Full Press Release Details
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF CONDUIT PHARMACEUTICALS LIMITED
should read the following discussion and analysis of our financial condition and results of operations with our audited financial statements
for the year ended December 31, 2022, together with related notes thereto, and unaudited and unreviewed financial statements for
the six months ended June 30, 2023, together with related notes thereto, included in the Proxy Statement/Prospectus. The discussion and
the analysis should also be read together with the section of the Proxy Statement/Prospectus entitled
"Business of Conduit Pharmaceuticals Limited" and the unaudited (and unreviewed with respect to Conduit) pro forma combined
financial information as of and for the six months ended June 30, 2023, and for the year ended December 31, 2022 (included as Exhibit
99.3 of this Current Report). The following discussion contains forward-looking statements based upon current expectations that involve
risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements
as a result of various factors, including those set forth under the section titled "Risk factors" or in other parts of the
Proxy Statement/Prospectus. Our historical results are not necessarily indicative of the results that may be expected for any period
in the future. In this section, unless otherwise specified, the terms "we", "our", "us" and "Conduit"
refer to Conduit Pharmaceuticals Limited. All dollar amounts are expressed in thousands of United States dollars ("$"), unless
otherwise indicated.
Pharmaceuticals Limited formerly SGS Global Limited ("Conduit" or the "Company") was incorporated in the Cayman
Islands as an Exempted Company with Limited Liability in December 2018.
are a clinical-stage specialty biopharmaceutical company that was formed to facilitate the development and commercialization of clinical
assets that have not been, or are not being, prioritized by leading biopharmaceutical companies in order to develop pharmaceutical products
that meet the unmet medical needs of patients.
are led by highly experienced pharma executives, Dr. Freda Lewis-Hall, former Chief Medical Officer of Pfizer Inc., and Dr. David Tapolczay,
former Chief Executive Officer of the United Kingdom-based medical research charity LifeArc.
current development pipeline includes a glucokinase activator, which is Phase II ready in autoimmune diseases including uveitis, Hashimoto's
Thyroiditis, preterm labor and renal transplant rejection. Our development pipeline also includes a potent, irreversible inhibitor of
human Myeloperoxidase (MPO) that has the potential to treat idiopathic male infertility.
have an exclusive relationship and partnership with St George Street Capital ("SGSC"), a biomedical charity based in the
United Kingdom. We fund the development of clinical assets that are initially licensed by SGSC from its existing relationship with AstraZeneca
AB (PUBL). We conduct clinical trials on the clinical assets that we license from AstraZeneca in collaboration with SGSC. In doing so,
we are able to leverage the comprehensive clinical and scientific expertise in order to develop assets through Phase IIb trials in an
efficient manner. We expect that successful Phase IIb trials on the assets in our pipeline will increase the value of the assets.
successful clinical trials, we expect to commercialize the clinical assets in our pipeline through licensing arrangements with larger
pharmaceuticals companies, which may include up-front milestone payments and/or royalties during the time at which such clinical asset
is subject to patents.
intend to use the income received from licensing our clinical assets to fund the development of additional clinical assets. This will
allow us to use the existing income stream from clinical assets that have been licenses to fund our on-going operations without having
to rely solely on debt and/or equity financing. We initially intend to focus on assets that have been deprioritized by larger pharmaceuticals
companies and that have a high unmet medical need in order to develop these assets through the Phase IIb stage. We also believe that
we may be able to apply our business strategy and approach to arrangements to pharmaceutical companies in addition to AstraZeneca.
have incurred significant operating losses since inception. For the six months ended June 30, 2023 and 2022, our net loss was $4.7 million
and $0.9 million, respectively, and we expect to continue to incur significant losses for the foreseeable future as we continue to invest
in a number of research and development programs. As of June 30, 2023, we had an accumulated deficit of $15.4 million.
Merger Agreement and PIPE Financing
a comprehensive review of strategic alternatives, including identifying and reviewing potential candidates for a strategic transaction,
on November 8, 2022, we entered into an Agreement and Plan of Merger (the "Merger Agreement") by and among Conduit, Murphy
Canyon Acquisition Corp ("MURF"), and Conduit Merger Sub, Inc., a Cayman Islands exempted company and a wholly-owned subsidiary
of MURF ("Merger Sub"), which, among other things, provides for the merger of Merger Sub with and into Conduit, with Conduit
surviving the merger as a wholly-owned subsidiary of MURF (the "Business Combination"). On September 22, 2023 (the "Closing
Date"), we consummated the Business Combination with MURF.
the Business Combination, MURF will be renamed "Conduit Pharmaceuticals Inc." and will continue as a public company and a
registrant with the SEC ("New Conduit"). Conduit and MURF believe that the Business Combination and related proceeds will
result in the ability for combined business, through New Conduit, to access the capital markets, increased exposure for the clinical
assets that Conduit is currently developing, and an enhanced ability to attract collaboration, partnering and/or license arrangements
as more information will be readily available about New Conduit.
Business Combination will be accounted for a reverse recapitalization in accordance with U.S. GAAP. Under the reverse recapitalization
method, MURF will be treated as the acquired company for financial reporting purposes, and Conduit, the accounting acquirer, will be
assumed to have issued shares for the net assets of MURF, with no goodwill or other intangible assets recorded. This determination is
primarily based on the following predominant factors: (i) post-closing, our shareholders are expected to have a majority of the voting
power of the combined company and ability to elect the members of the combined company Board of Directors; (ii) the on-going operations
post-merger will comprise those of Conduit; and (iii) all of the senior management of the combined company except for the Chief Financial
Officer will be members of the management of Conduit. The board of directors of each of MURF and Conduit have approved the Business Combination.
The completion of the Business Combination, which is expected to occur in the third quarter of 2023, is subject to approval of the shareholders
of Conduit and the stockholders of MURF and the satisfaction or waiver of certain other customary closing conditions.
the completion of the Business Combination and the closing of the PIPE Financing, the most significant change in our future reported
financial position and result of operations was an estimated increase in cash (as compared to our balance sheet as of June 30, 2023)
to approximately $4.4 million after redemptions, including $20.0 million in gross proceeds from the PIPE Financing. Total direct transaction
costs of MURF and Conduit are estimated at approximately $18.5 million, substantially all of which was recorded as a reduction
to additional paid-in-capital as costs related to the reverse recapitalization. For additional information refer to the information attached
as Exhibit 99.3 to this Current Report.
the closing of the Business Combination, MURF changed its name to "Conduit Pharmaceuticals Inc." which we refer to as New
Conduit and New Conduit is an SEC registrant and its common stock is listed on The Nasdaq Global Market under the symbol "CDT"
and its Public Warrants are listed on The Nasdaq Capital Market under the symbol "CDTTW." As a public company, New Conduit
will need to hire additional personnel and implement procedures and processes to address applicable regulatory requirements and customary
practices. We expect that New Conduit will incur additional annual expenses as a public company for, among other things, directors'
and officers' liability insurance, director fees and additional internal and external accounting, legal and administrative resources,
including increased audit, legal and filing fees.
of COVID-19, the Russia and Ukraine Conflict, and Global Economic Conditions
a result of the spread of the COVID-19 pandemic, economic uncertainties have arisen which may negatively affect our financial position,
results of operations and cash flows. We have assessed that the COVID-19 pandemic has not so far had a material or direct impact on our
operations or financial position. Nevertheless, in light of the ongoing COVID-19 pandemic, we have implemented measures to protect employees
and take social responsibilities while at the same time attempting to limit any negative effects on our business.
full impact of the COVID-19 pandemic continues to evolve as of the date of this Current Report. As such, the full magnitude of the pandemic's
effect on our financial condition, liquidity and future results of operations is uncertain. Management continues to actively monitor
our financial condition, liquidity, operations, suppliers, industry and workforce. See "Risk Factors-Risks Related to
Conduit's Business and Industry-We may in the future be adversely affected by continuation or worsening of the global COVID-19
pandemic, its various strains or future pandemics."
to the pandemic, all clinical trials in the United Kingdom that were not related to COVID-19 were put on hiatus for significant portions
of the year ended December 31, 2021. As a result, during the hiatus, the Company shifted its activities to focus on clinical trials related
to COVID-19. The hiatus on clinical trials not related to COVID-19 was lifted at the end of the year ended December 31, 2021.
conflict between Russia and Ukraine has caused major macroeconomic disruptions that have impacted the global trade and economies. As
such increasing inflation around the globe has forced national banks to increase their interest rates, consequently impacting interest
yields around the globe. We have assessed the impact of these measures and concluded that as of today, no material impact has been identified
on our business or our ability to continue as a going concern.
Component of Result of Operations
and Development Expenses
and development expenses consist primarily of costs incurred in connection with the research and development of our product candidates
and programs. We expense research and development costs and intangible assets acquired that have no alternative future use as incurred.
These expenses include:
| personnel-related expenses, including salaries, bonuses, benefits and stock-based compensation for employees engaged in research and development functions; | ||
| expenses incurred in connection with the clinical development and regulatory approval of our product candidates, including under agreements with third parties, such as consultants, contractors and CROs; | ||
| license fees with no alternative use; and | ||
| other expenses related to research and development. |
expense research and development costs as incurred. Advance payments that we make for goods or services to be received in the future
for use in research and development activities are recorded as prepaid expenses. The prepaid amounts are expensed as the benefits are
date, we do not track our research and development expenses on a program-by-program basis as we only worked on one program related to