Chemomab Therapeutics Ltd. — Q3 2021 Form 10-Q
Reporting period: Quarter ended September 30, 2021. The interim financial statements are unaudited. Chemomab is an Israel-based clinical-stage biotechnology company focused on therapies for inflammatory and fibrotic diseases. The March 2021 merger with Anchiano was accounted for as an asset acquisition/reverse recapitalization, with Chemomab Ltd. the accounting acquirer; this corporate change affects comparability with prior periods.
Financial results and position
- Revenue: None to date. The company expects no product revenue unless and until a candidate is approved and commercialized, or it earns collaboration revenue.
- Q3 2021: Research and development expense was $1.487 million, general and administrative expense was $1.404 million, and net loss was $2.968 million. Q3 2020 net loss was $1.224 million. Basic and diluted loss per ordinary share was $0.013 versus $0.009.
- Nine months ended September 30: Operating expenses totaled $7.343 million and net loss was $7.442 million, compared with $4.030 million and $4.000 million, respectively, in 2020. Research and development expense rose 15% to $3.951 million; general and administrative expense increased 465% to $3.392 million. Loss per ordinary share was $0.038 versus $0.030.
- Cash flow, nine months: Operating activities used $9.480 million, investing activities used $25.605 million, and financing activities provided $61.155 million. Cash, cash equivalents, and restricted cash increased $26.070 million.
- Liquidity at September 30: Cash and cash equivalents were $37.744 million and short-term bank deposits were $26.524 million, or approximately $64.3 million combined. Total assets were $67.440 million; total liabilities were $1.928 million, including operating lease liabilities. The filing reports no borrowings or other financial debt.
- Equity and commitments: Accumulated deficit was $31.137 million and shareholders’ equity was $65.512 million. Contractual commitments totaled $6.474 million. Gross proceeds from the 2021 private placement and ATM sales contributed to the increase in financing cash flow; ATM sales through September raised $15.9 million gross.
Margins are not meaningful because the company had no revenue. The filing’s reported loss per share and share counts reflect retroactive adjustments for the reverse split and merger exchange ratio.
Material changes and business developments
- Q3 expenses increased year over year: research and development rose 44%, while general and administrative expense rose 623%. Management attributed the R&D increase to greater clinical and preclinical activity, and the G&A increase primarily to merger completion, recruiting, share-based compensation, and public-company costs.
- The company is advancing CM-101, a CCL24-inhibiting antibody. A Phase 2a PSC trial was recruiting in the UK and Israel and expanding to additional territories; a Phase 2 study in systemic sclerosis was planned to begin early in 2022. A separate Phase 2a NASH study was enrolling to inform development of a subcutaneous formulation.
- The company raised approximately $45.5 million in a March 2021 private placement and received approximately $2.4 million in cash in the merger. It also sold 699,806 ADSs through its ATM program from April 30 through September 30 for $15.9 million gross. The ATM agreement permits up to $75 million of ADS sales, at the company’s option.
Outlook, risks, and contingencies
- Management estimated that available cash resources would fund projected requirements approximately through mid-2023. The company nevertheless expects to need substantial additional financing and had no commitments for future external funding. Further equity issuance may dilute shareholders; debt could add fixed obligations and restrictive covenants.
- Management expects R&D expense to increase as programs advance, and G&A expense to increase to support development and public-company operations. The filing provides no numerical revenue, earnings, or cash-flow guidance.
- COVID-19 delayed PSC trial enrollment and affected enrollment rates. The company expanded recruiting territories, but further disruption and patient dropout remained possible; the extent of future impact was uncertain.
- Clinical and regulatory outcomes, trial costs and timing, access to financing, and the need to fund further development are key uncertainties. The company cautions that forward-looking statements are subject to risks and may differ materially from actual outcomes.
- Management reported no pending legal claims expected to have a material adverse effect and no material changes to previously disclosed risk factors. Disclosure controls and procedures were considered effective as of September 30, 2021; management was strengthening internal financial-reporting controls following the merger and planned to complete its assessment in the 2021 annual report.
- After quarter-end, Dale Pfost became CEO and a board member, replacing Adi Mor, who remained Chief Scientific Officer and a board member. Donald Marvin was appointed CFO, EVP, and COO in November, replacing interim CFO Sigal Fattal, who continued as a senior consultant. The new executives were eligible for options, with grants described in the filing.
Important facts for investors to verify
- Whether the stated cash runway through mid-2023 remains adequate given trial progress, spending, and financing plans.
- PSC enrollment progress and timing, the planned systemic sclerosis study, and the NASH study’s role in advancing CM-101.
- Future ATM usage, share issuance, dilution, and any exercise of the private-placement warrants.
- Whether COVID-19 or other operational issues further affect trial enrollment, retention, or timelines.
- How merger-related accounting and the reverse recapitalization affect comparisons of historical results and share counts.