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Achilles Therapeutics plc(ACHL) - 2023 Q4 - Annual Report
ACHLAchilles Therapeutics plc(ACHL)2024-04-04 12:12

Nasdaq Compliance and Regulatory Issues - The company received a deficiency letter from Nasdaq on September 20, 2023, indicating that the closing bid price for its ADSs had been below the minimum 1.00perADSfor30consecutivebusinessdays[346].−ThecompanywasgivenuntilMarch18,2024,toregaincompliancewithNasdaqListingRule5550(a)(2)andsuccessfullyreestablishedpricecomplianceonMarch4,2024[346].−ThecompanymayfacechallengesinmaintainingcompliancewithNasdaqlistingrequirements,whichcouldleadtopotentialdelistingofitsADSs[347].−ThecompanymayincursignificantregulatoryandcompliancecostsasaresultofoperatingasaU.S.listedcompany,whichincludeslegal,accounting,andotherexpensesnotpreviouslyincurredasaprivateentity[348].−ThecompanyissubjecttoU.S.federalsecuritieslaws,andanyclaimsarisingundertheselawsmustbebroughtinfederalcourtinNewYork[366].−Thecompanyhaslimitedchoiceofforumforlegalactions,whichmaydiscouragelawsuitsagainstit[365].ShareholderRightsandCorporateGovernance−ThecompanyhasnotpaiddividendsonitsADSsanddoesnotintendtodoso,limitingreturnstoshareholderstopotentialappreciationoftheirshares[354].−ThecompanymaynotprovidevotingmaterialstoADSholdersintimeforthemtoexercisetheirvotingrights,potentiallylimitingtheirabilitytoparticipateincorporategovernance[356].−Shareholderapprovalisrequiredforcertaincapitalstructuredecisions,whichmaylimitthecompany′sflexibility[367].−Thecompanyhasafive−yearauthorizationfromshareholderstoallotadditionalshares,whichwillneedtobereneweduponexpiration[368].−ShareholderrightsdifferunderEnglishlawcomparedtoU.S.law,includingpreemptiverightsandrequirementsforshareholderapprovaloncertaincorporateactions[396].−ThecompanyisnotcurrentlysubjecttotheUKTakeoverCode,whichaffectsshareholderprotectionsintakeoversituations[392].−Thecompany’sArticlesofAssociationstipulatethatthecourtsofEnglandandWalesaretheexclusiveforumforresolvingmostshareholdercomplaints[398].FinancialPerformanceandOperatingResults−Thecompanyanticipatesfluctuationsinoperatingresultsduetovariousfactors,includingresearchanddevelopmentcostsandclinicaltrialoutcomes,makingfutureresultsdifficulttopredict[388].−Thecompanymayfacesignificantfluctuationsinquarterlyandannualoperatingresults,whichcouldleadtoadeclineinthepriceofitsAmericanDepositaryShares(ADSs)ifexpectationsarenotmet[390].−TotaloperatingexpensesfortheyearendedDecember31,2023,were1.00 per ADS for 30 consecutive business days[346]. - The company was given until March 18, 2024, to regain compliance with Nasdaq Listing Rule 5550(a)(2) and successfully reestablished price compliance on March 4, 2024[346]. - The company may face challenges in maintaining compliance with Nasdaq listing requirements, which could lead to potential delisting of its ADSs[347]. - The company may incur significant regulatory and compliance costs as a result of operating as a U.S. listed company, which includes legal, accounting, and other expenses not previously incurred as a private entity[348]. - The company is subject to U.S. federal securities laws, and any claims arising under these laws must be brought in federal court in New York[366]. - The company has limited choice of forum for legal actions, which may discourage lawsuits against it[365]. Shareholder Rights and Corporate Governance - The company has not paid dividends on its ADSs and does not intend to do so, limiting returns to shareholders to potential appreciation of their shares[354]. - The company may not provide voting materials to ADS holders in time for them to exercise their voting rights, potentially limiting their ability to participate in corporate governance[356]. - Shareholder approval is required for certain capital structure decisions, which may limit the company's flexibility[367]. - The company has a five-year authorization from shareholders to allot additional shares, which will need to be renewed upon expiration[368]. - Shareholder rights differ under English law compared to U.S. law, including preemptive rights and requirements for shareholder approval on certain corporate actions[396]. - The company is not currently subject to the UK Takeover Code, which affects shareholder protections in takeover situations[392]. - The company’s Articles of Association stipulate that the courts of England and Wales are the exclusive forum for resolving most shareholder complaints[398]. Financial Performance and Operating Results - The company anticipates fluctuations in operating results due to various factors, including research and development costs and clinical trial outcomes, making future results difficult to predict[388]. - The company may face significant fluctuations in quarterly and annual operating results, which could lead to a decline in the price of its American Depositary Shares (ADSs) if expectations are not met[390]. - Total operating expenses for the year ended December 31, 2023, were 75.3 million, a decrease of 3.1millioncomparedto3.1 million compared to 78.4 million in 2022[692]. - Research and development expenses increased by 1.0millionto1.0 million to 58.2 million in 2023, primarily due to a 4.7millionincreaseintheNSCLCprogramanda4.7 million increase in the NSCLC program and a 3.2 million increase in the melanoma program[693]. - General and administrative expenses decreased by 4.1millionto4.1 million to 17.0 million in 2023, attributed to a reduction in facilities expenses and lower personnel costs[695]. - Other income (expense), net was 6.1millionfor2023,downfrom6.1 million for 2023, down from 7.3 million in 2022, mainly due to a decrease in foreign exchange gains[696]. - The provision for income taxes was 0.5millionfor2023,comparedto0.5 million for 2023, compared to 0.1 million in 2022, related to U.S. income tax obligations[697]. - The net loss for the year ended December 31, 2022, was 71.2million,comparedtoanetlossof71.2 million, compared to a net loss of 61.1 million in 2021[699]. - As of December 31, 2023, the company had cash and cash equivalents of 131.5million,withnetcashproceedsof131.5 million, with net cash proceeds of 230.9 million from preferred shares and 160.6millionfromIPOsales[705].−Netcashusedinoperatingactivitiesfor2023was160.6 million from IPO sales[705]. - Net cash used in operating activities for 2023 was 48.4 million, primarily due to a net loss of 69.7million[708].−Thecompanyexpectstofunditsoperatingexpensesandcapitalrequirementsthrough2025withitscurrentcashreserves,focusingonongoingclinicaltrials[715].TaxationandFinancialObligations−AsofDecember31,2023,thecompanyhadcumulativeUnitedKingdomcarryforwardtaxlossesof69.7 million[708]. - The company expects to fund its operating expenses and capital requirements through 2025 with its current cash reserves, focusing on ongoing clinical trials[715]. Taxation and Financial Obligations - As of December 31, 2023, the company had cumulative United Kingdom carryforward tax losses of 121.7 million[409]. - The company expects to be classified as a Passive Foreign Investment Company (PFIC) for the taxable year ending December 31, 2024[404]. - The UK research and development tax credit regime allows the company to surrender some trading losses for a cash rebate of 33.35% of qualifying R&D expenditure incurred prior to April 1, 2023, decreasing to 18.6% thereafter[410]. - Changes to the R&D tax relief legislation effective from April 2024 may restrict the relief that can be claimed for subcontracted R&D activity[411]. - The company has not paid any UK corporation tax due to generating losses since inception[409]. - The company is subject to increased scrutiny from HMRC regarding claims for R&D tax credits[414]. - The determination of whether the company is a Controlled Foreign Corporation (CFC) is complex and may have adverse tax consequences for U.S. Holders[407]. - The company may incur additional costs if the U.S. Federal Forum Provision is found to be inapplicable or unenforceable[400]. Cybersecurity and Operational Risks - The company has not experienced any material cybersecurity incidents to date, but acknowledges the increasing risk of cyber-attacks that could disrupt operations and compromise sensitive data[373]. - The company relies on third-party providers for manufacturing and clinical trials, which could be adversely affected by cybersecurity incidents or operational disruptions[374]. - The company has implemented security measures to protect its information systems, but acknowledges that cyber-attacks are becoming more sophisticated and frequent[379]. - The company is exposed to significant risks related to cybersecurity incidents, which could lead to litigation, fines, and reputational damage[381]. - The company is predominantly self-insured against various business disruptions, which could significantly harm its financial condition[374]. Environmental and Social Governance (ESG) Concerns - Environmental, social, and governance (ESG) concerns are increasingly impacting the company's operations, potentially leading to increased costs and reduced demand for products if expectations are not met[382]. - Climate change poses physical risks to the company's facilities and supply chain, which could result in increased operational costs and business interruptions[385]. - The company may face new legal or regulatory requirements related to climate change, which could increase compliance costs and operational expenses[387].