CollPlant Holdings Ltd. — FY2017 Form 20-F
Reporting period: Year ended December 31, 2017. This is an annual report, not a standalone fourth-quarter filing. Financial statements are prepared under IFRS as issued by the IASB, in NIS; dollar figures are convenience translations. ADSs began trading on Nasdaq on January 31, 2018.
Business context and results
CollPlant is an Israel-based regenerative medicine company developing tissue-repair products using recombinant human type I collagen (rhCollagen) produced in tobacco plants. Its programs include BioInk for 3D bioprinting, VergenixSTR for tendinopathy, and VergenixFG for wound care. VergenixSTR and VergenixFG had European CE marks and early commercial sales; the company reported that it had not yet generated significant product revenue.
Key financial metrics
| Metric | FY2017 | FY2016 |
|---|---|---|
| Revenue | NIS 1.668 million ($481,000) | NIS 292,000 |
| Cost of revenue / gross profit | NIS 52,000 / NIS 1.616 million | NIS 0 / NIS 292,000 |
| Gross margin | Approximately 97% | Not meaningful as cost of revenue was nil |
| Net R&D expense after participation | NIS 14.066 million | NIS 16.789 million |
| General, administrative and marketing expense | NIS 8.303 million | NIS 11.048 million |
| Operating loss | NIS 20.753 million ($5.986 million) | NIS 27.545 million |
| Comprehensive loss | NIS 20.880 million ($6.022 million) | NIS 27.893 million |
| Basic and diluted loss per share | NIS 0.16 | NIS 0.28 |
| Cash used in operating activities | NIS 17.884 million ($5.158 million) | NIS 19.357 million |
| Cash used in investing activities | NIS 447,000 | NIS 492,000 |
| Cash from financing activities | NIS 32.395 million | NIS 18.486 million |
At December 31, 2017, cash and cash equivalents were NIS 17.817 million ($5.139 million); total assets were NIS 28.045 million, total liabilities NIS 18.962 million, and equity NIS 9.083 million. Current assets of NIS 22.414 million exceeded current liabilities of NIS 4.918 million. The balance sheet included NIS 12.639 million of debentures at fair value and NIS 141,000 of derivative liabilities. The debentures converted into pre-funded warrants in January 2018.
Material changes versus the prior year
- Revenue rose from NIS 292,000 to NIS 1.668 million, driven by a full year of Vergenix sales, wider European distribution, and initial BioInk sales of NIS 689,000. Management said average product sale prices did not materially change.
- Operating loss narrowed by approximately 25%, and comprehensive loss narrowed by approximately 25%. Net R&D expense declined, mainly because of lower subcontractor, consumables, and personnel costs and the termination of the Bioventus Surgical Matrix Carrier program.
- Operating cash outflow eased from NIS 19.357 million to NIS 17.884 million. Financing inflows increased to NIS 32.395 million, largely from equity and securities transactions.
- Cash increased from NIS 3.797 million at year-end 2016 to NIS 17.817 million at year-end 2017. Total liabilities also rose, principally reflecting the Alpha debentures and related derivative accounting.
Outlook, risks and unusual items
- Management expected existing cash and proceeds from securities purchase agreements to fund planned operations and capital spending for at least 12 months from the filing, while cautioning that plans could change and additional funding might be needed. The company expected continued losses and cash use while developing products, pursuing approvals, and expanding manufacturing and sales.
- 2018 priorities included expanding BioInk activity and collaborations, increasing European VergenixFG and VergenixSTR sales, and continuing R&D, production, and marketing. U.S. approvals for Vergenix products were expected to require the PMA pathway; timing and success were uncertain.
- Alpha, Meitav Dash, and Ami Sagi financings included substantial warrants and full-ratchet anti-dilution protections. The Israel Securities Authority questioned whether the Meitav Dash and Sagi financings were a single transaction requiring shareholder approval; the company proceeded without seeking that approval. The filing warns of possible claims, litigation, damages, or impediments to financing.
- IIA grants carry royalty and other restrictions. The company recorded an estimated NIS 1.234 million royalty liability; maximum royalties were estimated at approximately NIS 31.7 million before interest, contingent on product sales. IIA rules also restrict certain transfers of manufacturing and know-how outside Israel.
- European patent proceedings resulted in revocation of one collagen-plant patent in 2017 and abandonment/revocation of another; a further FibroGen opposition remained pending. A separate Israeli VAT assessment of NIS 1.5 million for 2012–2016 was disputed, with management stating that an adequate provision was included.
- The company reported no material legal proceedings other than the patent matters described, and no off-balance-sheet arrangements. It reported that disclosure controls were effective, but the filing did not include management’s internal-control assessment or auditor attestation, citing its newly public status and emerging-growth-company exemption. The auditor issued an unqualified opinion on the IFRS financial statements.
Most important facts for investors to verify
- Current cash, actual cash burn, and whether stated runway assumptions remain valid after subsequent financing and spending.
- Final status and economic terms of Alpha financing, warrant conversions/exercises, anti-dilution provisions, and resulting fully diluted share count.
- Sales, repeat orders, and clinical or regulatory progress for BioInk, VergenixSTR, and VergenixFG; commercial sales remained limited in 2017.
- Outcome and potential cost of the ISA financing dispute, European patent opposition, and Israeli VAT assessment.
- Potential IIA royalty payments and restrictions, and the funding and timing required to scale manufacturing and pursue U.S. approvals.