Filing summary
Important issuer note: The supplied filing is Anchiano Therapeutics Ltd.’s Form 10-Q, not a Chemomab Therapeutics Ltd. filing. It covers the quarter ended June 30, 2020; financial statements are unaudited and amounts below are in U.S. dollars unless stated otherwise.
Business context and reporting period
Anchiano was an early-stage, preclinical biotechnology company developing small-molecule pan-mutant RAS inhibitors and PDE10/β-catenin pathway inhibitors. It had no revenue. The company had discontinued its Phase 2 Codex study of inodiftagene vixteplasmid in November 2019 after concluding it was unlikely to pass the planned futility threshold.
In January 2020, Anchiano approved closing its Israeli office and laboratories. In July, it announced further cost reductions, a temporary pause in pan-RAS research and development, and a review of strategic alternatives with Oppenheimer & Co. The CEO resigned effective July 2, 2020; the board assumed CEO responsibilities pending a replacement.
Financial performance and position
| Metric | Three months ended June 30, 2020 | Six months ended June 30, 2020 | Comparable 2019 period |
|---|---|---|---|
| Revenue | None | None | None |
| Research and development expense | $1.307 million | $2.357 million | $2.576 million and $6.711 million, respectively |
| General and administrative expense | $2.176 million | $4.001 million | $1.962 million and $3.253 million, respectively |
| Restructuring expense | None | $0.670 million | None |
| Net loss | $3.481 million | $7.016 million | $4.439 million and $14.352 million, respectively |
| Loss per share | $0.09 | $0.19 | $0.12 and $0.45, respectively |
| Cash used in operating activities | Not presented as a quarterly figure | $8.966 million | $7.037 million |
At June 30, 2020, cash and cash equivalents were $8.824 million, down from $17.575 million at December 31, 2019. Total current assets were $9.672 million and current liabilities were $1.751 million. Total liabilities were $1.859 million, consisting principally of operating lease liabilities and payables; the filing reports no financial borrowings. Accumulated deficit was $112.447 million, and shareholders’ equity was $8.157 million. No meaningful revenue or profit margins apply because the company had no revenue and incurred losses.
Material changes versus prior periods
- For the first half, R&D expense fell 65% year over year, primarily because of lower clinical-trial and manufacturing costs after the Codex study ended; this was partly offset by RAS-program development costs.
- First-half G&A expense increased 23%, attributed mainly to personnel, insurance and professional fees supporting a U.S. public-company infrastructure.
- First-half net loss improved by $7.336 million, largely because 2019 included $4.388 million of net finance expense related principally to warrant remeasurement. In 2020, net finance income was $0.012 million.
- Operating cash use increased by $1.929 million year over year. Management attributed this to unfavorable working-capital changes, including lower payables and accruals and payment of previously accrued restructuring costs.
- There were no financing cash flows in the first half of 2020; the comparable 2019 period included $26.621 million of net IPO proceeds.
Outlook, risks and unusual items
- Going concern: Management said existing cash was expected to fund projected needs only into the first quarter of 2021. The filing states that substantial doubt exists about the company’s ability to continue as a going concern. Additional financing or a strategic transaction would be needed, but may not be available on acceptable terms or at all.
- Operating plans: The company expected to pause internal and external pan-RAS R&D, reduce its workforce by three employees (about 60% of the June 30 workforce), and vacate its Cambridge facility. It anticipated a third-quarter 2020 restructuring charge but had not determined the amount. It expected future R&D and G&A expenses to decline, while strategic-review advisory costs would add to G&A.
- CEO-related contingency: The company disclosed potential maximum exposure of up to $0.4 million relating to the former CEO’s claim that he resigned for “Good Reason.” The company disputed entitlement to severance and said it would contest claims.
- Licensing matter: Yissum alleged that stopping payments to maintain licensed IP related to the discontinued program breached the agreement. The parties had agreed on termination, return of IP documentation and mutual releases; the filing said no monetary demand had been asserted and an agreement was expected to be signed in the third quarter.
- Other risks: The company said COVID-19 had not significantly affected operations as of August 5, 2020, but its future impact was uncertain. Anchiano regained Nasdaq bid-price compliance on June 5, 2020 after receiving a deficiency notice, but continued compliance was not assured. A strategic-alternatives review might not result in a transaction or create stockholder value.
Important facts for investors to verify
- Whether Anchiano secured financing or completed a strategic transaction before its stated first-quarter 2021 cash runway expired.
- Actual cash burn, cash runway, and the amount and timing of restructuring charges after the R&D pause, workforce reduction and Cambridge facility exit.
- Any developments in the former CEO’s severance dispute and the Yissum license termination and release agreement.
- Whether the pan-RAS and PDE10/β-catenin programs continued, were licensed, or were otherwise affected by the strategic review.
- Ongoing Nasdaq listing compliance and potential dilution: 37,099,352 ordinary shares were outstanding as of July 29, 2020; the filing also reported 4,179,278 options and 10,975,959 warrants outstanding.