BriaCell Therapeutics Corp. — Form 10-Q Summary
Reporting period: Fiscal first quarter ended October 31, 2022; filed December 14, 2022. Amounts are in U.S. dollars. The filing is unaudited and reports under U.S. GAAP. BriaCell is a clinical-stage immuno-oncology biotechnology company with no reported revenue.
Financial results and position
- Revenue and margins: No revenue was reported. Operating and gross margins are therefore not meaningful.
- Operating expenses: $5.40 million, up from $2.28 million in the comparable 2021 quarter. Research and development was $3.26 million (prior year: $0.88 million); general and administrative expense was $2.15 million (prior year: $1.41 million).
- Operating and net loss: Operating loss was $5.40 million versus $2.28 million. Net loss was $1.11 million, or $0.07 per share, compared with $27.53 million, or $1.81 per share, in the prior-year quarter.
- Non-operating item: Net financial income was $4.30 million, principally from a $4.12 million gain as the fair value of warrant liabilities declined. The comparable period had a $25.25 million warrant-liability fair-value loss. These fair-value movements materially affect reported net loss and are not operating cash flows.
- Cash flow: Operating cash use was $3.54 million versus $1.78 million in the prior-year quarter. Financing cash use was $47,294, related to the warrant buyback. Cash and cash equivalents declined $3.59 million during the quarter, from $41.04 million to $37.45 million.
- Liquidity and balance sheet: Current assets were $38.22 million and current liabilities $0.97 million, resulting in working capital of $37.25 million. Total assets were $38.45 million. The company reported no interest-bearing debt; it had $27.14 million of warrant liabilities, classified as non-current. Accumulated deficit was $61.46 million.
- Equity and share compensation: Common shares outstanding were 15,518,018 at October 31, unchanged during the quarter. Share-based compensation expense was $1.11 million, versus $0.52 million in the prior-year quarter.
Material changes versus the prior comparable period
- R&D expense increased by about $2.38 million, which management attributed to expanded clinical trials, increased laboratory activity and hiring, and share-based compensation. G&A expense rose by about $0.74 million, primarily due to insurance, compensation, professional fees and additional personnel.
- The reported net loss narrowed substantially, mainly because the warrant-liability fair-value movement changed from a large loss in 2021 to a gain in 2022—not because operating costs declined.
- Cash used in operations increased by about $1.76 million year over year. Cash at quarter-end was $37.45 million, compared with $55.49 million at October 31, 2021.
- The company completed its share buyback program on September 27, 2022. During the quarter it repurchased and cancelled 15,736 publicly traded warrants for $47,294; no common shares were repurchased during the quarter.
Business, outlook and risks
- BriaCell is advancing Bria-IMT, a whole-cell immunotherapy, in a Phase I/IIa study with Incyte’s PD-1 inhibitor retifanlimab for advanced breast cancer, alongside the BriaDx companion diagnostic program. It also described next-generation Bria-OTS+ and Bria-PROS programs and an exclusive worldwide license to develop and commercialize soluble CD80, subject to royalties and patent-management costs.
- The company reported preliminary results from a 12-patient cohort: 70% of evaluable patients showed disease-control or progression-free-survival benefits compared with their prior therapy, and disease control was reported in 4 of 7 evaluable patients. These are company-reported early clinical observations, not definitive efficacy findings; patients remained in the study and follow-up was ongoing. The filing says the study had received FDA Fast Track designation.
- No quantified revenue, earnings or clinical-development guidance was provided. Management expected existing capital resources to meet liquidity needs for at least 12 months from issuance of the financial statements, while also stating that continued operations and longer-term plans depend on financing and eventual profitable operations. Management said additional capital may be needed and there is no assurance it can be obtained.
- The filing says COVID-19 had delayed execution of clinical trials and research programs by at least one quarter and could affect enrollment and timelines.
- Legal contingency: The notes describe ongoing litigation with Alpha Capital Anstalt over a loan and warrants. BriaCell disputes the claims and has counterclaimed; the company assessed, based on counsel’s advice, that it was more likely than not it would not have to pay Alpha. The outcome and potential damages were uncertain, with discovery ongoing. Elsewhere, Part II says “Legal Proceedings: None”; this presentation should be reconciled.
- Controls: Management concluded disclosure controls and procedures were not effective at October 31, 2022 because of material weaknesses in internal control over financial reporting. Remediation plans included additional personnel, segregation of duties, independent review and better documentation.
- BriaCell said it was a development-stage business with sustained losses and no assurance it would be able to raise sufficient capital. It reported no off-balance-sheet arrangements or contractual obligations in the MD&A.
Important facts for investors to verify
- Whether the reported clinical response and progression-free-survival observations hold up with continued follow-up, a larger cohort and complete study disclosures.
- Cash burn, trial spending and financing needs relative to management’s stated 12-month liquidity expectation.
- The status, potential exposure and disclosure treatment of the Alpha Capital litigation.
- The size, valuation sensitivity and potential settlement or dilution implications of the $27.14 million warrant liability.
- Progress in remediating the material weaknesses in internal control and restoring effective disclosure controls.
- Whether COVID-related or other enrollment and clinical-site delays continue to affect development timelines.