Anixa Biosciences, Inc. — FY2018 Form 10-K
Reporting period: Fiscal year ended October 31, 2018, compared with FY2017. This is an annual filing, not a standalone fourth-quarter report. The company changed its name from ITUS Corporation to Anixa Biosciences, Inc. effective October 1, 2018.
Business context
Anixa is an early-stage biotechnology company focused on Cchek, a blood-based cancer-detection platform, and Certainty Therapeutics’ preclinical CAR-T treatment initially targeting ovarian cancer. FY2018 revenue came from legacy patent licensing; the company reported no revenue from its diagnostic or therapeutic programs. It had eight employees at year-end.
Financial performance and liquidity
| Metric | FY2018 / October 31, 2018 | FY2017 / October 31, 2017 |
|---|---|---|
| Revenue | $1.113 million | $0.363 million |
| Operating loss | $14.289 million | $6.076 million |
| Net loss | $14.243 million | $5.009 million |
| Net loss attributable to common stockholders | $13.996 million; $0.79 per share | $7.018 million; $0.58 per share |
| Cash used in operating activities | $4.273 million | $3.797 million |
| Cash, cash equivalents and short-term investments | $5.056 million | $6.839 million |
| Working capital | $4.273 million | Not stated here |
| Total assets | $6.449 million | $8.812 million |
| Current liabilities | $1.265 million | $0.889 million |
Revenue rose about 207%, but consisted of one-time, non-recurring license payments; one licensee accounted for all patent-licensing revenue in both years. Research and development expense increased to $6.813 million from $1.598 million, while general and administrative expense rose to $6.912 million from $4.411 million. The increases were substantially affected by stock-based compensation. The company recorded an additional $0.583 million patent-asset impairment. No interest expense or outstanding debt is shown at October 31, 2018; prior-year interest expense and a debt-extinguishment gain related to a patent acquisition obligation settled in FY2017.
FY2018 investing activities provided $1.462 million, primarily reflecting net certificate-of-deposit maturities. Financing provided $2.528 million, including $2.470 million from an at-the-market share offering. Cash and short-term investments declined by approximately $1.783 million year over year. The filing does not present a meaningful gross margin measure for these licensing and development activities.
Material changes and operating developments
- The company shifted resources toward biotechnology: R&D spending rose materially, including costs for the Moffitt collaboration and the Wistar CAR-T license.
- FY2018 stock-based compensation was significant, including approximately $5.718 million for employee/director options and $2.860 million for restricted stock awards.
- Cchek results reported during the year included a blinded prostate study with 92% sensitivity and 92% specificity, and a biopsy-setting study reporting 89% sensitivity and 100% specificity for distinguishing high-risk prostate cancer from healthy males. The latter suggested potential to reduce unnecessary biopsies by up to 56%.
- Certainty was preparing an IND application for its ovarian-cancer CAR-T program after an October 2018 pre-IND meeting with the FDA. The company stated that a human trial could begin as early as summer 2019, subject to FDA review and approval.
Outlook, risks and contingencies
As of January 11, 2019, management believed available cash, short-term investments and expected cash flows would fund activities for the next 12 months. This is a projection, not a guarantee; management also anticipated continuing losses and stated that additional financing might be needed. Further equity or convertible-debt financing could dilute shareholders, and funding may not be available on acceptable terms.
Cchek remained developmental: the reported studies used relatively small samples, and earlier testing was described as unblinded and non-uniform. Evaluation of benign and other conditions that could affect immune markers was still needed. Regulatory pathway, clinical utility, reimbursement and commercial acceptance were unresolved. The company’s CAR-T program was preclinical, dependent on third parties, and subject to substantial safety, efficacy, manufacturing, clinical-trial and regulatory risks. Both programs depended on securing sufficient capital and potential commercial partners.
A putative shareholder derivative complaint filed November 5, 2018 alleged breach of fiduciary duty and unjust enrichment. The company was named as a nominal defendant; defendants moved to dismiss, and the matter was being briefed. The filing said potential losses could not be reasonably estimated. Management assessed disclosure controls and internal control over financial reporting as effective, but the auditor did not attest to the internal-control assessment. The independent auditor issued an unqualified opinion on the financial statements.
Important facts for investors to verify
- Whether subsequent Cchek studies validate the reported accuracy in larger, representative and independently blinded populations, including patients with benign or inflammatory conditions.
- The status and timing of the CAR-T IND submission, FDA response, clinical-trial start and Moffitt collaboration commitments.
- Cash burn, remaining liquidity, subsequent financing and potential dilution; compare actual cash needs with management’s 12-month funding estimate.
- The durability of licensing revenue, given its non-recurring nature and concentration in one licensee, and the recoverability of remaining patent assets.
- Developments and potential costs related to the shareholder derivative complaint, as well as outstanding equity awards and their dilutive impact.