Akari Therapeutics (NASDAQ:AKTX) is an innovative biotechnology company that has undergone a transformative merger, solidifying its position as a diversified player in the pharmaceutical industry. With a renewed focus on key programs and a strengthened financial position, Akari is poised to make significant strides in developing advanced therapies for autoimmune, inflammatory, and oncological diseases.

Business Overview and History

Akari Therapeutics was founded in 2010 with a focus on developing advanced therapies for autoimmune and inflammatory diseases. The company's lead product candidate, nomacopan, is a recombinant small protein that acts on complement C5, preventing release of C5a and formation of C5b-9, as well as specifically sequestering and inhibiting leukotriene B4 (LTB4).

In the early years, Akari concentrated on research and development activities to advance nomacopan through preclinical studies and into clinical trials. The company initiated a Phase II clinical trial evaluating nomacopan for the treatment of bullous pemphigoid (BP) in 2014. However, this program was discontinued in 2022 after initial trial results did not meet expectations.

Despite this setback, Akari persevered with nomacopan's development. In 2018, the company launched a Phase II/III clinical trial evaluating nomacopan for the treatment of hematopoietic stem cell transplant-related thrombotic microangiopathy (HSCT-TMA) in pediatric patients. This trial continued until 2024 when Akari announced the suspension of the HSCT-TMA program following a portfolio prioritization review.

Throughout its history, Akari has faced significant financial challenges, relying heavily on equity financing to fund its operations. The company has raised over $50 million through various private placements and public offerings since its inception. In 2024, Akari was notified by Nasdaq that it was not in compliance with the minimum shareholders' equity requirement for continued listing. After negotiations, Akari regained compliance in November 2024, maintaining its Nasdaq listing.

In May 2024, Akari entered into a definitive merger agreement with Peak Bio, Inc., a company known for its proprietary antibody drug conjugate (ADC) platform technology. This strategic combination, which closed in November 2024, has expanded Akari's pipeline and bolstered its capabilities in the oncology space.

Following the merger, Akari's key priorities include advancing Peak Bio's ADC platform, which utilizes novel payloads and linker technologies, as well as progressing Akari's lead asset, PAS-nomacopan, for the treatment of geographic atrophy (GA), a devastating form of dry age-related macular degeneration (AMD). The company has received positive and constructive feedback from the FDA on its development plans for PAS-nomacopan in GA.

Financials and Liquidity

Akari's financial performance has been characterized by significant research and development investments, as is typical for a clinical-stage biotechnology company. For the fiscal year ended December 31, 2023, the company reported no revenue and a net loss of $17.75 million. The company's cash position as of December 31, 2023, stood at $13.25 million.

For the nine months ended September 30, 2024, Akari reported no revenue and a net loss of $16.02 million, compared to a net loss of $5.87 million for the same period in 2023. The increase in net loss was primarily due to higher research and development expenses, general and administrative costs, merger-related costs, and restructuring expenses. The company's cash position as of September 30, 2024, decreased to $2.25 million.

During the nine months ended September 30, 2024, Akari incurred $5.74 million in research and development expenses related to the clinical development of nomacopan for HSCT-TMA, including payments to contract research organizations (CROs) and other vendors. Additionally, the company spent $3.40 million on chemistry, manufacturing, and control activities for nomacopan and PAS-nomacopan, an increase of $1.76 million compared to the same period in 2023, primarily due to increased spending on the development and preparation for manufacturing of PAS-nomacopan.

To support its ongoing operations and research efforts, Akari has raised capital through various financing activities. In 2022 and 2023, the company conducted several private placements and registered direct offerings, raising a total of $25.19 million in net proceeds. Additionally, in May 2024, Akari secured $7.6 million in gross proceeds from a private placement financing round led by existing investors and insiders.

The company's liquidity position remains a concern, with a current ratio and quick ratio of 0.29 as of September 30, 2024. The company's accumulated deficit reached $243.50 million by the end of Q3 2024. The auditors expressed substantial doubt about Akari's ability to continue as a going concern in its 2023 fiscal year-end financial statements. However, the recent $7.6 million financing, coupled with the expected benefits of the Peak Bio merger, are expected to provide the necessary runway to advance the company's key programs.

Operational Highlights and Upcoming Catalysts

Akari's key operational highlights include:

1. Merger with Peak Bio: The successful completion of the merger with Peak Bio in November 2024 has bolstered Akari's pipeline and capabilities, particularly in the oncology space. The combined entity is now focused on advancing Peak Bio's ADC platform and Akari's PAS-nomacopan for the treatment of geographic atrophy.

2. Positive FDA Feedback on PAS-nomacopan: In August 2024, Akari received positive and constructive feedback from the FDA on its development plans for PAS-nomacopan in the treatment of geographic atrophy. This feedback provides clarity on the company's final IND-enabling preclinical plans, drug manufacturing, and Phase 1 clinical strategy for this long-acting bispecific inhibitor.

3. Restructuring and Cost-Saving Measures: In May 2024, Akari announced a reduction-in-force and operational restructuring plan to align with the company's prioritization of the Peak Bio ADC platform and the PAS-nomacopan program. The company reduced its workforce by approximately 67% and incurred $1.70 million in restructuring and other costs during the nine months ended September 30, 2024, including $1.40 million in severance and other settlement payments to terminated employees and executives, and $0.30 million in non-cash share-based compensation expense related to accelerated vesting of equity awards.

4. Interim CEO Appointment and Alignment with Shareholders: In May 2024, Akari appointed Samir R. Patel, M.D., as Interim CEO. Dr. Patel's compensation structure, which consists solely of equity, demonstrates his alignment with the interests of Akari's shareholders.

5. Suspension of HSCT-TMA Program: Following a portfolio prioritization review, Akari announced the suspension of its HSCT-TMA program in May 2024, allowing the company to focus resources on its most promising assets.

Looking ahead, Akari's key upcoming catalysts include:

• Completion of IND-enabling studies and filing of an Investigational New Drug (IND) application for PAS-nomacopan in geographic atrophy, expected in 2025
• Advancement of Peak Bio's ADC platform, including the TROP-2 ADC program, through preclinical and potential clinical development
• Continued exploration of partnership and licensing opportunities for nomacopan and the ADC platform

Risks and Challenges

Despite the promising developments, Akari Therapeutics faces several risks and challenges common to the biotechnology industry:

1. Clinical Trial Risks: As a clinical-stage company, Akari's success is heavily dependent on the successful completion and positive outcomes of its clinical trials for PAS-nomacopan and the ADC programs. Failures or delays in these trials could significantly impact the company's prospects.

2. Regulatory Hurdles: Obtaining regulatory approvals for Akari's drug candidates is crucial, and any setbacks or delays in the regulatory process could hinder the company's ability to bring its products to market.

3. Competitive Landscape: Akari operates in highly competitive therapeutic areas, with the potential for new entrants or advancements by rival companies to challenge the company's position.

4. Financing and Liquidity Concerns: Akari's ability to secure additional funding to support its operations and research efforts remains a key risk, as the company's current cash position may not be sufficient to sustain its activities in the long term. The company's accumulated deficit of $243.50 million and low current ratio of 0.29 highlight the need for additional financing.

5. Integration Challenges: The successful integration of Peak Bio's operations and technologies with Akari's existing business is critical to unlocking the full potential of the merged entity.

Conclusion

Akari Therapeutics has undergone a transformative merger with Peak Bio, positioning the combined company as a diversified player in the biotechnology industry. With a renewed focus on key programs, including the ADC platform and the PAS-nomacopan asset, Akari is poised to make significant strides in addressing unmet medical needs across autoimmune, inflammatory, and oncological diseases. The company's strategic decision to suspend the HSCT-TMA program and restructure its operations has allowed it to concentrate resources on its most promising assets.

However, the company faces the typical risks and challenges associated with clinical-stage biotechnology companies, including regulatory hurdles, competitive pressures, and ongoing financing requirements. Akari's financial position remains precarious, with a significant accumulated deficit and limited cash resources. The success of the company will depend on its ability to advance its pipeline, particularly PAS-nomacopan for geographic atrophy and the ADC platform, while managing its cash burn and securing additional funding as needed.

As Akari navigates these challenges, its ability to successfully integrate the Peak Bio operations, advance its pipeline, and leverage its strengthened portfolio will be crucial in determining the company's long-term success. The positive FDA feedback on PAS-nomacopan and the potential of the ADC platform provide reasons for optimism, but careful execution and financial management will be essential for Akari to capitalize on these opportunities and create value for shareholders in the coming years.