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August 10, 2018
Ian Huen
Chief Executive Officer
Aptorum Group Ltd
17th Floor, Guangdong Investment Tower
148 Connaught Road Central
Hong Kong
Re: Aptorum Group Ltd.
Draft Registration Statement on Form F-1
Submitted July 13, 2018
CIK No. 0001734005
Dear Mr. Huen:
We have reviewed your draft registration statement and have the
following comments. In
some of our comments, we may ask you to provide us with information so we may
better
understand your disclosure.
Please respond to this letter by providing the requested information and
either submitting
an amended draft registration statement or publicly filing your registration
statement on
EDGAR. If you do not believe our comments apply to your facts and circumstances
or do not
believe an amendment is appropriate, please tell us why in your response.
After reviewing the information you provide in response to these comments
and your
amended draft registration statement or filed registration statement, we may
have additional
comments.
Draft Registration Statement on Form F-1 Submitted July 13, 2018
Cover page
1. Please amend your prospectus cover page to state the volume of
securities being offered
on a minimum and maximum offering basis. Refer to Item 501(b)(2) of
Regulation S-K.
Additionally, please expand your disclosure to include the date the
offering will end, any
plans to place funds in escrow, or alternatively, that you have no such
plans. Refer to Item
501(b)(8)(iii) of Regulation S-K.
Ian Huen
FirstName LastNameIan Huen
Aptorum Group Ltd
Comapany NameAptorum Group Ltd
August 10, 2018
August 10, 2018 Page 2
Page 2
FirstName LastName
2. We note your disclosure on page 6 and elsewhere that your Class B
ordinary shares are
entitled to ten votes per share for any matter submitted for
shareholder approval. Please
expand your cover page disclosure to briefly discuss your dual-class
structure and the
relative voting rights of your Class A and Class B ordinary shares.
3. We note that there is currently no public market for your Class A
ordinary shares, that you
"plan to apply" to have this class listed on the Nasdaq Global Market,
and that the offering
is conditioned on the "reasonable expectation" that the shares would
qualify for listing.
We further note your disclosure that the selling shareholders may not
sell "on any trading
market" until the shares are approved for listing, but that they may
sell in negotiated
transactions. Please amend the cover page to indicate that the selling
stockholders will sell
the shares at a fixed price until the shares are listed on the Nasdaq
and thereafter at
prevailing market prices or privately negotiated prices.
Propsectus Summary
Overview, page 1
4. We note from your disclosure that you have not yet conducted any
clinical trials. Terms
such as "award-winning" and "first-in-class" suggest that the product
candidates are
effective and likely to be approved. Please delete these references
throughout your
registration statement. If your use of these terms was intended to
convey your belief that
the products are based on a novel technology or approach and/or is
further along in the
development process, you may discuss how your technology differs from
technology used
by competitors and that you are not aware of competing products that
are further along in
the development process. Statements such as these should be
accompanied by cautionary
language that the statements are not intended to give any indication
that the product
candidates have been proven effective or that they will receive
regulatory approval.
Similarly, please remove the reference to
"First-in-Class/Best-in-Class innovations" on
page 62 and the statements concerning the poster award and live
demonstration prize on
page 73.
5. We note your disclosure that you may develop formulations of your
therapeutic molecules
which may qualify as nutraceuticals or some other product category
which may be subject
to less regulation and provide a faster path to revenue generation.
Please expand your
disclosure to identify the relevant product candidate(s) and the
contingencies to
commercializing such product candidate(s) as nutraceuticals.
Alternatively, please delete
this disclosure.
6. We note your disclosure that you determined to pursue projects in your
non-therapeutics
segment, such as the AML clinic, to provide some interim revenue.
Please balance your
disclosure by quantifying your estimated operating expenses and/or
identifying the
relevant factors to achieving profitability at the clinic.
Ian Huen
FirstName LastNameIan Huen
Aptorum Group Ltd
Comapany NameAptorum Group Ltd
August 10, 2018
August 10, 2018 Page 3
Page 3
FirstName LastName
Aptorum's Lead Projects, page 2
7. Please expand the number of columns in the development chart so that
it includes all
phases of development that must be completed in order to market your
products (i.e.,
Phase 2 and 3). Please make similar revisions to the chart on page 65.
8. Please clarify the distinctions between "Target ID & Selection," "Lead
Discovery," "Lead
Optimization" and "IND Enabling" and describe the activities conducted
at each of these
stages.
9. As you are in the preclinical stage of development, have not completed
your preclinical
studies and do not intend to submit an IND application until 2020 or
2021, please revise
your disclosure to avoid characterizing your chart as a "pipeline"
chart.
10. We note your disclosure that "preclinical studies of ALS-1 indicate
that it inhibits the
replication of influenza virus in vitro with a nanomolar EC50 and
protects mice challenged
with lethal doses of avian influenza A H5N1." Please delete this
language or place this
selected information in its full and proper context by providing the
specific details and
parameters of the study from which the data was drawn.
11. We note your disclosure on page 3 that "The target site on NP where
ALS-1 is acting has
been identified and mechanism established. Animal model efficacy has
been
demonstrated, while chemical structures are being optimized" as well
as numerous other
statements throughout your registration statement that present your
conclusions regarding
the safety and efficacy of your product candidates, which are
premature and inappropriate
for you to make as these determinations are within the sole authority
of the U.S. Food and
Drug Administration and comparable regulatory bodies. Please revise
your disclosure to
remove these statements here and throughout your registration
statement.
As a non-exhaustive list of examples only, we note the following
statements:
"NLS-1 is a drug molecule derived from natural products (green tea)
which appears to
be effective for the treatment of endometriosis..." on page 4;
"In an animal study...oral administration of Pro-EGCG exhibits
superior efficacy over
other conventional therapeutic agents..." on page 4;
"Assuming our research continues to generate positive results..." on
page 63;
"According to data in our preclinical studies...ALS-1 outperforms
oseltamivir (sold
under the brand name Tamiflu) in cell-based assays and stops virus
replication during
the early to late stages of viral infection..." on page 66;
"EGCG, a naturally occurring molecule occurring extracted from green
tea, appears to
be efficacious for the treatment of endometriosis..." on page 68;
"The target site has been identified and animal efficacy and safety
have been
demonstrated..." on page 72; and
Ian Huen
FirstName LastNameIan Huen
Aptorum Group Ltd
Comapany NameAptorum Group Ltd
August 10, 2018
August 10, 2018 Page 4
Page 4
FirstName LastName
"We intend to develop SPLS-1 as an alternative treatment for liver
cancer, which we
believe will offer improved safety and efficacy..." on page 73.
12. Please remove the graphics from the Summary section and discuss them
in the Business
section where appropriate context may be provided.
Our Structure, page 5
13. We note your disclosure that prior to the completion of the offering,
and as long as
officers and directors own at least 50% of the voting power of the
Company's outstanding
stock, you will qualify as a "controlled company" under Nasdaq listing
rules. Please revise
your disclosure to clarify whether you expect to qualify as a
controlled company after the
offering (on a minimum and maximum basis) and if so, please add a
related risk factor
discussing the scope of the controlled company exemption from
corporate governance
standards.
Our Securities, page 6
14. Please expand your disclosure to discuss the concentration of voting
power due to the
ownership of your Class B ordinary shares. Please add related risk
factor disclosure
discussing the following risks as they relate to the concentration of
ownership of your
Class B common shares:
Your Class A ordinary shares may be undervalued;
Your capital structure may have the effect of delaying or preventing
a change of
control that shareholders may view as beneficial or result in your
Class A shares being
undervalued; and
Future issuances of your Class B ordinary shares may be dilutive to
holders of your
Class A ordinary shares.
Implications of Being an Emerging Growth Company, page 7
15. Please supplementally provide us with copies of all written
communications, as defined in
Rule 405 under the Securities Act, that you, or anyone authorized to
do so on your behalf,
present to potential investors in reliance on Section 5(d) of the
Securities Act, whether or
not they retain copies of the communications.
Risk Factors
Risks related to our IP
"A significant portion of our IP portfolio currently comprises pending patent
applications and
provisional patents...", page 23
16. We note your discussion that a significant portion of your IP
portfolio includes pending
patent applications and provisional patents that have not yet been
issued. Please revise
Ian Huen
FirstName LastNameIan Huen
Aptorum Group Ltd
Comapany NameAptorum Group Ltd
August 10, 2018
August 10, 2018 Page 5
Page 5
FirstName LastName
your disclosure to identify the product candidates for which you have
obtained patents
versus pending or provisional patents.
Use of Proceeds, page 49
17. Please revise this section so that it provides your intended use of
proceeds of the offering
on a minimum and maximum offering basis. Additionally, it appears from
your disclosure
that the proceeds from the offering will not be sufficient to complete
all of your specified
uses. Please disclose how far in the development you expect to achieve
with the proceeds
of this offering and identify the sources of other funds needed to
complete development of
your product and device candidates through commercialization,
development of your
AML clinic and establishment of your self-owned laboratory. Refer to
Instruction 3 to
Item 504 of Regulation S-K.
Capitalization, page 50
18. You indicate that you present capitalization information on an actual,
pro forma, and pro
forma as adjusted basis. However, your table shows columns for actual,
as adjusted
(minimum offering amount), and as adjusted (maximum offering amount),
which do not
match this description. Please revise, as necessary.
Dilution, page 51
19. Please disclose the percentage of immediate dilution resulting from
the offering. Refer to
Item 9.E of the instruction to Form 20-F.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Results of Operations (Successor Basis)
Research and Development Expenses, page 60
20. Please disclose your research and development expense incurred by
project. If you do not
keep track of such costs by project, disclose that fact and the costs
incurred by the types of
costs classified as research and development.
Business
Lead Projects and Significant Projects, page 64
21. We note your disclosure that your Project Companies have entered into
standard license
agreements with various university and licensing entities customized
to the nature of each
project. Given the current stage of development of your product
candidates, these
agreements appear to be material. Please expand your disclosure to
include the material
terms of these agreements. Additionally, please file these license
agreements as exhibits to
the registration statement or tell us why you believe you are not
substantially dependent
upon these agreements. Refer to Item 601(b)(10) of Regulation S-K.
Ian Huen
FirstName LastNameIan Huen
Aptorum Group Ltd
Comapany NameAptorum Group Ltd
August 10, 2018
August 10, 2018 Page 6
Page 6
FirstName LastName
Lead Projects, page 66
22. Please revise your disclosure of your preclinical studies for ALS-1,
ALS-4, and NLS-1 to
remove conclusory statements regarding efficacy and to discuss the
results in terms of
objective data points. Additionally, please tell us whether the
results shown represent
results that were achieved consistently in the preclinical studies,
and also explain whether
such studies were powered for statistical significance.
23. Please ensure that the graphics presented are legible and include
legends defining
abbreviated terms and that include relevant disclosure so that lay
readers will understand
the graphic.
Patent License, page 66
24. Please expand your disclosure concerning the license agreement related
to product
candidate ALS-1 to include all material terms, including the
following:
each parties' rights and obligations;
financial terms, including potential milestone payments and royalty
rate or range not
to exceed ten percent;
duration of the agreement and royalty term; and
termination provisions.
Please make similar revisions to the disclosure concerning the license
agreements related
to ALS-4 on page 68 and NLS-1 on page 71. Please also explain what you
mean by "ITF
matching scheme" on page 71.
SLS-1: Robotic Catheter Platform..., page 73
25. Please expand to describe the current development stage and regulatory
status of this
device.
Intellectual Property, page 74
26. We note your disclosure on page 68 that a U.S. provisional patent has
been filed related to
ALS-4. We note also your disclosure on page 74 that a U.S. provisional
patent
application was filed related to VLS-3. Please expand your disclosure
to explain what a
provisional patent application is and whether you or another party is
actively preparing a
patent application and, if so, when you anticipate filing this
application. Please also
include the dates that the provisional patent applications were filed,
how the cost of a
patent application, if any, will be funded, and the date that you will
lose the filing date
established by the provisional patent application if a patent
application is not filed.
27. Please expand your disclosure in the chart on page 75 to include all
patents, patent
applications and provisional patents that are material to your
business. Refer to Item 4.B.6
of Form 20-F.
Ian Huen
FirstName LastNameIan Huen
Aptorum Group Ltd
Comapany NameAptorum Group Ltd
August 10, 2018
August 10, 2018 Page 7
Page 7
FirstName LastName
Important Advisors and Consultants to the Company, page 77
28. Please expand your disclosure to identify the services provided by
each individual that are
material to your business. To the extent these individuals do not
actively provide services
that are material to your business, please remove these biographies or
tell us why you
believe it is appropriate to include them.
Government Regulation, page 80
29. We note the only disclosure regarding government regulations specific
to medical device
testing and approval is a statement on page 81 that "devices are
subject to different forms
of testing and approval" and must satisfy "various FDA requirements in
order to be
brought to market." Please expand to describe the regulations specific
to the SLS-1
robotic catheter device.
Appointment Letters, page 101
30. Please revise to describe the material terms of each letter separately
as it appears the terms
of the letters were not the same for each officer. For instance, we
note that Dr. Cheng
received a stock bonus of 5% of Aptorum Medical Limited's ordinary
shares in connection
with his appointment letter.
Transactions with Related Parties, page 101
31. Your service agreement with Covar Pharmaceuticals Incorporated appears
to be material.
Please file the Covar agreement as an exhibit to the registration
statement. Refer to Item
601(b)(10) of Regulation S-K. Alternatively, please tell us why you
believe such filing is
not required.
Description of Share Capital
Voting Rights, page 112
32. Please revise to clarify the matters requiring a special resolution as
opposed to an ordinary
resolution.
Anti-Takeover Provisions, page 114
33. Please expand your disclosure to specify the limitation on the ability
of shareholders to
convene a general meeting under your Memorandum and Articles.
Consolidated Financial Statements, page F-1
34. Please tell us how you determined the appropriate allocation of
shareholders' equity upon
the change in investment company status. In this regard, we note that
you allocated the
entire net asset balance as of February 28, 2017 to ordinary shares
and APIC despite the
fact that your net assets included undistributed ordinary income and
accumulated
Ian Huen
Aptorum Group Ltd
August 10, 2018
Page 8
undistributed net realized loss on investments. Explain how you
determined that no
amounts should be allocated to accumulated deficit or accumulated other
comprehensive
loss.
Notes to Consolidated Financial Statements (Successor Basis)
14. Summary of Significant Accounting Policies
Intangible Assets, page F-37
35. Please provide us a detailed analysis supporting your determination that
the unpatented
licenses have an indefinite useful life. Refer to ASC 350-30-35-4.
36. Please confirm to us that you do not have additional obligations under
the license
agreements. Otherwise, disclose the amount and description of the
obligations that are
remaining, including those that are contingent. To the extent material,
such disclosure
should also be made as contractual obligations under your MD&A liquidity
section.
Research and Development Expenses, page F-38
37. Please tell us, if true, why you do not include amortization of the
patent license or
depreciation of the laboratory equipment in research and development
expenses. Refer to
ASC 730-10-25-2.
General
38. Please provide us proofs of all graphics, visual, or photographic
information you will
provide in the printed prospectus prior to its use, for example in a
preliminary prospectus.
Please note that we may have comments regarding this material.
You may contact Keira Nakada at 202-551-3659 or Angela Connell at
202-551-3426 if
you have questions regarding comments on the financial statements and related
matters. Please
contact Christine Westbrook at 202-551-5019 or Mary Beth Breslin at
202-551-3625 with any
other questions.
Sincerely,
FirstName LastNameIan Huen
Division of
Corporation Finance
Comapany NameAptorum Group Ltd
Office of
Healthcare & Insurance
August 10, 2018 Page 8
cc: Louis Taubman, Esq.
FirstName LastName