Kazia Therapeutics Limited — FY2018 Form 20-F
Reporting period: Fiscal year ended June 30, 2018; this is an annual report, not a 2017 quarterly filing. Financial statements are prepared under IFRS and reported primarily in Australian dollars (A$). Kazia is an oncology-focused biotechnology company with no product-sales revenue. Its lead programs are GDC-0084 for glioblastoma and Cantrixil for ovarian cancer.
Financial and operating highlights
| Metric | FY2018 | FY2017 |
|---|---|---|
| Revenue, solely bank interest | A$119,000 | A$249,000 |
| Other income | A$12.989 million | A$8.563 million |
| Loss after tax | A$6.039 million | A$10.670 million |
| Research and development expense | A$9.774 million | A$11.136 million |
| General and administrative expense | A$5.598 million | A$8.529 million |
| Net cash used in operating activities | A$8.661 million | A$11.435 million |
| Cash and cash equivalents at year-end | A$5.956 million | A$14.455 million |
| Total assets / net assets | A$28.175 million / A$19.242 million | A$35.910 million / A$25.338 million |
- FY2018 basic and diluted loss per share was A$0.1248, versus A$0.0228 in FY2017. The company completed a 10-for-1 share consolidation during FY2018.
- Current assets were A$9.260 million and current liabilities A$3.887 million, a current ratio of about 2.4. The company reported no borrowings in FY2018. Its remaining A$464,000 Triaxial convertible note is classified in equity and may convert into shares.
- No operating margin is meaningful because the company had no product sales and remained loss-making. No dividends were paid or declared.
Material changes versus FY2017
- Net loss narrowed by about 43%, reflecting lower R&D and administrative spending and substantial non-recurring income, partly offset by investment losses and a lower R&D rebate.
- Other income included an A$8.411 million gain from a Noxopharm legal settlement and an A$1.461 million gain from revaluing contingent consideration. The settlement assets subsequently incurred A$1.114 million in fair-value losses and A$2.830 million in impairment losses.
- The R&D tax rebate recognized fell to A$2.2 million from A$8.409 million. FY2018 R&D expense declined about 12% and general and administrative expense about 34%.
- Cash declined A$8.499 million year over year. Operating cash outflow improved, while investing activities provided A$150,000, principally the cash portion of the settlement; FY2017 investing outflow included the Glioblast acquisition.
- The company consolidated shares 10-for-1 and canceled A$162.2 million of share capital under Australian law; year-end ordinary shares were 48,409,621.
Outlook, risks and unusual items
- GDC-0084 entered a U.S. Phase II trial in March 2018; initial results were expected in early calendar 2019. Cantrixil remained in Phase I dose escalation, with preliminary observations including stable disease in three of five evaluable patients and one partial response in combination with chemotherapy. These are early, limited data, not evidence of established efficacy.
- Management expected FY2019 reports from Cantrixil Phase I and initial GDC-0084 Phase II results. It stated that then-available cash was expected to support R&D through approximately Q2 2019, while emphasizing dependence on financing, grants, licensing and partnerships.
- The auditor issued an unqualified opinion but drew attention to a material uncertainty that may cast doubt on the company’s ability to continue as a going concern, citing the A$6.039 million loss and A$8.661 million operating cash outflow. Management prepared the statements on a going-concern basis and said it was pursuing funding options.
- After year-end, Kazia raised A$3.4 million in an October 2018 placement and announced a Share Purchase Plan of up to A$15,000 per eligible shareholder. The filing also described a proposed transfer of its anti-tropomyosin program to TroBio for 12% equity, conditional on grant novation.
- Key risks include clinical efficacy and safety failures, need for further capital and potential dilution, reliance on Australian R&D tax incentives, third-party trial and manufacturing providers, patent protection, and competition. The Australian government had announced changes to the R&D rebate, including a A$4 million annual refund cap.
Most important facts for investors to verify
- Whether the reported clinical timelines and subsequent trial results for GDC-0084 and Cantrixil were achieved, and how robust the efficacy and safety evidence is.
- Current cash, cash runway and financing needs, including the proceeds and terms of the post-year-end placement and Share Purchase Plan.
- Eligibility, timing and collectability of the A$2.2 million FY2018 R&D rebate, and the effect of Australian rebate changes.
- Value and liquidity of settlement-related Noxopharm shares and options, as well as milestone-triggered contingent consideration and possible share issuance.
- The going-concern uncertainty and any subsequent funding, partnership or licensing developments. The filing states no clear quarterly financial figures for the metadata’s “2017 Q4” period.