – directly or indirectly - to the development of adaptive plastic responses required for cancer stem cells to withstand and survive in hostile environmental conditions, such as hypoxia and nutrient deprivation, both at the primary tumour and metastatic site level, and/or to resist hormonal or chemotherapy treatments, often in the broader context of the activation of an epithelial-to-mesenchymal transition (EMT) program. These genes include those involved in: (a) metabolism reprogramming and mitochondrial physiology (MRPS23, NDUFB10, Phb); (b) mRNA ribonucleoparticle bioGENEsis, mRNA transcription, splicing and export, and RNA processing and degradation events (ALYREF, EXOSC4); and (c) survival/escape from apoptosis, which is connected to resistance to hormonal and/or chemotherapy through hijacking of signalling pathways, such as TGF-beta and pi3k-AKT-mTOR (NOL3, LY6E, EIF4EBP1). Additional evidence for a mechanistic link between the 20 genes and the cancer stem cell phenotype comes from the observation that these genes are frequently overexpressed in breast cancer, sometimes as a consequence of gene amplification.

Whilst further studies may be needed to establish whether the genes comprised in the signature are causal in the determination and/or maintenance of cancer stem cells in breast cancers, and possibly of their metastatic potential, the ability of the 20 stem cell gene signature to predict distant metastasis in breast cancer patients also support the proposition that the metastatic potential of individual breast cancers can be traced back to the molecular characteristics of a rare subpopulation of tumour cells that display cancer stem cell traits.

Summary of Clinical Research History

Through validation studies in a large prospective-retrospective cohort of breast cancer patients with high-quality follow-up, and functional prospective studies based on the use of fresh tumour samples from an additional consecutive series of breast cancer patients, it has been established that the 20-gene SC-based assay predicts the individual likelihood to develop distant metastasis in breast cancer, in particular in triple negative breast cancer and luminal ER+/HER2- breast cancer cancers and does so, most likely, by interrogating the number and biological characteristics of their cancer stem cells. Of note, our genomic predictor comprises a set of genes that do not belong (with one exception) to any other genomic tool or molecular classifier described for triple negative breast cancer and luminal breast cancers.

We accordingly believe that the result of our research is the development of a unique tool capable of probing into the “degree of stemness”, and hence into the clinical outcome, of breast cancers.

Our initial research focused on genes discriminating mammary stem cells from progenitors in the normal gland. Only those genes that were expressed at higher levels in mammary stem cells versus progenitors were selected. Selection criteria was based on the premise that cancer stem cells might display traits reminiscent of those present in normal mammary stem cells and, since cancer stem cells are rare, the selection of overexpressed genes (mammary stem cells versus progenitors) afforded a higher likelihood of scoring differences, with respect to under-expressed genes.

 

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Accordingly, these findings have important potential implications from both the biological and clinical perspective.

Clinical and Commercial Viability

From a clinical standpoint, although future studies in independent retrospective and/or prospective breast cancer patient cohorts are warranted to increase the level of clinical evidence of the reliability and transportability of the 20 stem cell gene genomic tool, in light of the recent independent validation study in the TransATAC cohort of the Royal Marsden Hospital and Queen Mary University in London, the results of our research have immediate relevance to the clinical management of breast cancer patients, in particular for the subgroup of ER+/HER2- breast cancer patients. These patients represent the majority (~75%) of the cases and display high molecular heterogeneity and variability in their clinical behaviour. Accordingly, ER+/HER2- breast cancer patients can greatly benefit from accurate stratification of their risk of recurrence, for the administration of the optimal therapy, while avoiding under- or over-treatment.

Based on the 20 stem cell -gene signature, StemPrintER^™ is a specific risk model for ER+/HER2- breast cancer patients. StemPrintER^™ is an independent predictor of both early and late metastasis. This places StemPrintER^™ among the more recently developed second generation multi-gene assays for breast cancer, such as Prosigna and EndoPredict, which have been shown to outperform first generation breast cancer prognostic tests – e.g., Oncotype DX^® and MammaPrint – in the prediction of the risk of late recurrence (5–10 years post-surgery).

In particular, StemPrintER^™ predicts early metastasis in lymph node-negative breast cancer patients, and both early and late metastasis in lymph node-positive breast cancer patients. Accordingly, we consider that StemPrintER^™ could have immediate clinical application as a tool to tailor the administration of adjuvant chemotherapy, in addition to the standard endocrine therapy, in those ER+/HER2- breast cancer patients at high risk of early recurrence, while sparing unnecessary chemotherapy to low risk patients.

In addition, StemPrintER^™ could also represent a valuable tool to identify ER+/HER2- breast cancer patients at high risk of late recurrence, who might benefit from prolongation of endocrine therapy beyond the standard 5 years of treatment. This is an important issue in the clinical management of ER+/HER2- breast cancer patients, who remain at persistent risk of recurrence for at least 15–20 years, with >50% of relapses and more than two-thirds of deaths occurring >5 years after the original diagnosis. However, while continuation of endocrine therapy reduces the proclivity to develop late recurrences, its benefits must be weighed against side effects and quality of life, avoiding overtreatment through accurate patient stratification.

Recent Developments

A team of scientists from IEO/University of Milan conducted an independent validation of StemPrintER^™ and its derivative, SPARE, in the TransATAC cohort of ER+/HER2- postmenopausal breast cancer patients, in collaboration with the Royal Marsden Hospital and Queen Mary University in London, alongside a head-to-head comparison of StemPrintER^™ with Oncotype DX^® in these patients.

This study was further evidence that StemPrintER^™/SPARE predicts the distant recurrence risk independently of all the other clinicopathological parameters, as expressed by the Clinical Treatment Score (CTS), and that StemPrintER^™/SPARE provides substantial more prognostic information on the top of clinicopathological parameters (CTS) for a more refined distant recurrence prediction.

The results from this study also clearly showed that StemPrintER^™ outperforms Oncotype DX^® in 10-year risk prediction in more than 800 ER+/HER2- postmenopausal breast cancer patients in the analysis, including in lymph node-negative (N0) and 1 to 3 lymph node-positive (N1-3) patients. In particular, StemPrintER^™ is 40-50% superior to Oncotype DX^® in providing additional prognostic information beyond the standard CTS.

Commercialization

We intend to continue our collaboration strategy to further develop, validate and commercialize the StemPrintER^™/SPARE platform. We intend to conduct further validation and utility studies with the intention of filing for regulatory review under the CLIA system and, ultimately, for reimbursement review. We also expect to pursue a strategy to achieve appropriate regulatory review with European and Asian regulatory agencies to expand the addressable market for its products.

 

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Regulatory Process

For diagnostics in the U.S., all laboratories performing clinical testing must achieve compliance with federal regulations under CLIA. These regulations are administered at the state level through the individual state departments of health where states may add further regulation alongside the federal. There are two states, New York and Washington, where the state level regulations are considered at least or more rigorous than the federal, and in those two states, the state level credentialing is allowed to show compliance at the federal level exempting from the need to achieve direct CLIA certification.

Companies which create a test and offer the diagnostic product as a service (returning results to individuals/clinicians) as a LDT under the CLIA process should obtain clearance from the FDA for that LDT. Performing the LDT in a CLIA compliant laboratory without first clearing the test though FDA is more simple and faster but does necessitate both the laboratory and the product being certificated and require specialist staff and approval processes.

CLIA requires that laboratories demonstrate or verify the analytical validity of all tests they perform. A clinical laboratory analyzing specimens based on a proprietary test method (i.e., an LDT)must, among other things, document the accuracy, precision, specificity, sensitivity of, and establish a reference range for, such test.

Revenue Strategy

Our revenue is expected to be derived from different sources including standard private third-party and government medical insurance coverage and reimbursement models. Prior to full commercial scaling, we expect to focus our first revenues from a small number of early adopting sites, where we may also subsidize the full cost of the test to encourage use and create further validation data. This is expected to be within 24 months of Admission, subject to successful validation trials and approvals under the CLIA certification or upon the obtaining of a CE mark for the test.

Competition

The current market leader in the field is the Oncotype DX^® assay, a 21-gene assay that predicts the likelihood of chemotherapy benefit and 10-year risk of distant recurrence to inform adjuvant treatment decisions in certain women with early-stage invasive breast cancer. Oncotype DX^® is owned by Exact Sciences Corp., a leading provider of cancer screening and diagnostic tests.

Whilst Exact Sciences Corp. is market leader, as noted above, a team of scientists from IEO/University of Milan conducted a head-to-head comparison of StemPrintER^™ with Oncotype DX^® in collaboration with the Royal Marsden Hospital and Queen Mary University in London with favorable results showing superior performance of StemPrintER^™ over Oncotype DX^®.

EndoPredict is a CE-marked assay that is designed to predict the likelihood of metastases developing within 10 years of an initial breast cancer diagnosis. The test is for pre- and post-menopausal people with early breast cancer with ER+, HER2- and LN- or LN-positive disease (up to 3 positive nodes).

MammaPrint is a CE-marked assay that is designed to assess the risk of distant recurrence within 5 and 10 years and whether a person would benefit from chemotherapy. The test is for pre- and post-menopausal people with stage 1 or 2 breast cancer, with a tumor size of 5 centimeters or less, and LN-negative or LN-positive disease (up to 3 positive nodes). The test can be used irrespective of ER and HER2 status.

Prosigna is a CE-marked assay designed to provide information on breast cancer subtype and to predict distant recurrence-free survival at 10 years. The test is for postmenopausal people with early breast cancer that is ER+/HER2- and LN-negative or LN-positive (up to 3 positive nodes).

As was noted by the U.K. National Institute for Health and Care Excellence (NICE) in its review of available prognostic testing, there are few available studies of the market leaders on a direct comparison basis focused on head-to-head utility.

 

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Government Regulation

EU and U.K. regulatory overview

The following provides an overview of key aspects of medical device regulation within the EU and U.K. It should be noted this overview does not address every facet of regulation but only those that would generally be most relevant to the activities discussed in this registration statement.

We operate and intend to operate in a highly regulated industry that is subject to a changing political, economic and regulatory landscape across many countries. Our products will be subject to national and supra-national EU laws and regulations. Our products will also be subject to U.K. laws and regulations.

Current EU and U.K. regulatory framework

Software applications (whether stand-alone or components of a larger system) qualify as medical devices or medical device accessories under EU rules if they meet the relevant definition under the EU Medical Device Directive 93/42/EEC (the “Medical Device Directive”) or they may be classified as in vitro medical 38 devices and governed by the In Vitro Diagnostic Medical Device Directive 98/79/EC (the “IVD Directive”) as the regulatory route to bear CE marking.

Which directive is applicable to our products will depend on a number of factors, including whether or not our software interprets data derived from human tissue or blood samples, or data which itself has been derived from an in vitro medical device. Given that the data our software may analyze may come from multiple sources and may change over time, we have set out below an overview of both the Medical Device Directive and the IVD Directive. Included in discussion below is the upcoming change to meet EU Medical Device Regulation (EU) 2017/745) (the “MDR”) and EU In Vitro Diagnostic Regulation (EU) 2017/746 (the “IVDR”).

As published on September 1, 2020 guidance document, the MHRA will continue to recognize CE marks and certificates issued by EEA-based notified bodies until June 30, 2023 and then medical devices and IVDs distributed in Great Britain will be required to bear the new U.K.CA mark from July 1, 2023. Commercialization of products in Northern Ireland will continue to require a CE Mark as achieved through the MDD or IVDD regime (or MDR by May 26, 2021 and IVDR by May 26, 2022).

Due to the delay with MDR and IVDR taking effect after Brexit, IVDR and MDR will not automatically apply in Great Britain. It is anticipated that additional changes to requirements for commercializing medical devices and IVDs in Great Britain may be forthcoming as suggested in MHRA’s guidance document. Until then, under U.K. law, Medical Devices Regulations 2002 (“U.K. MDR 2002”, and as amended by 2019 No. 791), as transposed from MDD and IVDD into U.K. law will continue to apply post-Brexit.

The Medical Device Directive

Under the Medical Device Directive, a software medical device may be placed on the EU market only if it conforms with the “essential requirements” set out in Annex I to the Medical Device Directive. To assist manufacturers in satisfying the essential requirements of the Medical Device Directive, the European standards organizations have prepared European standards applicable to medical devices. These include harmonized international quality standards (including International Organization for Standardization Standards and International Electrotechnical Commission standards) aimed at ensuring that medical devices are correctly designed and manufactured. While not mandatory, compliance with these standards entitles the manufacturer to a presumption of conformity with the essential requirement that is covered by the standards concerned.

The manufacturer is obliged to demonstrate that the device conforms to the relevant essential requirements through a conformity assessment procedure. For Class I non-sterile and non-measuring medical devices, the manufacturer is responsible for performing the conformity assessment procedure. For Class II and III devices, as well as the sterility/measuring aspects of Class I devices, the manufacturer declares conformity with the essential requirements, but this must be backed up with a conformity assessment by a notified body resulting in a CE certificate. Depending on the conformity assessment route agreed with the notified body, separate certificates may be issued for the device and the underlying quality assurance system against harmonized standard EN ISO 13485.

EU government regulatory bodies are not involved in the pre-market approval of medical devices. The onus of ensuring a device is safe enough to be placed on the market is ultimately the responsibility of the manufacturer and,

 

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where relevant, the notified body. Notified bodies are entities licensed by the individual member states to provide independent certification of certain classes of medical device. They apply for and are designated to carry out this function by the relevant national competent authorities, which carry out periodic assessment audits to determine whether the notified bodies continue to satisfy the requirements set out in the Medical Device Directive and the guidance developed by the Notified Body Oversight Group. A notified body must possess the resources (e.g., facilities and staff) for the conformity assessment of medical devices for which it is designated and must conduct such assessments in a competent, transparent, independent and impartial manner.

Once the appropriate conformity assessment procedure for a medical device has been completed, the manufacturer must draw up a written declaration of conformity and affix the CE mark to the device. The device can then be marketed throughout the EEA. Notified bodies perform surveillance and unannounced audits at the manufacturer and critical suppliers with respect to the devices covered by the certificates issued by them. If non-conformities raised during the audits are not timely remedied by the manufacturer, the notified body may (partially or wholly) suspend or withdraw the certificate concerned.

Manufacturers of medical devices are subject to post-market requirements, notably device vigilance and safety reporting obligations. EU member states are responsible for enforcing the EU’s medical device rules and for ensuring that only compliant medical devices are placed on the market or put into service in their jurisdictions. They have powers to suspend the marketing and use, or demand the recall, of unsafe or noncompliant devices. They also have the power to bring enforcement action against companies or individuals for breaches of the device rules, but this is extremely rare absent a public health risk. Non-compliance may also result in notified bodies revoking any certificate of conformity that they have issued for a device or the manufacturer’s quality system.

The IVD Directive

The EU regulates in vitro medical devices (“IVDs”) as a specific category of medical devices with particular differences, which means they are regulated under a separate regime. The Company’s software application is envisaged to process input data from EHRs and from ‘wet’ samples and is envisaged to be installed as a local software layer in clinical institutions that will communicate with the cloud. The EU Guidance document “Qualification and Classification of standalone software” provides that stand alone software fulfilling the definition of medical device and intended to be used for the purpose of providing information derived from in vitro examination of a specimen derived from the human body falls under the IVD Directive. The software may therefore qualify as ‘expert function software’ for the purposes of the applicable guidance, in which case it would therefore be regulated under the IVD Directive.

The IVD Directive sets out certain “essential requirements” set out in Annex I of the IVD Directive and with which IVDs must comply before being placed on the market in the EU. Not all the essential requirements will apply to all devices and it is up to the manufacturer of the device to assess which are appropriate for that particular product. As for the Medical Device Directive, one way in which manufacturers can demonstrate that they have met the essential requirements is to comply with the relevant national standards that transpose harmonized standards.

There are four categories of IVDs, reflecting the perceived risk. Annex II of the IVD Directive sets out specific device types that are categorized as either high risk (List A) or moderate risk (List B). There are also self-test IVDs, which are those devices intended by the manufacturer to be able to be used by lay persons in a home environment, and then the final category covers all IVDs which are not classified as List A, List B or Self-test IVDs, known as general IVDs. As for other medical devices, pre-market approval is delegated to notified bodies. For List A, List B and Self-Test IVDs this means that the manufacturer must gain independent certification by a notified body in order to complete the conformity route process, apply for CE marking and be able to place the device on the European market.

Manufacturers of IVDs are subject to post-market requirements, including setting up an on-going systematic process to review experience gained for their device on the market and to have a vigilance procedure to immediately inform relevant competent authorities. Each competent authority has the right to remove a device that they believe is unsafe from their national market.

 

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The EU Medical Device Regulation

In May 2017, the European Commission finalized and adopted the text of the Medical Device Regulation, which will repeal and replace the Medical Device Directive. Due to COVID-19 pandemic, implementation of the Medical Device Regulation will take effect May 26, 2021. The Company will need to ensure compliance with the Medical Device Regulation in the future if it is to place software that is a medical device on the EU market.

The Medical Device Regulation contains a new classification rule specific to software in Annex VIII (rule 11). All software intended to provide information used to make diagnostic or therapeutic decisions will be in Class IIa, except if the decisions may cause death or an irreversible deterioration in health, in which case it will be in Class III. Where decisions could result in a serious deterioration in a person’s state of health or a surgical intervention, they will be in Class IIb. Software intended to monitor physiological processes will be in Class IIa, except if it is intended to monitor vital physiological parameters and variations in those parameters could result in immediate danger to the patient, in which case it is classified as Class IIb. All other software will be in Class I. Software that currently qualifies as a Class I device under the Medical Device Directive may therefore need to be reclassified as Class IIa or higher once the Medical Device Regulation becomes applicable. This will require a notified body conformity assessment in accordance with the requirements of the Medical Device Regulation.

The Medical Device Regulation will require significantly more clinical data for CE marking than is currently required by the Medical Device Directive. It also promulgates new design requirements for software and will not grandfather any previous CE mark under the Medical Device Directive. We will need to obtain timely CE marking under the new regulation.

The EU In Vitro Diagnostic Medical Device Regulation

The EU In Vitro Diagnostic Medical Device Regulation (“IVDR”) was adopted in May 2017 and will repeal the existing In Vitro Diagnostic Medical Devices Directive (98/79/EC). The majority of the provisions of the IVDR apply from May 26, 2022 and will harmonize the law on in vitro medical devices across the EU. We will need to ensure compliance with the IVDR in the future if it is to place software that is a medical device which is used as an in vitro diagnostic on the EU market after this regulation comes into force. The IVDR will require significantly more clinical data for CE marking than is currently required by the IVD Directive. It also promulgates new design requirements for software and will not grandfather any previous CE mark under the IVD Directive.

As a result, should the IVDR apply to our products, we will need to obtain timely CE marking under the new regulation.

The IVDR contains a new classification regime for all IVDs, including software that qualifies as an IVD, in Annex VIII. The new classification regime groups all IVDs in four risk classes A, B, C, and D, of which only risk class A remains subject to self-declaration for CE marking. Because the software is intended to work with blood-based biomarkers it is likely that, if it is regulated by the IVDR, it will be classified in the highest risk class (D) and will be subject to notified body conformity assessment. Depending on the intended use and inherent risks of the devices, it may alternatively be classified in risk Class C per Rule 2 or Rule 3 as defined in Annex VIII of the IVDR. Class C devices per IVDR are also subject to notified body conformity assessment.

With implementation of IVDR and MDR, Medical Device Coordination Group (MDCG) have established a set of guidelines. The MDCG guidelines are specific to IVDR and MDR and therefore replaces prior MEDEV guidelines that are specific to IVDD and MDD.

U.K. MDR 2002 (as amended by 2019 No.791, MDR 2019)

At this time, essential requirements and conformity assessments follow similarly to those described per MDD and IVDD with specific modifications as transposed into U.K. MDR 2002 and their respective amendments. Process by which requirements for conformity assessments as specified in U.K. MDR 2002 (and amendments) are supplemented by guidance issued by the MHRA. With respect to software as the medical device defined by U.K. MDR 2002, similar definitions to MDD and IVDD applied. Guidance to medical device stand-alone software including apps and in vitro diagnostic medical device provides an interim guide until such time as the MHRA publishes a new set of guidance.

 

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Other Healthcare Standards

Development, clinical evaluation and marketing of digital health software products are subject to significant global regulation by governments and global regulatory agencies. Many approvals require clinical evaluation data relating to safety, quality and efficacy of a product. Many countries, including the U.S. (510(k) clearance), Europe (CE marking), China (CFDA), and Japan (PMDA) have high standards of technical appraisal and have a risk of delays in the approval process.

Data Protection Legislation

On May 25, 2018, the GDPR came into effect in the European Union which regulation continued to apply in the U.K. for the Brexit transition period with effect from January 31, 2020 to December 31, 2020 alongside, the Data Protection Act 2018 (“DPA 2018”) which is and will, post Brexit, be the domestic law governing the processing of personal data in the U.K.. The obligations in the DPA 2018 are for all practical purposes the same as those set out in the GDPR. The GDPR imposes an enhanced data protection regulatory regime with potentially significant sanctions for non-compliance. To the extent we process personal data that is subject to the GDPR, in the future, we will need to comply with the GDPR and the DPA 2018, and any other applicable laws with respect to the handling of personal data respectively for EU and U.K.. U.K. and European hospitals which may, in the future, provide patient data to the us for the us to analyze using its artificial intelligence technology will also be responsible for ensuring that there is a legal basis on which they may collect the data and anonymize it effectively so that it can be transferred to us as anonymous data to which GDPR and the DPA 2018 do not apply (because once anonymized effectively it will no long be personal data). In vitro diagnostic kit development will include, at a minimum, compliance to ISO 13485:2016 – Medical devices – Quality management systems – Requirements for regulatory purposes, 21CFR820 (U.S. Quality Systems Regulations) and other product design and manufacturing standards as identified to support our commercial plan.

U.S. health regulatory overview

The following provides an overview of key aspects of laboratory service and medical device regulation within the U.S. It should be noted this overview does not address every facet of regulation at the federal and state level, but only those that would generally be most relevant to the activities described in this registration statement.

Federal and state clinical laboratory licensing requirements

The CLIA, governs the operations of all clinical laboratories operating in or returning results to individuals in the U.S. CLIA is administered by CMS, in partnership with state health departments. A clinical laboratory is defined as a laboratory that performs testing on specimens derived from humans for the purpose of providing information for the diagnosis, prevention or treatment of disease, or the assessment of health. Clinical laboratories must hold a certificate applicable to the type of laboratory examinations they perform and must demonstrate compliance with regulations addressing, among other things, personnel qualification and training, record keeping, quality control, and proficiency testing, all of which are intended to ensure the timeliness, reliability, and accuracy of clinical laboratory testing services. CLIA requires that laboratories demonstrate or verify the analytical validity of all tests they perform. Where a clinical laboratory analyses specimens based on a proprietary test method (i.e., an LDT), the laboratory must, among other things, document the accuracy, precision, specificity, sensitivity of, and establish a reference range for, such test.

CMS provides for exemption from CLIA for states that develop clinical laboratory standards that are at least as stringent as federal requirements. Both New York and Washington State are exempt from CLIA. The NYS Clinical Laboratory Evaluation Program requires all independent clinical laboratories operating in, or testing specimens from, NYS to obtain a laboratory permit prior to commencing operations, and all clinical laboratories performing LDTs to submit test validation documentation demonstrating the tests’ analytical and clinical validity.

Failure to comply with CLIA certification and state clinical laboratory licensure requirements may result in a range of enforcement actions, including certificate or license suspension, limitation, or revocation, directed plan of action, onsite monitoring, civil monetary penalties, criminal sanctions, and revocation of the laboratory’s approval to receive Medicare and Medicaid payment for its services, as well as significant adverse publicity.

 

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FDA

The FDA regulates, among other medical products, “medical devices” which include certain articles intended for use in the diagnosis, prevention, cure, mitigation, or treatment of disease or intended to effect the structure or function of the body. Whether a product is intended for use as a medical device is generally determined, in the first instance, based on the manufacturer’s product labelling, which includes the label affixed to the product, materials distributed with the product, and promotional communications concerning the product.

Devices classified as Class I (low risk), generally may be marketed without FDA pre-market review, but are subject to “general controls”, including establishment registration, device listing, record keeping, medical device reporting, and quality system regulations, including design controls. Devices classified as Class II (moderate risk), may, in addition to general controls, also be subject to “special controls” (e.g., performance standards / manufacturing standards, post-market surveillance, patient registries, special labelling requirements, pre-market data requirements and guidelines), and also generally must obtain 510(k) premarket clearance or DeNovo authorization from FDA. Class III (high risk) devices must, in addition to general controls, obtain FDA pre-market approval through the submission of a pre- market approval application that contains evidence, including data from adequate and well- controlled clinical studies, demonstrating that the device is safe and effective for its intended use. In general, devices that require FDA pre-market clearance or DeNovo authorization may not be commercially distributed or promoted prior to obtaining such authorization, although they may be distributed and used for the purpose of developing the clinical data necessary to support FDA marketing applications, subject to certain limitations. Post-market changes to a cleared / authorized or approved device also may be subject to prior review by FDA, depending on the scope of the change and its potential impact on device safety and effectiveness.

It should also be emphasized that this pre-market review process is only one facet of FDA’s regulation. For example, FDA regulates product labelling, including promotional claims; the manufacturing of medical devices, including their design, under FDA quality system requirements; clinical trials with new or modified products; and post-market monitoring for, reporting of, and action related to, safety concerns. Failure to comply with applicable pre- and post-market device requirements can result in a determination by FDA that a device is “adulterated” (Section 501) or “misbranded” (Section 502) in violation of the U.S. Federal Food, Drug, and Cosmetics Act. The statute provides for a number of penalties, including seizure, injunction, criminal, and civil monetary penalties, for the sale or distribution of adulterated or misbranded devices. In general, prior to undertaking enforcement action, FDA will notify a regulated entity of a violation or suspected 36 violation through a communication, such as a “Warning Letter” or “Untitled Letter”. If FDA identifies violations during inspection of a manufacturer’s facility, the agency will issue a Form 483 listing the identified violation and directing the manufacturer to make the necessary corrections.

FDA regulation of software

Commercially distributed software applications that meet the definition of a medical device may be subject to FDA pre-market authorization, depending on their classification and software function. These include both applications that are components of a hardware medical device and certain “stand-alone” software. In 2017, FDA issued final guidance adopting international principles established by the International Medical Device Regulators Forum for the clinical evaluation of software as a medical device (“SaMD”), which refers to software that is intended to be used for one or more medical purposes that perform these purposes without being part of a hardware medical device. In 2019, FDA issued a guidance that provides guidance on FDA’s oversight of device software functions including mobile medical apps that meet the definition of a device. While the guidance is not binding on either FDA or regulated industry, FDA intends to consider the principles in developing regulatory approaches for SaMD as well as for digital health technologies.

FDA regulation of LDTs

FDA regulates a category of medical devices, called in vitro diagnostic medical devices, or IVDs, that are used in the collection, preparation, and examination of specimens from the human body. IVDs include reagents, instruments, and systems that are intended for use in diagnosis of disease or other conditions, including the state of health, in order to cure, mitigate, treat, or prevention disease or its sequelae. FDA historically has taken the position that tests

 

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developed in-house by a clinical laboratory and used to analyze patient specimens meet the definition of an IVD and fall within the agency’s regulatory jurisdiction. At the same time, FDA historically has for the most part exercised “enforcement discretion,” i.e., has not required clinical laboratories performing LDTs to comply with IVD device requirements. In the past, FDA has signaled intent to modify its enforcement discretion policy with regard to LDT regulation, and in 2014 proposed a regulatory framework for LDTs, which it abandoned before implementation in 2016. As of August 19, 2020, the U.S. Department of Health and Human Services (HHS) determined that LDTs will not require a premarket review with FDA, but rather an applicant may voluntarily submit a premarket notification or premarket approval (or an Emergency Use Authorization in the case of COVID-19 tests) for their LDT. It is possible that Congress will enact legislation directing FDA to regulate LDTs.

The U.S. Federal Trade Commission and Consumer Protection Laws

Within the U.S., the U.S. Federal Trade Commission (“FTC”), has authority to regulate advertising for most medical devices and for laboratory services. In addition, various state consumer protection laws exist which can similarly regulate claims that are being made by entities with respect to what benefits their products or services can provide to consumers. In some instances, FTC or U.S. states have taken action with respect to medical products based on claims being made with respect to, e.g., their benefits to patients, seeking various penalties, such as injunctions and substantial fines. Activities have focused more, to date, on products that are sold directly to consumers, such as dietary supplements, as opposed to prescription products ordered by physicians, although the possibility exists that FTC or other consumer protection bodies could take steps to regulate claims with respect to IVDs or LDTs.

Fraud and Abuse

The significant U.S. fraud and abuse laws include the:

 

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Anti-Kickback Statute: the federal U.S. Anti-Kickback Statute (42 U.S. Code § 1320a–7b(b) imposes criminal penalties on persons and entities for, among other things, knowingly and willfully soliciting, offering, receiving or providing remuneration (including any kickback, bribe or rebate), directly or indirectly, in cash or in kind, to induce or reward, or in return for, either the referral of an individual for, or the purchase, lease or order of a good, facility, item or service for which payment may be made under a government healthcare program such as Medicare and Medicaid.

 

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False Claims Act: the U.S. federal false claims and civil monetary penalties laws, including the federal civil U.S. False Claims Act (31 USC. §§ 3729 – 3733), impose criminal and civil penalties, including through civil whistleblower or qui tam actions against individuals or entities for, among other things knowingly presenting or causing to be presented false or fraudulent claims for payment by a federal healthcare program or making a false statement or record material to payment of a false claim or avoiding, decreasing, or concealing an obligation to pay money to the federal government, with potential liability including mandatory treble damages, significant per-claim penalties, and administrative penalties.

Transparency requirements

The U.S. Physician Payments Sunshine Act (known as Affordable Care Act Section 6002: Transparency Reports and Reporting of Physician Ownership or Investment Interests) requires certain manufacturers of drugs, devices, biologics, and medical supplies for which payment is available under Medicare, Medicaid, or the Children’s Health Insurance Program, with specific exceptions, to report annually to the CMS information related to payments or transfers of value made to physicians and teaching hospitals, as well as information regarding ownership and investment interests held by physicians and their immediate family members. Any failure to report or providing incomplete or misleading information may subject the Company to penalties. Analogous state laws. Analogous state fraud and abuse laws and regulations, such as U.S. state antikickback and false claims laws, can apply to sales or marketing arrangements, and claims involving healthcare items or services reimbursed by governmental or non-governmental third-party payors. These laws are generally broad and are enforced by many different U.S. federal and state agencies as well as through private actions. Some state laws require adherence to compliance guidelines promulgated by the U.S. federal government and require device and drug manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures.

 

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Data privacy and security

HIPAA

The HIPAA imposes criminal and civil liability for, among other things, failing to protect the privacy of patient and security of patient data. Additionally, the HIPAA by the Health Information Technology for Economic and Clinical Health Act and its implementing regulations, also imposes obligations on covered entities and their business associates that perform certain functions or activities that involve the use or disclosure of protected health information on their behalf, including mandatory contractual terms as well as implementing reasonable and appropriate administrative, physical and technical safeguards with respect to maintaining the privacy, security and transmission of protected health information.

FTC

The FTC has taken an active role with regard to protection of personal information, relying on its broad consumer protection powers to seek substantial penalties where companies that have made deceptive or misleading statements regarding practices of collecting and safeguarding data or did not have adequate safeguards to protect information consistent with their claims regarding data security.

State laws also govern the privacy and security of health information in some circumstances, many of which differ from each other in significant ways and often are not pre-empted by HIPAA, thus complicating compliance efforts.

Legal Proceedings

We are not party to any material legal matters or claims. In the future, we may become party to legal matters and claims arising in the ordinary course of business, the resolution of which we do not anticipate would have a material adverse impact on our financial position, results of operations or cash flows.

C. ORGANIZATIONAL STRUCTURE

We have one wholly owned subsidiary: StemPrintER Sciences Limited, a private company incorporated in England and Wales with limited liability under the Companies Act.

D. PROPERTY, PLANTS AND EQUIPMENT

We do not own any property but sublease approximately 75 square feet of office space in London from Tiziana for which we reimburse Tiziana at cost. We believe that our existing facilities are adequate to meet our current needs for the foreseeable future, and that suitable additional alternative spaces will be available in the future on commercially reasonable terms if needed.

 

ITEM 4A.

UNRESOLVED STAFF COMMENTS

Not Applicable.

 

ITEM 5.

OPERATING AND FINANCIAL REVIEW AND PROSPECTS

You should read the following discussion and analysis together with “Selected Financial Data” and our consolidated financial statements, including the notes thereto, included elsewhere in this registration statement. Some of the information contained in this discussion and analysis or set forth elsewhere in this registration statement, including information with respect to our plans and strategy for our business and related financing, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in the “Risk Factors” section of this registration statement, our actual results could differ materially from the results described in or implied by these forward-looking statements. Our audited consolidated financial statements as of and for the year ended December 31, 2020 have been prepared in accordance with IFRS.

 

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A. OPERATING RESULTS

Overview

We operate a genomics-based personalized medicine business, particularly focused on breast cancer patients. Our pre-clinical product candidate is StemPrintER^™, a multi-gene prognostic assay intended for the prediction of the risk of distant recurrence in luminal, ER+/HER2-negative breast cancer patients, based on the detection of 20 stem cell markers normalised to four housekeeping genes. StemPrintER^™ has been evaluated in an initial retrospective validation study using a consecutive cohort of approximately 2,400 patients with breast cancer. In that validation study, StemPrintER^™ showed superiority to Oncotype DX^® in predicting recurrence in ER+/HER2- postmenopausal breast cancer patients. Our next generation derivative risk model, SPARE, combines StemPrintER^™ with two clinical markers, namely lymph nodal status and tumour size, in a more refined risk model.

StemPrintER Sciences Limited was transferred to the Company on October 30, 2020 pursuant to the Demerger of the StemPrintER^™ and SPARE business from Tiziana. The objective of the Demerger was to maximise value to the shareholders of Tiziana through the further commercialization of StemPrintER^™ and its assets and intellectual property. The Demerger will allow us to continue its collaboration strategy to further develop, validate and commercialize the StemPrintER^™/SPARE platform as a separate listed company with cash reserves of approximately £1.095 million.

Since our inception, we have devoted substantially all of our resources to conducting research and development of our product candidate. Our revenue is expected to be derived from different sources including standard private third-party and government medical insurance coverage and reimbursement models. To date, Tiziana, the former parent of our subsidiary StemPrintER, raised a total of £89.9 million from external funding sources, such as major investment funds and other leading investors. On completion of the Demerger, Tiziana transferred £1.0 million in cash to StemPrintER Sciences Limited and the entire issued share capital of StemPrintER Sciences Limited to the Company and has agreed to invest a further £2.0 million in our equity securities if and when we list on the London Stock Exchange. As of December 31, 2020, we had cash, cash equivalents and short-term investments of £1,151,383.

We expect our expenses to increase substantially in connection with our ongoing development activities related to our preclinical and clinical programs. We intend to conduct further validation and utility studies with the intention of filing for regulatory review under the CLIA system and, ultimately, for reimbursement review. We also expect to pursue a strategy to achieve appropriate regulatory review with European and Asian regulatory agencies to expand the addressable market for its products. In addition, we plan to build out our management team and infrastructure.

In addition, upon the effectiveness of this registration statement, we expect to incur additional costs associated with operating as a public company in the United States. We expect that our expenses and capital requirements will increase substantially in the near to mid-term as we:

 

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continue our research and development efforts;

 

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seek regulatory approvals for any product candidates that successfully complete clinical trials;

 

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add clinical, scientific, operational financial and management information systems and personnel, including personnel to support our product development and potential future commercialization claims; and

 

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operate as a U.S. public company.

As a result, we may need substantial additional funding to support our continuing operations and pursue our growth strategy. Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operations through a combination of public or private equity or debt financings or other sources, which may include collaborations with third parties. We may be unable to raise additional funds or enter into such other agreements or arrangements when needed on favorable terms, or at all. If we fail to raise capital or enter into such agreements as, and when needed, we may have to significantly delay, scale back or discontinue the development and commercialization of our product candidates.

 

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Material Contracts

The following are all of the contracts (not being contracts entered into in the ordinary course of business) that have been entered into by us (including our wholly-owned subsidiary StemPrinterER Sciences Limited) since our incorporation which: (i) are, or may be, material to us (or our wholly-owned subsidiary StemPrinterER Sciences Limited); or (ii) contain obligations or entitlements which are, or may be, material to us (or our wholly-owned subsidiary StemPrinterER Sciences Limited) as at the date of this registration statement.

Demerger Agreement

On October 5, 2020, we entered into an agreement with Tiziana pursuant to which Tiziana declared a dividend in specie on its ordinary shares equal to the book value (of approximately £3.07 million) of Tiziana’s shareholding in StemPrintER Sciences Limited, the entity within the Tiziana Group which holds all of the assets and intellectual property relating to StemPrintER^™ and SPARE and £1.0 million in cash.

The dividend in specie was satisfied by the transfer by Tiziana to us of the shares in StemPrintER Sciences Limited. In return for this transfer, we allotted Ordinary Shares to Tiziana shareholders who were registered on the Tiziana Share Register at the Demerger Record Time (being 7:00 a.m. on October 30, 2020), on the basis of one Ordinary Share for each Tiziana ordinary share held by them at that time, save that the number of Ordinary Shares allotted to our initial subscriber (who at the Demerger Record Time was a Tiziana shareholder) was reduced by the number of Ordinary Shares already held by them so that, on the Demerger becoming effective, each Tiziana Shareholder (including our initial subscriber) held one Ordinary Share for each Tiziana ordinary share held at the Demerger Record Time.

The Demerger was conditional, among other things, upon Court approval of a capital reduction which was approved by special resolution of shareholders on October 2, 2020. The Court sanctioned the related capital reduction on October 27, 2020; the Demerger became effective on October 30, 2020; and we allotted 194,612,288 Ordinary Shares to the Tiziana shareholders.

On October 30, 2020, we entered into a supplementary agreement to the Demerger Agreement with Tiziana, pursuant to which we agreed to issue 9,581,254 additional Ordinary Shares at a price of £0.01 per share to reflect various rights which existed in Tiziana prior to the Demerger, and Tiziana agreed to subscribe for £2.0 million in additional Ordinary Shares upon completion of the London listing.

Asset Transfer Agreement

On October 5, 2020, StemPrintER Sciences Limited entered into an agreement with Tiziana pursuant to which Tiziana transferred all of the StemPrintER^™ intellectual property and other business assets, together with £1 million in cash to StemPrintER Sciences Limited in exchange for the issue by StemPrintER Sciences Limited of 3,070,000 Ordinary Shares, each credited as fully paid.

License

On June 24, 2014, Tiziana entered into an exclusive license agreement with IEO/University of Milan, pursuant to which it obtained a worldwide, royalty-bearing, exclusive license under certain patents and a worldwide, royalty-bearing, non-exclusive license under certain know-how, respectively, of IEO/University of Milan to develop and commercialize licensed products in connection with a multi-gene prognostic tool. This license was assigned to us pursuant to the terms of the Asset transfer Agreement.

Pursuant to the terms of the License, we are obliged to use commercially reasonable efforts in connection with the development and commercialization of the licensed products, including in accordance with specified diligence milestones. If we fail to meet our obligations under the License or if the License is terminated for any reason, it could negatively impact our business and strategic goals. The License may also be terminated for other reasons including breach and insolvency.

 

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