NeuroSense Therapeutics Ltd. — FY2021 Form 20-F
Reporting period: Fiscal year ended December 31, 2021. This is an annual report, not a quarterly filing; separate fourth-quarter results are not provided. Financial statements are prepared under IFRS as issued by the IASB and presented in U.S. dollars.
Business context
NeuroSense is a clinical-stage biotechnology company developing treatments for neurodegenerative diseases. Its lead candidate, PrimeC, is an extended-release oral combination of ciprofloxacin and celecoxib for ALS. The FDA and EMA have granted PrimeC orphan drug designation. The company had no approved products and generated no revenue in 2021.
Key financial metrics
| Metric (US$ millions, except per-share data) | 2021 | 2020 |
|---|---|---|
| Revenue | 0 | 0 |
| Research and development expense | 3.082 | 2.495 |
| General and administrative expense | 2.505 | 0.393 |
| Operating loss | (5.587) | (2.888) |
| Net loss | (4.041) | (2.828) |
| Basic and diluted loss per share | (0.65) | (0.51) |
| Net cash used in operating activities | (1.539) | (0.695) |
| Cash and cash equivalents at year-end | 11.063 | 0.699 |
| Working capital at year-end | 10.77 | Not clearly stated |
| Total liabilities at year-end | 2.425 | 0.120 |
Margins are not meaningful because the company had no revenue. The 2021 net loss was smaller than the operating loss primarily because of $1.546 million in net financing income, including a $2.732 million gain from revaluing IPO warrants. Financing expenses included $1.152 million of IPO warrant issuance costs. No material borrowing or debt securities are reported; the balance sheet includes a $1.828 million warrant liability.
Changes versus 2020
- Net loss widened by $1.213 million, while operating loss increased by $2.699 million.
- R&D expense rose 23% to $3.082 million, reflecting higher personnel, share-based compensation and clinical-program costs.
- G&A expense increased to $2.505 million from $0.393 million, mainly due to higher share-based compensation and professional fees, including costs associated with becoming a public company.
- Operating cash use increased to $1.539 million from $0.695 million. Financing provided $11.902 million, principally from the December 2021 IPO, warrant and option exercises, and SAFE instruments.
- Year-end cash increased to $11.063 million from $0.699 million. The company reported approximately $9.9 million in net IPO proceeds. In March 2022, it received a further $3.87 million from warrant exercises.
Outlook, clinical progress and risks
- Management stated that cash at December 31, 2021, together with subsequent warrant-exercise proceeds, was expected to fund operations for at least 12 months from the financial-statement approval date. The company also expects to need additional financing to complete development and commercialization; funding availability and terms are uncertain.
- The Phase IIa NST002 study of PrimeC enrolled 15 patients and met its safety and tolerability primary endpoint. Ten patients (67%) experienced at least one treatment-emergent adverse event; four (27%) had events judged related to the drug, none of which were serious. Six patients experienced at least one severe event; two deaths were considered by the investigator unrelated to study drug.
- Reported efficacy comparisons were against historical or virtual controls in an open-label, small study and were not statistically significant. The filing reports a 0.84-point monthly ALSFRS-R decline for PrimeC-treated patients versus 1.02 points for the PRO-ACT comparison (p=0.39). Biomarker changes were described as evidence of biological activity, not proof of clinical benefit.
- At the time of the report, management planned a Phase IIb study of the extended-release formulation in the first half of 2022, with top-line results expected in the first half of 2023, and a pivotal Phase III trial in the second half of 2023. It also described supporting toxicity and pharmacokinetic studies; FDA clearance to initiate the PK study was reported on March 18, 2022.
- Material risks include dependence on PrimeC and successful clinical and regulatory outcomes; limited clinical evidence; substantial future capital needs; competition; reliance on third-party manufacturers and CROs; uncertain patent protection; and foreign-exchange exposure to the Israeli shekel. COVID-19 and Israel’s political and security environment could disrupt operations, trials or supply chains.
- The company also disclosed funding pharmaceutical compounding for off-label use of PrimeC’s component drugs in six patients through clinicians. It planned to report the use to the FDA and noted that the FDA could view it as a deviation from the IND.
- The filing reports no material legal proceedings, material contractual commitments at year-end, or off-balance-sheet arrangements. The auditor issued an unqualified opinion on the IFRS financial statements. Management concluded disclosure controls were effective at a reasonable-assurance level; the filing did not include management’s internal-control assessment because of the transition period for newly public companies.
Important facts for investors to verify
- Reconcile operating cash use: the audited cash-flow statement reports $1.539 million, while the MD&A narrative reports $1.521 million.
- Confirm current cash, cash runway and financing needs using subsequent filings, including the timing and use of the March 2022 warrant proceeds.
- Track actual enrollment, design, timing and results of the planned Phase IIb and Phase III trials, and distinguish clinical endpoints from exploratory biomarker findings.
- Review warrant terms and accounting: the IPO warrants were recorded as a liability and their fair-value movement materially affected 2021 earnings.
- Assess dilution and potential share supply from outstanding warrants, options, RSUs and shares eligible for resale after lock-up restrictions.