Midatech Pharma : Interim Report 2020

Midatech Pharma plc

Interim Report

Six months ended 30 June 2020

Company Number 09216368

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Midatech Pharma Plc

("Midatech" or the "Company")

Midatech Pharma PLC (AIM: MTPH.L; Nasdaq: MTP), a drug delivery technology company focused on improving the bio-delivery and bio-distribution of medicines, announces its unaudited interim results for the six months ended 30 June 2020.

OPERATIONAL HIGHLIGHTS (including post period end)

• In March, an exploratory study was initiated with MTX110 by Columbia University in five patients with DIPG using an alternative convection enhanced delivery system.
• In March, the Company announced a wide-ranging Strategic Review, updated in April to include a Formal Sale Process under the Takeover Code. The Formal Sale Process was subsequently terminated in July.
• In March, the decision was taken to terminate further in-house development of the MTD201 programme with immediate effect although the asset remains available for licensing. All activities connected with MTD201 have been wound down expeditiously and the manufacturing facilities in Bilbao have been closed. Following the termination of in-house development of MTD201, the Company realigned its strategy towards exploiting its Q-Sphera technology more broadly.
• In April, an exploratory study was initiated with MTX110 by the University of Texas, Houston in five patients with recurrent medulloblastoma.
• In June, the Company signed a research collaboration with Dr Reddy's Laboratories Ltd under which Midatech is deploying its in-house expertise and Q-Sphera drug delivery platform to medicines nominated by Dr Reddy's.
• In July, the Company signed a collaboration with an unnamed European affiliate of a global pharmaceutical company, to establish the application of the Q-Sphera platform to new modalities in drug delivery.

FINANCIAL HIGHLIGHTS (including post period end)

• Total revenue in H1 2020 was £0.17m (H1 2019: £0.45m). Total revenue represents income from R&D collaborations plus grant revenue.
• Research and development costs increased by 15% to £3.99m (H1 2019: £3.46m) as a result of lower MTX110 development costs, redundancy costs of £0.88m and write-down of Spain assets of £0.55m, offset by a negative share-based payment charge of £0.35m.
• Administrative expenses increased to £2.93m (H1 2019: £2.05m) and included £0.35m one- time costs associated with Spanish Government loans, £0.07m UK redundancy costs and a £0.51m increase in legal and professional fees.
• Impairment of intangible assets of £11.59m (H1 2019: Nil) related to the termination of further in-house development of MTD201 and associated IPRD and goodwill.
• Net cash used in operating activities (after changes in working capital) in H1 2020 was
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£7.09m, compared with £4.56m in H1 2019.

• In May, in a concurrent Registered Direct Offering in the US and a Placing in the UK, the Company raised £4.26m before expenses through the sale of 15.76m ordinary shares at £0.27 per share and warrants exercisable for 16.55m ordinary shares at £0.34 per share.
• In July, the Company raised an additional £5.75m before expenses in an oversubscribed UK Placing, including a Broker Option, through the sale of 21.3m ordinary shares at £0.27 per share with no warrants.
• The cash balance at 30 June 2020 was £4.33m.

This announcement contains inside information for the purposes of Article 7 of EU Regulation 596/2014.

About Midatech Pharma PLC

Midatech Pharma PLC (dual listed on LSE AIM: MTPH; and NASDAQ: MTP) is a drug delivery technology company focused on improving the bio-delivery and bio-distribution of medicines. The Company combines approved and development medications with its proprietary and innovative drug delivery technologies to provide compelling products that have the potential to powerfully impact the lives of patients.

The Company has developed three in-house technology platforms, each with its own unique mechanism to improve delivery of medications to sites of disease. All of the Company's technologies have successfully entered human use in the clinic, providing important validation of the potential for each platform:

• Q-Sphera™platform: a disruptive micro-technology used for sustained release to prolong and control the release of therapeutics over an extended period of time (from weeks to months).
• MidaSolve™ platform: an innovative nanotechnology used to dissolve insoluble drugs so that they can be administered in liquid form directly and locally into tumours.
• MidaCore™ platform: a leading-edge nanotechnology used for targeting medications to sites of disease.

The platform nature of the technologies offers the potential to develop multiple drug assets rather than being reliant on a limited number of programmes. Midatech's technologies are supported by 36 patent families including 120 granted patents and an additional 70 patent applications. Midatech's headquarters and R&D facility is in Cardiff, UK. For more information please visit www.midatechpharma.com

Forward-Looking Statements

Certain statements in this press release may constitute "forward-looking statements" within the meaning of legislation in the United Kingdom and/or United States Private Securities Litigation Reform Act. All statements contained in this press release that do not relate to matters of historical fact should be considered forward- looking statements.

Reference should be made to those documents that Midatech shall file from time to time or announcements that may be made by Midatech in accordance with the London Stock Exchange AIM Rules for Companies ("AIM Rules"), the Disclosure and Transparency Rules ("DTRs") and the rules and regulations promulgated by the US Securities and Exchange Commission, which contains and identifies other important factors that could cause actual results to differ materially from those contained in any projections or forward-looking statements. These forward-looking statements speak only as of the date of this announcement. All subsequent written and oral forward-looking statements by or concerning Midatech are expressly qualified in their entirety by the cautionary statements above. Except as may be required under the AIM Rules or the DTRs or by relevant law in the United Kingdom or the United States, Midatech does not undertake any obligation to publicly update or revise any forward-looking statements because of new information, future events or otherwise arising.

CHIEF EXECUTIVE'S REVIEW

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The first half of 2020 proved to be a period of significant transition for Midatech. We began the half-year with positive results from our Phase I study comparing subcutaneous and intramuscular administration of MTD201, conferring the potential for an additional patient and cost benefit of the product. Preparations for Phase III were well advanced when the dislocation in the capital markets which began in mid-February combined with the limited prospects for partnering of assets at that time, caused the Board to reassess and the Company began a wide-ranging strategic review of its operations.

Strategic Review and Formal Sale Process

On 31 March 2020 we announced that the Company was initiating a formal Strategic Review. The Board had concluded that, in the context of its cash runway, the Company was unlikely to consummate a license transaction or raise sufficient funds to continue the required remaining investment in MTD201 of approximately US$30 million on a timely basis. We therefore decided to terminate further inhouse development of the MTD201 programme with immediate effect, although the asset remains available for licensing. We also took the difficult decision to close the Company's MTD201 dedicated manufacturing facilities in Bilbao, Spain and offer redundancy to all 42 employees. In addition, a further five UK-based employees in clinical research and administrative roles were also offered redundancy.

On 20 April 2020, we announced that we had appointed Noble Capital Markets Inc. to advise the Board in considering all options for extracting value from its technologies and optimising outcomes for the Company's shareholders including partnering clinical stage assets, partnering or selling one or more technologies, or selling the Company by way of a "Formal Sale Process" under the Takeover Code. We did not receive any proposals for the acquisition of the Company under the Code and, accordingly, the Formal Sale Process was terminated in July. We are evaluating expressions of interest from third parties for the potential acquisition of certain assets of the Company

All activities connected with MTD201 have been wound down expeditiously and the manufacturing facilities in Bilbao have been closed. Following the termination of in-house development of MTD201, we realigned our strategy for exploiting our Q-Sphera technology as discussed under Commercial Update below.

Commercial Update

As a result of the Strategic Review, Midatech's remaining 20 employees and operations are now concentrated in Cardiff. The Company's strategy was immediately pivoted to deploy its proprietary Q-Sphera drug delivery technology to (1) formulate a compelling portfolio of novel products with significant commercial potential for licensing to pharmaceutical company partners; and (2) formulate proprietary compounds of pharmaceutical partners under collaboration agreements.

The Company's commercial strategy is gaining traction. On 8 June 2020, we announced a collaboration with Dr Reddy's Laboratories Ltd and on 21 July 2020 we announced a second collaboration with a European affiliate of a global pharmaceutical company, in each case to explore the feasibility of applying Midatech's Q-Sphera technology to the partners' proprietary products. One of our partners has extended the initial collaboration to two products. We believe the collaborations are encouraging early validation of the technology platform and, if successful, we would expect to enter into licensing and technology transfer agreements with partners including milestone payments and royalties with the medium term goal of becoming a self-sustaining, profitable business.

R&D update

With termination of further inhouse development of MTD201 and change in strategic emphasis towards collaborating and partnering at proof-of-concept stage, the Company's R&D portfolio is significantly more diversified as follows:

ID	API	Therapeutic Area	Administration	Formulation	Pre-	Phase	Phase	Partnering
					clinical	I	II	Status

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