UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 20-F

(Mark One)

OR

OR

OR

Commission File Number001-37652

MIDATECH PHARMA PLC

(Exact name of registrant as specified in its charter)

England and Wales

(Jurisdiction of incorporation or organization)

Oddfellows House

19 Newport Road

Cardiff, CF24 0AA

United Kingdom

(Address of principal executive offices)

Stephen Stamp, Chief Executive Officer and Chief Financial Officer

Oddfellows House

19 Newport Road

Cardiff, CF24 0AA

United Kingdom

Tel: +44 1235 888 300

(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.

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

None

(Title of Class)

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

None

(Title of Class)

The number of outstanding shares of each of the issuer’s classes of capital or common stock as of December 31, 20192020 was: 23,464,98163,073,852 Ordinary Shares

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES☐ NOx

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 Section 15(d) of the Securities Exchange Act of 1934. YES☐ NOx

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. YESx NO☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YESx NO☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer”, and “emerging growth company” in Rule 12b-2 of the Exchange Act (check one):

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.o

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 controls 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. o

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

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 17o Item 18o

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). YESo   NOx

TABLE OF CONTENTS

GENERAL INFORMATION

Midatech Pharma PLC is a public limited company organized under the laws of England and Wales under registered number 09216368. In this annual report, references to “we,” “us,” “our,” “the Group,” “Company,” “company” or “Midatech” means Midatech Pharma PLC and our consolidated subsidiaries.

On December 4, 2015, we acquired DARA BioSciences, Inc., or DARA, through a merger transaction, or the Merger. Immediately following the closing of the Merger, DARA became our wholly owned subsidiary and changed its named to “Midatech Pharma US Inc.”, or Midatech US. Effective as of November 1, 2018, Midatech US was sold to Kanwa Holdings, LP, an affiliate of Barings LLC. Where this Annual Report on Form 20-F (i) provides information for dates prior to December 4, 2015, such information does not include the historical information of DARA, and (ii) references Midatech US, it is referencing the former DARA entity from December 4, 2015 through October 31, 2018.

Our principal executive offices are located at Oddfellows House, 19 Newport Road, Cardiff, CF24 0AA, United Kingdom. The telephone number at our principal executive office is +44 1235 888 300.

We maintain an Internet website at www.midatechpharma.com. None of the information contained on our website, or on any other website linked to our website, will be incorporated in this annual report by reference or otherwise be deemed to be a part of this annual report.

The trademarks, trade names and service marks appearing in this Annual Report on Form 20-F are the property of their respective owners.

PRESENTATION OF FINANCIAL AND OTHER DATA

The consolidated financial statement data as of December 31, 2020, 2019 2018 and 20172018 and for the years ended December 31, 2020, 2019 2018 and 20172018 have been derived from our consolidated financial statements, as presented at the end of this annual report, which have been prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board.

We prepare our consolidated financial statements in British pounds sterling. Except as otherwise stated, all monetary amounts in this annual report are presented in British pounds sterling. Solely for the convenience of the reader, unless otherwise indicated, all British pounds sterling amounts as of and for the year ended December 31, 20192020 have been translated into United States dollars at the rate as of December 31, 2019,2020, of £1.00 to $1.3269,$1.3662, based on noon buying rates published by the Federal Reserve Bank of New York for the British pound sterling on such date. These translations should not be considered representations that any such amounts have been, could have been or could be converted into United States dollars at that or any other exchange rate as of that or any other date.

In this annual report, unless otherwise specified or the context otherwise requires:

References to a particular “fiscal” year are to our fiscal year ended December 31 of such year. References to years not specified as being fiscal years are to calendar years.

On March 3, 2020, following shareholder approval, we effected a one-for-20 reverse split of our ordinary shares, nominal value 0.1p per share, or Ordinary Shares, and our Ordinary Shares began trading on AIM, a market operated by the London Stock Exchange plc, or AIM, on a split-adjusted basis as of such date. No fractional shares were issued in connection with the reverse stock split. As a result of the reverse stock split, the number of issued and outstanding Ordinary Shares was reduced to 23,494,981 shares as of March 3, 2020.

Concurrently with the reverse split, and in an effort to bring our Depositary Share price into compliance with The NASDAQ Stock Market LLC’s, or NASDAQ, minimum bid price per share requirement, on March 3, 2020 we effected a ratio change in the number of Ordinary Shares represented by our American depositary shares, or Depositary Shares, from 20 Ordinary Shares per Depositary Share to five Ordinary Shares per Depositary Share, reducing the number of outstanding Depositary Shares, as of the close of business on March 3, 2020 to 988,656.

The change in the number of shares resulting from the reverse stock split and change in the number of Depositary Shares resulting from the change in ratio has been applied retroactively to all share and per share amounts presented in this annual report, to the extent applicable.

As reference, the following provides a description of the different phases of clinical trials, as may be used in this annual report:

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This annual report contains certain forward-looking information about the Company that is intended to be covered by the safe harbor for “forward-looking statements” provided by the Private Securities Litigation Reform Act of 1995. These statements may be made directly in this annual report or may be incorporated into this annual report by reference to other documents. Our representatives may also make forward-looking statements. Forward-looking statements are statements that are not historical facts. Words such as “expect,” “believe,” “will,” “may,” “anticipate,” “plan,” “estimate,” “intend,” “should,” “can,” “likely,” “could” and similar expressions are intended to identify forward-looking statements. Forward-looking statements appear in a number of places throughout this annual report and include statements regarding our intentions, beliefs, assumptions, projections, outlook, analyses or current expectations concerning, among other things, our intellectual property position, research and development projects, results of operations, cash needs, capital expenditures, financial condition, liquidity, prospects, growth and strategies, regulatory approvals and clearances, the markets and industry in which we operate and the trends and competition that may affect the markets, industry or us.

These forward-looking statements are based on currently available competitive, financial and economic data together with management’s views and assumptions regarding future events and business performance as of the time the statements are made and are subject to risks and uncertainties. We wish to caution you that there are some known and unknown factors that could cause actual results to differ materially from any future results, performance or achievements expressed or implied by such forward-looking statements, including but not limited to risks related to:

Any forward-looking statements that we make in this annual report speak only as of the date of such statement, and we undertake no obligation to update such statements to reflect events or circumstances after the date of this annual report or to reflect the occurrence of unanticipated events. Comparisons of results for current and any prior periods are not intended to express any future trends or indications of future performance, unless expressed as such, and should only be viewed as historical data. You should, however, review the factors and risks we describe in the reports we will file from time to time with the SEC after the date of this annual report. See “Item 10. Additional Information—H. Documents on Display.”

You should also read carefully the factors described in “Item 3. Key Information—D. Risk Factors” and elsewhere in this annual report to better understand the risks and uncertainties inherent in our business and underlying any forward-looking statements. As a result of these factors, we cannot assure you that the forward-looking statements in this annual report will prove to be accurate. Furthermore, if our forward-looking statements prove to be inaccurate, the inaccuracy may be material. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified timeframe, or at all.

PART I

Not Applicable.

Not Applicable.

DARA BioSciences, Inc.

On December 4, 2015, we acquired DARA and subsequently changed its nameWe have elected to Midatech US. Our financial and operating data for fiscal 2015, set forthvoluntarily comply with the amendments to Item 3.A of Form 20-F, effective February 10, 2021, contained in our consolidated financial statements for the year ended December 31, 2015 and referenced in our consolidated financial statements for the years ended December 31, 2016 and 2017, was not adjusted to reflect the full year effect of our acquisition of DARA, whereas statement of financial position data and subsequent periods include contributions from Midatech US through December 31, 2017. We sold Midatech US effective November 1, 2018 and under IFRS 5, the results of Midatech US have been represented as loss from discontinued operations for fiscal 2018 and for all comparative prior periods shown elsewhere in this annual report.

Selected Financial Data

We prepare our consolidated financial statements in accordance with International Financial Reporting Standards, or IFRS, as issued by the International Accounting Standards Board, or IASB, and as adopted by the European Union. The following table sets forth certain of our consolidated financial data as of the dates and for the periods indicated. Our historical results are not necessarily indicative of the results that may be expected in the future. The selected historical financial data presented below should be read in conjunction with “Item 5. Operating and Financial Review and Prospects” and our financial statements and the related notes thereto, which are included elsewhere in this annual report. The selected historical financial information in this section is not intended to replace our financial statements and the related notes thereto.

Selected Financial Data

Exchange Rates

Our financial reporting currency is the British pound sterling. Fluctuations in the exchange rate between the British pound sterling and the United States dollar will affect the United States dollar amounts received by owners of our Depositary Shares on conversion of dividends, if any, paid in British pound sterling on our Ordinary Shares, and will affect the United States dollar price of the Depositary Shares on the NASDAQ Capital Market.SEC Release No. 33-10890.

Not Applicable

Not Applicable

Our business has significant risks. In addition to the other information included in this annual report, including the matters addressed in the section of the annual report entitled “Cautionary Note Regarding Forward-Looking Statements” and in our financial statements and the related notes, you should consider carefully the risks described below. The risks and uncertainties described below are not the only risks and uncertainties we may face. Additional risks and uncertainties not presently known to us, or that we currently consider immaterial could also negatively affect our business, financial condition, results of operations, prospects, profits and stock prices. If any of the risks described below actually occur, our business, financial condition, results of operations, prospects, profits and stock prices could be materially adversely affected.

Summary of Risk Factors

The occurrence of one or more of the events or circumstances described in this section titled “Risk Factors,” alone or in combination with other events or circumstances, may materially adversely affect our business, financial condition and operating results. In that event, the trading price of our securities could decline, and you could lose all or part of your investment. Such risks include, but are not limited to:

Risks Related to Our Financial Operations and Capital Needs

We have incurred significant losses since our inception and anticipate that we will continue to incur losses in the future.

We are an early-stage biopharmaceutical company. Investment in biopharmaceutical product development is highly speculative because we entail substantial upfront capital expenditures and significant risk that a product candidate will fail in development, will fail to gain regulatory approval or otherwise fail to become commercially viable. We continue to incur significant development and other expenses related to our ongoing operations. As a result, we are not profitable and have incurred substantial losses since our inception. For the year ended December 31, 2020, we had a net loss of £22.19 million and an accumulated deficit of £122.43 million. For the years ended December 31, 2019 and 2018 we had a net loss of £10.09 million and an accumulated deficit of £99.84 million. For the years ended December 31, 2018 and 2017 we had a net loss of £15.03 million and £16.06 million, respectively.

We expect to continue to incur losses for the foreseeable future, and do not expect these losses to reduce as we continue our development of, and work with any licensing partners to seek regulatory approvals for, our product candidates.

We may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may adversely affect our business. The size of our future net losses will depend, in part, on the rate of future growth of our expenses and our ability to generate revenues. If we fail to find licensing partners, if we abandon any development programs, or if any of our licensed product candidates fail in clinical trials or do not gain regulatory approval, or if approved, fail to achieve market acceptance, we may never become profitable. Even if we achieve profitability in the future, we may not be able to sustain profitability in subsequent periods. Our prior losses and expected future losses have had and will continue to have an adverse effect on our shareholders’ equity and working capital.

We are currently undergoingIn 2020, we undertook a strategic review of our operations, which may be a lengthy process and yield uncertain results.

In March 2020, we reviewed the remaining costs necessary to complete the Phase III clinical trial of our product candidate MTD201, as well as the manufacturing scale-up of our MTD201 manufacturing capabilities at our Bilbao, Spain facilities. Given the state of the financial markets, and our current cash runway, we determined we were unlikely to conclude a license transaction or raise sufficient funds to continue the required remaining investment in MTD201 in a timely manner. Due to this, the Board of Directors made the determination to terminate the further in-house development of MTD201 immediately, including closing our Bilbao facilities, and to seek a license partner for MTD201.

On March 31, 2020, we announced that, due to the prevailing conditions in the capital markets and the prospect of raising additional funds and finding a partner for our assets, the Board of Directors initiated a strategic review of our operations. The objective of the review iswas to identify ways to maximize value for our stakeholders given the significant challenges faced by our business. We have formed a Finance Committee comprised of Mr. Stamp and Rolf Stahel, our Chairman, to review, analyze and make recommendations to the Board of Directors regarding a possible sale of our business or other strategic transactions, and have hired an outside advisor to assist us. Any sale would be subject to certain rules and regulations in the United Kingdom and the United States, and we are currently considered to be inWe entered into an “offer period” under United Kingdom rules and regulations, which placesplaced certain restrictions and obligations on us. ThisIn January 2021, we announced that the strategic review had completed, although the impact of the uncertainty created by the process on all stakeholders, including employees, vendors and shareholders, may not be lengthy and there can be no certainty as to its result.apparent for some time.

Our requirement for additional financing in the short-term represents a material uncertainty that raises substantial doubt about our ability to continue as a going concern. 

We have experienced net losses and significant cash outflows from cash used in operating activities over the past years as we develop our portfolio. For the year ended December 31, 2019,2020, the Company incurred a consolidated loss from operations of £10.1£22.2 million and negative cash flows from operations of £6.5£9.3 million. As of December 31, 2019,2020, we had an accumulated deficit of £99.8£122.4 million.

Our consolidated financial statements have been presented on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As at December 31, 2019, we had cash and cash equivalents of £10.93 million. In May 2020, we completed an equity offering, raising £3.7 million, net of costs. We believe we currently have enough cash to fund our planned operations into the second quarter of 2021.

Our future viability is dependent on our ability to generate cash from operating activities, to raise additional capital to finance our operations and to successfully obtain regulatory approval to allow marketing of our development products. Our failure to raise capital as and when needed could have a negative impact on our financial condition and ability to pursue our business strategies. For example, due to our current

Our consolidated financial statements have been presented on a going concern basis, which contemplates the realization of assets and forecasted cash position, on Marchthe satisfaction of liabilities in the normal course of business. As at December 31, 2020, we madehad cash and cash equivalents of £7.5 million. We believe we currently have enough cash to fund our planned operations into the decision to cease self-funded developmentfourth quarter of certain of our research and development programs, close our Spanish operations and make certain positions redundant in our United Kingdom operations. In connection with our strategic review announced on the same date, we are in the process of seeking to license or assign one or more of our technologies to a partner or, alternatively, to seek a buyer for our Company. Any or all of these transactions may be on unfavorable terms.2021.

We have prepared cash flow forecasts and considered the cash flow requirement for our next fivethree years, including the period twelve months from the date of the approval of the financial statements. These forecasts show that further financing will be required during the course of the next 12 months, assuming, inter alia, that certain development programs and other operating activities continue as currently planned.  This requirement for additional financing represents a material uncertainty that raises substantial doubt about our ability to continue as a going concern. As a result, our independent registered public accounting firm included an explanatory paragraph in its report on our financial statements as of and for the year ended December 31, 20192020 with respect to this uncertainty.

In addition, the global spread of pandemic novel coronavirus, COVID-19, places increased uncertainty over our forecasts. The restrictions placed and being placed on the movement of people will likely cause delays to some of our plans. The scale of the impact of COVID-19 is evolving and it is difficult to assess to what extent, and for how long, it will cause delays to our operations. We have established a COVID-19 task force internally to monitor the impact of COVID-19 on our business and prioritize activities to minimize its effect.

In addition to utilizing the existing cash reserves, as part of our strategic review, we and our advisors are evaluating a number of near-term funding options potentially available to us, including fundraising and/or the partnering of assets or technologies or the sale of the Company.technologies. After considering the uncertainties, we considered it appropriate to continue to adopt the going concern basis in preparing the financial information.

Our ability to continue as a going concern is dependent upon our ability to obtain additional capital and/or dispose of assets, for which there can be no assurance we will be able to do on a timely basis, on favorable terms or at all.

Our operations are in early-stage development with no sources of recurring revenue and there is no assurance that we will successfully develop and license our product candidates or ever become profitable.

We are at a relatively early stage of our commercial development. To date, we have generated a minimal amount of revenue from our product candidates. Our ability to generate revenue and become and remain profitable depends, in part, on our ability to successfully find a licensing partner for our product candidates, or other product candidates we may in-license or acquire, and have such candidates successfully commercialized. Our current strategy is, once proof-of-concept of our product candidates has been established, to generate revenue via a partner, thereby earning royalty and/or milestone income; however, this is not expected to materialize in the foreseeable future, and there can be no guarantee we will be able to find a licensing partner for our product candidates. Even if our product candidates were to successfully achieve regulatory approval, we do not know when any of the product candidates will generate revenue, if at all. Our ability to generate revenue from our product candidates also depends on a number of additional factors, including our ability, and the ability of any licensing partners, to:

In addition, because of the numerous risks and uncertainties associated with product development, including that our product candidates may not advance through development or achieve the endpoints of applicable clinical trials, we are unable to predict the timing or amount of increased expenses, or when or if we will be able to achieve or maintain profitability. Even if we are able to complete the process described above, we anticipate incurring significant costs.

Even if we are able to generate royalty and/or milestone revenues from the sale of product candidates, we may not become profitable and may need to obtain additional funding to continue operations. If we fail to become profitable or are unable to sustain profitability on a continuing basis, then we may be unable to continue our operations at planned levels and may be forced to cease or reduce our operations.

There can be no assurance that we will operate profitably, produce a reasonable return, if any, on investment, or remain solvent. If our strategy proves unsuccessful, stockholders could lose all or part of their investment.

If we require or seek to raise additional capital to fund our operations and we fail to obtain necessary financing, we may be unable to complete the development of our product candidates.

We expect to continue to spend substantial amounts of our cash resources going forward in order to advance the development of our product candidates.

Until such time as we can generate a sufficient amount of revenue from the product candidates we license, if ever, we expect that we may finance future cash needs through, among other things, public or private equity or debt offerings. Such offerings may take place in the United Kingdom, the United States or other foreign countries. However, if we are unable to raise capital when needed, or on terms acceptable to us, our business could be significantly harmed. If we raise additional funds through the issuance of debt or additional equity securities, such issuance could result in dilution to our existing shareholders and/or increased fixed payment obligations. Furthermore, these securities may have rights senior to those of our Ordinary Shares and could contain covenants that would restrict our operations and potentially impair our competitiveness, such as limitations on our ability to incur additional debt, limitations on our ability to acquire, sell or license intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business. Any of these events could significantly harm our business, financial condition and prospects.

Our forecast of the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement and involves risks and uncertainties, and actual results could vary as a result of a number of factors, including the factors discussed elsewhere in this “Risk Factors” section. We have based this estimate on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we currently expect. Our future funding requirements, both near and long-term, will depend on many factors, including, but not limited to:

If a lack of available capital means that we are unable to expand our operations or otherwise capitalize on our business opportunities, our business, financial condition and results of operations could be materially adversely affected.

We are exposed to political, regulatory, social and economic risk relating to the United Kingdom’s exit from the European Union.

On June 23,Following the result of a referendum in 2016, the United Kingdom government held an in-or-out referendum on the United Kingdom’s membership ofleft the European Union in which voters approved the United Kingdom’s exit from the European Union,on January 31, 2020, commonly referred to as “Brexit.” On March 29, 2017,Brexit. Pursuant to the United Kingdom formally initiated itsformal withdrawal from the European Union by triggering Article 50 of the Treaty of Lisbon. On January 9, 2020, a withdrawal agreement, setting out the terms of the United Kingdom’s withdrawal from the European Union, was approved by the United Kingdom Parliament, and on January 31, 2020, the United Kingdom formally completed its exit from the European Union. However, a transition period is expected to continue until December 31, 2020, by which time the United Kingdom is expected to negotiate a new trade agreement with the European Union, though such an agreement is not guaranteed in that timeframe. It is unknown what terms will emerge from a new trade agreementarrangements agreed between the United Kingdom and the European Union, and the exact impact of market risks we face is uncertain. Depending on the terms of such agreement, including whether or not the United Kingdom could lose accesswas subject to the singlea transition period until December 31, 2020, during which European Union marketrules continued to apply. The Trade and customs union, there may be anCooperation Agreement between the United Kingdom and the European Union, which outlines the future trading relationship between the United Kingdom and the European Union, was agreed in December 2020. The impact of the new trade agreement on the general and economic conditions in the United Kingdom remains uncertain. There may be, for example, additional costs in materials and equipment sourced from the European Union and/or delays that could have a material adverse effect on our business, financial condition and results of operations.

From a regulatory perspective, the United Kingdom’s withdrawal from the European Union could bear significant complexity and risks.  A basic requirement of European Union law relating to the grant of a marketing authorization for a medicinal product in the European Union is that the applicant is established in the European Union. Following the withdrawal of the United Kingdom from the European Union, on January 31, 2020, marketing authorizations previously granted to applicants established in the United Kingdom may no longer be valid.  Moreover, the scope of a marketing authorization for a medicinal product granted by the European Commission pursuant to the centralized procedure might not, in the future, include the United Kingdom. In these circumstances, an authorization granted by competent United Kingdom authorities would be required to place medicinal products on the United Kingdom market. In addition, the laws and regulations that will apply after the United Kingdom withdraws from the European Union would affect the manufacturing sites that hold a certification issued by the United Kingdom competent authorities, and vice versa.  Our capability to rely on these manufacturing sites for products intended for the European Union market would also depend upon the exact terms of the United Kingdom withdrawal.

Any of these factors could significantly increase the complexity of our activities in the European Union and in the United Kingdom, could depress our economic activity and restrict our access to capital, which could have a material adverse effect on our business, financial condition and results of operations and reduce the price of our Ordinary Shares and Depositary Shares.

WeIn previous years, we and our independent registered public accounting firm have identified material weaknesses in our internal control over financial reporting, and any failure by us to maintain an effective system of internal controls or provide reliable financial and other information in the future, may cause investors to lose confidence in our financial statements and SEC filings and the market price of our securities may be materially and adversely affected.

The Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, requires, among other things, that we maintain effective internal controls for financial reporting and disclosure controls and procedures. We are required, under Section 404 of the Sarbanes-Oxley Act, to furnish a report by management on, among other things, the effectiveness of our internal control over financial reporting. This assessment includes disclosures of any material weaknesses identified by management in its internal control over financial reporting.

A material weakness is a control deficiency, or combination of control deficiencies, in internal control over financial reporting that results in more than a reasonable possibility that a material misstatement of annual or interim financial statements will not be prevented or detected on a timely basis. Section 404 of the Sarbanes-Oxley Act also generally requires an attestation from our independent registered public accounting firm on the effectiveness of our internal control over financial reporting. However, for as long as we remain an emerging growth company,a non-accelerated filer, we intend to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are emerging growth companies including, but not limited to, not being required to comply with the independent registered public accounting firm attestation requirement.

In preparing our interim financial statements for the six months ending June 30, 2019, we and our independent registered public accounting firm identified a material weakness in the effectiveness of our internal controls over financial reporting, specifically that we had expensed a deposit in our income statement, as opposed to classifying it as a recoverable financial asset in other receivables during the six months ended June 30, 2019. As previously disclosed, in October 2018, pursuant to the terms of a Stock Purchase Agreement dated September 26, 2018, or Purchase Agreement, by and among the Company, Midatech Pharma US, Inc., our former wholly owned subsidiary, or Midatech US, and Kanwa Holdings, LP, an affiliate of Barings LLC, we sold our subsidiary, Midatech US to Kanwa Holdings, LP. During the fiscal year ended December 31, 2019, following a request by Midatech US, we paid a deposit of £947,000 in connection with a certain indemnity obligation set forth in the Purchase Agreement.  The deposit was originally expensed in the income statement.  Following a review by our independent registered public accounting firm of the interim financial information for the six months ended June 30, 2019, this deposit was reclassified as a recoverable financial asset in other receivables. 

Furthermore, as part of their audit procedures for 2019, BDO LLP, our independent registered public accounting firm at the time, identified the following material weaknesses in our internal control environment:

During 2020, we took corrective measures to address the material weaknesses identified by BDO LLP as follows:

Although we are institutinghave instituted these remedial measures to address the material weaknesses identified and to continually review and evaluate our internal control systems to allow management to report on the sufficiency of our internal control over financial reporting, we cannot assure you that we will not discover additional weaknesses in our internal control over financial reporting. Any such additional weaknesses or failure to adequately remediate any existing weakness could materially and adversely affect our financial condition and results of operations, as well as our ability to accurately report our financial condition and results of operations in a timely and reliable manner.

Additionally, the material weaknesses described above, or other material weaknesses or significant deficiencies we may become aware of in the future, could result in our determining that our controls and procedures are not effective in future periods or could result in a material misstatement of the consolidated financial statements that would not be prevented or detected.

Any failure to maintain effective internal controls over financial reporting could severely inhibit our ability to accurately report our financial condition, results of operations or cash flows. If we are unable to conclude that our internal control over financial reporting is effective, or if our independent registered public accounting firm determines we have a material weakness or significant deficiency in our internal control over financial reporting once that firm begin its Section 404 reviews, we could lose investor confidence in the accuracy and completeness of our financial statements and reports, the market price of our ordinary shares and/or Depositary Shares could decline, and we could be subject to sanctions or investigations by NASDAQ, the SEC or other regulatory authorities. Failure to remedy any material weakness in our internal control over financial reporting, or to implement or maintain other effective control systems required of public companies, could also restrict our future access to the capital markets.

We have recognized a material intangible asset impairment losses in the pastloss as of December 31, 2020, and we may be required to recognize additional non-cash impairment losses in the future.

As of December 31, 2017,2020, in connection with our decision to suspendterminate further in-house development of MTD201, our program for Opsisporin and the resulting reduction in sales forecasts,Q-Sphera formulation of octreotide, we recognized an impairment loss for in-process research and development of Opsisporin, resulting£9.3 million. In addition, because no other Q-Sphera products were advanced beyond the formulation stage as of December 31, 2020, we recognized an impairment of goodwill arising from our acquisition of Q Chip Limited in a charge toDecember 2014 of £2.3 million. Further, in connection with the income statement of £1.5 million. While Opsisporin is currently outsidepurported termination of our strategic focus, pre-clinical prooflicense to panobinostat, the active ingredient for our MTX110 product, by Secura Bio, Inc. in June 2020, we recognized an impairment of concept studies have been completed and we believe that Opsisporin still has merit and development may be restarted when we have more available resources.an intangible asset of £0.8 million as of December 31, 2020.

These charges discussed above and any future impairment charges could materially increase our expenses and reduce our profitability. The process of testing goodwill and intangible assets for impairment involves numerous judgments, assumptions and estimates made by our management including expected future profitability, cash flows and the fair values of assets and liabilities, which inherently reflect a high degree of uncertainty and may be affected by significant variability. If the business climate deteriorates, including the markets in which certain of our product candidates may be sold, then actual results may not be consistent with these judgments, assumptions and estimates, and our goodwill and intangible assets, to the extent not impaired at the time, may become impaired in future periods. This would in turn have an adverse impact on our financial position and results of operations.

Further, our decision in March 2020 to terminate the continued in-house development of MTD201 could, if we are unable to realize one or any of our strategic alternatives with respect to this asset, result in impairment charges in our financial statements for the fiscal year ending December 31, 2020. These could include an impairment charge of £9.30 million in respect of the Q-Sphera in process research and development intangible asset and £2.29 million in respect of goodwill which arose from the acquisition of Q Chip Limited in December 2014.

In connection with our sale of Midatech US, we may be subject to significant indemnity obligations.

In connection with our sale of Midatech US to Kanwa Holdings, LP, and pursuant to the terms of Purchase Agreement, we agreed to indemnify Kanwa Holdings, LP from certain breaches of representations and warranties, taxes and other matters, including, but not limited to, any liability related to any prescription drug user fee amounts owed under the Prescription Drug Fee User Act, or PDUFA, to the FDA by Midatech US for the U.S. government’s fiscal year ended September 30, 2018. While Midatech US and the Company have sought a waiver for such PDUFA user fee, during the fiscal year ended December 31, 2019, following a request by Midatech US, and in connection with the indemnity obligations in the Purchase Agreement, we paid a deposit of £947,000 with respect to such fee. If the waiver is not granted, Midatech US will be entitled to keep the deposit. To the extent any other indemnity obligation is not capped in amount, we may not have sufficient cash flow to make such further indemnity payment. Further, we cannot predict the nature of and amount of all indemnity or other obligations we have to Kanwa Holdings, LP. Such payments may be costly and may materially adversely affect our financial condition and results of operations.

Risks Related to Our Business and Industry

The effects of health epidemics, including the ongoing global coronavirus COVID-19 pandemic, in regions where we, or the third parties on which we rely, have business operations could adversely impact our business, including our clinical trials, preclinical studies and supply chains, depending on the location, duration and severity of disruptions to the systems affecting our business.

Beginning in late 2019, the outbreak of a novel strain of coronavirus, COVID-19, has evolved into a global pandemic and in March 2020, the World Health Organization characterized COVID-19 as a pandemic. The COVID-19 pandemic, which has continued to spread, and the related adverse public health developments, including orders to shelter-in-place, travel restrictions, and the imposition of additional requirements on businesses, have adversely affected workforces, organizations, healthcare communities, economies, and financial markets globally, leading to an economic downturn and increased market volatility. The United States government and the United Kingdom government also has imposed travel restrictions international travel. It has also disrupted the normal operations of businesses across industries, including ours, and caused significant disruption in the operations of third party manufacturers and CROs upon whom we rely.

In response to the spread of COVID-19 as well as public health directives and orders, we have implemented work-from-home policies to support the community efforts to reduce the transmission of COVID-19 and protect employees, complying with guidance from government authorities in the countries within which we operate. We have implemented a number of measures to ensure employee safety and business continuity, including limiting access to our facilities to only those individuals required to execute their job responsibilities and restricted the number of staff working concurrently in our laboratories. In addition, we have suspended all non-essential travel for our employees and have discouraged employee attendance at industry events and in-person work-related meetings, all of which could negatively affect our business.

We are currently conducting clinical trials in the United States. Timely enrollment in our clinical trials is dependent upon capacity at our clinical trial sites, some of which have been and are currently adversely affected by COVID-19. Due to the uneven geographic impact of the pandemic, these localized disruptions are difficult to predict. Shutdowns or other restrictions related to COVID-19 or other infectious diseases could impact personnel at third-party manufacturing facilities, which, in turn, could impact the availability or cost of materials and disrupt our supply chain. Additionally, clinical trials may involve immunocompromised patients who are at higher risk for COVID-19 and who are therefore more likely to avoid hospitals or other high-risk areas.

The effects of the governmental restrictions and guidelines, and the measures we have implemented to comply with them, may negatively impact productivity, disrupt our business and delay our clinical programs and timelines. The magnitude of these potential disruptions will depend, in part, on the length and severity of the restrictions and other limitations on our ability to conduct our business in the ordinary course.

As a result of the COVID-19 outbreak, or similar pandemics, we may experience disruptions that could severely impact our business and drug development activities, including:

These and other factors arising from the COVID-19 pandemic could worsen in countries that are already afflicted with COVID-19, could continue to spread to additional countries, or could return to countries where the pandemic has been partially contained, each of which could continue to adversely impact our ability to conduct clinical trials and our business generally, and could have a material adverse impact on our operations and financial condition and results.

In addition, the trading price for our Ordinary Shares and Depositary Shares, as well as trading price for the publicly traded securities of other biopharmaceutical companies, as well as the broader global financial markets, have been highly volatile as a result of the COVID-19 pandemic and the resulting impact on United Kingdom and United States economic activities. As a result, we may face difficulties raising capital when needed, and any such sales may be on unfavorable terms to us. Further, to the extent we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of existing shareholders will be diluted.

The ultimate impact of the COVID-19 pandemic on our business operations is highly uncertain and subject to change and will depend on future developments which are difficult to predict, including the duration of the pandemic, the ultimate geographic spread of the disease, additional or modified government actions, new information that will emerge concerning the severity and impact of COVID-19 and other actions taken to contain or address its impact in the short and long term, among others. We do not yet know the full extent of potential delays or impacts on our business, our licensing efforts, our clinical studies, our research programs, healthcare systems or the global economy, and if the ultimate impact of the COVID-19 pandemic and the resulting uncertain economic and healthcare environment is more severe than we anticipated, we may not be able to execute on our current operating plan or on our strategy. If the duration of the COVID-19 pandemic and the associated period of business and social restrictions and economic uncertainty is longer than we anticipated, our cash, cash equivalents, and marketable securities may not be sufficient to fund the activities under our operating plan for the time period that we anticipated, and we may be required to revise our operating plan further. To the extent the COVID-19 pandemic adversely affects our business and financial results, it may also have the effect of heightening many of the other risks described in this “Risk Factors” section.

We are in receipt of a letter purporting to terminate our license agreement related to panobinostat, the active pharmaceutical ingredient in our MTX110 product. If we are unsuccessful in challenging this termination, our business, financial condition and results of operations could be materially adversely affected.

On June 8, 2020, we received a letter sent on behalf of Secura Bio. Inc., or Secura Bio, dated June 1, 2020, purporting to terminate a License Agreement, executed on or about June 6, 2017, or the License Agreement, by and between Midatech Limited and Novartis AG, or Novartis, which Novartis subsequently transferred to Secura Bio, or the Secura License Agreement. Pursuant to the Secura License Agreement, Midatech Limited was granted a worldwide, sublicenseable license to certain patents of panobinostat, the active pharmaceutical ingredient of Midatech’s development product MTX110. Midatech Limited’s rights are limited to the treatment of brain cancer in humans, administered by convection-enhanced delivery. We view MTX110 as an important asset and currently have threetwo ongoing clinical trials for MTX110 and intend to fundcommence two further clinical trials as part of our MTX110 clinical program of MTX110 out of proceeds raised in our May 2020 fundraising.program.

We plan to continue to pursue development of MTX110 and the strategic review process previously disclosed. We are also reviewing with our outside counsel remedies we may have if Secura Bio does not withdraw the notice and otherwise cease to interfere with our ongoing business and strategic review process, which we have formally requested. We are evaluating available actions to protect our rights under the Secura License Agreement and our assets. Notwithstanding the foregoing, if Secura Bio does not withdraw its notice, the uncertainty and diversion of time and resources associated could have a material adverse effect on our business, financial condition and prospects, and we cannot assure you that we would be successful in resolving such dispute.

Our future success is dependent on product development and the ability to successfully license our product candidates to partners who can seek regulatory approval and commercialization of our product candidates.

We continue to conduct research and development for our product candidates and, to a lesser extent, clinical trials for certain of our product candiates;candidates; however there can be no assurance that any of our targeted developments will be successful. We must develop functional products that address specific market needs. We must therefore engage in new development activities, which may not produce innovative, commercially viable results in a timely manner or at all. In addition, we may not be able to develop new technologies or identify specific market needs that are addressable by our technologies, or technologies available to us. We may encounter delays and incur additional development and production costs and expenses, over and above those expected, in order to develop technologies and products suitable for licensing. If any of our development programs are curtailed, this may have a material adverse effect on our business and financial conditions.

Our business is dependent on our ability to complete the development of product candidates, and license our product candidates to partners who will seek to obtain regulatory approval for and commercialize our product candidates in a timely manner. Any licensing partner cannot commercialize a product without first obtaining regulatory approval from the appropriate regulatory authorities in a country. Before obtaining regulatory approvals for the commercial sale of any product candidate for a target indication, it must be demonstrated with substantial evidence gathered in preclinical and well-controlled clinical studies that the product candidate is safe and effective for use for that target indication and that the manufacturing facilities, processes and controls are adequate. The process of developing, obtaining regulatory approval for and commercializing product candidates is long, complex and costly. Even if a product candidate were to successfully obtain approval from the EMA, the MHRA, the FDA and/or comparable foreign regulatory authorities, any approval might contain significant limitations related to use restrictions for certain age groups, warnings, precautions or contraindications, or may be subject to burdensome post-approval study or risk management requirements. If our product candidates are unable to obtain regulatory approval in one or more jurisdictions, or any approval contains significant limitations, we may not be able to obtain sufficient funding or generate sufficient revenue to continue the development of any other product candidate. Furthermore, even if a product candidate obtains approval from the regulatory authorities, it is likely that, in order to obtain royalty and/or milestone revenue from any of our licensing partners, our licensing partners may need to expand their commercial operations, establish commercially viable pricing and obtain approval for adequate reimbursement from third parties and government departments and healthcare payors for such products. If our product candidates are unable to successfully be commercialized, we may not be able to earn sufficient revenues to continue our business.

Clinical drug development involves a risky, lengthy and expensive process with an uncertain outcome, and results of earlier studies and trials may not be predictive of future trial results.

Clinical testing is expensive and can take many years to complete, and its outcome is inherently uncertain. Failure can occur at any time during the clinical trial process. The results of any preclinical studies and early clinical trials of our product candidates may not be predictive of the results of later-stage clinical trials, even after seeing promising results in earlier clinical trials. Product candidates in later stages of clinical trials may fail to show the desired safety and efficacy traits despite having progressed through preclinical studies and initial clinical trials. A number of companies in the biopharmaceutical industry, including many with greater resources and experience than us, have suffered significant setbacks in advanced clinical trials due to lack of efficacy or adverse safety profiles, notwithstanding promising results in earlier trials. For example, in May 2016, we announced that the results of our Phase II dosing study of our transbuccal insulin delivery system, which delivered insulin through the mouth, were unfavorable compared to the traditional sub-cutaneous, or through the skin, insulin delivery system. Any future clinical trial results for our other product candidates and programs may also be unsuccessful.

In 2018, we embarked on first-in-human clinical trial program for our MTD201 and MTX110 products, with MTD201 completing our Phase I study in the third quarter of 2018, with an additional Phase I study completed in the third quarter of 2019. The MTX110 Phase I clinical study is expected to be completed in mid-2020, although recruitmentthe fourth quarter of 2020. In 2020, Phase I clinical trials of MTX110 were initiated by the final patient may be delayedUniversity of Texas in medulloblastoma, and by COVID-19.Columbia University in diffuse intrinsic pontine glioma. In connection with the termination of our MTD201 program, we have determined not to conduct additional clinical trials in humans, other than clinical trials for which funding is provided by third parties or via grants. We expect our licensing partners will be responsible for any future clinical trials. We and any of our licensing partners may experience delays in ongoing or future clinical trials and we do not know whether planned clinical trials will begin or enroll subjects on time, need to be redesigned or be completed on schedule, if at all. Clinical trials may be delayed, suspended or prematurely terminated for a variety of reasons, such as:

Patient and/or volunteer enrollment, a significant factor in the timing of clinical trials, is affected by many factors including the size and nature of the patient population, the proximity of subjects to clinical sites, the eligibility criteria for the trial, the design of the clinical trial, the ability to obtain and maintain patient consents, whether enrolled subjects drop out before completion, competing clinical trials, and clinicians’ and patients’ perceptions as to the potential advantages of the drug being studied in relation to other available therapies, including any new drugs that may be approved for the indications we are investigating. Furthermore, we rely on contract research organizations and clinical trial sites to ensure the proper and timely conduct of our clinical trials and while we have agreements governing their activities, we have limited influence over their actual performance.

If we experience delays in the completion of, or termination of, any ongoing or future clinical trial of our product candidates, the commercial prospects of our product candidates will be harmed, and our ability to generate product revenues from any of these product candidates will be delayed. In addition, any delays in completing clinical trials may slow down our product candidate development and approval process and jeopardize the ability to commence product sales and generate revenues. Any of these occurrences may harm our business, financial condition and prospects significantly. In addition, many of the factors that cause, or lead to, a delay in the commencement or completion of clinical trials may also ultimately lead to the denial of regulatory approval of our product candidates.

The regulatory approval processes in the United States and Europe are lengthy, time consuming and inherently unpredictable, and if we are ultimately unable to obtain regulatory approval for our product candidates, our business may be substantially harmed.

The time required to obtain approval for a product candidate by the EMA, the MHRA, the FDA and other comparable foreign regulatory authorities is unpredictable, but typically takes many years following the commencement of preclinical studies and clinical trials and depends upon numerous factors, including the substantial discretion of the regulatory authorities. In addition, approval policies, regulations, or the type and amount of clinical data necessary to gain approval may change during the course of a product candidate’s clinical development and may vary among jurisdictions. It is possible that none of our existing product candidates or any product candidates we may seek to develop in the future will ever obtain regulatory approval.

Our product candidates could fail to receive regulatory approval from the EMA, the MHRA, the FDA and other comparable foreign regulatory authorities for many reasons, including:

In addition, the EMA, the MHRA, the FDA and other comparable foreign regulatory authorities may require more information, including additional preclinical or clinical data to support approval, which may delay or prevent approval and any commercialization plans, or we or any licensing partner may decide to abandon the development program. If approval were to be obtained, regulatory authorities may approve any of our product candidates for fewer or more limited indications than is requested, may grant approval contingent on the performance of costly post-marketing clinical trials, or may approve a product candidate with a label that does not include the labeling claims necessary or desirable for the successful commercialization of that product candidate. In addition, if our product candidate produces undesirable side effects or safety issues, the regulatory authorities (the FDA, MHRA, EMA or a comparable foreign regulatory authority) may require the establishment of Risk Evaluation and Mitigation Strategy, or REMS, which may, for instance, restrict distribution of the products and impose burdensome implementation requirements on us or any licensing partner. Any of the foregoing scenarios could materially harm the commercial prospects for our product candidates.

Our product candidates may cause undesirable side effects or have other properties that could delay or prevent their regulatory approval and limit the commercial profile of an approved label, and such side effects or other properties could result in significant negative consequences following any marketing approval of any of our product candidates.

Undesirable side effects caused by any of our product candidates could cause us, our licensing partner, if any, or regulatory authorities to interrupt, delay or halt clinical trials and could result in a more restrictive label or the delay or denial of regulatory approval by the EMA, the MHRA, the FDA or other comparable foreign regulatory authority. Results of the clincialclinical trials could reveal a high and unacceptable severity and prevalence of side effects or risks associated with a product candidate’s use. In such an event, our trials could be suspended or terminated and the regulatory authorities could order us to cease further development of or deny approval of our product candidates for any or all targeted indications. The drug-related side effects could affect patient recruitment or the ability of enrolled subjects to complete the trial or result in potential product liability claims. Any of these occurrences may harm our business, financial condition and prospects significantly.

Additionally, if undesirable side effects of our products are identified following marketing approval, a number of potentially significant negative consequences could result, including:

Consequently, our reputation and business operations may suffer.

Any of these events could prevent the achievement or maintaining of market acceptance of the particular product or product candidate, if approved, and could significantly harm our business, results of operations and prospects.

Even if our product candidates receive regulatory approval, they may still face future development, manufacturing and regulatory difficulties.

Our product candidates, if they receive regulatory approval, will be subject to the ongoing requirements of the EMA, the MHPA, the FDA and other regulatory agencies governing the manufacture, quality control, further development, labeling, packaging, storage, distribution, safety surveillance, import, export, advertising, promotion, recordkeeping and reporting of safety and other post-market information. The safety profile of any product is closely monitored by the EMA, the MHRA, the FDA and other regulatory authorities after approval. If the EMA, the MHRA, the FDA or other regulatory authorities become aware of new safety information after approval of any of our products or product candidates, regulatory authorities may require labeling changes or establishment of a risk mitigation strategy or similar strategy, impose significant restrictions on a product’s indicated uses or marketing, or impose ongoing requirements for potentially costly post-approval studies or post-market surveillance.

In addition, manufacturers of drug and biological products and their facilities are subject to continual review and periodic inspections by the EMA, the MHRA, the FDA and other governmental regulatory authorities for compliance with current good manufacturing practices, or cGMP, regulations. If a previously unknown problem with a product, such as adverse events of unanticipated severity or frequency, or a problem with the facility where the product is manufactured is discovered, a regulatory agency may impose restrictions on that product, the manufacturing facility or the party commercializing the product, including requiring recall or withdrawal of the product from the market or suspension of manufacturing. If our product candidates or the manufacturing facilities for our product candidates fail to comply with applicable regulatory requirements, a regulatory agency may:

The occurrence of any of these events or penalties described above may inhibit our ability to generate revenue from product candidates that are commercialized by any of our licensing partners.

We expect to seek to establish agreements with potential licensing partners and collaborators and, if we are not able to establish them on commercially reasonable terms, we may have to alter our development and commercialization plans.

Our current commercialization strategy is to deploy our proprietary drug delivery technologies to formulate a compelling portfolio of novel first-in-class sustained release formulations of products with significant commercial potential for licensing to pharmaceutical company partners at proof-of-concept stage, which would potentially result in revenue generation from product royalty and/or milestone deals. We expect to seek to work with licensing or collaboration partners for the development and commercialization of one or more of our product candidates. For example, in January 2019, we entered into that certain Licensing, Collaboration and Distribution Agreement, or the CMS License Agreement, with China Medical Systems Holdings Limited, or CMS, as guarantor, and two of its wholly owned subsidiaries, CMS Bridging Limited, or CMS Bridging, and CMS Medical Hong Kong Limited, or CMS Medical HK, each a CMS Party, pursuant to which, among other things, we agreed to license certain of our products to the CMS Parties in exchange for, among other things, royalty revenue. Likely future collaborators may include large and mid-size pharmaceutical companies, regional and national pharmaceutical companies and biotechnology companies.

We face significant competition in seeking appropriate licensing or collaboration partners. Whether we reach a definitive agreement will depend, among other things, upon our assessment of the partner’s resources and expertise, the terms and conditions of the proposed collaboration and the proposed partner’s evaluation of a number of factors. Those factors may include the potential differentiation of our product candidate from competing product candidates, design or results of clinical trials, the likelihood of approval by the FDA or comparable foreign regulatory authorities and the regulatory pathway for any such approval, the potential market for the product candidate, the costs and complexities of manufacturing and delivering the product to patients and the potential of competing products. The partner may also consider alternative product candidates or technologies for similar indications that may be available for collaboration and whether such collaboration could be more attractive than the one with us for our product candidate.

These agreements are complex and time consuming to negotiate and document. Further, there have been a significant number of recent business combinations among large pharmaceutical companies that have resulted in a reduced number of potential future licensing and collaboration partners.

We may not be able to negotiate agreements with these potential partners on a timely basis, on acceptable terms, or at all. If we are unable to do so, we may have to curtail the development of the product candidate for which we are seeking to collaborate, reduce or delay its development program or one or more of our other development programs.

If we enter into agreements with a licensing or collaboration partner for the development and commercialization of our product candidates, our prospects with respect to those product candidates will depend in significant part on the success of those collaborations.

Some of our revenues are currently derived from licensing or collaboration agreements with other biopharmaceutical companies, research institutes and universities, and we expect a material amount of our revenue in the future will be derived from these and similar agreement. We may enter into additional agreements with a licensing or collaboration partner for the development and commercialization of certain of our product candidates. If we enter into such agreements, we will have limited control over the amount and timing of resources that our partners will dedicate to the development or commercialization of our product candidates. Our ability to generate revenues from these arrangements will depend on any future licensing partners’ ability to successfully perform the functions assigned to them in these arrangements. In addition, any future licensing or collaboration partner may have the right to abandon research or development projects and terminate applicable agreements, including funding obligations, prior to or upon the expiration of the agreed upon terms.

Agreements involving our product candidates pose a number of risks, including:

Agreements may not lead to development or commercialization of product candidates in the most efficient manner, or at all. If any future partners of ours is involved in a business combination, it could decide to delay, diminish or terminate the development or commercialization of any product candidate licensed to it by us.

The commercial success of any of our product candidates is not guaranteed.

There can be no assurance that any of our product candidates currently in development will be successfully developed into any commercially viable product or products and/or be manufactured in commercial quantities at an acceptable cost or be marketed successfully and profitably. If we, or our partners, encounter delays at any stage, and fail successfully to address such delays, it may have a material adverse effect on our business, financial condition and prospects. In addition, our success will depend on the market’s acceptance of these products and there can be no guarantee that this acceptance will be forthcoming or that our technologies will succeed as an alternative to competing products. If a market fails to develop or develops more slowly than anticipated, we may be unable to recover the costs we may have incurred in the development of particular products and may never achieve profitable royalty or licensing revenues from that product.

The pharmaceutical and biotechnology industries are highly competitive.

The development and commercialization of new drug products is highly competitive. Our business faces competition from a range of major and specialty pharmaceutical and biotechnology companies worldwide with respect to our product candidates, and will face competition in the future with respect to any product candidates that we may seek to develop or commercialize.

There are a number of pharmaceutical and biotechnology companies that currently market and sell products or are pursuing development of products similar to our technology and product candidates. With respect to our product candidates, from a technology perspective, we believe other companies using gold nanoparticle technologies include CytImmune Sciences, Inc., and Nanospectra Biosciences, Inc. We believe other companies in the sustained release space include Medincell S.A., GP Pharm, S.A., Peptron, Inc., Graybug Inc. and Nanomi B.V. In addition, Teva Pharmaceutical Industries Limited, Pharmathen S.A.other companies using gold nanoparticle technologies include CytImmune Sciences, Inc., Dr. Reddy’s Laboratories Limited and Mylan N.V. are all believed to be developing a sustained release octreotide injection.Nanospectra Biosciences, Inc.

Some of these competitive products and therapies are based on scientific approaches that are the same or similar to our approach, and others are based on entirely different approaches. Potential competitors also include academic institutions, government agencies and other public and private research organizations that conduct research, seek patent protection and establish collaborative arrangements for research, development, manufacturing and commercialization.

Our competitors in the biotechnology and pharmaceutical industries may have superior research and development capabilities, products, manufacturing capability or sales and marketing expertise. Many of our competitors may have significantly greater financial and human resources and may have more experience in research and development.

As a result of these factors, our competitors may obtain regulatory approval of their products more rapidly than we are able to or may obtain patent protection of other intellectual property rights that limit our ability to develop or commercialize our product candidates. Our competitors may also develop products that are more effective, more widely used and less costly than our own product candidates, and may be more successful in commercializing their products.

We anticipate that we will face increased competition in the future as new companies enter our markets and alternative products and technologies become available. Mergers and acquisitions in the pharmaceutical and biotechnology industries may result in even more resources being concentrated among a smaller number of our competitors. Smaller and other early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. These third parties compete with us in recruiting and retaining qualified scientific, management and commercial personnel, as well as in acquiring technologies complementary to, or necessary for, our programs.

AnyOur product candidatecandidates may be subject to government price controls in certain jurisdictions that may be commercialized may become subjectaffect our revenue.

There has been heightened governmental scrutiny in the United Kingdom, United States, European Union and other jurisdictions of pharmaceutical pricing practices in light of the rising cost of prescription drugs and biologics. In the United States, such scrutiny has resulted in several recent Congressional inquiries and proposed and enacted federal and state legislation designed to, unfavorableamong other things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for products. At the federal level, the Trump administration used several means to propose or implement drug pricing reform, including through federal budget proposals, executive orders and policy initiatives. For example, on July 24, 2020 and September 13, 2020, the Trump administration announced several executive orders related to prescription drug pricing that seek to implement several of the administration’s proposals. As a result, the FDA released a final rule on September 24, 2020, effective November 30, 2020, providing guidance for states to build and submit importation plans for drugs from Canada. Further, on November 20, 2020, the Department of Health and Human Services finalized a regulation third party regulation, third party reimbursement practicesremoving safe harbor protection for price reductions from pharmaceutical manufacturers to plan sponsors under Medicare Part D, either directly or healthcare reform initiatives,through pharmacy benefit managers, unless the price reduction is required by law. The implementation of the rule has been delayed by the Biden administration from January 1, 2022 to January 1, 2023 in response to ongoing litigation. The rule also creates a new safe harbor for price reductions reflected at the point-of-sale, as well as sociala new safe harbor for certain fixed fee arrangements between pharmacy benefit managers and political pricing pressures,manufacturers, the implementation of which could harm our business.have also been delayed. On November 20, 2020, the Centers for Medicare and Medicaid Services issued an interim final rule implementing the Trump administration’s Most Favored Nation executive order, which would tie Medicare Part B payments for certain physician-administered drugs to the lowest price paid in other economically advanced countries, effective January 1, 2021. On December 28, 2020, the U.S. District Court in Northern California issued a nationwide preliminary injunction against implementation of the interim final rule. It is unclear whether the Biden administration will work to reverse these measures or pursue similar policy initiatives.

The abilityAt the state level, legislatures have increasingly enacted legislation and implemented regulations designed to marketcontrol pharmaceutical and commercialize any products successfully will dependbiological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in part onsome cases, designed to encourage importation from other countries and bulk purchasing.

Outside of the extentUnited States, particularly in the European Union, the pricing of prescription pharmaceuticals is subject to whichgovernmental control. In these countries, pricing negotiations with governmental authorities can take considerable time after the receipt of marketing approval for a product. To obtain coverage and reimbursement for these products and related treatments will be available from government health administration authorities, private health insurers and other organizations. Our future revenues and profitability will be adversely affected if these third-party payors do not sufficiently cover and reimburse the cost of these products and related procedures or services. If these entities do not provide sufficient coverage and reimbursement for any drug products that is marketed, these productspricing approval in some countries, we may be too costly for general use, and physicians may prescribe them less frequently.

The Medicare program and certain government pricing programs, including the Medicaid drug rebate program, the Public Health Service’s 340B drug pricing program, or the 340B program, and the pricing program under Section 603 of the Veterans Health Care Act of 1992, impact the revenues we may derive from future products that we may commercialize. Any future legislation or regulatory actions altering these programs or imposing new compliance requirements could have a significant adverse effect on our business. There have been, and we expect there will continue to be, a number of legislative and regulatory actions and proposals to control and reduce health care costs. These measures may, among other things: negatively impact the level of reimbursement for pharmaceutical products; require higher levels of cost-sharing by beneficiaries; change the discounts required to conduct a clinical trial that compares the cost-effectiveness of our product candidate to other available therapies. If reimbursement of our products is unavailable or limited in scope or amount, or if pricing is set at unsatisfactory levels, our business could be provided by pharmaceutical manufacturers to government payors and/or providers; extend government discounts to additional government programs and/or providers; or reduce the level of reimbursement for health care servicesharmed.

Recently enacted and other non-drug items. Any such measures could indirectly impact demand for pharmaceutical products because they can cause payors and providers to apply heightened scrutiny and/or austerity actions to their entire operations, including pharmacy budgets.

Also, the trend toward managed health carefuture legislation in the United States as well asand other countries may affect the implementationprices we may obtain for our product candidates and increase the difficulty and cost for us to commercialize our product candidates.

In the United States and many other countries, rising healthcare costs have been a concern for governments, patients and the health insurance sector, which has resulted in a number of changes to laws and regulations, and may result in further legislative and regulatory action regarding the healthcare and health insurance systems that could affect our ability to profitably sell any product candidates for which we obtain marketing approval. For a detailed discussion of healthcare reform initiatives of importance to the pharmaceutical industry, see “Item 4. Information on the Group—B. Business Overview—Government Regulations.”

For example, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010, or the Affordable CareACA, was enacted in the United States in March 2010 with the stated goals of containing healthcare costs, improving quality and expanding access to healthcare, and includes measures to change healthcare delivery, increase the number of individuals with insurance, ensure access to certain basic healthcare services, and contain the rising cost of care. There have been executive, judicial and Congressional challenges to certain aspects of the ACA. While Congress has not passed repeal legislation, several bills affecting the implementation of certain taxes under the ACA have been signed into law. H.R. 1: An Act to provide for reconciliation pursuant to titles II and V of the concurrent growth of organizations such as managed care organizations, accountable care organizations and integrated delivery networks, may result in increased pricing pressuresresolution on the budget for pharmaceutical products, including any products that may be offered by us in the future. Moreover, legislative and regulatory changes to the Affordable Care Act, including possible repeal, remain possible under the Trump Administration. Certain changes, such as the removal of the Affordable Care Act’s individual health insurance mandate, have already been made by the U.S. Congress via enactment offiscal year 2018, or the Tax Cuts and Jobs Act of 2017, orincludes a provision repealing, effective January 1, 2019, the Tax Cuts Act, and the long-term effects of such legislative changes to the Affordable Care Act are unknown. In addition, third-party payors, in an effort to control costs, are increasingly making patients responsible for a higher percentage of the total cost of drugs in the outpatient setting. This can lower the demand for our products if the increased patient cost sharing obligations are more than they can afford. Individual states’ responses to ongoing financial pressures could also result in measures designed to limit reimbursement, restrict access, or impose broader or deeper discounts on branded pharmaceutical products utilized for Medicaid patients. We are unable to predict what changes in legislation or regulation relating to the health care industry or third-party coverage and reimbursement, including possible repeal of the Affordable Care Act, may be enacted in the future or what effect such legislation or regulation would have on our business.

There may be significant delays in obtaining coverage and reimbursement for any drug for which approval is obtained, and coverage may be more limited than the purposes for which the drug is approvedtax-based shared responsibility payment imposed by the EMA,ACA on certain individuals who fail to maintain qualifying health coverage for all or part of a year that is commonly referred to as the MHRA,“individual mandate”. Additionally, the FDA or comparable foreign regulatory authorities. Moreover, eligibility for2020 federal spending package permanently eliminated, effective January 1, 2020, the ACA-mandated “Cadillac” tax on high-cost employer-sponsored health coverage and reimbursement does not imply that any drug will be paid for in all cases or at a rate that covers our costs, including research, development, manufacturing, selling and distribution costs.

In addition, there may be downward pricing pressure on the price of any commercialized product candidate due to social or political pressure to lower the cost of drugs, which could reduce our revenue and future profitability. Recent events have resulted in increased public and governmental scrutiny of the cost of drugs. In particular, U.S. federal prosecutors have issued subpoenas to pharmaceutical companies seeking information about drug pricing practices. The U.S. Senate has, in the past, publicly investigated a number of pharmaceutical companies relating to drug-price increases and pricing practices. Our revenue and future profitability could be negatively affected if these inquiries were to result in legislative or regulatory proposals that limit the ability to increase the prices of the products sold. Pressure from social activist groups and future government regulations may also put downward pressure on the price of drugs, which could result in downward pressure on the prices of any product candidates we may commercialize in the future.

Currently enacted and future legislation in the United Kingdom, United States and other foreign jurisdictions may increase the difficulty and cost to obtain marketing approval of and commercialize our product candidates and affect the prices that may be charged.

In the United Kingdom, United States and other foreign jurisdictions, legislative and regulatory changes and proposed changes regarding the healthcare system could prevent or delay marketing approval of our product candidates, restrict or regulate post-approval activities and affect the ability to profitably sell any product candidates for which marketing approval is obtained.  

In the United States, in recent years, Congress has considered reductions in Medicare reimbursement levels for drugs administered by physicians. The Centers for Medicare also has authority to revise reimbursement rates and to implement coverage restrictions for some drugs. Cost reduction initiatives and changes in coverage implemented through legislation or regulation could decrease utilization of and reimbursement for any approved products, which in turn would affect the price we can receive for those products. While Medicare regulations apply only to drug benefits for Medicare beneficiaries, private payors often follow Medicare coverage policy and payment limitations in setting their own reimbursement rates. Therefore, any reduction in reimbursement that results from federal legislation or regulation may result in a similar reduction in payments from private payors.

In March 2010, President Obama signed into law the Affordable Care Act. This law substantially changes the way healthcare is financed by both governmental and private insurers in the United States, and significantly impacts the pharmaceutical industry.  The Affordable Care Act is intended to broaden access to health insurance, reduce or constrain the growth of healthcare spending, enhance remedies against fraud and abuse, add new transparency requirements for healthcare and health insurance industries, impose new taxes and fees on pharmaceutical and medical device manufacturers,tax and, impose additional health policy reforms.  The Affordable Care Act expanded manufacturers’ rebate liability under the Medicaid program from fee-for-service Medicaid utilization to include the utilization of Medicaid managed care organizations as well; increased the minimum Medicaid rebate due for most innovator drugs in general from 15.1% of average manufacturer price, or AMP, to 23.1% of AMP; and capped the total rebate amount for innovator drugs at 100% of AMP.  The Affordable Care Act and subsequent legislation also changed the definition of AMP.  The Affordable Care Act requires pharmaceutical manufacturers of branded prescription drugs to pay a branded prescription drug fee to the federal government.  Each such manufacturer pays a prorated share of the branded prescription drug fee of $2.8 billion in 2019, based on the dollar value of its branded prescription drug sales to certain federal programs identified in the law.  Substantial new provisions affecting compliance have also been enacted, which may affect our business practices with healthcare practitioners if our product candidates are not approved and marketed in the United States.  The Affordable Care Act also expanded the 340B program to include additional types of covered entities.  Final Centers for Medicare regulations to implement the changes to the Medicaid drug rebate program under the Affordable Care Act became effective on April 1, 2016.  If not repealed or amended, it is likely that the Affordable Care Act will continue the pressure on pharmaceutical pricing, especially under the Medicare and Medicaid programs, and may also increase our regulatory burdens and operating costs.

In addition, other legislative changes have been adopted since the Affordable Care Act was enacted. Beginning April 1, 2013, Medicare payments for all items and services, including drugs and biologics, were reduced by 2% under the sequestration (i.e., automatic spending reductions) required by the Budget Control Act of 2011, as amended by the American Taxpayer Relief Act of 2012.  Subsequent legislation extended the 2% reduction, on average, to 2025.  This could cause Medicare Part D plans to seek lower prices from manufacturers. Even if favorable coverage and reimbursement status is attained for our products, less favorable coverage policies and reimbursement rates may be implemented in the future.

As previously noted, in December 2017, the Tax Cuts Act repealed the Affordable Care Act’s penalties against individuals for failure to purchase health insurance, commonly known as the individual mandate, effective January 1, 2019. The repeal of2021, also eliminated the individual mandate will likely cause fewer Americans to be insured in the future, as compared with the prior version of the law. Additionally, on January 22, 2018, President Trump signed a continuing resolution on appropriations for fiscal year 2018 that delayed the implementation of certain Affordable Care Act-mandated fees, including the so-called “Cadillac” tax on certain high cost employer-sponsored insurance plans, the annual fee imposed on certain health insurance providers based on market share, and the medical device excise tax on non-exempt medical devices.insurer tax. Further, the Bipartisan Budget Act of 2018, among other things, amendsamended the Affordable Care Act,ACA, effective January 1, 2019, to increase from 50% to 70% the point-of-sale discount that is owed by pharmaceutical manufacturers who participate in Medicare Part D and to close the coverage gap in most Medicare drug plans, commonly referred to as the “donut hole.”hole”. On December 14, 2018, a Texas U.S. District Court Judge ruled that the ACA is unconstitutional in its entirety because the “individual mandate” was repealed by Congress could consider other legislation to repeal or replace certain elementsas part of the Affordable CareTax Act. We ultimately cannot predict with any assuranceAdditionally, on December 18, 2019, the ultimate long-term effectU.S. Court of changesAppeals for the 5th Circuit upheld the District Court ruling that the individual mandate was unconstitutional and remanded the case back to the Affordable Care ActDistrict Court to determine whether the remaining provisions of the ACA are invalid as well. The U.S. Supreme Court is currently reviewing the case, although it is unknown when a decision will be made. Further, although the U.S. Supreme Court has not yet ruled on us, nor can we provide any assurancethe constitutionality of the ACA, on January 28, 2021, President Biden issued an executive order to initiate a special enrollment period from February 15, 2021 through May 15, 2021 for purposes of obtaining health insurance coverage through the ACA marketplace. The executive order also instructs certain governmental agencies to review and reconsider their existing policies and rules that recentlimit access to healthcare, including among others, reexamining Medicaid demonstration projects and waiver programs that include work requirements, and policies that create unnecessary barriers to obtaining access to health insurance coverage through Medicaid or future changes to the Affordable Care Act provisions will not have an adverse effect on our business, financial condition, results of operations, cash flowsACA. It is unclear how the Supreme Court ruling, other such litigation, and the trading price of our Ordinary Shares or Depositary Shares, as well as anticipated revenue from product candidates that may be successfully developed and for which marketing approval is obtained. The scope of potential future legislation to further amend the Affordable Care Act provisions is highly uncertain in many respects, as is the effect of such future legislation on our business and prospects. It is possible that somehealthcare reform measures of the Affordable Care Act provisions that generally are not favorable forBiden administration will impact the research-based pharmaceutical industry could also be repealed along with Affordable Care Act coverage expansion provisions.ACA and our business.

In Europe, members of the European Union, or signatories thereto, are obliged to integrate directives into their national laws. European Union regulations, as inaddition, other European Union Member States, become immediatelyfederal health reform measures have been proposed and directly enforceable in the member territories. These include without limitation:

In the United Kingdom, the regulation of medicinal products derives from European Union legislation, particularly Directive 2001/83/EC on the European Community code relating to medicinal products for human use, and Regulation (EC) 726/2004 on the authorization and supervision of medicinal products and establishing the EMA. This legislation has been adopted in the United Kingdom byStates. For example, as a result of the Human Medicines RegulationsBudget Control Act of 2011, providers are subject to Medicare payment reductions of 2% per fiscal year through 2030 with the exception of a temporary suspension from May 1, 2020 through March 31, 2021 unless additional Congressional action is taken. Further, the American Taxpayer Relief Act of 2012 (SI 2012/1916)reduced Medicare payments to several providers and appliedincreased the statute of limitations period for the government to recover overpayments from providers from three to five years. The Medicare Access and CHIP Reauthorization Act of 2015 also introduced a quality payment program, or Quality Payment Program, under which certain individual Medicare providers will be subject to certain incentives or penalties based on new program quality standards. The Quality Payment Program provides clinicians with two ways to participate, including through the MHRA, whichAdvanced Alternative Payment Models, or APMs, and the Merit-based Incentive Payment System, or MIPS. In November 2019, the Centers for Medicare and Medicaid Services issued a final rule finalizing the changes to the Quality Payment Program. At this time, it is unclear how the executive agencyintroduction of the DepartmentQuality Payment Program will impact overall physician reimbursement under the Medicare program. Any reduction in reimbursement from Medicare or other government programs may result in a similar reduction in payments from private payors. It is also possible that additional governmental action is taken in response to the COVID-19 pandemic.

The combination of Health implementinghealthcare cost containment measures, increased health insurance costs, reduction of the number of people with health insurance coverage, as well as future legislation and regulations focused on reducing healthcare costs by reducing the cost of or reimbursement and access to pharmaceutical legislationproducts, may limit or delay our ability to generate revenue, attain profitability, or commercialize our products.

Coverage and adequate reimbursement may not be available for our current or any future product candidates, which could make it difficult for us to sell profitably, if approved.

Market acceptance and sales of any product candidates that we commercialize, if approved, will depend in part on the extent to which reimbursement for these products and related treatments will be available from third-party payors, including government health administration authorities, managed care organizations and private health insurers. Third-party payors decide which therapies they will pay for and establish reimbursement levels. Third-party payors in the United Kingdom.  Accordingly,States often rely upon expiryMedicare coverage policy and payment limitations in setting their own coverage and reimbursement policies. However, decisions regarding the extent of coverage and amount of reimbursement to be provided for any product candidates that we develop will be made on a payor-by-payor basis. One payor’s determination to provide coverage for a drug does not assure that other payors will also provide coverage for the drug. Additionally, a third-party payor’s decision to provide coverage for a therapy does not imply that an adequate reimbursement rate will be approved. Third-party payors are increasingly challenging the price, examining the medical necessity and reviewing the cost-effectiveness of medical products, therapies and services, in addition to questioning their safety and efficacy. We may incur significant costs to conduct expensive pharmaco-economic studies in order to demonstrate the medical necessity and cost-effectiveness of our product candidates, in addition to the costs required to obtain FDA approvals. Our product candidates may not be considered medically necessary or cost-effective.

Each payor determines whether or not it will provide coverage for a therapy, what amount it will pay the manufacturer for the therapy, and on what tier of its list of covered drugs, or formulary, it will be placed. The position on a payor’s formulary, generally determines the co-payment that a patient will need to make to obtain the therapy and can strongly influence the adoption of such therapy by patients and physicians. Patients who are prescribed treatments for their conditions and providers prescribing such services generally rely on third-party payors to reimburse all or part of the transition period following the withdrawal of the United Kingdom from the European Union, the terms of any agreement relating to medicinal products negotiated between the United Kingdom and the European Union which may come into force at the end of the transition period, or the laws which would apply if the United Kingdom leaves the European Union without such an agreement, may result in the alteration of such regulations.

In the European Union, marketing approvals can be submitted through the national, mutual recognition or decentralized procedures. For marketing authorizations submitted through the centralized procedure, the EMA is responsible. The EMA advises the European Commission in relation to decisions on marketing authorizations.

Reimbursement in the European Union is typically controlled by statutory stipulations and controls on pharmaceutical pricing. Healthcare is broadly divided into public and private health. Products thatassociated healthcare costs. Patients are not to be supplied through the countries’ public health services are typically less subject to price controls. All medicines validly prescribed on a public health prescription are in principle reimbursed from that country’s public funds.

In many European Union member states and signatories, a separate cost/benefit analysis may be required or requested (not a legal requirement) in order for prescribed products to be reimbursed. In the United Kingdom, most new medicines undergo an assessment by the United Kingdom National Institute for Health and Care Excellence, or the NICE, which will issue guidance on if and howunlikely to use the product in the National Health Service, or the NHS, in Englandour products, and Wales. This decisionproviders are unlikely to prescribe our products, unless coverage is largely based on the opinion of NICE regarding clinical effectivenessprovided and cost effectiveness relative to alternative therapies. NICE appraisals follow a comprehensive and inclusive process including consultations with and contributions from stakeholders. Clinicians are expected to take NICE’s guidance into account when making prescribing decisions. Where NICE issues a positive recommendation, NHS bodies are required to make funding availablereimbursement is adequate to cover a significant portion of the cost of theour products and their administration. Therefore, coverage and adequate reimbursement is critical to new medical product as a treatment option, consistent with NICE’s guidance. In contrast, products which are not recommended by NICE are generally not funded on a routine basis.acceptance.

A primary trend in the U.S. healthcare industry and elsewhere is cost containment. Third-party payors have attempted to control costs by limiting coverage and the amount of reimbursement for particular medications. We cannot be sure whether additional legislative changesthat coverage and reimbursement will be enacted, or whether the FDA or other jurisdictional regulations, guidance or interpretations will be changed, oravailable for any drug that we commercialize and, if reimbursement is available, what the impactlevel of such changes (or in some instances, current regulations, guidancereimbursement will be. Even if favorable coverage and reimbursement status is attained for one or interpretations) on the marketing approvals of ourmore product candidates iffor which we receive regulatory approval, less favorable coverage policies and reimbursement rates may be implemented in the future. Inadequate coverage and reimbursement may impact the demand for, or the price of, any drug for which we obtain marketing approval. If coverage and adequate reimbursement are not available, or are available only to limited levels, we may be.not be able to successfully commercialize our current and any future product candidates that we develop.

We are subject to environmental laws and regulations that govern the use, storage, handling and disposal of hazardous materials and other waste products.

We are subject to environmental laws and regulations governing the use, storage, handling and disposal of hazardous materials and other waste products. We have health and safety policies and procedures in place to assess the risks associated with use of hazardous materials, and the assessment includes information for employees on how the substances should be used to avoid contamination of the environment and inadvertent exposure to themselves and their colleagues. Despite our precautions for handling and disposing of these materials, we cannot eliminate the risk of accidental contamination or injury. In the event of a hazardous waste spill or other accident, we could be liable for damages, penalties or other forms of censure. If we fail to comply with any laws or regulations, or if an accident occurs, we may have to pay significant penalties and may be held liable for any damages that result. This liability could exceed our financial resources and could harm our reputation. We may also have to incur significant additional costs to comply with current or future environmental laws and regulations. Our failure to comply with any government regulation applicable to our laboratory and the materials used in our laboratory may adversely affect our ability to develop, produce, market or partner any products we may commercialize or develop.

Our success depends in part on our ability to protect rights in our intellectual property, which cannot be assured.

Our success and ability to compete effectively are in large part dependent upon exploitation of proprietary technologies and products that we have developed internally or have acquired or in-licensed. To date, we have relied on copyright, trademark and trade secret laws, as well as confidentiality procedures, non-compete and/or work for hire invention assignment agreements and licensing arrangements with our employees, consultants, contractors, customers and vendors, to establish and protect our rights to our technology and, to the best extent possible, control the access to and distribution of our technology, software, documentation and other proprietary information, all of which offer only limited protection. Where we have the right to do so under our agreements, we seek to protect our proprietary position by filing patent applications in the United States, the United Kingdom and worldwide related to our novel technologies and products that are important to our business. The patent positions of biotechnology and pharmaceutical companies generally are highly uncertain, involve complex legal and factual questions and have in recent years been the subject of much litigation. As a result, the issuance, scope, validity, enforceability and commercial value of our patents, including those patent rights licensed to us by third parties, are highly uncertain. There can be no assurance that:

 The steps we have taken to protect our proprietary rights may not be adequate to preclude misappropriation of our proprietary information or infringement of our intellectual property rights, both inside and outside of the United Kingdom and United States. The rights already granted under any of our currently issued patents and those that may be granted under future issued patents may not provide us with the proprietary protection or competitive advantages we are seeking. If we are unable to obtain and maintain patent protection for our technology and products, or if the scope of the patent protection obtained is not sufficient, our competitors could develop and commercialize technology and products similar or superior to ours, and our ability to successfully commercialize our technology and products may be adversely affected.

With respect to patent rights, we do not know whether any of the pending patent applications for any of our licensed compounds will result in the issuance of patents that protect our technology or products, or which will effectively prevent others from commercializing competitive technologies and products. Although we have a number of issued patents covering our technology, our pending applications cannot be enforced against third parties practicing the technology claimed in such applications unless and until a patent issues from such applications. Further, the examination process may require us to narrow the claims, which may limit the scope of patent protection that may be obtained. Because the issuance of a patent is not conclusive as to its inventorship, scope, validity or enforceability, issued patents that we own or have licensed from third parties may be challenged in the courts or patent offices in the European Union, United Kingdom, the United States and other foreign jurisdictions. Overall, such challenges may result in the loss of patent protection, the narrowing of claims in such patents, or the invalidity or unenforceability of such patents, which could limit our ability to stop others from using or commercializing similar or identical technology and products, or limit the duration of the patent protection for our technology and products. Protecting against the unauthorized use of our patented technology, trademarks and other intellectual property rights is expensive, difficult and may in some cases not be possible. In some cases, it may be difficult or impossible to detect third party infringement or misappropriation of our intellectual property rights, even in relation to issued patent claims, and proving any such infringement may be even more difficult.

The patent prosecution process is expensive and time-consuming, and we may not be able to file and prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner. It is also possible that we will fail to identify patentable aspects of inventions made in the course of our development and commercialization activities before it is too late to obtain patent protection on them. Further, given the amount of time required for the development, testing and regulatory review of new product candidates, patents protecting such candidates might expire before or shortly after such candidates are commercialized. We expect to seek extensions of patent terms where they are available in any countries where we are prosecuting patents. However, the applicable authorities, including the FDA in the United States, and any equivalent regulatory authority in other countries, may not agree with our assessment of whether such extensions are available, and may refuse to grant extensions to our patents, or may grant more limited extensions than we request. If this occurs, our competitors may be able to take advantage of our investment in development and clinical trials by referencing our clinical and preclinical data and launch their product earlier than might otherwise be the case. Changes in either the patent laws or interpretation of the patent laws in the European Union, the United Kingdom, the United States and other countries may diminish the value of our patents or narrow the scope of our patent protection. The laws of foreign countries may not protect our rights to the same extent as the laws of the United Kingdom or the United States, and these foreign laws may also be subject to change. Publication of discoveries in the scientific literature often lag behind the actual discoveries, and patent applications typically are not published until 18 months after filing or, in some cases, not at all. Therefore, we cannot be certain that we were the first to make the inventions claimed in our owned or licensed patents or pending patent applications, or that we were the first to file for patent protection of such inventions.

Previously, in the United States, assuming the other requirements for patentability are met, the first to make the claimed invention was entitled to the patent. Outside the United States, the first to file a patent application is entitled to the patent. In March 2013, the United States transitioned to a “first to file” system in which the first inventor to file a patent application will be entitled to the patent. Under either the previous or current system, third parties will be allowed to submit prior art prior to the issuance of a patent by the United States Patent and Trademark Office, and may become involved in opposition, derivation, reexamination, inter-partes review or interference proceedings challenging our patent rights or the patent rights of others. An adverse determination in any such submission, proceeding or litigation could reduce the scope of, or invalidate, our patent rights, which could adversely affect our competitive position with respect to third parties.

Our commercial success depends, in part, upon our not infringing intellectual property rights owned by others.

Although we believe that we have proprietary platforms for our technologies and product candidates, we cannot determine with certainty whether any existing third party patents or the issuance of any third party patents in the future would require us to alter our technology, obtain licenses or cease certain activities. We may become subject to claims by third parties that our technology infringes their intellectual property rights, in which case we will have no option other than to defend the allegation, which may be possible to resolve through negotiation or which might result in court proceedings. An adverse outcome in any of these circumstances is that we might be subject to significant liabilities, be required to cease using a technology or to pay license fees (both prospectively and retrospectively); and may be subject to the payment of significant damages. We could incur substantial costs in any litigation or other proceedings relating to patent rights, even if it is resolved in our favor. If the proceedings occur in the United States, it is likely that we will be responsible for our own legal costs, no matter the outcome of the litigation. In contrast, in the United Kingdom, the losing party typically is ordered to pay the winning party’s costs, although it is rare to have a complete recovery of all costs from the losing side. Some of our competitors may be able to sustain the costs of complex litigation more effectively or for a longer time than we can because of their substantially greater resources. In addition, uncertainties or threatened or actual disputes relating to any patent, patent application or other intellectual property right (including confidential information) could have a material adverse effect on our ability to market a product, enter into collaborations in respect of the affected products, or raise additional funds.

The policing of unauthorized use of our patented technologies and product candidates is difficult and expensive. There can be no assurance that the steps we take will prevent misappropriation of, or prevent an unauthorized third party from obtaining or using, the technologies, know-how and products we rely on. In addition, effective protection may be unavailable or limited in some jurisdictions. Any misappropriation of our proprietary technology, product candidates and intellectual property could have a negative impact on our business and our operating results. Litigation may be necessary in the future to enforce or protect our rights or to determine the validity or scope of the proprietary rights of others. Litigation could cause us to incur substantial costs and divert resources and management attention away from our daily business and there can be no guarantees as to the outcome of any such litigation. In addition, a defendant in any such litigation may counterclaim against us, resulting in additional time and expense to defend against such a counterclaim, which defense may not be successful.

We may become involved in lawsuits to protect or enforce our intellectual property, which could be expensive, time consuming and unsuccessful.

Competitors may infringe on our patents or misappropriate or otherwise violate our intellectual property rights. To counter infringement or unauthorized use, litigation may be necessary in the future to enforce or defend our intellectual property rights, to protect our trade secrets or to determine the validity and scope of our own intellectual property rights or the proprietary rights of others. This can be expensive and time consuming. Many of our current and potential competitors have the ability to dedicate substantially greater resources to defend our intellectual property rights than we can. Accordingly, despite our efforts, we may not be able to prevent third parties from infringing upon or misappropriating our intellectual property. Litigation could result in substantial costs and diversion of management resources, which could harm our business and financial results. In addition, in an infringement proceeding, a court may decide that a patent owned by or licensed to us is invalid or unenforceable, or may refuse to stop the other party from using the technology at issue on the grounds that our patents do not cover the technology in question. An adverse result in any litigation proceeding could put one or more of our patents at risk of being invalidated, held unenforceable or interpreted narrowly. Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation.

Third parties may initiate legal proceedings alleging that we are infringing their intellectual property rights, the outcome of which would be uncertain and could have a material adverse effect on the success of our business.

Our commercial success depends upon our ability and the ability of our collaborators and licensing partners to develop, manufacture, market and sell our product candidates, and to use our proprietary technologies without infringing the proprietary rights of third parties. We may become party to, or threatened with, future adversarial proceedings or litigation regarding intellectual property rights with respect to our products and technology. Third parties may assert infringement claims against us based on existing patents or patents that may be granted in the future. If we are found to infringe a third party’s intellectual property rights, we could be required to obtain a license from such third party to continue developing and commercializing our products and technology. However, we may not be able to obtain any required license on commercially reasonable terms or at all. Even if we are able to obtain a license, it may be non-exclusive, thereby giving our competitors access to the same technologies licensed to us. We could be forced, including by court order, to cease commercializing the infringing technology or product. In addition, in any such proceeding or litigation, we could be found liable for monetary damages. A finding of infringement could prevent us from commercializing our product candidates or force us to cease some of our business operations, which could materially harm our business. Any claims by third parties that we have misappropriated our confidential information or trade secrets could have a similar negative impact on our business.

We may be subject to claims that our employees have wrongfully used or disclosed alleged trade secrets of their former employers.

Many of our employees, including our senior management, were previously employed at other biotechnology or pharmaceutical companies. Some of these employees, including members of our senior management, executed proprietary rights, non-disclosure and non-competition agreements in connection with such previous employment. Although we try to ensure that our employees do not use the proprietary information or know-how of others in their work for us, we may be subject to claims that we or these employees have used or disclosed intellectual property, including trade secrets or other proprietary information, of any such employee’s former employer. We are not aware of any threatened or pending claims related to these matters or concerning the agreements with our senior management, but in the future litigation may be necessary to defend against such claims. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a potential distraction to management.

If we are unable to protect the confidentiality of our trade secrets, our business and competitive position could be harmed.

In addition to seeking patents for some of our technology and product candidates, we also rely on trade secrets, including unpatented know-how, technology and other proprietary information, to maintain our competitive position. We seek to protect these trade secrets, in part, by entering into non-disclosure and confidentiality agreements with parties who have access to them, such as our employees, corporate collaborators, outside scientific collaborators, contract manufacturers, consultants, advisors and other third parties. We also enter into confidentiality and invention or patent assignment agreements with our employees and consultants. Despite these efforts, any of these parties may breach the agreements and disclose our proprietary information, including our trade secrets, and we may not be able to obtain adequate remedies for such breaches. In addition, a court may determine that we failed to take adequate steps to protect our trade secrets, in which case it may not be possible to enforce our trade secret rights. Enforcing a claim that a party illegally disclosed or misappropriated a trade secret is difficult, expensive and time-consuming, and the outcome is unpredictable. In addition, some may be less willing or unwilling to protect trade secrets. If any of our trade secrets were to be lawfully obtained or independently developed by a competitor, we would have no right to prevent such competitor from using that technology or information to compete with us, which could harm our competitive position.

We may face product liability claims stemming from product candidates.

In carrying out our activities, we may potentially face contractual and statutory claims, or other types of claims from customers, suppliers and/or investors. In addition, we are exposed to potential product liability risks that are inherent in the research, development, production and supply of products. Subjects enrolled in our clinical trials, consumers, healthcare providers or other persons administering or selling products based on our and our collaborators’ technology may be able to bring claims against us based on the use of such products. If we cannot successfully defend ourselves against claims that any product candidates commercialized caused injuries, we could incur substantial costs and liabilities. Irrespective of their merits or actual outcome, liability claims may result in:

We have obtained product liability insurance coverage with a £8.0 million annual aggregate coverage. Our insurance coverage may not be sufficient to cover our entire product liability related expenses or losses and may not cover us for any expenses or losses we may suffer. Moreover, insurance coverage is becoming increasingly expensive and, in the future, we may not be able to maintain insurance coverage at a reasonable cost, in sufficient amounts or upon adequate terms to protect us against losses due to product liability. If we determine that it is prudent to increase our product liability, we may be unable to obtain this increased product liability insurance on commercially reasonable terms or at all. Large judgments have been awarded in class action or individual lawsuits based on drugs that had unanticipated side effects, including side effects that may be less severe than those of our products. A successful product liability claim or series of claims brought against us could cause the price of the Ordinary Shares and/or Depositary Shares to decline and, if judgments exceed our insurance coverage, could decrease our cash and have a material adverse effect our business, results of operations, financial condition and prospects.

We rely on third parties to conduct our preclinical and clinical trials. If these third parties do not successfully carry out their contractual duties or meet expected deadlines, we may not be able to obtain regulatory approval for or commercialize our product candidates and our business could be substantially harmed.

We are, and may continue to be, reliant on other parties for the successful development and commercialization of many of our product candidates. We rely upon CROs for the conduct of our clinical studies. We rely on these parties for execution of our preclinical and clinical trials, and control only certain aspects of their activities. Nevertheless, we are responsible for ensuring that each of our studies is conducted in accordance with the applicable protocol and legal, regulatory and scientific standards, and our reliance on the CROs or collaboration partners does not relieve us of our regulatory responsibilities. We also rely on third parties to assist in conducting our preclinical studies in accordance with Good Laboratory Practices and requirements with respect to animal welfare. We and our CROs or collaboration or licensing partners are required to comply with Good Clinical Practices, or GCP, which are regulations and guidelines enforced by the MHRA, the FDA, the EMA and comparable foreign regulatory authorities for all of our products in clinical development. Regulatory authorities enforce these GCP through periodic inspections of trial sponsors, principal investigators and trial sites. If we or any of our CROs or partners fail to comply with applicable GCP, the clinical data generated in our clinical trials may be deemed unreliable and the EMA, the MHPA, the FDA or comparable foreign regulatory authorities may require us to perform additional clinical trials before approving our marketing applications. We cannot be assured that upon inspection by a given regulatory authority, such regulatory authority will determine that any of our clinical trials comply with GCP requirements. In addition, our clinical trials must be conducted with product produced under cGMP requirements. Failure to comply with these regulations may require us to repeat preclinical and clinical trials, which would delay the regulatory approval process.

Our CROs are not our employees, and except for remedies available to us under such agreements with such CROs, we cannot control whether or not they devote sufficient time and resources to our on-going clinical, nonclinical and preclinical programs. If CROs do not successfully carry out their contractual duties or obligations or meet expected deadlines or if the quality or accuracy of the clinical data they obtain is compromised due to the failure to adhere to our clinical protocols, regulatory requirements or for other reasons, then our clinical trials may be extended, delayed or terminated and we may not be able to obtain regulatory approval for or successfully commercialize our product candidates. As a result, our results of operations and the commercial prospects for our product candidates would be harmed, our costs could increase and our ability to generate revenues could be delayed.

Because we have relied on third parties, our internal capacity to perform these functions is limited. Outsourcing these functions involves risk that third parties may not perform to our standards, may not produce results in a timely manner or may fail to perform at all. In addition, the use of third party service providers requires us to disclose our proprietary information to these parties, which could increase the risk that this information will be misappropriated. We currently have a small number of employees, which limits the internal resources we have available to identify and monitor our third party providers. To the extent we are unable to identify and successfully manage the performance of third party service providers in the future, our business may be adversely affected. Though we carefully manage our relationships with our CROs, there can be no assurance that we will not encounter similar challenges or delays in the future or that these delays or challenges will not have a material adverse impact on our business, financial condition and prospects.

We are dependent on third party suppliers, and if we experience problems with any of these third parties, the manufacturing of our product candidates could be delayed, which could harm our results of operations.

We are dependent upon certain qualified suppliers, of which there are a limited number, for the supply of raw materials, components, devices and manufacturing equipment. Additionally, these suppliers may also have downstream suppliers who supply materials, components, devices and manufacturing equipment, which may indirectly impact our business operations. We may also become dependent in the future on third party contract manufacturing organizations for the production of our product candidates for commercial sale. Thus, the success of our business may be adversely affected by the underperformance of third parties, exploitation by third parties of our commercial dependence and by unforeseen interruptions to third parties’ businesses. Although the existence of several alternative suppliers for each function mitigates the risks associated with this dependence, as does the availability of commercial insurance in respect of the impact of accidental events, the failure of a third party to properly to carry out their contractual duties or regulatory obligations could be highly disruptive to our business. Supply chain failures can result in significant clinical or commercial supply interruptions which could materially hamper our ability to conduct clinical trials or to supply adequate commercial supplies, and efforts to qualify new suppliers can be costly and time consuming. Further, any action taken by a third party that is detrimental to our reputation could have a negative impact on our ability to register our trademarks and/or market and sell our products.

In the future, we intend to license certain of our products to other companies for later stages of development and subsequent marketing, and consequently we will be increasingly reliant on securing and retaining such partners once our products advance through the development process. There can be no assurance that we will be able to secure such partners or that, once secured, our partners will continue to make the necessary and timely investments in our products to complete their development in the expected time and achieve commercial success.

Our counterparties may become insolvent.

There is a risk that parties with whom we trade or have other business relationships with (including partners, joint venturers, customers, suppliers, subcontractors and other parties) may become insolvent. This may be due to general economic conditions or factors specific to that company. In the event that a party with whom we trade becomes insolvent, this could have an adverse impact on our revenues and profitability.

Our relationships with customers and third party payors are subject to applicable anti-kickback, fraud and abuse and other healthcare laws and regulations, which could expose us to criminal sanctions, civil penalties, contractual damages, reputational harm and diminished profits and future earnings.

Healthcare providers, physicians and third party payors play a primary role in the recommendation and prescription of any of our products or any product candidate for which we obtain marketing approval. Our arrangements with third party payors and customers exposes us to broadly applicable fraud and abuse and other healthcare laws and regulations that may constrain the business or financial arrangements and relationships through which we will market, sell and distribute our products for which we obtain marketing approval.

The shifting commercial compliance environment and the need to build and maintain robust and expandable systems to comply with different compliance or reporting requirements in multiple jurisdictions increase the possibility that a healthcare or pharmaceutical company may fail to comply fully with such laws and regulations. Efforts to ensure that our business arrangements with third parties will comply with applicable healthcare laws and regulations may involve substantial costs. It is possible that governmental authorities will conclude that our business practices do not comply with applicable fraud and abuse or other healthcare laws and regulations or guidance. If our operations are found to be in violation of any of these laws or any other governmental regulations that may apply to us, we may be subject to significant civil, criminal and administrative penalties, damages, fines, exclusion from government funded healthcare programs, such as Medicare and Medicaid in the United States, and the curtailment or restructuring of our operations. If any of the physicians or other providers or entities with whom we expect to do business is found to not be in compliance with applicable laws, they may be subject to criminal, civil or administrative sanctions, including exclusions from government funded healthcare programs. Even if we are not determined to have violated these laws, government investigations into these issues typically require the expenditure of significant resources and generate negative publicity, which could harm our financial condition and divert resources and the attention of our management from operating our business.

We are subject to cybersecurity risks and other cyber incidents, including the misappropriation of our information and other breaches of information security that may result in disruption and the incurrence of costs in an effort to minimize those risks.

In the normal course of conducting our business, we collect and store sensitive data on our networks, including intellectual property, personal information of our employees, and our proprietary business information and that of our customers, vendors and business partners.  Despite the security measures we have in place and any additional measures we may implement in the future to safeguard our systems and to mitigate potential security risks, our facilities and systems, and those of our third-party service providers, could be vulnerable to security breaches, computer viruses, lost or misplaced data, programming errors, human errors, acts of vandalism or other events. Any steps we take to deter and mitigate these risks may not be successful and may cause us to incur increasing costs. Any disruption of our systems or security breach or event resulting in the misappropriation, loss or other unauthorized disclosure of confidential information, whether by us directly or by our third-party service providers, could damage our reputation, result in the incurrence of costs, expose us to the risks of litigation and liability, result in regulatory penalties under laws that protect privacy of personal information, disrupt our business or otherwise affect our results of operations.

Regulatory, legislative or self-regulatory/standard developments regarding privacy and data security matters could adversely affect our ability to conduct our business.

In the European Union, the General Data Protection Regulation (EU) 2016/679, or GDPR, which came into effect on May 25, 2018, may increase our burden of regulatory compliancelays down the legal framework for data protection and require us to change certain of our privacy and data security practices in order to achieve compliance.privacy. The GDPR implements moreapplies directly in all European Union member states (until December 31, 2020, this included the United Kingdom) and applies to companies with an establishment in the European Economic Area, or EEA, and to certain other companies not in the EEA that offer or provide goods or services to individuals located in the EEA or monitor the behavior of individuals located in the EEA. In the United Kingdom, the GDPR has been converted into United Kingdom domestic law, pursuant to the Data Protection, Privacy and Electronic Communications (Amendments etc)(EU Exit) Regulations 2019 (as amended), which makes some minor technical amendments to ensure the GDPR is operable in the United Kingdom, or the UK GDPR. The UK GDPR is also supplemented by the Data Protection Act 2018. United Kingdom and European Union data protection law is therefore aligned. The GDPR and UK GDPR implement stringent operational requirements for processors and controllers of personal data, including, for example, requiring expanded disclosures about how personal information is to be used, limitations on retention of information, increased requirements pertaining to health data and pseudonymized (i.e., key-coded) data, increased cyber security requirements, mandatory data breach notification requirements and higher standards for data controllers to demonstrate that they have obtained eithera valid consent or have another legal basis in place to justify theirfor certain data processing activities. The GDPR further provides that European Union member states may make their own additionalfurther laws and regulations in relation to certainthe processing of genetic, biometric or health data, processing activities, which could furtherresult in differences between member states, limit our ability to use and share personal data or could cause our costs to increase, and could require localized changes. Underharm our business and financial condition. Failure to comply with European Union laws, including failure under the GDPR and UK GDPR, Data Protection Act 2018, ePrivacy Directive and other laws relating to the security of personal data may result in fines of up to €20 million (or £17.5 million under the UK GDPR) or up to 4% of the total worldwide annual turnover of the preceding financial year, whichever is higher,if greater, and other administrative penalties including criminal liability, which may be assessed for non-compliance, which significantly increasesonerous and adversely affect our potentialbusiness, financial exposure for non-compliance. Wecondition, results of operations and prospects. Failure to comply with the GDPR and related laws may also give risk to increase risk of private actions from data subjects and consumer not-for-profit organizations, including a new form of class action that is available under the GDPR. While we do not routinely handle or process personal data, although we do maintain a database of employee information; however, since the GDPR and UK GDPR only came into effect recently, the potential risks associated with non-compliance therewith are uniquely difficult to predict.

We are currently undergoing a leadership transition and this transition, along with the possibility that we may in the future be unable to retain and recruit qualified scientists, key executives, key employees or key consultants, may delay our development efforts or otherwise harm our business.

On May 31, 2018, Dr. James Phillips, our then-Chief Executive Officer and member of the Board of Directors, stepped down from all of his positions with the Company and its subsidiaries. Dr. Craig Cook, formerly our Chief Operating Officer and Head of Research and Development, was appointed by the Board of Directors to succeed Dr. Phillips.  Further, on February 26, 2019, three of our non-executive directors, John Johnston, Michele Luzi, and Pavlo Protopapa, resigned, and we appointed Dr. Huaizheng Peng to the Board of Directors. In July 2019, we appointed Frédéric Duchesne to our Board of Directors. In September 2019, our then-Chief Financial Officer and member of our Board of Directors, Nicholas Robbins-Cherry, stepped down from all of his positions with the Company and its subsidiaries. Stephen Stamp was appointed by the Board of Directors to succeed Mr. Robbins-Cherry. In March 2020, Dr. Cook stepped down from all of his positions with the Company and its subsidiaries and two of our non-executive directors, Dr. Huaizheng Peng and Frédéric Duchesne, resigned from the Board of Directors. Mr. Stamp was appointed our Chief Executive Officer upon Dr. Cook’s resignation, in addition to his continued service as our Chief Financial Officer. While we have confidence in Mr. Stamp and our remaining leadership team, including the Board of Directors, the uncertainty inherent in this ongoing leadership transition may be difficult to manage, may cause concerns from third parties with whom we do business, and may increase the likelihood of turnover of other key officers and employees.

In addition, our future development and prospects depend to a large degree on the experience, performance and continued service of our senior management team, including members of our Board of Directors. We have invested in our management team at all levels. We have entered into contractual arrangements with our directors and senior management team with the aim of securing the services of each of them. However, retention of these services or the identification of suitable replacements cannot be guaranteed. There can be no guarantee that the services of the current directors and senior management team will be retained, or that suitably skilled and qualified individuals can be identified and employed, which may adversely impact our ability to develop our technologies and/or provide our services at the time requested by our customers or our ability to market our services and technologies, and otherwise to grow our business, could be impaired. The loss of the services of any of the directors or other members of the senior management team and the costs of recruiting replacements may have a material adverse effect on us and our commercial and financial performance.

The ability to continue to attract and retain employees with the appropriate expertise and skills also cannot be guaranteed. Finding and hiring any additional personnel and replacements could be costly and might require us to grant significant equity awards or other incentive compensation, which could adversely impact our financial results, and there can be no assurance that we will have sufficient financial resources to do so. Effective product development and innovation, upon which our success is dependent, is in turn dependent upon attracting and retaining talented technical and scientific personnel, who represent a significant asset and serve as the source of our technological and product innovations. If we are unable to hire, train and retain such personnel in a timely manner, the development and introduction of our products could be delayed and our ability to sell our products and otherwise to grow our business will be impaired and the delay and inability may have a detrimental effect upon our performance.

Our strategic review and the associated workforce reduction announced in March 2020 may not result in anticipated savings, could result in total costs and expenses that are greater than expected and could disrupt our business.

In March 2020, we announced a reduction in workforce as part of the termination of the MTD201 program and closing of our Bilbao, Spain manufacturing facilities. We may not realize, in full or in part, the anticipated benefits, savings and improvements in our cost structure from our efforts due to unforeseen difficulties, delays or unexpected costs. If we are unable to realize the expected operational efficiencies and cost savings from the restructuring, our operating results and financial condition would be adversely affected. We also cannot guarantee that we will not have to undertake additional headcount reductions or restructuring activities in the future. Furthermore, these changes may be disruptive to our operations. For example, our headcount reductions could yield unanticipated consequences, such as attrition beyond planned staff reductions, or increase difficulties in our day-to-day operations. Our headcount reductions could also harm our ability to attract and retain qualified management, scientific and medical personnel who are critical to our business. Any failure to attract or retain qualified personnel could prevent us from successfully developing and commercializing our product candidates in the future.

Our employees may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements, which could have a material adverse effect on our business.

We are exposed to the risk of employee fraud or other misconduct. Misconduct by employees could include intentional failures to comply with applicable regulations, provide accurate information to regulatory authorities, comply with manufacturing standards, comply with healthcare fraud and abuse laws and regulations, report financial information or data accurately, or disclose unauthorized activities to us. In particular, sales, marketing and business arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, kickbacks, self-dealing and other abusive practices. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentive programs and other business arrangements. Employee misconduct could also involve the improper use of information obtained in the course of clinical trials, which could result in regulatory sanctions and serious harm to our reputation. We have adopted a Code of Business Conduct and Ethics, but it is not always possible to identify and deter employee misconduct, and the precautions we have taken to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws or regulations. If any such actions are instituted against us and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business and results of operations, including the imposition of significant fines or other sanctions.

We, or third parties upon whom we depend, may be adversely affected by natural disasters and/or global health pandemics, and our business, financial condition and results of operations could be adversely affected.

The occurrence of unforeseen or catastrophic events, including extreme weather events and other natural disasters, man-made disasters, or the emergence of epidemics or pandemics, depending on their scale, may cause different degrees of damage to the national and local economies and could cause a disruption in our operations and have a material adverse effect on our financial condition and results of operations. Man-made disasters, pandemics, and other events connected with the regions in which we operate could have similar effects. If a natural disaster, health pandemic, or other event beyond our control occurred that prevented us from using all or a significant portion of our offices and/or lab spaces, damaged critical infrastructure, or that otherwise disrupted operations, it may be difficult for us to continue our business for a substantial period of time.

On January 30, 2020, the World Health Organization, or WHO, announced a global health emergency because of a new strain of novel coronavirus, COVID-19, originating in Wuhan, China and the risks to the international community as the virus spread globally beyond its point of origin, resulting in increased travel restrictions and extended shutdown of certain businesses in the region and certain other affected areas, including Europe. In March 2020, the WHO declared the COVID-19 outbreak a pandemic, which continues to spread throughout the world. The spread of this pandemic has caused significant volatility and uncertainty in U.S. and international markets. This has resulted in an economic downturn and may disrupt our business and delay our remaining clinical programs and timelines.

As COVID-19 continues to spread in the territories where we operate, including the United Kingdom and, until we are able to fully divest from it, Spain, our business operations have been interrupted, and could be further interrupted or delayed particularly if a large portion of our employees become ill. COVID-19 may also affect employees of third-party organizations located in affected geographies that we rely upon to carry out our remaining clinical trials. The spread of COVID-19, or another infectious disease, could also negatively affect the operations at our third-party suppliers, which could result in delays or disruptions in the supply of drug product or other suppliers used in our clinical trials. In addition, we have taken, and may take in the future, temporary precautionary measures intended to help minimize the risk of the virus to our employees, including temporarily requiring all employees to work remotely, suspending all non-essential travel worldwide for our employees and discouraging employee attendance at industry events and in-person work-related meetings, which could negatively affect our business.On May 11, 2020 the UK government announced that employees could return to the workplace provided appropriate safety measures were undertaken, including observance of social distancing.

Further, timely enrollment in clinical trials is reliant on clinical trial sites which may be adversely affected by global health matters, including, among other things, pandemics. For example, our current clinical trial sites may be located in regions currently being afflicted by COVID-19. Some factors from the COVID-19 outbreak that we believe may adversely affect our drug development activities include:

The impact of COVID-19 on our business is uncertain at this time and will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of COVID-19 and the actions to contain COVID-19 or treat its impact, among other things, but prolonged closures or other business disruptions may negatively affect our operations and the operations of our of agents, contractors, consultants or collaborators, which could have a material adverse impact our business, results of operations and financial condition.

Unexpected facility shutdowns or system failures may occur and our disaster recovery plans may not be sufficient.

We depend on the performance, reliability and availability of our properties, machinery, and laboratory equipment and information technology systems. We may not be able to access our facilities as a result of events beyond our control, such as extreme weather conditions, quarantines, flood, fire, theft, terrorism and acts of God. Currently, the United Kingdom isEngland and Wales are in a lockdown due to COVID-19 and our facilities, including laboratory facilities in Cardiff, Wales, are working at a reduced capacity in order to conform to social distancing policies, which has resulted in a disruption in our current operations and which could have a material adverse effect on our business.

Further, any damage to or failure of our equipment and/or systems could also result in disruptions to our operations. A complete or partial failure of our information technology systems, or those of our CROs and other third parties on which we rely, or corruption of data could result in our inability to access information that we need in order to meet our obligations to our customers or a breach of confidentiality with respect to our or our customers’ proprietary information. If such an event were to occur and cause interruptions in our operations, it could result in a material disruption of our drug development programs. For example, the loss of clinical trial data from completed or ongoing clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. Our disaster recovery plans may not adequately address every potential event and our insurance policies may not cover any loss in full or in part (including losses resulting from business interruptions) or damage that we suffer fully or at all. The occurrence of one or more of these events could have a material adverse effect on our business, financial position, reputation or prospects, and might lead to a claim for damages.

Our business may be adversely affected by economic conditions and current economic weakness.

Any economic downturn either globally, regionally or locally, including the economic downturn due to COVID-19, in any country in which we operate may have an adverse effect on the demand for any products derived from our product candidates. A more prolonged economic downturn may lead to an overall decline in our sales, limiting our ability to generate a profit and positive cash flow. The markets in which we expect the products to be offered are directly affected by many national and international factors that are beyond our control, such as political, economic, currency, social and other factors.

We are exposed to the risks of doing business internationally.

We currentlyhave in the past, and may in the future, operate outside of the United Kingdom. OurThese international operations are subject to a number of risks inherent in operating in different countries. These include, but are not limited to, risks regarding:

The occurrence of any of these events or conditions could adversely affect our ability to increase or maintain our operations in various countries.

We have undertaken, and may in the future undertake, additional strategic acquisitions. Failure to integrate acquisitions could adversely affect our value.

One of the ways we have grown our pipeline and business in the past is through strategic acquisitions, such as our acquisition of DARA. We may, from time to time, evaluate additional acquisition opportunities, and may, in the future, strategically make further acquisitions of, and investments in, businesses and technologies when we believe the opportunity is advantageous to our prospects. There can be no assurance that in the future we will be able to find appropriate acquisitions or investments. In connection with these acquisitions or investments, we may:

We also may be unable to find suitable acquisition candidates and may not be able to complete acquisitions on favorable terms, if at all. If we do complete an acquisition, this may not ultimately strengthen our competitive position or ensure that we will not be viewed negatively by customers, financial markets or investors. Further, acquisitions could also pose numerous additional risks to our operations, including:

We may not be able to complete one or more acquisitions or effectively integrate the operations, products or personnel gained through any such acquisition without a material adverse effect on our business, financial condition and results of operations.

We are exposed to risks related to currency exchange rates.

We currently conduct a portion of our operations outside of the United Kingdom. Because we use the British pound sterling as our financial statement reporting currency, changes in currency exchange rates have had and could have a significant effect on our operating results when our operating results are translated from the local currency into the British pound sterling. Exchange rate fluctuations between local currencies and the British pound sterling create risk in several ways, including the following: weakening of the British pound sterling, as seen, for example, following the results of the Brexit referendum, may increase the British pound sterling cost of overseas research and development expenses and the cost of sourced product components outside the United Kingdom; strengthening of the British pound sterling may decrease the value of our revenues denominated in other currencies; the exchange rates on non-sterling transactions and cash deposits can distort our financial results; and commercial pricing and profit margins are affected by currency fluctuations. Future changes in currency exchange rates could have a material adverse effect on our financial results.

The ownership of a significant portion of our outstanding Ordinary Shares by Chinese entities may expose us to greater regulatory scrutiny.

At various times during recent years, the governments of the United States and China have had disagreements over political and economic issues. Controversies may arise in the future between these two countries. Any political or trade controversies between the United States and China could adversely affect our ability to successfully conduct our business in China or the United States, the market price of our Ordinary Shares or Depositary Shares and our ability to access the capital markets in the United States. Also, as a result of recent controversies involving Chinese controlled companies, it is possible that such companies have come under increased scrutiny in the United States and other countries, including the United Kingdom. If we become subject to enhanced regulatory review and oversight, responding to such review and oversight may be expensive and time consuming and may have a material adverse effect on our operations, even if we otherwise have complied with all legal and regulatory requirements.

Risks Related to Ownership of Our Securities

The price of our Ordinary Shares and Depositary Shares may be volatile.

Each Depositary Share represents five Ordinary Shares. A public market has only been established for the Depositary Shares since December 2015, and such a market may not be sustained. Both the United States and United Kingdom stock markets have experienced significant volatility, including in pharmaceutical and biotechnology stocks. In particular, the closing prices of our Ordinary Shares on AIM and our Depositary Shares on the NASDAQ Capital Market have fluctuated significantly in the prior few years.

In addition to the factors discussed in this “Risk Factors” section and elsewhere in this annual report, the factors that could cause volatility in the market price of each ordinary share and the Depositary Shares include:

In addition, the stock market in general, NASDAQ, and pharmaceutical and biotechnology companies in particular, have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of these companies.  Broad market and industry factors may negatively affect the market price of our Ordinary Shares, regardless of our actual operating performance.  The realization of any of the above risks or any of a broad range of other risks, including those described in these “Risk Factors,” could have a dramatic and material adverse impact on the market price of our Ordinary Shares and Depositary Shares.

We may be subject to securities litigation, which is expensive and could divert management attention.

The market price of our Ordinary Shares and Depositary Shares may be volatile, and in the past, some companies that have experienced volatility in the market price of their stock have been subject to securities class action litigation. We may be the target of this type of litigation in the future. Securities litigation against us could result in substantial costs and divert our management’s attention from other business concerns, which could seriously harm our business.

The liquidity of our Depositary Shares and Ordinary Shares may have an adverse effect on our share price.

As at May 22, 2020,April 15, 2021, we had 39,252,55763,380,667 Ordinary Shares outstanding. Of these shares, 13,281,84039,227,410 of our Ordinary Shares were held as Depositary Shares. Some companies that have issued American depositary shares on United States stock exchanges have experienced lower levels of liquidity in their American depositary shares than is the case for their ordinary shares listed on their domestic exchange. Our Depositary Shares are traded on the NASDAQ Capital Market and our Ordinary Shares are traded on AIM. We cannot predict the effect of this dual listing on the value of our Ordinary Shares and Depositary Shares. However, the dual listing of our Ordinary Shares and Depositary Shares may dilute the liquidity of these securities in one or both markets and may adversely affect the development of an active trading market for the Depositary Shares in the United States. The price of the Depositary Shares could also be adversely affected by trading in our Ordinary Shares on AIM. As a result of these and other factors, you may not be able to sell your Depositary Shares. In addition, investors may incur higher transaction costs when buying and selling Depositary Shares than they would incur in buying and selling common stock. An inactive market may also impair our ability to raise capital by selling Depositary Shares and Ordinary Shares and may impair our ability to enter into strategic partnerships or acquire companies or products by using our Ordinary Shares as consideration. 

Our Ordinary Shares and Depositary Shares trade on two different markets, and this may result in price variations and regulatory compliance issues.

Depositary Shares representing our Ordinary Shares are listed for trading on the NASDAQ Capital Market and our Ordinary Shares are traded on AIM. Trading in our securities on these markets is made in different currencies and at different times, including as a result of different time zones, different trading days and different public holidays in the U.S. and the United Kingdom. Consequently, the effective trading prices of our securities on these two markets may differ. Any decrease in the trading price of our securities on one of these markets could cause a decrease in the trading price of our securities on the other market.

Shareholder ownership interests in the Company may be diluted as a result of future financings, additional acquisitions or the exercise of our options and warrants, and may have a material negative effect on the market price of our securities.

We may seek to raise additional funds from time to time in public or private issuances of equity and such financings may take place in the near future or over the longer term. Sales of our securities offered through future equity offerings may result in substantial dilution to the interests of our current shareholders. The sale of a substantial number of securities to investors, or anticipation of such sales, could make it more difficult for us to sell equity or equity-related securities in the future at a time and at a price that we might otherwise wish to effect sales.  

As of May 22, 2020,April 15, 2021, we had issued 103,7761,356,052 options under the Midatech Pharma PLC Enterprise Management Incentive Plan, 167,428and 129,926 non-EMI options and 13,247 options under the Midatech Pharma PLC 2016 US Option Plan.options. In addition, we assumed 2,857 options pursuant to thein connection with our acquisition of DARA in 2015.2015, of which 2,835 were still outstanding. Further, as of May 22, 2020,April 15, 2021, we had issued outstanding warrants exercisable for (i) 15,692,276 Ordinary Shares with an exercise price of £10.00 per share, (ii) 630,000 Depositary Shares with an exercise price of $6.25 each (representing 3,150,000 Ordinary Shares), (iii) 1,818,1821,318,182 Depositary Shares with an exercise price of $2.05 each (representing 9,090,9106,590,910 Ordinary Shares), (iv) 90,90929,546 Depositary Shares with an exercise price of $2.0625 each (representing 454,546147,730 Ordinary Shares), (v) 6,999,999 Ordinary Shares with an exercise price of £0.34 each, and (vi) 4,624 Ordinary Shares with a weighted average exercise price of $110.51 per share (assumed pursuant to the acquisition of DARA in 2015). We may also issue Ordinary Shares (and Depositary Shares underlying such Ordinary Shares) or other securities convertible into Ordinary Shares from time to time for future acquisition. The issuance of the securities underlying these instruments, or perception that issuance may occur, will have a dilutive impact on other shareholders and could have a material negative effect on the market price of our Ordinary Shares and Depositary Shares.

If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, our stock price and trading volume could decline.

The trading market for our Ordinary Shares and Depositary Shares will depend in part on the research and reports that securities or industry analysts publish about us or our business. If one or more of the analysts who cover us downgrade our stock or publish inaccurate or unfavorable research about our business, the price of our Ordinary Shares and Depositary Shares would likely decline. If one or more of these analysts cease coverage of our Company or fail to publish reports on us regularly, demand for our securities could decrease, which might cause the price of our Ordinary Shares and Depositary Shares and our trading volume to decline.

The rights of holders of Depositary Shares are not the same as the rights of holders of Ordinary Shares.

We are a public limited company incorporated under the laws of England and Wales. The Depositary Shares represent a beneficial ownership interest in our Ordinary Shares. The rights of holders of Depositary Shares will be governed by English law, our constitutional documents, the listing rules of AIM, or AIM Rules, and the deposit agreement pursuant to which the Depositary Shares are issued. The rights and terms of the Depositary Shares are designed to replicate, to the extent reasonably practicable, the rights attendant to the Ordinary Shares, for which there is currently no active trading market in the United States. However, because of aspects of United Kingdom law, our constitutional documents and the terms of the deposit agreement, the rights of holders of Depositary Shares will not be identical to and, in some respects, may be less favorable than, the rights of holders of Ordinary Shares.

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

As a holder of Depositary Shares, you will not have the right to vote the shares underlying the Depositary Shares directly unless you cancel the Depositary Shares in accordance with the terms of the related deposit agreement and vote the underlying shares at the applicable shareholders meeting. Holders of the Depositary Shares will appoint the depositary or its nominee as their representative to exercise the voting rights attaching to the Ordinary Shares represented by the Depositary Shares. You may not receive voting materials in time to instruct the depositary to vote, and it is possible that you, or persons who hold their Depositary Shares through brokers, dealers or other third parties, will not have the opportunity to exercise a right to vote.

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

The depositary of the Depositary Shares has agreed to pay to you distributions with respect to cash or other distributions it or the custodian receives on Ordinary Shares or other deposited securities after deducting its agreed fees and expenses. You will receive these distributions in proportion to the number of Ordinary Shares your Depositary Shares represent. However, the depositary is not responsible if it decides that it is unlawful or impractical to make a distribution available to any holders of Depositary Shares. We have no obligation to take any other action to permit the distribution of our Depositary Shares, Ordinary Shares, rights or anything else to holders of our Depositary Shares. As a result, you may not receive the distributions made on Ordinary Shares or any value from them if it is illegal or impractical for us to make them available to you. These restrictions may have a material adverse effect on the value of your Depositary Shares.

You may be subject to limitations on transfer of your Depositary Shares.

Your Depositary Shares are transferable on the books of the depositary. However, the depositary may close its books at any time or from time to time when it deems expedient in connection with the performance of its duties. The depositary may refuse to deliver, transfer or register transfers of your Depositary Shares generally when our books or the books of the depositary are closed, or at any time if we or the depositary deems it advisable to do so because of any requirement of law or government or governmental body, or under any provision of the deposit agreement, or for any other reason.

Securities traded on AIM may carry a higher risk than shares traded on other exchanges that may impact the value of your investment.

Our Ordinary Shares are currently traded on the AIM. Investment in equities traded on the AIM is perceived to carry a higher risk than an investment in equities quoted on exchanges with more stringent listing requirements, such as the Main Market of the London Stock Exchange, New York Stock Exchange or NASDAQ. This is because the AIM imposes less stringent corporate governance and ongoing reporting requirements than those other exchanges. In addition, the AIM requires only semi-annual, rather than quarterly, financial reporting. You should be aware that the value of our Ordinary Shares may be influenced by many factors, some of which may be specific to us and some of which may affect AIM-listed companies generally, including the depth and liquidity of the market, our performance, a large or small volume of trading in our Ordinary Shares, legislative changes and general economic, political or regulatory conditions, and that the prices may be volatile and subject to extensive fluctuations. Therefore, the market price of our Ordinary Shares underlying the Depositary Shares may not reflect the underlying value of the Company.

It may be difficult for you to bring any action or enforce any judgment obtained in the United States against us or members of our Board of Directors, which may limit the remedies otherwise available to you.

We are incorporated as a public limited company in England and Wales. In addition, all of the members of our Board of Directors are nationals and residents of countries, including the United Kingdom, outside of the United States. Most or all of the assets of these individuals are located outside the United States. As a result, it may be difficult or impossible for you to bring an action against us or against these individuals in the United States if you believe your rights have been infringed under the securities laws or otherwise. In addition, a United Kingdom court may prevent you from enforcing a judgment of a United States court against us or these individuals based on the securities laws of the United States or any state thereof. A United Kingdom court may not allow you to bring an action against us or our directors based on the securities laws of the United States or any state thereof.

 We have no present intention to pay dividends on our Ordinary Shares in the foreseeable future and, consequently, your only opportunity to achieve a return on your investment during that time may be if the price of Depositary Shares appreciates.

We have no present intention to pay dividends on our Ordinary Shares in the foreseeable future. Any determination by our Board of Directors to pay dividends will depend on many factors, including our financial condition, results of operations, legal requirements and other factors. Accordingly, if the price of the Depositary Shares falls in the foreseeable future and you sell your Depositary Shares, you will lose money on your investment, without the likelihood that this loss will be offset in part or at all by cash dividends.

We are a “foreign private issuer” under the rules and regulations of the SEC and, as a result, are exempt from a number of rules under the Exchange Act and are permitted to file less information with the SEC than a company incorporated in the United States.

We are incorporated as a public limited company in England and Wales and are deemed to be a “foreign private issuer” under the rules and regulations of the SEC. As a foreign private issuer, we are exempt from certain rules under the Exchange Act that would otherwise apply if we were a company incorporated in the United States, including:

In addition, our officers, directors and principal shareholders are exempt from the reporting and “short-swing” profit recovery provisions of Section 16 of the Exchange Act and the related rules with respect to their purchases and sales of Ordinary Shares and Depositary Shares. Accordingly, you may receive less information about us than you would receive about a public company incorporated in the United States and may be afforded less protection under the United States federal securities laws than you would be if we were incorporated in the United States.

Additional reporting requirements may apply if we lose our status as a foreign private issuer.

If we lose our status as a foreign private issuer at some future time, then we will no longer be exempt from such rules and, among other things, will be required to file periodic reports and financial statements as if we were a company incorporated in the United States. The costs incurred in fulfilling these additional regulatory requirements could be substantial.

As a foreign private issuer, we are not required to comply with many of the corporate governance standards of NASDAQ applicable to companies incorporated in the United States.

Our Board of Directors is required to maintain an audit committee comprised solely of three or more directors satisfying the independence standards of NASDAQ applicable to audit committee members. As a foreign private issuer, however, we are not required to comply with most of the other corporate governance rules of NASDAQ, including the requirement to maintain a majority of independent directors, and nominating and compensation committees of our Board of Directors comprised solely of independent directors. Although United Kingdom corporate governance rules which we abide by have comparable requirements, holders of Depositary Shares may not be afforded the benefits of the corporate governance standards of NASDAQ to the same extent applicable to companies incorporated in the United States.

We are no longer an “emerging growth company” but remain a non-accelerated filer, and we cannot be certain if the reduced disclosure requirementsreporting obligations applicable to emerging growth companies willnon-accelerated filers may make our securities less attractive to investors.

We are currentlyno longer an “emerging growth company,” as defined under the Jumpstart Our Business Startups Act. However, for as long as we remain a “non-accelerated filer” under the rules of the SEC, our independent registered public accounting firm is not required to deliver an annual attestation report on the effectiveness of our internal control over financial reporting. We will remain an “emerging growth company” until December 31, 2020; provided, however, thatcease to be a non-accelerated filer if our annual gross revenues exceed $1.07 billion, or our non-convertible debt issued within a three-year period exceeds $1 billion, or(a) the aggregate market value of our common shares that areoutstanding Ordinary Shares held by non-affiliates exceeds $700 million onas of the last business day of theour most recently completed second fiscal quarter is $75 million or more and we reported annual net revenues of any givengreater than $100million for our most recently completed fiscal year or (b) the aggregate market value of our outstanding Ordinary Shares held by non-affiliates as of the last business day of our most recently completed second fiscal quarter is $700million or more, regardless of annual net revenues. If we would cease to be a non-accelerated filer, we would be subject to the requirement for an emerging growth companyannual attestation report by our independent registered public accounting firm on the effectiveness of our internal control over financial reporting. We cannot predict whether investors will find our securities less attractive if we rely on this exemption. If some investors find our securities less attractive as of the following fiscal year. As an emerging growth company, we are not required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, we have reduced disclosure obligations, including with regard toa result, there may be a less active trading market for our financial statementssecurities and executive compensation,our stock price may be more volatile and we are exempt from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.may decline.

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

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

Any failure to maintain effective internal controls and procedures over financial reporting could severely inhibit our ability to accurately report our financial condition, results of operations or cash flows.

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

As a public company in the United Kingdom and United States, we are incurring significant legal, accounting and other expenses that we did not incur as a private company, and these expenses may increase even more after we are no longer an “emerging growth company.” We are subject to the reporting requirements of, in the United Kingdom, the AIM Rules, the Market Abuse Regulation, or MAR, and the Disclosure Guidance and Transparency Rules, and in the United States, the Exchange Act, the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Protection Act, as well as rules adopted, and to be adopted, by the SEC and the NASDAQ. Our management and other personnel will need to devote a substantial amount of time to these compliance initiatives. Moreover, we expect these rules and regulations to substantially increase our legal and financial compliance costs and to make some activities more time-consuming and costly. For example, we expect these rules and regulations to make it more difficult and more expensive for us to obtain director and officer liability insurance and we may be required to incur substantial costs to maintain the sufficient coverage. We cannot predict or estimate the amount or timing of additional costs we may incur to respond to these requirements. The impact of these requirements could also make it more difficult for us to attract and retain qualified persons to serve on our Board of Directors, our board committees or as members of our senior management.

Regulations related to “conflict minerals” may cause us to incur additional expenses and could limit the supply and increase the cost of certain metals used in manufacturing our products.

In August 2012, the SEC adopted a rule requiring disclosures of specified minerals, known as conflict minerals, that are necessary to the functionality or production of products manufactured or contracted to be manufactured by U.S. public companies. The conflict minerals rule requires companies annually to diligence, disclose and report whether or not such minerals originate from the Democratic Republic of Congo and other specified countries. The rule could affect sourcing at competitive prices and availability in sufficient quantities of certain minerals used in the manufacture of our products, including gold. The number of suppliers who provide conflict-free minerals may be limited. In addition, there may be material costs associated with complying with the disclosure requirements, such as costs related to determining the source of certain minerals used in our products, as well as costs of possible changes to products, processes, or sources of supply as a consequence of such verification activities. Since our supply chain is complex, we may not be able to sufficiently verify the origins of the relevant minerals used in our products through the due diligence procedures that we implement, which may harm our reputation. In addition, we may encounter challenges to satisfy those customers who require that all of the components of our products be certified as conflict-free, which could place us at a competitive disadvantage if we are unable to do so.

If we cannot continue to meet NASDAQ’s continued listing requirements, NASDAQ may delist our Depositary Shares, which could have an adverse impact on the liquidity and market price of our Depositary Shares.

Our Depositary Shares are currently listed on the NASDAQ Capital Market. We are required to meet certain qualitative and financial tests to maintain the listing of our Depositary Shares on NASDAQ. On December 11, 2019, we received a letter from NASDAQ stating that, for the previous 30 consecutive business days, the bid price for our Depositary Shares had closed below the minimum $1.00 bid price per share requirement for continued listing on The NASDAQ Capital Market under NASDAQ Listing Rule 5550(a)(2). On March 18, 2020, we received written notice from NASDAQ notifying us that for the preceding 10 consecutive business days the closing bid price for our Depositary Shares had been $1.00 or greater. Accordingly, NASDAQ determined that we had regained compliance with NASDAQ Listing Rule 5550(a)(2).

Having regained compliance with these rules, we are now in compliance with all applicable requirements for continued listing on the NASDAQ Capital Market. However, we cannot assure you that we will remain in compliance with all applicable requirements for continued listing on the NASDAQ Capital Market. If, in the future, we fail to sustain compliance with all applicable requirements for continued listing on NASDAQ, our Depositary Shares may be subject to delisting by NASDAQ. This could inhibit the ability of our holders of Depositary Shares to trade their shares in the open market, thereby severely limiting the liquidity of such shares. Although stockholders may be able to trade their shares of Depositary Shares on the over-the-counter market, there can be no assurance that this would occur. Further, the over-the-counter market provides significantly less liquidity than NASDAQ and other national securities exchanges, is thinly traded and highly volatile, has fewer market makers and is not followed by analysts. As a result, your ability to trade or obtain quotations for these securities may be more limited than if they were quoted on NASDAQ or other national securities exchanges.

The change in ratio of our Ordinary Shares to Depositary Shares may not increase our Depositary Share price over the long-term.

On March 3, 2020, in an effort to bring our Depositary Share price into compliance with NASDAQ’s minimum bid price per share requirement, we effected a ratio change in the number of Ordinary Shares represented by our Depositary Shares from 20 Ordinary Shares per Depositary Share to five Ordinary Shares per Depositary Share. We cannot assure you, however, that the ratio change will accomplish this objective for any meaningful period of time, or result in any permanent or sustained increase in the market price of our Depositary Shares, which is dependent upon many factors, including our business and financial performance, general market conditions, and prospects for future success.

Thechange in ratio of our Ordinary Shares to Depositary Sharesmay decrease the liquidity of our Depositary Shares.

Although the Board of Directors believes that the increase in the market price of our Depositary Shares could encourage interest in our Depositary Shares and possibly promote greater liquidity for our stockholders, such liquidity could also be adversely affected by the reduced number of Depositary Shares outstanding after the ratio change. A reduction in the number of outstanding shares may lead to reduced trading and a smaller number of market makers for our Depositary Shares. In addition, the ratio change may increase the number of stockholders who own odd lots (less than 100 shares) of our Depositary Shares, creating the potential for such stockholders to experience an increase in the cost of selling their shares and greater difficulty affecting such sales.

We intend to operate so as to be treated exclusively as a resident of the United Kingdom for tax purposes, but the relevant tax authorities may treat us as also being a resident of another jurisdiction for tax purposes.

We are a public limited company incorporated under the laws of England and Wales. Under current English law, the decisions of the English courts and the published practice of Her Majesty’s Revenue and Customs suggest that we are likely to be regarded as being a United Kingdom resident and should remain so if, as we intend that, (i) all major meetings of our Board of Directors and most routine meetings are held in the United Kingdom with a majority of directors present in the United Kingdom for those meetings; (ii) at those meetings there are full discussions of, and decisions are made regarding, the key strategic issues affecting us and our subsidiaries; (iii) those meetings are properly minuted; (iv) at least some of our directors, together with supporting staff, are based in the United Kingdom; and (v) we have permanent staffed office premises in the United Kingdom sufficient to discharge our functions.

Even if we are considered by Her Majesty’s Revenue and Customs as resident in the United Kingdom for United Kingdom tax purposes, as expected, we would nevertheless not be treated as resident in the United Kingdom if (a) we were concurrently resident in another jurisdiction (applying the tax residence rules of that jurisdiction) that has a double tax treaty with the United Kingdom and (b) there is a tiebreaker provision in that tax treaty which allocates exclusive residence to that other jurisdiction. Because this analysis is highly factual and may depend on future changes in our management and organizational structure, there can be no assurance regarding the final determination of our tax residence. Should we be treated as resident for tax purposes in another jurisdiction other than the United Kingdom, we would be subject to taxation in such jurisdiction in accordance with such jurisdiction’s laws, which could result in additional costs and expenses.

We may beIf we are deemed or become a passive foreign investment company, referred to as aor PFIC, for U.S. federal income tax purposes in 20202021 or in any prior or subsequent year. Thisyear, this may result in adverse U.S. federal income tax consequences for U.S. taxpayers that are holders of our securities.

We will be treated as a PFIC for U.S. federal income tax purposes in any taxable year in which either (1) at least 75% of our gross income is “passive income” or (2) on average at least 50% of our assets by value produce passive income or are held for the production of passive income. Passive income for this purpose generally includes, among other things, certain dividends, interest, royalties, rents and gains from commodities and securities transactions and from the sale or exchange of property that gives rise to passive income. Passive income also includes amounts derived by reason of the temporary investment of funds, including those raised in a public offering. In determining whether a non-U.S. corporation is a PFIC, a proportionate share of the income and assets of each corporation in which it owns, directly or indirectly, at least a 25% interest (by value) is taken into account.

We do not believe we were a PFIC for 20192020, but there can be no assurance that we will not be a PFIC in 20202021 or subsequent years,for any other taxable year, as our operating results for any such years may cause us to be a PFIC. If we arewere to be characterized as a PFIC for U.S. federal income tax purposes in 2020, or any subsequenttaxable year during which a U.S. shareholder owns our securities, and asuch U.S. shareholder does not make an election to treat us as a “qualified electing fund,” or a QEF, or make a “mark-to-market” election, then “excess distributions” to a U.S. shareholder, and any gain realized on the sale or other disposition of our securities will be subject to special rules. Under these rules: (1) the excess distribution or gain would be allocated ratably over the U.S. shareholder’s holding period for the securities; (2) the amount allocated to the current taxable year and any period prior to the first day of the first taxable year in which we were a PFIC would be taxed as ordinary income; and (3) the amount allocated to each of the other taxable years would be subject to tax at the highest rate of tax in effect for the applicable class of taxpayer for that year, and an interest charge for the deemed deferral benefit would be imposed with respect to the resulting tax attributable to each such other taxable year. In addition, if the United States Internal Revenue Service, or the IRS, determines that we are a PFIC for a year with respect to which we have determined that we were not a PFIC, it may be too late for a U.S. shareholder to make a timely QEF or mark-to-market election. U.S. shareholders who hold or have held our securities during a period when we were or are a PFIC will be subject to the foregoing rules, even if we cease to be a PFIC in subsequent years, subject to exceptions for U.S. shareholders who made a timely QEF or mark-to-market election. However, because we do not intend to prepare or provide the information that would permit the making of a valid “qualified electing fund”QEF election, such an election will not be available to United States holders.

Recent and potential future changes to U.S. and non-U.S. tax laws could materially adversely affect our Company and holders of our Ordinary Shares and the Depositary Shares.

The Tax Cut Act, which was legislation bringing about broad changes in the existing U.S. corporate tax system, was enacted in the United States in December 2017. The Tax Cut Act made significant changes to the U.S. federal income tax laws. Certain provisions of the Tax Cut Act could have an adverse effect on the business, financial condition, and results of operations of the Company or an adverse effect on holders of our Ordinary Shares or Depositary Shares, Warrants, or Pre-Funded Warrants.Shares. The U.S. Treasury Department and the IRS continue to interpret and issue guidance on how provisions of the Tax Cut Act will be applied and administered. The interpretations of many provisions of the Tax Cut Act are still unclear. We cannot predict when or to what extent any additional U.S. federal tax laws, regulations, interpretations, or rulings clarifying the Tax Cut Act will be issued or the impact of any such guidance on investors or the Company. Prospective investorsHolders of Ordinary Shares and Depositary Shares are urged to consult their own tax advisors regarding the effect of the Tax Cut Act and other potential changes to the U.S. federal tax laws prior to investing in the Company.

Future changes in tax laws, regulations and treaties, or the interpretation thereof, in addition to initiatives related to the Base Erosion and Profit Shifting, Project of the Organisation for Economic Co-Operation and Development; the European Commission’s “state aid” investigations; and other developments could have an adverse effect on the taxation of international businesses, including our own. Furthermore, countries where we are subject to taxes evaluate their tax policies and rules on a regular basis, and we may see significant changes in legislation and regulations concerning taxation.laws.

We are unable to predict what tax changes may be enacted in the future or what effect such changes would have on our business, but such changes could affect our effective tax rates in countries where we have operations and could have an adverse effect on our overall tax position in the future, along with increasing the complexity, burden and cost of tax compliance. In addition, such changes could impact the holders of Ordinary Shares or Depositary Shares.

We were originally formed as a limited liability company under the laws of England and Wales in 2000 under the name Midatech Limited, which acquired its base nanoparticle technology through an assignment of worldwide commercialization rights and joint ownership of patent rights from Consejo Superior de Investigaciones Cientificas, or CSIC, in Madrid, Spain. Midatech Limited was a research and development focused biotech company which subsequently advanced and developed this gold nanoparticle drug delivery platform technology to enhance the delivery of medicines for major therapeutic indications where clinical therapeutic options are limited, with a particular focus on certain cancers, such as liver and brain cancer.

To better be able to continue the commercial development of the research and development programs of Midatech Limited, Midatech Pharma PLC was incorporated on September 12, 2014 under the laws of England and Wales, to be the public holding company of Midatech Limited and Midatech Pharma (Wales) Limited, or Midatech Wales, under registered number 09216368. On December 8, 2014, we completed our initial public offering of our Ordinary Shares in the United Kingdom.

Also on December 8, 2014, we acquired Midatech Wales (formerly known as Q Chip Limited) and its subsidiaries in exchange for approximately 5.4 million Ordinary Shares. Founded in 2003 with the acquisition of core intellectual property around micro-fluidics from Cardiff University, Midatech Wales develops a complementary technology and products that allow sustained delivery of substances over extended periods of time. We believe that this technology provides an additional drug delivery platform to improve biodelivery and biodistribution of existing drugs.

On December 4, 2015, in to establish a presence in the United States, we acquired DARA (including its commercial products) and its subsidiaries pursuant to an Agreement and Plan of Merger entered into on June 4, 2015. As a result, DARA became a wholly owned subsidiary of Midatech, and was subsequently renamed Midatech US.

On December 24, 2015, we expanded our commercial product portfolio by acquiring Zuplenz® (ondansetron) Oral Soluble Film, or Zuplenz, a marketed anti-emetic oral soluble film from Galena Biopharma, Inc. for the prevention of chemotherapy-induced nausea and vomiting, radiotherapy-induced nausea and vomiting, and post-operative nausea and vomiting. Zuplenz was subsequently contributed to Midatech US in April 2018.

Effective November 1, 2018, and pursuant to the Purchase Agreement, we sold 100% of the outstanding equity interests of Midatech US to an affiliate of Barings LLC for initial consideration of $13.0 million, and up to $6.0 million of additional payments subject to the achievement of 2018 and 2019 net sales performance targets with respect to certain Midatech US products, both individually and in the aggregate. These target were not met and no additional payments were received.

On March 31, 2020 we announced that, in the context of prevailing conditions in the capital markets, we did not expect to be able to raise capital to fund the continued development of MTD201, including scale-up of MTD201 manufacturing at our Bilbao facilities. We determined to conduct a strategic review of our operations, cease further investment in MTD201 and close our operations in Bilbao, Spain, including making all our employees in Bilbao redundant.

On April 20, 2020, we announced an update to the strategic review of operations including the appointment of Noble Capital Markets, Inc., or Noble, to advise us on options for extracting value from its technologies. These options are expected to includetechnologies, including partnering our clinical stage assets, partnering existing and upcoming proof of concept formulations, partnering or selling one or more of our technologies or selling the entire Company.

On January 26, 2021, we announced, among other things, that the strategic review had completed and that we were now focused on executing our realigned strategy of deploying our technologies to develop more early stage products and seeking licensing partners at proof of concept stage.

Our principal executive office and registered offices are located at Oddfellows House, 19 Newport Road, Cardiff, United Kingdom CF24 0AA, and our telephone number is +44 1235 888 300. Our authorized representative in the United States is Donald J. Puglisi of Puglisi and Associates. Our agent for service in the United States is Donald J. Puglisi of Puglisi and Associates, located at 850 Library Avenue, Suite 204, Newark, Delaware 19711. Our Ordinary Shares are traded on AIM under the symbol “MTPH,” and our Depositary Shares are traded on the NASDAQ Capital Market under the symbol “MTP.”

We file reports and other information with the SEC. The SEC maintains an Internet website that contains reports, proxy and information statements, and other information regarding issuers, including us, that file electronically with the SEC. Our filings with the SEC are available to the public through the SEC’s website at http://www.sec.gov. Our corporate website is located at www.midatechpharma.com. Information contained on our website is not part of, or incorporated in, this annual report.

Capital Expenditures

Our capital expenditures amounted to £0.21 million, £0.31 million £0.24 million and £0.71£0.24 million for the years ended December 31, 2020, 2019 2018 and 2017,2018, respectively.

For the year ended December 31, 2020, our principal capital expenditures largely related to investment in our laboratory and pilot-scale manufacturing facility in Cardiff, Wales.

For the year ended December 31, 2019, our principal capital expenditures largely related to the purchase of laboratory equipment for our former manufacturing facility in Bilbao, Spain.

For the year ended December 31, 2018, our principal capital expenditures largely related to expansion of our pharmaceutical development capability in our Cardiff research and development facility, and production capability at our Bilbao, Spain manufacturing facility.

For the year ended December 31, 2017, our principal capital expenditures largely related to investment in, further development of, and equipment for, our manufacturing facility in Bilbao, Spain, costing £0.51 million.

Business Overview

We are focused on the research and development of medicines which we believe would benefit from improved bio-delivery and/or bio-distribution using our using our proprietary platform drug delivery technologies:

The following table further summarizes our platform technologies:

We have focused our resources and activities on using our technologies to develop our oncology and rare disease product pipeline programs, including:

In addition to these two lead programs, a further program in the clinic is MTX102, a European Union funded program seeking to develop a vaccine for Type I diabetes, based on the MidaCore technology for targeted delivery and uptake by the immune system.

In addition to the product candidates and collaborations discussed elsewhere, duringDuring the past three years we sold oncology treatment and supportive care products through our former subsidiary, Midatech US. With the sale of Midatech US in 2018, we no longer sell any products.

Intellectual Property. We have developed a strong intellectual property base and have a wide intellectual property portfolio of 120108 granted patents, 7057 applications in process and 3635 patent families (a set of patents to protect a single invention in various countries covering a range of diverse technologies).

Revenue. Revenue from continuing and discontinued operations for the whole of the Group is set out below.

Jumpstart Our Business Startups Act of 2012. As a company with less than $1.07 billion in revenue during our last fiscal year, we qualify as an “emerging growth company” as defined in the Jumpstart our Business Startups Act of 2012, or the JOBS Act. An emerging growth company may take advantage of specified reduced reporting and other burdens that are otherwise applicable generally to public companies. These provisions include:

We may take advantage of these provisions until December 31, 2020, or such earlier time that we are no longer an emerging growth company. We would cease to be an emerging growth company if we have more than $1.07 billion in annual revenues, have more than $700 million in market value of our share capital held by non-affiliates or issue more than $1 billion of non-convertible debt over a three-year period. We may choose to take advantage of some, but not all, of the available benefits under the JOBS Act. We have taken advantage of some reduced reporting burdens in this annual report. Accordingly, the information contained herein may be different than the information you receive from other public companies in which you hold stock.

In addition, the JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. This provision allows an emerging growth company to delay the adoption of some accounting standards until those standards would otherwise apply to private companies. We have irrevocably elected not to avail ourselves of delayed adoption of new or revised accounting standards and, therefore, we will be subject to the same requirements to adopt new or revised accounting standards as other public companies that are not emerging growth companies.

Recent Developments

Strategic Review

In March 2020, we reviewed the remaining costs necessary to complete the Phase III clinical trial of MTD201, which uses our sustained release platform, Q-Sphera, to formulate a long acting dose of octreotide for the treatment of acromegaly and neuroendocrine tumors, as well as the manufacturing scale-up of our MTD201 manufacturing capabilities at our Bilbao, Spain facilities. We believebelieved the remaining costs areto be in the order of $30 million (of which $8.5 million hashad been raised in loans from the Spanish government, as discussed in more detail herein). Given the state of the financial markets at that time, and our current cash runway, we determined we were unlikely to conclude a license transaction or raise sufficient funds to continue the required remaining investment in MTD201 in a timely manner. Due to this, theThe Board of Directors made the determination to terminate the further in-house development of MTD201 immediately and, to seekon March 31, 2020, announced a license partner for it.strategic review of the Company’s operations.

In connection with the decision to terminate the MTD201 program, the Board of Directors determined to closewe closed our MTD201-dedicated manufacturing facilities in Bilbao, Spain. We are currently in the process of closing these facilities. We have offered redundancy tomade redundant all of our Midatech Pharma España S.L., or Midatech Spain, employees and we are currently now,pursuant to a consultation process as required by Spanish law, in a period of consultation with these employees.law. We have also offered redundancy tomade redundant five employees located in the United Kingdom in our clinical research and administrative departments.

With respect to MTX110, provided sufficient funding is available to support the overall program, we will continue to develop the product candidate. For example, we anticipate we will use a portion of the net proceeds from our May 2020 equity offerings to fund the clinical development program of MTX110, among other things. For more information, see “—Registered Direct Offerings and Private Placements”.

Following these changes, our strategy has shifted to deploying our proprietary drug delivery technologies to formulate a compelling portfolio of novel first-in-class sustained release formulations of products with significant commercial potential for licensing to pharmaceutical company partners at a proof-of-concept stage. Other than with respect to MTX110, (forfor which anypilot clinical trials will be limitedare required to those funded from outside sources),demonstrate proof of concept due to the fact we are repurposing an existing medicine, we have no plans to undertake additional clinical trials in humans unless a license partner or grant funding has been secured. MTX110 is a direct delivery treatment for diffuse intrinsic pontine glioma, or DIPG, an ultra-rare brain cancer suffered by children, using our MidaSolve technology for direct delivery. For more information regarding our strategy, see “—Our Strategy.”

OnAdditionally, on March 31, 2020, Dr. Craig Cook, our then-Chief Executive Officer, resigned from his position and as a director of Midatech, effective immediately. He was succeeded by Mr. Stephen Stamp, our current Chief Financial Officer, who will servenow serves in the combined roles of Chief Executive Officer and Chief Financial Officer. In addition,Further, in line with our streamlined strategy and operations, each of Dr. Huaizheng Peng and Mr. Frederic Duchesne resigned from the Board of Directors, effective March 31, 2020.

On March 31, 2020,January 26, 2021, we announced, that, due to the prevailing conditions in the capital markets and the prospect of raising additional funds and finding a partner for our assets, the Board of Directors initiated a strategic review of our operations. The objective of the review is to identify ways to maximize value for our shareholders given the significant challenges faced by our business. We have formed a Finance Committee comprised of Mr. Stamp and Rolf Stahel, our Chairman, to review, analyze and make recommendations to the Board of Directors regarding a possible sale of our business oramong other strategic transactions.

On April 20, 2020, we announced an update tothings, that the strategic review had been completed and that we were now focused on executing our realigned strategy of operations including the appointment of Nobledeploying our technologies to advise us on options for extracting value from its technologies. These options are expected to include partnering our clinicaldevelop more early stage assets, partnering existingproducts and upcomingseeking licensing partners at proof of concept formulations, partnering or selling one or more of its technologies or selling the entire company. A sale of the company would be pursuant to a ‘Formal Sale Process’, as defined by The City Code on Takeovers and Mergers, or the Takeover Code. The Panel on Takeovers and Mergers, a United Kingdom-body that issues and administers the Takeover Code, has agreed to allow us and our advisers to conduct discussions with potential acquirors without the requirement to publicly identify any interested parties. As a result of the announcement, we are considered to be in an ‘Offer Period,’ which places certain restrictions and reporting obligations on us.stage.

Secura License Agreement

On June 8, 2020, we received a letter sent on behalf of Secura Bio, dated June 1, 2020, purporting to terminate the Secura License Agreement. Pursuant to the Secura License Agreement, Midatech Limited was granted a non-exclusive worldwide, sublicenseable license to certain patents of panobinostat, the active pharmaceutical ingredient of our development product MTX110. Midatech Limited’s rights are limited to the treatment of brain cancer in humans, administered by convection-enhanced delivery.

We view MTX110 as an important asset and currently have two ongoing clinical trials for MTX110 and intend to commence two further clinical trials as part of our MTX110 clinical program. We continue to enjoy freedom to use panobinostat for research purposes and we plan to continue to pursue development of MTX110. We believe that the relevant Secura Bio patents may delay a launch of MTX110 and the strategicfor use in patients with DIPG, however we do not anticipate it would have any impact on launching MTX110 for use in patients with glioblastoma multiforme. We continue to review process previously disclosed. We are also reviewing with our outside counsel any cost-effective remedies we may have if Secura Bio does not withdraw the notice and otherwise cease to interfere with our ongoing business, and strategic review process, which we have formally requested. We are evaluating available actions to protect

Notwithstanding the foregoing, if Secura Bio does not withdraw its notice, the uncertainty and diversion of time and resources associated could have a material adverse effect on our rights under the Secura License Agreementbusiness, financial condition and our assets.prospects, and we cannot assure you that we would be successful in resolving such dispute.

Impact of COVID-19

WeWith the global spread of the ongoing COVID-19 pandemic, we established a COVID-19 task force in mid-March 2020 with the objectives of safeguarding the health and wellbeing of our staff members and monitoring the impact on our vendors and collaborators. FromBeginning in mid-March 2020, our employees have for the most part been workingprimarily worked from their homes. Currently, only very few colleagues are working inSince that time, we have formally implemented a work-from-home policy for our Cardiff, Walesemployees, with exceptions being made for essential laboratory personnel. To the extent possible, we have reorganized the layout of our offices and laboratories in orderCardiff, Wales to conform to social distancing policies which has resulted in a disruption in our current operations and which could have a material adverse effect on our business.allow laboratory employees to safely return to the workplace, if allowed by their local government.

Our expectation is that the COVID-19 pandemic is likely to negatively affect businesses globally for an indeterminate period and that, once the pandemic is under control, recovery to normalization will not be instantaneous. Accordingly, we believe governmental limitations on travel will certainly cause delays to timelines. These delays may be the result of a limitation on the number of staff permitted in our facilities at any one time or delays in our vendor’s supply chains. In addition, delays are likelyhave occurred in the recruitment and execution of clinical trials as prospective and enrolled patients are unable to visit clinical sites.

It is not currently possible to quantify the impact of COVID-19 and resultant delays on the Company until it becomes clear that the global crisis has abated and a normalization of the business environment can be foreseen with confidence.

Registered Direct OfferingsOffering and Private PlacementsPlacement

October 2019 Offering. On October 25, 2019, we completed the closing of a registered direct offering with an institutional investor, or the October Investor, for the sale of 600,000 Depositary Shares (representing 3,000,000 Ordinary Shares) at a price per Depositary Share of $5.00, for aggregate gross proceeds of $3.0 million.

In a concurrent private placement, we sold to the October Investor warrants, or the October Private Placement Warrants, to purchase a total of 600,000 Depositary Shares (representing 3,000,000 Ordinary Shares) at an exercise price of $6.25 per Depositary Share. The October Private Placement Warrants became exercisable on December 23, 2019, the initial exercise date. The October Private Placement Warrants will expire five and one-half years from the initial exercise date. The closing of the private placement occurred on October 25, 2019.

H.C. Wainwright & Co., LLC, or Wainwright, served as the sole placement agent for the transaction. In connection therewith, we also issued to certain designees of Wainwright warrants, or Wainwright October Warrants, for the purchase of a total of 30,000 Depositary Shares (representing 150,000 Ordinary Shares) at an exercise price of $6.25 per Depositary Share pursuant to the terms of our engagement letter agreement with Wainwright. The Wainwright October Warrants became exercisable on December 23, 2019 and expire on October 22, 2024.

May 2020 Offering. On May 20, 2020, we completed the closing of a registered direct offering, or May Registered Direct Offering, with certain institutional investors, or the May Investors, for the sale of 1,818,182 Depositary Shares (representing 9,090,910 Ordinary Shares) at a price per Depositary Share of $1.65, for aggregate gross proceeds of $3.0 million.

In a concurrent private placement, we sold to the Investors warrants, or the May Private Placement Warrants, to purchase a total of 1,818,182 Depositary Shares (representing 9,090,910 Ordinary Shares) at an exercise price of $2.05 per Depositary Share. The May Private Placement Warrants, which were immediately exercisable, will expire five and one-half years from the issuance date. The closing of the private placement occurred on May 20, 2020. As of December 31, 2020, Private Placement Warrants to purchase 500,000 Depositary Shares had been exercised for an aggregate exercise price of approximately $1.0 million.

H.C. Wainwright & Co., LLC, or Wainwright, served as the sole placement agent for the transaction. In connection therewith, we also issued to certain designees of Wainwright warrants, or Wainwright May Warrants, for the purchase of a total of 90,909 Depositary Shares (representing 454,546 Ordinary Shares) at an exercise price of $2.0625 per Depositary Share pursuant to the terms of our engagement letter agreement with Wainwright. The Wainwright May Warrants became exercisable on May 18, 2020 and expire May 18, 2025.

United Kingdom PlacingPlacings

May 2020 Placing. Concurrently with the May Registered Direct Offering, on May 22, 2020, we, through Turner Pope Investments Limited, a United Kingdom Financial Conduct Authority registered broker, or TPI, completed a placing with certain investors in the United Kingdom, or the UKMay Placing, of 6,666,666 units, or Units, with each Unit comprising one new Ordinary Share, or Placing Share and one warrant exercisable for one new Ordinary Share, or UK Warrant, at an issue price of £0.27 per Unit. The exercise price of the UK Warrants is £0.34 per share, for aggregate gross proceed of £1.8 million. The UK Warrants expire five years and six months from the issuance date.

In connection with TPI acting as the placement agent for the UKMay Placing, we issued to TPI UK Warrants to purchase an aggregate of 333,333 Ordinary Shares, or 5.0% of the aggregate UK Warrants issued in the UKMay Placing.

TheJuly 2020 Placing. In July 2020, we, through TPI, completed a placing with certain investors in the United Kingdom, or the July Placing, of 18,518,518 Ordinary Shares, or the Placing Shares. A further 2,777,777 Ordinary Shares, or Broker Option Shares, were placed by TPI pursuant to a broker option. Each of the Placing Shares and the Broker Option Shares were sold at an issue price of £0.27 per share.

Each of the Units, and the securities underlying the Units, the Placing Shares and the Broker Option Shares were offered only outside the United States in reliance upon Regulation S under the Securities Act in an offshore transaction.

MTD201 Program

As set forth above, in light of the remaining costs to complete clinical trials and the manufacturing scale-up for MTD201, we have determined it necessary to terminate the in-house development of MTD201 immediately and seek a license partner for it.

MTD201 is for the treatment of chronic high morbidity neuro hormonal tumors in two indications - acromegaly and neuro endocrine tumors, or NET.tumors. Currently, this program has completed two Phase I clinical studies and we hope to license MTD201 to a partner for the pivotal registration studies for these two indications.

The aim of the MTD201 program, using our Q-Sphera sustained release platform, is to formulate a superior and differentiated long-acting alternative to the already approved somatostatin analogue octreotide, an immediate-release injection product. This product is used to treat the clinical manifestations of NET, as well as patients suffering from acromegaly. Somatostatin analogues are the mainstay of medical treatment for carcinoid syndrome that occurs with carcinoid tumors (hormone producing tumors in the body), and acromegaly that occurs due to a growth hormone secreting tumor in the pituitary gland in the brain. MTD201 is being developed as a long acting, sustained release form of the active substance octreotide, which, if approved, is expected to compete as a new differentiated product in the $2.5 billion long-acting somatostatin analogue market, which comprises Sandostatin LAR Depot, or SLAR, which is marketed by Novartis, and Ipsen Pharma S.A.’s product, Somatuline AutoGel.

On August 31, 2018, we announced the results of our ‘first-in-human’ study of MTD201. The double-blind, exploratory study compared tolerability, pharmacokinetics and growth hormone profiles after 30mg intramuscular injections of MTD201 or SLAR in 24 healthy subjects. Results from the study indicated that MTD201 produces a desirable, safe and effective sustained-release profile of octreotide, supporting a once-monthly treatment interval, as is indicated for SLAR. The overall profile supports the potential for an alternative product with an improved clinical and usability profile to SLAR. Additional advantages demonstrated in the study included smaller, less painful needle size, simpler and error free reconstitution and injection, quicker bedside reconstitution, reduced wastage and significantly lower manufacturing costs.

Following this study, and after consultations with key opinion leaders, regulators and potential partners, we determined to develop the MTD201 program as a new differentiated commercial octreotide sustained release product for the treatment of acromegaly and NET.

On October 8, 2019, we commenced a Phase 1 study of MTD201 to confirm the further key advantages of the product for both a subcutaneous dosing route, as well as an extended dosing interval in the range of six to eight weeks. The study was designed to investigate subcutaneous administration of MTD201 as an additional injection route, as compared to intramuscular administration, to help determine the preferred administration route we plan to take forward into further MTD201 studies. On January 8, 2020, we announced the positive results of theour second Phase I clinical trial, confirming similar pharmacokinetics and bioavailability of octreotide for subcutaneous and intramuscular routes of administration.

The next step would beAs described herein, in light of the preparationremaining costs to complete clinical trials and the manufacturing scale-up for a pivotal trial in acromegaly. These preparations were underway when the BoardMTD201, we have determined to terminate the MTD201program and wind down all activities as expeditiously as possible.further in-house development of MTD201, although the product remains available for licensing. We currently have no plans for additionalbelieve the data from our two Phase I clinical trials for MTD201.demonstrate the clinical utility of our Q-Sphera technology and a number of its features and benefits.

MTX110 Updates

The first application of our MidaSolve technology is for the treatment of debilitating childhood brain cancers that have no approved therapies. A Phase I safety study is currently being completed, and, subject to funding, the program is being expanded to additional studies planned to commence during 2020.

Current Clinical Trials. DIPG is an ultra-rare brain cancer, most commonly found in children. We believe MTX110 (soluble panobinostat), which is a ‘direct-to-brain’ treatment for DIPG and is based on our MidaSolve technology for direct delivery, may be an important advancement in transforming outcomes for patients with this disease. We have an open label

On October 19, 2020, we announced headline results from a Phase I study of safety and tolerability 8 patients ongoing in collaboration withat the University of California, San Francisco, or UCSF. ThisUCSF, in seven DIPG patients. The UCSF study which involvesmet its primary endpoint, supporting a dose escalation from an initial concentration of 30µbetween 60μM and 90μM of MTX110, depending upon patient tolerance in Phase II. At the interim cut-off date of September 30, 2020, median overall survival based on Kaplan Meier analysis was 26.06 months and overall survival at 12 months was 71.4% (which translated to determine a recommended Phase II dose, is expected to report top-line results in mid-2020. To date, results indicate that locally-delivered MTX110 is tolerable at these high doses.five of seven patients alive).

Assuming the final results of the UCSF study confirm good safety and tolerability at the optimal does of MTX110, and subject to receipt of funding, weWe plan to initiate a statistically-powered Phase II study in DIPG to examine efficacy and safety in a further 19 patients in Europe and/or the United States.20 patients. The Phase II trial will also use a convection enhanced delivery, or CED, system, whereby MTX110 will be infused under slight pressure directly into and around the tumor. We believe the primary endpoint of the study is likely to be patient survival rates after 12 months. WeIn addition, we are evaluating an expansion of our MTX110 clinical program to include a small pilot study in glioblastoma multiforme, or GBM.

On January 26, 2021, we announced that we were engaged in tentative discussions with a third party around the potential co-development of MTX110. On March 25, 2021, we announced these discussions had now advanced and a non-binding Heads of Terms had been agreed. The Heads of Terms envisage that, if the deal progresses to definitive agreements, the Company would expect this studyto receive a modest upfront payment upon execution, success-based development and sales milestones and royalties typical for a licensing agreement with products in a similar stage of development. R&D expenses would be assumed by the two parties with the apportionment to be primarily funded by a €2.6 million grant from the European Union, though thereagreed based on their respective territories. There can be no guarantee this grant will be received. Ifassurance on the grant is not received, we expect to delay this trial until funding is available. For more information regarding this grant, see “Item 5. Operating and Financial Review and Prospectus—Recent Developments—Spanish Governmental Loans and European Union Grants.”

In addition, we have also initiated an exploratory trial in five patients with DIPG at Columbia University, using an alternative CED infusion system.

Orphan Drug Status. On October 24, 2019, we announcedtiming for concluding the discussions nor any assurance that the FDA has granted orphan drug designation for MTX110. Orphan drug designation is granted to support the development of drugs that target rate diseases with high unmet needs, affecting 200,000 or fewer U.S. patients annually, and that are expected to provide significant therapeutics advantages over existing treatments. Orphan designation qualifies a company for benefits that apply across all stages of drug development, including an accelerated approval process, seven years of market exclusivity upon regulatory approval, if received, tax credits for qualified U.S. clinical trials, eligibility for orphan drug grants and exemption from certain administrative fees.

MTX102 Clinical Trial Results

On July 19, 2019, we announced interim positive safety results from our “first in human” study of MTX102, our immune-tolerizing diabetes vaccine product candidate. The focus of this Phase I study is to assess the safety of MTX102. The study consisted of five Type I diabetes patients, all meeting strict parameters. MTX102 was well tolerated, with asymptomatical local injection site reactions being the only drug-related finding, and no serious adverse event were reported. We believe the study provides encouraging safety validation of the MidaCore technology as a potential platform for the development of medications for use in humans.

All patients on the study have entered the follow-up phase of the trial, which we believeparties will conclude in mid-2020, after which we, along with our European Union consortium partners, will review the data and the program.enter into definitive agreements.

Spanish Governmental Loans and European Union GrantGrants

On September 11, 2019, our wholly owned subsidiary, Midatech Pharma España S.L., or Midatech Spain received a €6.6 million loan from the Spanish Ministry of Industry, Commerce and Tourism, under its Re-industrialisation Programme, or the REINDUS Loan. The loan was fully drawn down in September 2019. Principal on the REINDUS Loan is due2019, and payable in seven equal annual installments of €0.94 million each, commencing in September 2023. Interest, which is payable annually in arrears, accrues at the annual rate of 1.647% for the life of the loan. For each of the first three years, interest payable is approximately €0.1 million, with subsequent payments diminishing over the remainder of the term of the loan. The loan iswas partially secured by a guarantee by the Company of €3.0 million (€2.7 million relating to the principal loan amount, plus a further €0.3 million in respect of future interest) in the form of a cash bond.

The REINDUS Loan was intended to partially fund activities to scale-up the manufacturing capability of our MTD201 program, however, in connection with our decision to terminate the MTD201 program and shut down our Bilbao, Spain manufacturing facilities, we have begun the process to repayfully repaid this loan. Upon repayment, we expect our cash bond to be released.loan in August 2020. The total amount to be repaid iswas approximately €3.6 million (net of deposits returned to us). In addition, we expect to repayrepaid other loans from the Spanish government in connection with this termination. As of December 31, 2020, €119,000 of Spanish government loans remained outstanding. This remaining amount was repaid in February 2021. In February 2021, we received a fine of €149,835 from the Spanish tax authorities in relation to the purported late repayment of the loan. We consider the fine without foundation and are currently appealing it.

On December 5, 2019, we announced that confirmation had been received for a €2.7 million grant from the European Union to be used to conduct a clinical study designed to demonstrate the efficacy of MTX110 as a treatment for DIPG. The grant which iswas subject to, finalization of a grant agreement with the European Union andamong other things, the Company satisfying to the European Union that it meets the SME criteria of the European Union, isUnion. Subsequently, the Company was notified that, due to be made pursuant to the European Union’s EIC Accelerator (SME Instrument) and is part of the European Innovation Council. There can be no guarantee we will satisfy the criteria for the loan and that the grant will be received. If the grant is received, we plan to begin a European study consisting of an open label trial of MTX110 during a one-year treatment period. The grant is expected to cover 70% of the expected study costs,its relationships with the Company coveringCMS Parties, it did not qualify as an SME and was therefore not eligible to receive the remaining amounts. If the grant is not received, we expect to cancel this planned trial.grant.

Reverse Stock Split and Change in Ratio of Depositary Shares

On March 3, 2020, following shareholder approval, we effected a one-for-20 reverse split of our Ordinary Shares and our Ordinary Shares began trading on AIM on a split-adjusted basis as of such date. No fractional shares were issued in connection with the reverse stock split. As a result of the reverse stock split, the number of issued and outstanding Ordinary Shares was reduced to 23,494,981 shares as of March 3, 2020.

Concurrently with the reverse stock split, and in an effort to bring our Depositary Share price into compliance with NASDAQ’s minimum bid price per share requirement, on March 3, 2020 we effected a ratio change in the number of Ordinary Shares represented by our Depositary Shares from 20 Ordinary Shares per Depositary Share to five Ordinary Shares per Depositary Share, reducing the number of outstanding Depositary Shares, as of the close of business on March 3, 2020 to 988,656.

       The change in the number of Ordinary Shares resulting from the reverse stock split and Depositary Shares resulting from the change in ratio has been applied retroactively to all share and per share amounts presented in this annual report.

Regained Compliance with NASDAQ Continued Listing Requirements

Our Depositary Shares are currently listed on the NASDAQ Capital Market. On December 11, 2019, we received a letter from NASDAQ stating that, for the previous 30 consecutive business days, the bid price for our Depositary Shares had closed below the minimum $1.00 bid price per share requirement for continued listing on the NASDAQ Capital Market under NASDAQ Listing Rule 5550(a)(2). On March 18, 2020, we received written notice from NASDAQ notifying us that for the preceding 10 consecutive business days the closing bid price for our Depositary Shares had been $1.00 or greater. Accordingly, NASDAQ determined that we had regained compliance with NASDAQ Listing Rule 5550(a)(2).

Having regained compliance with these rules, we are now in compliance with all applicable requirements for continued listing on the NASDAQ Capital Market. We cannot assure you that we will remain in compliance with all applicable requirements for continued listing on the NASDAQ Capital Market.

Change in Executive Officers

On September 9, 2019, we announced that Nicholas Robbins-Cherry, our then-Chief Financial Officer and a member of the Board of Directors, resigned as our Chief Financial Officer and director. Mr. Stephen Stamp was appointed by the Board of Directors to succeed Mr. Robbins-Cherry, effective as of such date.

On March 31, 2019,2020, we announced that Dr. Craig Cook, our then-Chief Executive Officer and a member of the Board of Directors, resigned from all of his positions with the Company, effective as of such date. Mr. Stamp was appointed by the Board of Directors to succeed Dr. Cook, as well as maintain his position as Chief Financial Officer.

Our Strategy

Our businessdevelopment, manufacturing and commercialization strategy is based on advancing our proprietary technology platforms and programs with a view to partnering these assets during the course of their development. This is expected to drive a commercial pipeline of products with improved essential parameters, over and above the currently marketed source or parent compound, including safety, tolerability, efficacy and compliance profiles. We believe that our management team has significant industry and technical experience and is highly capable of, and committed to, building our value.

FromSince our announcement of a product perspective, we expect our platform drug delivery technologies will be used to generate our own proprietary pharmaceutical assets that can then be licensed as they reach clinical development phases. Products may be licensed outright to a pharmaceutical partner that would,strategic review in turn, completeMarch 2020 and the termination of further in-house development of the productMTD201, we have sought to broaden our research and seek regulatory approval prior to marketing the approved product. Product candidates may originate from in-house research of potential opportunities or proposals fromdevelopment pipeline through technology collaborations with third party pharmaceutical companies, who may contract with usinitiating new internal programs and adding new indications to re-formulate their proprietary medicine on a fee-for-service basis.MTX110. Our realigned strategy is to advance our development programs to proof-of-concept stage, before seeking license partners to fund further development, manufacturing scale-up and commercialization of such programs.

Development

An exampleOur intention is to build a balanced portfolio of this partnering approach is our license agreement with certain CMS entities, in which the Licensees will be responsible for developing and commercializing certain of our key pipeline products in China and certain other southeast Asia countries. For more information on this agreement, see “—Commercial Agreements, Strategic Partnerships and Collaborations—CMS License Agreement.”Q-Sphera programs employing a strategy to create an:

From a technology perspective, the nature of our technology platforms – Q-Sphera, MidaSolve, and MidaCore – are such that they can be used to license the platforms and provide related services to a pharmaceutical partner that would in-turn create, develop and commercialize its own pharmaceutical products.

From a marketing perspective, we intend to out-license to a pharmaceutical partner for commercialization. In this way, we seek to maximize value for shareholders without requiring a full-scale commercial operation and infrastructure.

We arehave applied our MidaSolve technology to panobinostat to create our proprietary product MTX110. Our development strategy for MTX110 is to demonstrate its utility in the processa range of closingintractable brain cancers with a series of pilot proof-of-concept studies before seeking licensee partners. Once a licensing partner has been secured, we would expect any future development costs to be reimbursed by that partner.

Manufacturing

As part of our manufacturing facilitiesstrategic review, we decided to close our operations in Bilbao, Spain, andincluding our Q-Sphera dedicated manufacturing facility. To establish proof-of-concept in pre-clinical studies for potential licensees, we do not intend to reestablish manufacturing capabilities. Instead, we expect our licensee partners eitherare able to manufacture the product themselves ornon-GMP Q-Sphera products at pilot scale at our Cardiff, Wales facility. Our intention is to technology transfer manufacture of clinical trial supplies and, ultimately, full GMP commercial manufacture to a third party contract manufacturerCMO. We would expect a licensee to assume responsibility for manufacturing. In both cases,the cost of manufacturing would be underGMP product and commercial scale-up pursuant to a technology license with the Company.transfer agreement.

CommercializationMTX110 is currently being manufactured to GMP standards at a CMO.

We do not currently commercialize any product. Commercialization

Once proof-of-concept has been established, we intend to seek to license our products to a partner who would complete the development, and subsequently market and sell themsale, of the product in thean agreed upon licensed territory. In addition to reimbursement of development costs, wethe partner would expect the partnerbe expected to make milestone payments based upon certainon sales targets as well asand royalty payments.

Our Platform Technologies and Pipeline

Central to our business are our three complementary platform technologies that enable the sustained release, direct local delivery, or targeted delivery improvement to previously approved therapeutic drugs. Individually, these platforms are expected to offer unique advantages that address current therapeutic challenges and needs. Our sustained release “Q-Sphera” technology platform is used for selected applications, and ensures consistently sized monodispersed polymer microparticles that may be engineered for precise and sustained release drug delivery. Our GNP “MidaCore” technology platform may provide improved targeting of chemotherapeutics agents to individual tumors using specific targeting agents in order to deliver a therapeutic payload into the tumor cell, while at the same time decreasing the side effect profile associated with off-target effects of these drugs.  Our nano-inclusion technology platform, “MidaSolve,” used for local delivery of therapeutics, allows for the delivery of generally water insoluble drugs into the site of disease through the creation of water soluble complexes without the efficacy of the active drug compound being affected. Individually and collectively, we believe that these technologies provide platforms that improve bio-delivery and bio-distribution of therapeutic molecules to the right place of disease, at the right time.

In 2020, following our strategic review, we pivoted from a largely singular focus on the clinical development and manufacturing scale up of MTD201 to a strategy based on a broader, but earlier stage, pipeline designed to optimize opportunities for partnering success. Our development pipeline includes 10 projects, of which three are partnered with the European affiliate of a global healthcare company, and as set forth in more detail below:

Sustained Release Technology Platform: Q-Sphera

Technology. Our Q-Sphera technology is an advanced microencapsulation and polymer-depot sustained release drug delivery platform produced using a novel and disruptive printing-based process, with numerous and distinct advantages over conventional sustained release (reactor-based) technologies.employs 3-D printing techniques to encapsulate medicines in polymer-based bioresorbable microspheres. Q-Sphera is a precise, scalable, efficient, and environmentally friendly microparticle manufacturing platform. From a clinical perspective, Q-Sphera ensures monodispersed microparticles that release active drug compounds into the body in a tightly controlled, highly predictable and linear manner over an extended period of time from one to six months.time.

Q-Sphera is the next generation polymer microsphere technology which simplifies manufacturing, facilitates the sustained release of previously unachievable products and delivers formulations with significant patient, healthcare professional and payor benefits. Our polymer microsphere platform has been developed to enable sustained release delivery solutions for peptide and small-molecule therapeutics through precise definition of the properties of polymer microparticles into which active compounds can be incorporated. Microspheres are small, spherical particles that can be utilized as a time release drug capsule. This technology contributes to our oncology franchise as well as potential applications in endocrinology and other disease areas.

Current reactor-based emulsion manufacturing technology has been in use for over 20 years and, despite several issues, it continues to be used by the vast majority of the market as there are limited alternatives. Reactor-based emulsion processes, used by most existing products, require large infrastructure, are energy intensive, inefficient and wasteful, producing large quantities of unusable particles, and utilize large volumes of toxic organic solvents that are damaging to the environment.

The future, printing-based Q-Sphera platform we developed uniquely addresses all these problems by using advanced printing technology that is highly efficiency and scaleable, and which requires minimal infrastructuremicrospheres may be injected to produce several million microspheres per second, with easily removable non-toxic solvents that are environmentally friendly. The key advantages of Q-Sphera are uniformity (within each individual microsphere) and consistency (from microsphere to microsphere) of product, as the spheres are produced under controlled and identical conditions. Tight homogenous particle size distributions are produced, which increases the usable product yield and leads to a superior clinical profile with improved injectability characteristics compared to product produced with traditional emulsion manufacturing methods. Data from the recent clinical trials of the MTD201 product, showed a lack of dose dumping and burst, lower variability from subject to subject, reduced injection site pain, and use of smaller gauge needles. The clinical result of the Q-Sphera™ process is a superior formulation that produces consistent and reproducible drug concentrationsform depots in the body, within narrow limits.which release drugs over predictable, sustained periods from one week up to several months. We believe Q-Sphera offers numerous potential advantages to patients and payors compared with other immediate release products and polymer-based technologies, as set forth below:

Pipeline. We have an internal Q-Sphera pipeline comprising MTD211 and MTD219 for central nervous system and transplant anti-rejection indications, respectively. The active pharmaceutical ingredients included in MTD211 and MTD219 are already marketed as immediate release products and both are currently undergoing pre-clinical in vivo studies to demonstrate proof-of-concept. If successful, MTD211 and MTD219 will be made available for licensing to partners for their continued clinical development.

MTD201. Following the announcement of a strategic review, we ceased further in-house development of MTD201, our Q-Sphera formulation of octreotide for acromegaly and neuroendocrine tumors. We completed two clinical trials for MTD201, a 2018 first-in-human Phase I study compared MTD201 with Novartis’ SLAR, and second Phase I study of MTD201 completed in January 2020 which compared subcutaneous administration with intramuscular administration in healthy volunteers and showed similar pharmacokinetics and bioavailability in healthy volunteers. Together, the two Phase I studies of MTD201 serve as clinical validation of the Q-Sphera technology, confirming many of Q-Sphera’s features and benefits for patients, payors and licensees.

MidaSolve: Local Delivery Technology Platform: MidaSolvePlatform

TheTechnology. Our MidaSolve nano inclusion (NI) technology is utilized for potent, small molecule chemotherapeutics that have minimal solubility in water at biological pH, which means they cannot normally be injected and limits them to oral administration in solid form. When reformulated with MidaSolve technology, the complexed molecules solubilize such that the molecule can be administered in liquid form into the body. This enables local infusion directly into the tumor, thus extending the available routes of administration for drugs that otherwise would be limited to oral forms only.

Many of the small molecule chemotherapeutics that are indicated for solid tumor treatment demonstrate this minimal solubility with limited available routes of administration. In some cases, the problem of insolubility can be addressed by formulation in mixtures of water and a solvent such as ethanol or dimethyl sulfoxide (DMSO), but such solvents are toxic to the human body and the resulting solution cannot be used for treatments of brain cancers (e.g. glioma). Our MidaSolve technology platform provides a means for increasing the aqueous solubility of several classes of cancer therapeutics and producing complexes that solubilize these agents in water, thereby enabling administration in liquid form directly into tumors.

The complexed molecules comprise a hydrophobic (‘water-fearing’) inner surface and a hydrophilic (‘water-loving’) outer surface, and as a result are capable of forming host-guest complexes with normally water-insoluble molecules. A hydrophobic, poorly water-soluble drug can associate with the inner, more hydrophobic surface of the MidaSolve host, while the hydrophilic outer surface allows the complex to dissolve at biological pH.

We have studiedMTX110. Using our MidaSolve technology in combination with panobinostat, an otherwise insoluble drug, MTX110 is designed for direct-to-tumor treatment of intractable brain cancers. The resulting complex is readily soluble in water at therapeutic concentrations, thus enabling liquid administration routes directly into the complexationtumor that otherwise would not be possible. Panobinostat (Farydak®) is a potent, nonselective histone deacetylase inhibitor that was developed for the treatment of multiple myeloma. Given in its natural oral form, panobinostat does not cross the blood-brain barrier, and solubility-enhancing effectsthus does not reach brain tumors. It is also a highly toxic substance and, when given orally, suffers from significant dose-limiting side effects. MidaSolve allows an alternate means of these nano complexes on certain classes of chemotherapeutics that, because of their insolubility, cannot be administereddelivery in liquid form. Theseform, and MTX110, our soluble form of panobinostat, is infused directly into the tumor. Direct delivery of MTX110 bypasses the blood-brain barrier and ensures adequate drug exposure to tumor cells without exposing the rest of the body to potentially toxic concentrations. MTX110’s intratumoral delivery thus provides a significant potential for treatment of DIPG and, potentially, other forms of brain cancer.

We are currently researching the utility of MTX110 to proof-of-concept stage in the following three indications.

In October 2020, we reported the first-in-man study by UCSF of MTX110 in DIPG using a CED system. The Phase I study established a recommended dose for Phase II, a good safety and tolerability profile but also encouraging survival data in the seven patients treated. We are in the process of planning for a Phase II study to confirm the safety and efficacy of MTX110 in DIPG.

On October 24, 2019, we announced that the FDA has granted orphan drug designation for MTX110. Orphan drug designation is granted to support the development of drugs currently havethat target rate diseases with high unmet needs, affecting 200,000 or fewer U.S. patients annually, and that are expected to be administered as an oral tablet form, which limits the amountprovide significant therapeutics advantages over existing treatments. Orphan designation qualifies a company for benefits that apply across all stages of drug that getsdevelopment, including an accelerated approval process, seven years of market exclusivity upon regulatory approval, if received, tax credits for qualified U.S. clinical trials, eligibility for orphan drug grants and exemption from certain administrative fees.

The University of Texas is undertaking a Phase I exploratory study in medulloblastoma using direct administration of MTX110 into the fourth ventricle of the brain, enabling it to circulate through the CSF.

We are currently in the process of planning a Phase I exploratory study to assess the utility of MTX110 in GBM.

For additional information regarding MTX100, see “—Recent Developments—MTX110 Updates.”

Secura Bio. On June 8, 2020, we received a letter sent on behalf of Secura Bio, dated June 1, 2020, purporting to terminate the Secura License Agreement. Pursuant to the tumor site, as well as increasing side effects onSecura License Agreement, Midatech Limited was granted a non-exclusive worldwide, sublicenseable license to certain patents of panobinostat, the body as it circulatesactive pharmaceutical ingredient of our development product MTX110. Midatech Limited’s rights are limited to the treatment of brain cancer in humans, administered by convection-enhanced delivery. We plan to continue to pursue development of MTX110 and the system.strategic review process previously disclosed. For more information, see “—Recent Developments—Secura License Agreement.”

MidaCoreMidaCore: Targeted Delivery Platform

Technology. MidaCore is a leading innovation in ‘ultra-small’ nanomedicine and is designed for targeted delivery to enable improved delivery of therapeutics to tumor cells and the immune system. In oncology treatments MidaCore provides a nano complex (less than 5nm in size, or approximately 80,000 times smaller than the width of a hair) that carries conventional small molecule chemo-therapeutic payloads and delivers these to the tumor site in high concentrations. In immunotherapy, treatments, MidaCore acts as a nanocarrier complex for synthetic immuno-peptides that stimulate the immune system to seek out and destroy cancer cells via immune mediated vaccine processes. These small complexes can enter immune processing cells to induce T-cell mediated immune responses specifically against tumor cells, viral infected host cells or autoimmune disease.

The MidaCore technology platform is based on ultra-small GNPupon ‘ultra-small’ nanoparticle drug conjugates, which at 2nm2-4nm in size are among the smallest particles in biomedical use. They are composed of a core of gold atoms decorated with a permutation of therapeutic andand/or targeting molecules. The small size and multi-functional arrangement around the gold core underpin the ability to improve biodistribution, and target tumor and/or immune sites providing a new generation of oncology drugs.

MidaCore design and synthesis GNP technology enables the production of 2nm to 5nm medications, which we believe is roughly five-to-tenfold smaller than any other delivery vehicle in clinical trials. MidaCore’s therapeutics are comprised of a core of gold atoms (approximately 100 gold atoms per GNP) surrounded by an organic layer of carbohydrates that stabilize the metallic core and make the particle water-soluble and biocompatible. MidaCore therapeutic constructs have a number of key advantages in their use as drug delivery vehicles, driven chiefly by their small size and multivalency attributes:

GNP’s penetrate cell membranes in a non-disruptive way to deliver drugs inside the target cell. Intracellular release of the therapeutic payload is via glutathione, or GSH, mediated release of payloads from the GNP surface. Because the intracellular GSH concentration (1-10 mM) is substantially higher than extracellular levels (2 µM in plasma), it serves as an effective trigger to release a payload from GNP surfaces. In oncology, the difference in GSH concentrations is even more marked between cancer cells and normal cells, an important advantage in GNP cancer therapeutic.

MidaCore vaccines are easily injectable and are rapidly mobile to lymph nodes and antigen presenting cells, or APCs, the gateway cells of the human immune system. Upon reaching the APC’s, the MidaCore vaccine triggers the production of CD8+T-lymphocytes (a type of immune cell), attacking immune cells, that then proliferate and seek out and attack the targeted cancer cells. In the case of autoimmune disease such as Type 1 diabetes, the T lymphocytes that respond to the GNP vaccine are CD4 T-regulatory cells that instead of stimulating the immune system, act to dampen down the immune response and stops the body attacking itself.

Thus, the same GNP concept is common to both cancer and autoimmune applications, but the immune system is stimulated in the former and reduced in the latter depending on the GNP peptide combination selected. In addition, this concept is being applied to the development of vaccines by our partner Emergex Vaccines for killer viruses such as Ebola, Dengue, and Zika.

Our Product Candidates

MTD201

As disclosed herein, in light of the remaining costs to complete clinical trials and the manufacturing scale-up for MTD201, on March 31, 2020 we announced we had determined it necessary to terminate the in-house development of MTD201 immediately and seek a license partner for it.

We have recently completed two clinical trials for MTD201, a 2018 first-in-human Phase I study compared our Q-Sphera product, MTD201, with Novartis’ SLAR, and a 2019 Phase I study of MTD201 to investigate subcutaneous administration of MTD201as an additional injection route, as compared to intramuscular administration. For more information on these trials, see “—Recent Developments—MTD201 Program.” Given the decision to terminate the MTD201 program, we will no longer seek to conduct additional clinical trials for this program, but will work to license MTD201 to a partner who will advance it into the next stage of clinical trials.

Targeted Diseases.If MTD201 is successfully licensed and brought to market, we believe the first medical conditions to be treated with MTD201, utilizing Midatech’s Q-Sphera technology, will be for the treatment of chronic high morbidity neuro hormonal tumors in two indications - acromegaly and NET. This is a $2.5 billion annual market that has been dominated by SLAR for the past 20 years. Acromegaly is a chronic disease characterized by excess growth hormone production, generally due to a pituitary tumor. It is associated with increased morbidity and mortality, usually due to significant cardiovascular and heart disease due to the excessive growth hormone levels. NETs are slow growing tumors derived from hormone secreting cells. This is another debilitating disease with a high morbidity and mortality rate. Octreotide, used in MTD201 and SLAR, is a mainstay of medical treatment for both carcinoid and acromegaly.

MTX110

Our first MidaSolve host-guest formulation is MTX110, a water-soluble complex of the histone deacetylase inhibitor, panobinostat, a ‘direct-to-brain’ treatment used for the treatment of brain cancer. The resulting complex is readily soluble in water at therapeutic concentrations, thus enabling liquid administration routes directly into the tumor that otherwise would not be possible.

Panobinostat (Farydak®) is a potent, nonselective histone deacetylase inhibitor. It was selected as a potential treatment for a rare and fatal childhood brain cancer, DIPG, following the screening of 83 drugs against 14 patient-derived DIPG cell cultures. This independent research studied a range of drugs selected by pediatric neuro-oncologists that were considered as either promising targeted agents or traditional chemotherapeutic agents used in pediatric brain tumor therapy. Panobinostat was effective against 12 out of 14 patient derived DIPG cell cultures. In addition, genomic data, chemical screening data, and animal data suggests panobinostat as a promising therapy for DIPG and could rapidly be translated for use in the clinic. However, panobinostat, given in its natural oral form, does not cross the blood-brain barrier, and thus does not reach brain tumors. It is also a highly toxic substance and, when given orally, suffers from significant dose-limiting side effects. MidaSolve allows an alternate means of delivery in liquid form, and MTX110, our soluble form of panobinostat, is infused directly into the tumor. Direct delivery of MTX110 bypasses the blood-brain barrier and ensures adequate drug exposure to tumor cells without exposing the rest of the body to potentially toxic concentrations. MTX110’s intratumoral delivery thus provides a significant potential for treatment of DIPG and, potentially, other forms of brain cancer. Panobinostat was developed by Novartis and approved in 2015 for the treatment of multiple myeloma. We originally licensed panobinostat from Novartis for use in treating DIPG in children and GBM in adults. The license was subsequently transferred to Secura Bio.

Data from our laboratory and animal studies shows significantly improved survival rates. Animal studies conducted by us in collaboration with UCSF similarly show encouraging efficacy data, where MTX110 prolongs survival in a patient-derived rat DIPG (xenograft) model when delivered by convection-enhanced delivery. A statistically significantly improved survival difference was evidenced between the control dose and MTX110: 64 days for MTX110 versus 52 days for the control dose, at a dose of 100µM. Toxicology safety data has established a large therapeutic window, with doses of up to 1,000µM (shown to be well toleratedin vivodespite highly potent in vitro efficacy of concentrations of 10,000 times less than this.

We have an open label Phase I study of safety and tolerability 8 patients ongoing in collaboration with UCSF. This study, which involves dose escalation from an initial concentration of 30µM to determine a recommended Phase II dose, is expected to report top-line results in the mid- 2020. To date, results indicate that locally-delivered MTX110 is tolerable at these high doses.

Assuming the final results of the UCSF study confirm good safety and tolerability at the optimal does of MTX110, we plan to initiate a statistically-powered Phase II study to examine efficacy and safety in a further 19 patients in Europe and/or the United States. The Phase II trial will use a CED system, whereby MTX110 will be infused under slight pressure directly into and around the tumor. We expect the primary endpoint of the study to be patient survival rates after 12 months. We expect this study to be primarily funded by a €2.6 million grant from the European Union, though there can be no guarantee this grant will be received. If the grant is not received, we expect to cancel this planned trial. For more information regarding this grant, see “—Recent Developments—Spanish Governmental Loans and European Union GrantsMTX114.”

In addition, Using MidaCore technology, we have also initiated an exploratory trial in five patients with DIPG at Columbia University, using an alternative

CED infusion system.

Targeted Diseases.MTX110 is being developed initially for the treatment of DIPG, a rare and fatal, childhood brain cancer. DIPG is a high grade glioma that occurs mostly in children. The tumors aggressively infiltrate the brainstem such that cancer tissue typically cannot be differentiated from normal brain tissue. The overall median survival of children with DIPG is approximately nine months and remains unchanged despite decades of clinical trial research. The only standard of care is palliative focal radiotherapy, but this has minimal effect on survival and essentially all children die of this disease. Surgical resection is unavailable due to the location of the tumour in the brainstem. Approximately 1,000 individuals worldwide are diagnosed with DIPG each year and we believe new therapeutic strategies are urgently needed.

In addition to DIPG, MTX110 as a treatment for adult brain cancer GBM is in pre-clinical studies and we believe warrants further clinical investigation. The objective is to progress this program into the clinic in the near term.

Orphan Drug Status.On October 24, 2019, we announced that the FDA has granted orphan drug designation for MTX110.

Orphan drug designation is granted to support the development of drugs that target rate diseases with high unmet needs, affecting 200,000 or fewer U.S. patients annually, and that are expected to provide significant therapeutics advantages over existing treatments. Orphan designation qualifies a company for benefits that apply across all stages of drug development, including an accelerated approval process, seven years of market exclusivity upon regulatory approval, if received, tax credits for qualified U.S. clinical trials, eligibility for orphan drug grants and exemption from certain administrative fees.

Secura License Agreement. On June 8, 2020, we received a letter sent on behalf of Secura Bio, dated June 1, 2020, purporting to terminate the Secura License Agreement. Pursuant to the Secura License Agreement, Midatech Limited was granted a non-exclusive worldwide, sublicenseable license to certain patents of panobinostat, the active pharmaceutical ingredient of our development product MTX110. Midatech Limited’s rights are limited to the treatment of brain cancer in humans, administered by convection-enhanced delivery. We plan to continue to pursue development of MTX110 and the strategic review process previously disclosed. For more information, see “—Recent Developments—Secura License Agreement.”

MidaCore Product Candidates

MidaCore is being developed as an immunotherapeutic as well as a chemotherapeutic platform. Our immunotherapy franchise aims to create commercial vaccines for cancer and auto-immune diseases that have no or limited treatment options. MidaCore represents an innovative approach to vaccines, whereby GNPs are designed with antigenic peptides and other immunogenic agents to either (i) activate and enhance the immune response against tumor cells or (ii) suppress the immune response in autoimmune diseases.

In autoimmune indications, MidaCore is in clinical development in a first-in-human Phase 1 study as a vaccine for diabetes, the most common autoimmune disease worldwide. The vaccine works to normalize the immune system, improving diabetes control by preserving the insulin producing beta cells of the pancreas. On July 19, 2019, we announced positive safety results from this clinical study. The focus of this Phase I study was to assess the safety of MTX102. The study consisted of five Type I diabetes patients, all meeting strict parameters. MTX102 was well tolerated, with asymptomatic local injection site reactions being the only drug-related finding, and no serious adverse events were reported. We believe the study provides promising safety validation of the MidaCore technology as a platform for the development of medications for use in humans.

All patients on the study have entered the follow-up phase of the trial, which we believe will conclude in mid-2020, after which we, along with our European Union consortium partners, will review the data and the program.

MidaCore is also in pre-clinical development for further oncology and autoimmune diseases. Psoriasis, with a re-engineered version of the immuno-suppressive methotrexate, an immuno-suppressant for topical application in psoriasis,psoriasis. If successful, MTX114 would be a first topical formulation of methotrexate, MTX, thus avoiding the need for potentially toxic systemic administration. Data to date suggests that MidaCore GNP-MTX improvesPre-clinical data suggest MTX114 may reduce inflammation in a psoriatic skin towards a normal state.model. There are estimated to be over 100 million people who suffer from psoriasis worldwide.

MidaCore is in preclinical development with our partner Emergex Vaccines, who have licensed MidaCore technology for various set-point GNP vaccines against infectious diseases (including Dengue Fever, Zika, Ebola and pandemic flu) through a licensed program. Vaccine complexes comprising MidaCoreCertain other indications using GNP technology involve surface chemical binding of viral or bacterial specific marker peptides, with the objective of enhancing recognition and priming of the immune system.

For targeted chemotherapeutics, our research indicates that conjugation of active payloads with MidaCore may, along with specific cell-surface binding peptides, re-focus the biodistribution of the compound on the tumor site and enhance uptake into tumor cells, which in turn may improve the on-target efficacy and reduce the off-target safety effects. Peptide targeted MidaCore anti-cancer drug conjugates are being researchedhave been licensed to repurpose and improve the delivery and efficacy of existing chemotherapeutics for solid tumors.Emergex Vaccines.

Commercial Agreements, Strategic Partnerships and Collaborations 

We are currently collaborating with a number of biopharmaceutical companies, research institutes and universities on several of our development programs involving our core technologies.

Q-Sphera Collaborations. On June 8, 2020, we announced that we had entered into a research and development collaboration with Dr. Reddy’s Laboratories Ltd., or Dr. Reddy’s, to deploy our in-house expertise and proprietary drug delivery platforms towards comprehensive improvement of bio-delivery and bio-distribution of certain medicines nominated by Dr. Reddy’s. After some initial work, the collaboration was mutually terminated in January 2021 for reasons of technical feasibility.

On July 21, 2020, we announced a collaboration with the European affiliate of a global pharmaceutical company to deploy our in-house expertise and proprietary drug delivery platforms towards product candidates nominated by the collaborating company. This collaboration has, at the option of our partner, been subsequently expanded to three products.

CMS License Agreement.On January 29, 2019, we entered into the CMS License Agreement with CMS, as guarantor, and the Licensees. The CMS License Agreement was effective as of February 26, 2019. Pursuant to the terms of the CMS License Agreement, we agreed to license to the Licensees the exclusive right to use our technology and our intellectual property rights and information and data related to certain of our clinical and pre-clinical products (i.e. MTD201, MTX110, MTX102, MTR103 and MTD119), together with any other pipeline products or line extensions which are in or which enter pre-clinical or clinical development in the first three years following the effective time of the CMS License Agreement, together the Products, to develop and commercialize the Products in China, including Macau, Hong Kong and Taiwan, with the same rights in certain countries in south east Asia in respect of which the Licensees notifies us that such licensee wants a license after the grant of a regulatory approval of any of the Products by the FDA, EMA or by the regulatory authorities in the United Kingdom, France, Germany or Switzerland, collectively the Territory, such activities to be conducted by the Licensee(s) and affiliates of CMS and local partners as permitted sub-licensees. The Licensees have the exclusive right to import, obtain market approvals and register, market, distribute, promote and sell the Products in the Territory at the Licensees’ sole discretion, and in the event we choose not to or fail to meet the Licensees’ binding orders for the Products under certain circumstances, will be granted the right to manufacture the Products itself. The Licensees will be restricted from supplying the Products to any customers outside of the Territory, while we will be restricted from supplying the Products into the Territory, except through the Licensees.

In addition, we agreed to assist the Licensees (and/or any affiliate of CMS) with their applications for marketing approvals for the Products in the Territory, which approvals, if granted, will be exercised by CMS Bridging or CMS Medical HK, unless it is being transferred to us when we are entitled to terminate the CMS License Agreement for material breach by CMS Bridging or CMS Medical HK. We will manufacture the Products for the Licensees and their sub-licensees, which Products will be subject to exclusive purchase and supply arrangements with the Licensees for the Territory.

Further, we agreed to permit the Licensees to identify their own product and line extension targets in respect of which, if we agree, we will carry out initial development and then will, for a technology transfer fee, the amount of which will be dependent on the circumstances, transfer the specific program know-how and data to enable the Licensees to continue to develop using our platform technologies and then to commercialize in the Territory. We will receive a low single digit royalty on the Net Sales (as such term is defined in the CMS License Agreement) in the Territory. The Licensees will own any intellectual property rights it creates and any data they collect during the development process and will license such rights and data to us for the purposes of manufacturing the products in question and also to commercialize the products outside the Territory, for which we will pay the Licensees a low double digit royalty.

The Licensees shall pay us lump sum payments on a Product-by-Product basis (in U.S. dollars) upon the achievement of certain regulatory approvals (in six, or potentially seven, figure amounts) and sales performance milestones (in seven, or potentially, eight figure amounts), as well as royalties upon Net Sales (as a low double digit percentage for the Products other than MTX110, for which the royalty will be a single digit percentage) in the Territory.

The CMS License Agreement may be terminated by either party for specific material breaches or insolvency. In particular, our rights to terminate are limited to breaches of certain non-compete restrictions, failure to pay milestones or royalties, insolvency, or a failure to develop and/or commercialize particular Products in particular countries after the grant of an FDA or EMA regulatory approval. In addition, we have the right to terminate the agreement if the Licensee directly or indirectly infringes upon our intellectual property rights or challenges their validity or, in relation to a particular Product and a particular Territory at any time, because the Licensee has made a determination that it no longer wishes to develop and/or commercialize the Product in that country in the Territory. The CMS License Agreement also includes customary indemnification for a transaction of this type.

Secura License Agreement. On or about June 6, 2017, our subsidiary, Midatech Limited, entered into the Secura License Agreement with Novartis, pursuant to which Novartis granted it a non-exclusive worldwide, sublicenseable license to research, develop and commercialize, under Novartis patents, the Novartis oncology compound panobinostat, used for the treatment of brain cancer in humans, administered by CED. Subsequently, Novartis transferred the license and related agreement to Secura Bio.

Under the terms of the Secura License Agreement, Midatech Limited was required to make an upfront flat fee payment in the low seven figures in United States dollars, and will be required to make certain milestone payments to Secura Bio of up to an aggregate of $48 million if certain regulatory and commercial events are achieved. Midatech Limited must also make royalty payments based on expected sales of the licensed product, with rates ranging from the mid-teens to mid-twenties based on net sales of the licensed products. Pursuant to the terms of the agreement, the license will continue until the expiration of the royalty term (as defined in the agreement) for the last licensed product, unless earlier terminated pursuant to its terms.

On June 8, 2020, we received a letter sent on behalf of Secura Bio purporting to terminate the Secura License Agreement. We plan to continue to pursue development of MTX110 and the strategic review process previously disclosed.MTX110. For more information, see “—Recent Developments—Secura License Agreement.”

Consejo Superior De Investigaciones Cientificas. In June 2002, CSIC and Midatech Limited, the Company’s predecessor entity, entered into a patent and know-how agreement, whereby CSIC granted Midatech Limited an exclusive license to exploit its patent and know-how rights in any field and anywhere in the world where those patents are registered, and to make applications to register such patents throughout the world in CSIC and Midatech Limited’s joint names, provided that CSIC may use the patents and know-how for the purpose of performing a research agreement between CSIC and Midatech Limited, to deal in products supplied to it by Midatech Limited and to perform research for its own non-commercial purposes. CSIC also assigned to Midatech Limited PCT Application Number PCT/GB01/04633. The agreement between the parties was amended on October 14, 2004 so as to specifically include magnetic nanoparticles in the scope of the license and rights granted to Midatech Limited. The patents and know-how are considered by Midatech to be core to its business.

Pursuant to the terms of the agreement, CSIC is obliged to reassign the patents into Midatech Limited’s sole name within 14 days of Midatech accomplishing one of the following:

As of the December 31, 2019,2020, Midatech had accomplished all of the above milestones other than milestone related to the sale of products, and may therefore request that the relevant patents are assigned to it.

Midatech Limited is under an obligation to pay the following royalties to CSIC in prescribed circumstances following the commercialization of the relevant intellectual property:

As of December 31, 2019,2020, no royalties have been due or payable to CSIC.

Either party may terminate the agreement upon the insolvency of the other party or a material breach that is not remedied within 30 days’ notice.

EE-ASI Consortium Agreement. In June 2012, Midatech Limited entered into a consortium agreement with Cardiff University in Wales, Inserm-Transfert SA in Paris, France, Nanopass Technologies Ltd. in Israel, Leiden University Medical Center in the Netherlands, King’s College London in London, England, Institut National de la Sante et de aa Recherche Medicale, Marseille in Paris, France, and Linkopings University in Sweden. Pursuant to this agreement, the parties share and collaborate on various products and technology that is combined with the ultimate goal of integrating an antigen delivery system, to be used in clinical trials as a method of investigational medical product delivery.

All parties have joint ownership over any intellectual property rights which may arise. The portion of ownership is determined in proportion to a party’s contribution. Commercialization rights are to be determined on a fair and reasonable basis. Under the collaboration agreement, Midatech Limited contributed approximately €815,000 towards the consortium costs, of total requested European Union contribution of €6.0 million.

The project has received funds from the European Commission, which are distributed by a coordinator according to the consortium budget. The parties receive portions of this contribution, as determined by the consortium budget. A small clinical trial of six patients was completed in December 2019, with a study report expected in due course.

Sales and Marketing.

We do not currently have any internal sales and marketing organization or distribution capabilities.

Research and Development

We have a polymer micro-sphere laboratory in Cardiff, Wales used for development purposes only of our sustained release technology. We also have pilot scale manufacturing facilities for Q-Sphera and MidaCore products in Bilbao Spain, however, they are currently in the process of being closed.Cardiff, Wales.

TheAs of December 31, 2020, the research and development staffing for these two sites, prior to the restructuring announced on March 31, 2020,staff comprised of approximately 10five Ph.D. scientists, 13six MSc scientists and 22four BSc scientists.

Intellectual Property

Our success depends in large part on our ability to obtain and maintain proprietary protection for our product candidates (and products derived therefrom), technology and know-how, to operate without infringing the proprietary rights of others and to prevent others from infringing our proprietary rights. We strive to protect the proprietary technology that we believe is important to our business by, among other methods, seeking and maintaining patents, where available, that are intended to cover our product candidates (and products derived therefrom), compositions and formulations, their methods of use and processes for their manufacture and any other inventions that are commercially important to the development of our business. We also rely on trade secrets, know-how, continuing technological innovation and in-licensing opportunities to develop and maintain our proprietary and competitive position.

We have developed a strong intellectual property base globally, comprising patents, know-how, and trade secrets. Currently, we have 120108 granted patents, 7057 applications in process, in each case covering all major world markets, and 3635 separate patent families covering all major regions. We continue to strengthen our patent portfolio by strategically submitting new patents and divisional patent applications based on our active research and development activities. Central to our business are our three intellectual property technologies that are designed to enable the targeted delivery, i.e. right place, and controlled sustained release, i.e. right time, of existing therapeutic drugs. These technologies have broad applications in multiple therapeutic areas and offer the potential to create multiple revenue opportunities.

Patent rights have been granted in all the major world markets, including Europe, the United States and Japan, or the Key Markets. They confer a broad position of exclusivity for metal-core glycated-nanoparticles, including our GNPs. Our granted patents in our patent family 1 (expiring 2021) provide the foundation to the portfolio with product, process and use claims that encompass the GNPs used in all of our major programs and technology platforms, including oncology, nanoparticle technology and sustained release technology. The granted patents and pending patent applications in our patent families are owned solely by us, co-owned with other parties or in-licensed to us. These include:

We also have in our portfolio several vaccine and infectious disease related patent families. These relate to GNPs for immune-based therapy and antibiotic-GNP conjugates. We acquired through the Q Chip transaction patent applications directed to the apparatus and methods of “Q Sphera”“Q-Sphera” technology, which employs a piezoelectric droplet generator to form polymeric microparticles that encapsulate a drug for sustained release. The combination of our GNP technology with Midatech Wales’ sustained release technology has provided possibilities for new formulations of GNP-drug conjugates. Our GNPs, when encapsulated in Midatech Wales’ microparticles, enjoy patent protection conferred by the existing granted patents.

The term of individual patents depends upon the legal term for patents in the countries in which they are obtained. In most countries, including the United States, the patent term is 20 years from the filing date of a non-provisional patent application. In the United States, a patent’s term may, in certain cases, be lengthened by patent term adjustment, which compensates a patentee for administrative delays by the United States Patent and Trademark Office in examining and granting a patent, or may be shortened if a patent is terminally disclaimed over an earlier filed patent.

The term of a United States patent that covers a drug, biological product or medical device approved pursuant to a pre-market approval may also be eligible for patent term extension when FDA approval is granted, provided that certain statutory and regulatory requirements are met. The length of the patent term extension is related to the length of time the drug is under regulatory review while the patent is in force. The Drug Price Competition and Patent Term Restoration Act of 1984 permits a patent term extension of up to five years beyond the expiration date set for the patent. Patent extension cannot extend the remaining term of a patent beyond a total of 14 years from the date of product approval, only one patent applicable to each regulatory review period may be granted an extension and only those claims reading on the approved drug may be extended. Similar provisions are available in Europe and certain other foreign jurisdictions to extend the term of a patent that covers an approved drug, provided that statutory and regulatory requirements are met. Thus, in the future, if and when our product candidates receive approval by the FDA or foreign regulatory authorities, we expect to apply for patent term extensions on issued patents covering those products, depending upon the length of the clinical trials for each drug and other factors. The expiration dates of our patents and patent applications referred to above are without regard to potential patent term extension or other market exclusivity that may be available to us.

In addition to patents, we may rely, in some circumstances, on trade secrets to protect our technology and maintain our competitive position. However, trade secrets can be difficult to protect. We seek to protect our proprietary technology and processes, in part, by confidentiality agreements with our employees, corporate and scientific collaborators, consultants, scientific advisors, contractors and other third parties. We also seek to preserve the integrity and confidentiality of our data and trade secrets by maintaining physical security of our premises and physical and electronic security of our information technology systems.

Government Regulations

Government authorities in the United States, at the federal, state and local level, and in other countries and jurisdictions, including the European Union and the United Kingdom, extensively regulate, among other things, the research, development, testing, manufacture, quality control, approval, packaging, storage, recordkeeping, labeling, advertising, promotion, distribution, marketing, post-approval monitoring and reporting, and import and export of pharmaceutical products. The processes for obtaining regulatory approvals in the United States and in foreign countries and jurisdictions, along with subsequent compliance with applicable statutes and regulations and other regulatory authorities, require the expenditure of substantial time and financial resources. As we have disclosed herein, we are seeking to license our products candidates and other formulations to licensing partners. While many of the rules and regulations set forth herein do and will apply to us, some are more applicable to any licensing partner who seeks to conduct clinical trials, obtain regulatory approval and commercialize any of formulations or product candidates, which could have an impact on any licensing revenue received by us.

Review and Approval of Drugs in the United States

In the United States, the FDA regulates drugs under the Federal Food, Drug, and Cosmetic Act, or the FDCA, and implementing regulations. Failure to comply with the applicable United States requirements at any time during the product development process, approval process or after approval may subject an applicant and/or sponsor to a variety of administrative or judicial sanctions, including refusal by the FDA to approve pending applications, withdrawal of an approval, imposition of a clinical hold, issuance of warning letters and other types of letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, refusals of government contracts, restitution, disgorgement of profits, exclusion from participation in government sponsored insurance programs such as Medicare, or civil or criminal investigations and penalties brought by the FDA and the Department of Justice, or the DOJ, or other governmental entities.

An applicant seeking approval to market and distribute a new drug product in the United States must typically undertake the following:

Preclinical Studies

Preclinical studies include laboratory evaluation of the purity and stability of the manufactured drug substance or API and the formulated drug or drug product, as well asin vitro and animal studies to assess the safety and activity of the drug for initial testing in humans and to establish a rationale for therapeutic use. The conduct of preclinical studies is subject to federal regulations and requirements, including GLP regulations. The results of the preclinical tests, together with manufacturing information, analytical data, any available clinical data or literature and plans for clinical trials, among other things, are submitted to the FDA as part of an IND. Some long-term preclinical testing, such as animal tests of reproductive adverse events and carcinogenicity, may continue after the IND is submitted.

Human Clinical Trials in Support of an NDA

Clinical trials involve the administration of the investigational product to human subjects under the supervision of qualified investigators in accordance with GCP requirements, which include, among other things, the requirement that all research subjects provide their informed consent in writing before their participation in any clinical trial. Clinical trials are conducted under written study protocols detailing, among other things, the inclusion and exclusion criteria, the objectives of the study, the parameters to be used in monitoring safety and the effectiveness criteria to be evaluated. A protocol for each clinical trial and any subsequent protocol amendments must be submitted to the FDA as part of the IND. An IND automatically becomes effective 30 days after receipt by the FDA, unless before that time the FDA raises concerns or questions related to a proposed clinical trial and places the clinical trial on clinical hold. In such a case, the IND sponsor and the FDA must resolve any outstanding concerns before the clinical trial can begin.

In addition, an IRB representing each institution participating in the clinical trial must review and approve the plan for any clinical trial before it commences at that institution, and the IRB must conduct a continuing review and reapprove the study at least annually. The IRB must review and approve, among other things, the study protocol and informed consent information to be provided to study subjects. An IRB must operate in compliance with FDA regulations. Information about certain clinical trials must be submitted within specific timeframes to the National Institutes of Health for public dissemination on their ClinicalTrials.gov website.

Human clinical trials are typically conducted in three sequential phases, Phase I, Phase II and Phase III, which may overlap or be combined.

Progress reports detailing the results of the clinical trials must be submitted at least annually to the FDA and more frequently if serious adverse events occur. In addition, IND safety reports must be submitted to the FDA for any of the following: serious and unexpected suspected adverse reactions; findings from other studies or animal orin vitro testing that suggest a significant risk in humans exposed to the drug; and any clinically important increase in the case of a serious suspected adverse reaction over that listed in the protocol or investigator brochure. Phase I, Phase II and Phase III clinical trials may not be completed successfully within any specified period, or at all. Furthermore, the FDA or the sponsor may suspend or terminate a clinical trial at any time on various grounds, including a finding that the research subjects are being exposed to an unacceptable health risk. Similarly, an IRB can suspend or terminate approval of a clinical trial at its institution, or an institution it represents, if the clinical trial is not being conducted in accordance with the IRB’s requirements or if the drug has been associated with unexpected serious harm to patients. The FDA will typically inspect one or more clinical sites to assure compliance with GCP and the integrity of the clinical data submitted.

Submission of an NDA to the FDA

Assuming successful completion of required clinical testing and other requirements, the results of the preclinical studies and clinical trials, together with detailed information relating to the product’s chemistry, manufacture, controls and proposed labeling, among other things, are submitted to the FDA as part of an NDA requesting approval to market the drug product for one or more indications. Under federal law, the submission of most NDAs is additionally subject to an application user fee, currently $2,942,965, and the sponsor of an approved NDA is also subject to annual product and establishment user fees, currently $325,424. These fees are typically increased annually. Certain exceptions and waivers are available for some of these fees, such as an exception from the application fee for products with orphan designation and a waiver for certain small businesses

The FDA conducts a preliminary review of an NDA within 60 days of its receipt and informs the sponsor by the 74th day after the FDA’s receipt of the submission whether the application is sufficiently complete to permit substantive review. The FDA may request additional information rather than accept an NDA for filing. In this event, the application must be resubmitted with the additional information. The resubmitted application is also subject to review before the FDA accepts it for filing. Once the submission is accepted for filing, the FDA begins an in-depth substantive review. The FDA has agreed to specified performance goals in the review process of NDAs. Most such applications are meant to be reviewed within ten months from the date of filing, and most applications for “priority review” products are meant to be reviewed within six months of filing. The review process may be extended by the FDA for three additional months to consider new information or clarification provided by the applicant to address an outstanding deficiency identified by the FDA following the original submission.

Before approving an NDA, the FDA typically will inspect the facility or facilities where the product is or will be manufactured. These pre-approval inspections cover all facilities associated with an NDA submission, including drug component manufacturing (such as active pharmaceutical ingredients, or API), finished drug product manufacturing, and control testing laboratories. The FDA will not approve an application unless it determines that the manufacturing processes and facilities are in compliance with cGMP requirements and adequate to assure consistent production of the product within required specifications. Additionally, before approving an NDA, the FDA will typically inspect one or more clinical sites to assure compliance with GCP.

In addition, as a condition of approval, the FDA may require an applicant to develop a REMS. REMS use risk minimization strategies beyond the professional labeling to ensure that the benefits of the product outweigh the potential risks. To determine whether a REMS is needed, the FDA will consider the size of the population likely to use the product, seriousness of the disease, expected benefit of the product, expected duration of treatment, seriousness of known or potential adverse events, and whether the product is a new molecular entity. REMS can include medication guides, physician communication plans for healthcare professionals, and elements to assure safe use, or ETASU. ETASU may include, but are not limited to, special training or certification for prescribing or dispensing, dispensing only under certain circumstances, special monitoring, and the use of patient registries. The FDA may require a REMS before approval or post-approval if it becomes aware of a serious risk associated with use of the product. The requirement for a REMS can materially affect the potential market and profitability of a product.

The FDA is required to refer an application for a novel drug to an advisory committee or explain why such referral was not made. Typically, an advisory committee is a panel of independent experts, including clinicians and other scientific experts, that reviews, evaluates and provides a recommendation as to whether the application should be approved and under what conditions. The FDA is not bound by the recommendations of an advisory committee, but it considers such recommendations carefully when making decisions.

Fast Track, Breakthrough Therapy and Priority Review Designations

The FDA is authorized to designate certain products for expedited review if they are intended to address an unmet medical need in the treatment of a serious or life-threatening disease or condition. These programs are fast track designation, breakthrough therapy designation and priority review designation.

Specifically, the FDA may designate a product for fast track review if it is intended, whether alone or in combination with one or more other drugs, for the treatment of a serious or life-threatening disease or condition, and it demonstrates the potential to address unmet medical needs for such a disease or condition. For fast track products, sponsors may have greater interactions with the FDA and the FDA may initiate review of sections of a fast track product’s NDA before the application is complete. This rolling review may be available if the FDA determines, after preliminary evaluation of clinical data submitted by the sponsor, that a fast track product may be effective. The sponsor must also provide, and the FDA must approve, a schedule for the submission of the remaining information and the sponsor must pay applicable user fees. However, the FDA’s time period goal for reviewing a fast track application does not begin until the last section of the NDA is submitted. In addition, the fast track designation may be withdrawn by the FDA if the FDA believes that the designation is no longer supported by data emerging in the clinical trial process.

In 2012, Congress enacted the Food and Drug Administration Safety and Innovation Act, or FDASIA. This law established a new regulatory scheme allowing for expedited review of products designated as “breakthrough therapies.” A product may be designated as a breakthrough therapy if it is intended, either alone or in combination with one or more other drugs, to treat a serious or life-threatening disease or condition and preliminary clinical evidence indicates that the product may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development. The FDA may take certain actions with respect to breakthrough therapies, including holding meetings with the sponsor throughout the development process; providing timely advice to the product sponsor regarding development and approval; involving more senior staff in the review process; assigning a cross-disciplinary project lead for the review team; and taking other steps to design the clinical trials in an efficient manner.

The FDA may designate a product for priority review if it is a drug that treats a serious condition and, if approved, would provide a significant improvement in safety or effectiveness. The FDA determines, on a case- by-case basis, whether the proposed drug represents a significant improvement when compared with other available therapies. Significant improvement may be illustrated by evidence of increased effectiveness in the treatment of a condition, elimination or substantial reduction of a treatment-limiting drug reaction, documented enhancement of patient compliance that may lead to improvement in serious outcomes, and evidence of safety and effectiveness in a new subpopulation. A priority designation is intended to direct overall attention and resources to the evaluation of such applications, and to shorten the FDA’s goal for taking action on a marketing application from ten months to six months.

Accelerated Approval Pathway

The FDA may grant accelerated approval to a drug for a serious or life-threatening condition that provides meaningful therapeutic advantage to patients over existing treatments based upon a determination that the drug has an effect on a surrogate endpoint that is reasonably likely to predict clinical benefit. The FDA may also grant accelerated approval for such a drug when the product has an effect on an intermediate clinical endpoint that can be measured earlier than an effect on irreversible morbidity or mortality, or IMM, and that is reasonably likely to predict an effect on irreversible morbidity or mortality or other clinical benefit, taking into account the severity, rarity, or prevalence of the condition and the availability or lack of alternative treatments. Drugs granted accelerated approval must meet the same statutory standards for safety and effectiveness as those granted traditional approval.

For the purposes of accelerated approval, a surrogate endpoint is a marker, such as a laboratory measurement, radiographic image, physical sign, or other measure that is thought to predict clinical benefit, but is not itself a measure of clinical benefit. Surrogate endpoints can often be measured more easily or more rapidly than clinical endpoints. An intermediate clinical endpoint is a measurement of a therapeutic effect that is considered reasonably likely to predict the clinical benefit of a drug, such as an effect on IMM. The FDA has limited experience with accelerated approvals based on intermediate clinical endpoints, but has indicated that such endpoints generally may support accelerated approval where the therapeutic effect measured by the endpoint is not itself a clinical benefit and basis for traditional approval, if there is a basis for concluding that the therapeutic effect is reasonably likely to predict the ultimate clinical benefit of a drug.

The accelerated approval pathway is most often used in settings in which the course of a disease is long and an extended period of time is required to measure the intended clinical benefit of a drug, even if the effect on the surrogate or intermediate clinical endpoint occurs rapidly. For example, accelerated approval has been used extensively in the development and approval of drugs for treatment of a variety of cancers in which the goal of therapy is generally to improve survival or decrease morbidity and the duration of the typical disease course requires lengthy and sometimes large clinical trials to demonstrate a clinical or survival benefit.

The accelerated approval pathway is usually contingent on a sponsor’s agreement to conduct, in a diligent manner, additional post-approval confirmatory studies to verify and describe the drug’s clinical benefit. As a result, a drug candidate approved on this basis is subject to rigorous post-marketing compliance requirements, including the completion of Phase IV or post-approval clinical trials to confirm the effect on the clinical endpoint. Failure to conduct required post-approval studies, or confirm a clinical benefit during post-marketing studies, would allow the FDA to withdraw the drug from the market on an expedited basis. All promotional materials for drug candidates approved under accelerated regulations are subject to prior review by the FDA.

The FDA’s Decision on an NDA

On the basis of the FDA’s evaluation of the NDA and accompanying information, including the results of the inspection of the manufacturing facilities, the FDA may issue an approval letter or a complete response letter. An approval letter authorizes commercial marketing of the product with specific prescribing information for specific indications. A complete response letter generally outlines the deficiencies in the submission and may require substantial additional testing or information in order for the FDA to reconsider the application. If and when those deficiencies have been addressed to the FDA’s satisfaction in a resubmission of the NDA, the FDA will issue an approval letter. The FDA has committed to reviewing such resubmissions in two or six months depending on the type of information included. Even with submission of this additional information, the FDA ultimately may decide that the application does not satisfy the regulatory criteria for approval.

If the FDA approves a product, it may limit the approved indications for use for the product, require that contraindications, warnings or precautions be included in the product labeling, require that post-approval studies, including Phase IV clinical trials, be conducted to further assess the drug’s safety after approval, require testing and surveillance programs to monitor the product after commercialization, or impose other conditions, including distribution restrictions or other risk management mechanisms, including REMS, which can materially affect the potential market and profitability of the product. The FDA may prevent or limit further marketing of a product based on the results of post-market studies or surveillance programs. After approval, many types of changes to the approved product, such as adding new indications, manufacturing changes and additional labeling claims, are subject to further testing requirements and FDA review and approval.

Post-Approval Requirements

Drugs manufactured or distributed pursuant to FDA approvals are subject to pervasive and continuing regulation by the FDA, including, among other things, requirements relating to recordkeeping, periodic reporting, product sampling and distribution, advertising and promotion and reporting of adverse experiences with the product. After approval, most changes to the approved product, such as adding new indications or other labeling claims, are subject to prior FDA review and approval. There also are continuing, annual user fee requirements for any marketed products and the establishments at which such products are manufactured, as well as new application fees for supplemental applications with clinical data.

In addition, drug manufacturers and other entities involved in the manufacture and distribution of approved drugs are required to register their establishments with the FDA and state agencies, and are subject to periodic unannounced inspections by the FDA and these state agencies for compliance with cGMP requirements. Changes to the manufacturing process are strictly regulated and often require prior FDA approval before being implemented. FDA regulations also require investigation and correction of any deviations from cGMP and impose reporting and documentation requirements upon the sponsor and any third-party manufacturers that the sponsor may decide to use. Accordingly, manufacturers must continue to expend time, money and effort in the area of production and quality control to maintain cGMP compliance.

Once an approval is granted, the FDA may withdraw the approval if compliance with regulatory requirements and standards is not maintained or if problems occur after the product reaches the market. Later discovery of previously unknown problems with a product, including adverse events of unanticipated severity or frequency, or with manufacturing processes, or failure to comply with regulatory requirements, may result in revisions to the approved labeling to add new safety information; imposition of post-market studies or clinical trials to assess new safety risks; or imposition of distribution or other restrictions under a REMS program. Other potential consequences include, among other things:

The FDA strictly regulates marketing, labeling, advertising and promotion of products that are placed on the market. Drugs may be promoted only for the approved indications and in accordance with the provisions of the approved label. The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses, and a company that is found to have improperly promoted off-label uses may be subject to significant liability.

In addition, the distribution of prescription pharmaceutical products is subject to the Prescription Drug Marketing Act, or PDMA, which regulates the distribution of drugs and drug samples at the federal level, and sets minimum standards for the registration and regulation of drug distributors by the states. Both the PDMA and state laws limit the distribution of prescription pharmaceutical product samples and impose requirements to ensure accountability in distribution.

Abbreviated New Drug Applications for Generic Drugs

In 1984, with passage of the Hatch-Waxman amendments to the FDCA, Congress authorized the FDA to approve generic drugs that are the same as drugs previously approved by the FDA under the NDA provisions of the statute. To obtain approval of a generic drug, an applicant must submit an abbreviated new drug application, or ANDA, to the agency. In support of such applications, a generic manufacturer may rely on the preclinical and clinical testing previously conducted for a drug product previously approved under an NDA, known as the reference listed drug, or RLD.

Specifically, in order for an ANDA to be approved, the FDA must find that the generic version is identical to the RLD with respect to the active ingredients, the route of administration, the dosage form, and the strength of the drug. At the same time, the FDA must also determine that the generic drug is “bioequivalent” to the innovator drug. Under the statute, a generic drug is bioequivalent to a RLD if “the rate and extent of absorption of the drug do not show a significant difference from the rate and extent of absorption of the listed drug.”

Upon approval of an ANDA, the FDA indicates whether the generic product is “therapeutically equivalent” to the RLD in its publication “Approved Drug Products with Therapeutic Equivalence Evaluations,” also referred to as the “Orange Book.” Physicians and pharmacists consider a therapeutic equivalent generic drug to be fully substitutable for the RLD. In addition, by operation of certain state laws and numerous health insurance programs, the FDA’s designation of therapeutic equivalence often results in substitution of the generic drug without the knowledge or consent of either the prescribing physician or patient.

Under the Hatch-Waxman amendments, the FDA may not approve an ANDA until any applicable period of non-patent exclusivity for the RLD has expired. The FDCA provides a period of five years of non-patent data exclusivity for a new drug containing a new chemical entity. In cases where such exclusivity has been granted, an ANDA may not be filed with the FDA until the expiration of five years unless the submission is accompanied by a Paragraph IV certification, in which case the applicant may submit its application four years following the original product approval. The FDCA also provides for a period of three years of exclusivity if the NDA includes reports of one or more new clinical investigations, other than bioavailability or bioequivalence studies, that were conducted by or for the applicant and are essential to the approval of the application. This three-year exclusivity period often protects changes to a previously approved drug product, such as a new dosage form, route of administration, combination or indication.

Hatch-Waxman Patent Certification and the 30-Month Stay

Upon approval of an NDA or a supplement thereto, NDA sponsors are required to list with the FDA each patent with claims that cover the applicant’s product or an approved method of using the product. Each of the patents listed by the NDA sponsor is published in the Orange Book. When an ANDA applicant files its application with the FDA, the applicant is required to certify to the FDA concerning any patents listed for the reference product in the Orange Book, except for patents covering methods of use for which the ANDA applicant is not seeking approval. To the extent that the Section 505(b)(2) applicant is relying on studies conducted for an already approved product, the applicant is required to certify to the FDA concerning any patents listed for the approved product in the Orange Book to the same extent that an ANDA applicant would.

Specifically, the applicant must certify with respect to each patent that:

A certification that the new product will not infringe the already approved product’s listed patents or that such patents are invalid or unenforceable is called a Paragraph IV certification. If the applicant does not challenge the listed patents or indicates that it is not seeking approval of a patented method of use, the ANDA application will not be approved until all the listed patents claiming the referenced product have expired (other than method of use patents involving indications for which the ANDA applicant is not seeking approval).

If the ANDA applicant has provided a Paragraph IV certification to the FDA, the applicant must also send notice of the Paragraph IV certification to the NDA and patent holders once the ANDA has been accepted for filing by the FDA. The NDA and patent holders may then initiate a patent infringement lawsuit in response to the notice of the Paragraph IV certification. The filing of a patent infringement lawsuit within 45 days after the receipt of a Paragraph IV certification automatically prevents the FDA from approving the ANDA until the earlier of 30 months after the receipt of the Paragraph IV notice, expiration of the patent or a decision in the infringement case that is favorable to the ANDA applicant.

Pediatric Studies and Exclusivity

Under the Pediatric Research Equity Act of 2003, an NDA or supplement thereto must contain data that are adequate to assess the safety and effectiveness of the drug product for the claimed indications in all relevant pediatric subpopulations, and to support dosing and administration for each pediatric subpopulation for which the product is safe and effective. With enactment of the FDASIA in 2012, sponsors must also submit pediatric study plans prior to the assessment data. Those plans must contain an outline of the proposed pediatric study or studies the applicant plans to conduct, including study objectives and design, any deferral or waiver requests and other information required by regulation. The applicant, the FDA, and the FDA’s internal review committee must then review the information submitted, consult with each other, and agree upon a final plan. The FDA or the applicant may request an amendment to the plan at any time.

The FDA may, on its own initiative or at the request of the applicant, grant deferrals for submission of some or all pediatric data until after approval of the product for use in adults, or full or partial waivers from the pediatric data requirements. Additional requirements and procedures relating to deferral requests and requests for extension of deferrals are contained in FDASIA. Unless otherwise required by regulation, the pediatric data requirements do not apply to products with orphan designation.

Pediatric exclusivity is another type of non-patent marketing exclusivity in the United States and, if granted, provides for the attachment of an additional six months of marketing protection to the term of any existing regulatory exclusivity, including the non-patent and orphan exclusivity. This six-month exclusivity may be granted if an NDA sponsor submits pediatric data that fairly respond to a written request from the FDA for such data. The data do not need to show the product to be effective in the pediatric population studied; rather, if the clinical trial is deemed to fairly respond to the FDA’s request, the additional protection is granted. If reports of requested pediatric studies are submitted to and accepted by the FDA within the statutory time limits, whatever statutory or regulatory periods of exclusivity or patent protection cover the product are extended by six months. This is not a patent term extension, but it effectively extends the regulatory period during which the FDA cannot approve another application.

Orphan Drug Designation and Exclusivity

Under the Orphan Drug Act, the FDA may designate a drug product as an “orphan drug” if it is intended to treat a rare disease or condition (generally meaning that it affects fewer than 200,000 individuals in the United States, or more in cases in which there is no reasonable expectation that the cost of developing and making a drug product available in the United States for treatment of the disease or condition will be recovered from sales of the product). A company must request orphan product designation before submitting an NDA. If the request is granted, the FDA will disclose the identity of the therapeutic agent and its potential use. Orphan product designation does not convey any advantage in or shorten the duration of the regulatory review and approval process.

If a product with orphan status receives the first FDA approval for the disease or condition for which it has such designation or for a select indication or use within the rare disease or condition for which it was designated, the product generally will be receiving orphan product exclusivity. Orphan product exclusivity means that the FDA may not approve any other applications for the same product for the same indication for seven years, except in certain limited circumstances. Competitors may receive approval of different products for the indication for which the orphan product has exclusivity and may obtain approval for the same product but for a different indication. If a drug or drug product designated as an orphan product ultimately receives marketing approval for an indication broader than what was designated in its orphan product application, it may not be entitled to exclusivity.

Patent Term Restoration and Extension

The term of a United States patent that covers a drug, biological product or medical device approved pursuant to a PMA may also be eligible for patent term extension when FDA approval is granted, provided that certain statutory and regulatory requirements are met. The length of the patent term extension is related to the length of time the drug is under regulatory review while the patent is in force. The Hatch-Waxman Act permits a patent term extension of up to five years beyond the expiration date set for the patent. Patent extension cannot extend the remaining term of a patent beyond a total of 14 years from the date of product approval, only one patent applicable to each regulatory review period may be granted an extension and only those claims reading on the approved drug may be extended. Similar provisions are available in Europe and certain other foreign jurisdictions to extend the term of a patent that covers an approved drug, provided that statutory and regulatory requirements are met. The United States Patent and Trade Office reviews and approves the application for any patent term extension or restoration in consultation with the FDA.

Regulation Outside the United States

In order to market any product outside of the United States, a company must also comply with numerous and varying regulatory requirements of other countries and jurisdictions regarding quality, safety and efficacy and governing, among other things, clinical trials, marketing authorization, commercial sales and distribution of drug products. Whether or not it obtains FDA approval for a product, the company would need to obtain the necessary approvals by the comparable foreign regulatory authorities before it can commence clinical trials or marketing of the product in those countries or jurisdictions. The approval process ultimately varies between countries and jurisdictions and can involve additional product testing and additional administrative review periods. The time required to obtain approval in other countries and jurisdictions might differ from and be longer than that required to obtain FDA approval. Regulatory approval in one country or jurisdiction does not ensure regulatory approval in another, but a failure or delay in obtaining regulatory approval in one country or jurisdiction may negatively impact the regulatory process in others.

Regulation and Marketing Authorization in the European Union

The process governing approval of medicinal products in the European Union follows essentially the same lines as in the United States and, likewise, generally involves satisfactorily completing each of the following: