Anixa Biosciences, Inc. — Form 10-Q Summary
Business context and reporting period
Reports the unaudited fiscal first quarter ended January 31, 2020, compared with the three months ended January 31, 2019. Anixa is a development-stage biotechnology company focused on cancer diagnostics and therapeutics, with limited legacy patent-licensing activity. It reported no revenue in either period and has not generated revenue from its cancer programs.
Financial performance and liquidity
- Revenue: $0 in both periods.
- Net loss: $2.617 million in Q1 2020 versus $4.967 million in Q1 2019. Net loss attributable to common shareholders was $2.593 million versus $4.882 million; basic and diluted loss per share was $0.13 versus $0.25.
- Expenses: Operating costs and expenses were $2.630 million versus $4.984 million. R&D was $1.491 million versus $2.247 million; G&A was $1.139 million versus $2.066 million. The company reported no patent amortization or impairment in Q1 2020, compared with $251,000 of amortization and $419,000 of impairment in Q1 2019.
- Cash flow: Operating activities used $1.914 million versus $1.330 million. Investing activities used $536,000 versus providing $250,000. Financing activities provided $1.780 million versus $2.176 million. Cash and cash equivalents ended the quarter at $2.822 million, down from $3.492 million at October 31, 2019.
- Liquidity and liabilities: Cash, cash equivalents and short-term certificates of deposit totaled approximately $5.692 million at January 31, 2020, versus $5.842 million at October 31, 2019. Current assets were $5.869 million and current liabilities $1.126 million. Total liabilities were $1.166 million; these included $94,219 in operating lease liabilities. The filing reports no interest-bearing debt.
- Equity financing: The company raised approximately $1.752 million net through at-the-market stock sales, issuing 490,655 shares. It reported 20,841,309 shares outstanding at January 31, 2020 and 21,007,077 at March 9, 2020.
Material changes versus the prior comparable period
- Net loss narrowed by approximately $2.350 million. Lower stock-based compensation, the absence of prior-year patent amortization and impairment, and lower G&A contributed to the decrease; outside R&D spending increased.
- Noncash share-based compensation was approximately $1.021 million versus $2.750 million. R&D expense excluding noncash share-based compensation increased to approximately $1.164 million from $760,000.
- Operating cash use increased despite the lower reported loss. The company also shifted cash into certificates of deposit, resulting in investing cash outflow.
- Adoption of lease accounting in November 2019 brought a right-of-use asset and lease liabilities onto the balance sheet; the company said adoption had no material financial-statement impact.
Outlook, commentary and risks
- Management said, based on information available March 9, 2020, existing cash, investments and expected cash flows should fund activities for the next 12 months. This is an estimate, not a guarantee; the company cautioned that additional funding may be needed and may not be available on acceptable terms.
- The current ATM program could provide approximately $48.587 million of additional stock sales. Further equity or convertible-debt financing could dilute shareholders.
- Management expected no material near-term revenue from therapeutic or diagnostic programs. Cchek Prostate Cancer Confirmation launched commercially in December 2019; the company was working on marketing and reimbursement support.
- The company anticipated filing an IND for its triple-negative breast cancer vaccine around mid-2020 and for its ovarian-cancer CER-T program by year-end 2020, after clinical-grade material testing and subject to FDA review and approval. These are forward-looking expectations.
- Management identified cancer diagnostics, cancer therapeutics and legacy patent licensing as reportable segments. It described ongoing development of Cchek, the breast cancer vaccine and CER-T as primary priorities.
- The company reported no litigation known to management that would have a material adverse effect and no material changes to the risk factors in its fiscal 2019 Form 10-K. It cited funding needs, possible dilution and uncertainty in projections as risks.
- An unusual item affecting reported G&A was the discharge in January 2020 of a disputed liability of approximately $337,000 after the vendor’s statutory collection period expired. The filing reports no material changes in internal control and says disclosure controls were effective.
Important facts for investors to verify
- Whether cash use and spending plans remain consistent with management’s stated 12-month liquidity outlook.
- Progress and timing of the anticipated vaccine and CER-T IND submissions, including completion of material testing and FDA response.
- Commercial uptake, validation, reimbursement and revenue potential of the Cchek prostate test.
- Future use of the ATM program, share-count growth and the resulting dilution.
- Whether R&D and other cash expenses rise as development programs advance, given the absence of operating revenue.