Filing summary
Identity and period: The supplied filing is Cellect Biotechnology Ltd.’s Form 20-F for the fiscal year ended December 31, 2018, filed March 18, 2019. It is not a Quoin Pharmaceuticals filing and does not report 2018 Q4 results separately. Financial statements are prepared under IFRS and reported in NIS; U.S. dollar figures are convenience translations.
Business context
Cellect was an early-stage biotechnology company developing ApoGraft, a functional stem-cell selection platform, and its ApoTainer kit, initially for allogeneic hematopoietic stem-cell transplantation. The company had no product revenue and no product approved for sale. Its lead program was in an open-label Phase I/II trial; eight patients had been treated by the report date.
Financial results and liquidity
| Metric | 2018 | 2017 | Change or context |
|---|---|---|---|
| Revenue | None | None | No commercial revenue; significant revenue was not expected within at least the following year. |
| R&D expense | NIS 13.5m ($3.6m) | NIS 11.5m ($3.3m) | Up 17%, principally on materials and personnel. |
| General and administrative expense | NIS 15.7m ($4.2m) | NIS 12.9m ($3.7m) | Up 22%, mainly on personnel. |
| Operating loss | NIS 29.2m ($7.8m) | NIS 24.4m ($7.0m) | Widened 19.7% in NIS. |
| Net/comprehensive loss | NIS 20.1m ($5.4m) | NIS 28.2m ($8.1m) | Narrowed 29% in NIS, mainly reflecting favorable warrant fair-value movements and other financial income. |
| Operating cash used | NIS 23.6m ($6.3m) | NIS 17.8m ($5.1m) | Cash use increased with operating and R&D activity. |
| Cash and cash equivalents | NIS 17.8m ($4.75m) | NIS 13.7m ($3.96m) | 2017 also included NIS 14.0m of marketable securities; none remained at year-end 2018. |
| Total assets / liabilities | NIS 20.6m / NIS 6.7m | NIS 30.4m / NIS 11.5m | 2018 liabilities included NIS 1.8m of warrant liabilities; no borrowings are reported. |
| Shareholders’ equity | NIS 13.9m | NIS 18.9m | Accumulated deficit reached NIS 84.1m ($22.4m). |
Margins are not meaningful because the company had no revenue. Working capital was reported as NIS 13.7m ($3.7m). Management estimated year-end cash would fund operations through the end of Q1 2020 without further fundraising. In February 2019, the company raised NIS 22.1m ($6.1m) net in a follow-on offering; the filing does not provide a clearly updated runway estimate after that financing.
Material changes and notable items
- Total operating expenses rose to NIS 29.2m from NIS 24.4m; operating cash burn increased to NIS 23.6m from NIS 17.8m.
- Net loss improved despite the higher operating loss, as net financial income was NIS 9.1m in 2018 versus net financial expense of NIS 3.8m in 2017. The filing attributes the swing principally to fair-value changes in warrants, rather than improved operating performance.
- Financing cash flow was NIS 12.8m in 2018, chiefly from equity and warrant issuance. The January 2018 registered direct offering generated approximately $4.0m gross proceeds.
- The company optimized FasL-coated paramagnetic beads for ApoTainer. Interim clinical observations reported 100% engraftment among the first six patients at one-month follow-up, with no procedure-related adverse events; these early observations are not final trial results.
Outlook, risks and contingencies
- Going concern: The auditor’s report and management disclosure state that substantial doubt exists about the company’s ability to continue as a going concern. The company had recurring losses, negative operating cash flow, no revenue, and depended on external financing. Financial statements contain no adjustments for a possible failure to continue as a going concern.
- Development plans: Management expected interim Phase I/II results in the first half of 2019 and topline results in late 2019 or early 2020; planned a U.S. study and an FDA IND submission during 2019. These are forward-looking expectations, not reported outcomes.
- Regulatory uncertainty: A February 2019 Pre-Request for Designation sought FDA feedback on ApoTainer classification. The filing says the FDA response would be preliminary and nonbinding; classification as a device, biologic, or combination product could change the development and approval burden.
- Clinical and supply risks: Patient recruitment had been slower than expected, and earlier FasL supply delays affected trial planning. The company reported a five-year exclusive supply arrangement with Swiss Biotech Center and said it believed clinical-trial quantities were secured, but supply continuity remained a risk.
- Other material risks: Additional capital may be unavailable or dilutive; clinical efficacy and safety are unproven; commercialization, reimbursement, manufacturing scale-up, intellectual-property protection, competition, and geopolitical conditions in Israel could adversely affect results. The company also disclosed BIRD Foundation royalty obligations of 5% of relevant gross sales, capped at 150% of grants received, indexed to U.S. CPI.
- Governance and controls: Management concluded disclosure controls and internal control over financial reporting were effective at December 31, 2018. No auditor attestation of internal controls was included under the emerging-growth-company exemption.
Important facts for investors to verify
- Confirm the issuer: this is Cellect Biotechnology Ltd., not Quoin Pharmaceuticals Ltd.; confirm that an annual 2018 filing, rather than quarterly results, is the intended subject.
- Check subsequent filings for the February 2019 offering’s final proceeds, share and warrant dilution, and the company’s updated cash runway.
- Verify actual FDA feedback and regulatory pathway for ApoTainer, as well as whether the planned IND and U.S. study occurred.
- Review complete clinical-trial results and adverse-event, engraftment, recruitment, and follow-up data; the reported early patient observations are limited and preliminary.
- Assess current FasL supply arrangements, manufacturing readiness, and remaining financing needs against operating cash burn.