Filing identity and period
Important mismatch: The supplied filing is BiondVax Pharmaceuticals Ltd.’s Form 20-F, not a filing for Scinai Immunotherapeutics Ltd. It is an annual report for the fiscal year ended December 31, 2017—not a standalone fourth-quarter filing. The company reported under IFRS, with financial statements in NIS; USD figures are convenience translations at NIS 3.467 per $1.
BiondVax was a clinical-stage biopharmaceutical company developing M-001, a peptide-based universal influenza vaccine. It had no approved products and had generated no revenue.
Financial performance and position
| Metric | FY 2017 | FY 2016 |
|---|---|---|
| Revenue | None | None |
| R&D expense, net of grants and other participation | NIS 18.777m ($5.416m) | NIS 7.794m |
| Marketing, general and administrative expense | NIS 4.879m ($1.407m) | NIS 4.106m |
| Operating loss | NIS 23.656m ($6.823m) | NIS 11.900m |
| Net loss | NIS 34.551m ($9.966m) | NIS 9.184m ($2.649m) |
| Basic loss per share | NIS 0.17 ($0.05) | NIS 0.07 |
| Net cash used in operating activities | NIS 10.050m ($2.899m) | NIS 9.653m |
- Cash and cash equivalents: NIS 71.382m ($20.589m) at year-end 2017, versus NIS 15.705m in 2016. No short-term deposits remained at year-end 2017.
- Liquidity: Management reported working capital of approximately $19.7m and estimated available resources would fund operations for at least 15 months from year-end, without additional capital.
- Balance sheet: Total assets were NIS 81.695m ($23.563m), total liabilities NIS 25.443m ($7.338m), and shareholders’ equity NIS 56.252m ($16.225m). Accumulated deficit was NIS 123.417m ($35.598m).
- Debt and other liabilities: The company had not drawn the European Investment Bank (EIB) facility by December 31, 2017. It recorded NIS 10.3m ($2.971m) as a government-grant liability and NIS 8.177m ($2.358m) for warrants measured at fair value.
- Margins: Revenue was zero, so revenue-based margins are not meaningful.
The unaudited quarterly table reports a fourth-quarter 2017 net loss of NIS 12.350m ($3.562m). It also reports fourth-quarter net R&D expense of NIS 13.707m and an operating loss of NIS 14.887m. These quarterly figures should be checked against the filed statements and notes because the quarterly table is text-extracted and its presentation is difficult to reconcile with annual totals.
Material changes versus prior period
- Net loss increased to NIS 34.551m from NIS 9.184m. Management attributed the increase mainly to higher R&D costs and a NIS 10.3m increase in the recorded IIA grant liability, together with higher administrative costs.
- Net R&D expense rose to NIS 18.777m from NIS 7.794m; G&A increased to NIS 4.879m from NIS 4.106m.
- Net financial expense was NIS 10.895m, compared with net financial income of NIS 2.716m in 2016. The 2017 expense included exchange differences and revaluation of warrants.
- Cash increased substantially following equity financing. The filing reports approximately $17.8m raised in 2017 through public and private offerings and warrant exercises. Financing activities provided NIS 61.839m; investing activities provided NIS 6.759m, including proceeds from marketable securities and changes in deposits.
- Capital expenditures were approximately $1.3m in 2017, primarily for factory leasehold improvements, equipment and computers, versus approximately $5,000 in 2016.
Outlook, risks and unusual items
- Development outlook: Management planned a pivotal European Phase 3 trial before the 2018/19 flu season; the EMA’s committee had reviewed the plan and allowed it to proceed. The planned study was to enroll 9,630 participants over two years. A U.S. Phase 2 trial with NIAID had been agreed, with first enrollment reported in April 2018. These were forward-looking plans, not completed milestones as of the reporting date.
- Manufacturing: The company expected its Jerusalem mid-sized factory to be completed in the third quarter of 2018, with estimated construction costs of about $10m. Completion, regulatory approvals, manufacturing scale-up and timely supply for trials remained risks.
- Financing: The EIB facility provided for up to €20m in conditional, interest-free tranches, each repayable five years after payment. Access required matching available funding and other milestones; the facility was not an unconditional committed source of cash. It contemplated a first-ranking floating charge over company assets, excluding specified Yeda-licensed assets and IP, and a 3% share of annual M-001 sales revenue for ten years, subject to contract terms. Management said substantial additional financing would be needed; no new financing commitment was secured at year-end.
- Core risks: M-001 remained investigational; clinical efficacy, regulatory approval, commercial acceptance and reimbursement were uncertain. The company had limited experience conducting Phase 3 trials, depended on external funding and manufacturing, and faced competition, intellectual-property and license risks. The company also cited foreign-exchange exposure and political or security risks in Israel.
- Government funding obligations: IIA grants can entail royalties on product sales and restrictions or approvals for transferring funded technology or manufacturing outside Israel. The factory grant was subject to conditions including additional share-capital funding and maintaining IP and the facility in Israel for at least ten years.
- Unusual accounting and financing items: The NIS 10.3m grant-liability revaluation materially increased reported R&D expense; warrant revaluation and currency movements contributed to financial expense. Warrants were reported as a liability rather than equity.
- Legal and governance matters: A consultant dispute ended in 2017 with a payment reported in the notes as NIS 1m plus VAT; the narrative describes a settlement, while the notes refer to a court decision. The CEO had been investigated under warning by the Israeli Securities Authority in 2016 in connection with an investigation of certain shareholders; the company said it was not a party and the outcome was unclear. The filing also says the company approved NIS 200,000, potentially increased by up to a further NIS 200,000, toward the CEO’s required bond.
- Tax and shareholder considerations: The company believed it may have been a passive foreign investment company (PFIC) in 2017, creating potential U.S. tax consequences for U.S. investors. It had never paid dividends and did not expect to do so in the foreseeable future.
Most important facts for investors to verify
- Confirm the issuer and period: this is BiondVax’s FY 2017 20-F, not Scinai’s filing or a Q4-only report.
- Reconcile the reported quarterly fourth-quarter loss and expense figures to the audited annual statements and original filing tables.
- Review the accounting and assumptions behind the NIS 10.3m IIA grant liability and NIS 8.177m warrant liability.
- Check actual cash runway and subsequent financing against the year-end estimate, including whether EIB tranches were drawn and their collateral and repayment conditions.
- Track Phase 3 trial authorization, enrollment, cost, manufacturing readiness and whether the planned factory was completed on time.
- Review the consultant litigation outcome and the status and implications of the ISA investigation involving the CEO.
- Assess potential dilution from share and warrant issuance, the EIB’s sales-linked consideration, and the company’s continuing need for external capital.