XTL Biopharmaceuticals Ltd. — FY2021 Form 20-F
Reporting period: Fiscal year ended December 31, 2021. The filing is an annual report, not a quarterly report. Financial figures below are in U.S. dollars; amounts are in thousands unless stated otherwise. The financial statements were prepared under IFRS.
Business context
XTL is a development-stage biopharmaceutical company focused on autoimmune diseases. Its lead asset, hCDR1, is Phase II-ready for systemic lupus erythematosus (SLE) and Sjögren’s syndrome (SS), but neither indication is in an active clinical trial. The company has no approved or commercialized products and reported no product revenue. It also holds a small investment in InterCure Ltd. and retains a subsidiary with rights to rHuEPO, for which it does not expect material development activity.
Key financial metrics
| Metric | FY2021 / Dec. 31, 2021 | FY2020 / Dec. 31, 2020 |
|---|---|---|
| Revenue | No product sales | No product sales |
| Research and development expense | $30 | $38 |
| General and administrative expense | $1,001 | $910 |
| Operating loss | $(1,031) | $(948) |
| Net finance income (expense) | $1,466 | $(2,006) |
| Net income (loss) | $435 | $(2,954) |
| Basic earnings (loss) per share | $0.001 | $(0.006) |
| Cash and cash equivalents | $2,969 | $3,631 |
| Working capital | $6,006 | $5,867 |
| Total assets | $6,618 | $6,503 |
| Total equity | $5,333 | $3,612 |
| Net cash used in operating activities | $(1,049) | $(850) |
There is no meaningful revenue-based margin to assess. The company had no bank borrowings or credit facilities. Reported liabilities included $231 of accounts payable and $1,054 of non-current warrant liabilities. The $6,006 of working capital included $3,158 of marketable InterCure shares, rather than cash alone.
Material changes versus the prior year
- Net income improved by $3,389, from a $2,954 loss to $435 income, primarily because net finance results swung from a $2,006 expense to $1,466 income. FY2021 included a $719 gain from warrant revaluation and a $747 gain from revaluation of InterCure shares; these are valuation items, not operating revenue.
- Operating loss widened by $83. General and administrative expense rose $91, which management attributed mainly to restatement-related costs; research and development expense fell $8.
- Cash declined by $662 during 2021. Operating cash use increased by $199, while $385 of net financing cash was provided by warrant exercises.
- Year-end ordinary shares outstanding increased to 544.9 million from 514.2 million, reflecting warrant exercises. The warrant liability declined to $1,054 from $2,637, partly due to revaluation and exercises.
- Management restated the 2020 financial statements in May 2021 after determining warrants with a cashless-exercise feature had been incorrectly classified as equity rather than liabilities. The cashless-exercise right was subsequently cancelled following a registration filing.
Outlook, commentary and risks
- Management estimated that available cash would fund activities for at least 12 months from the March 30, 2022 report date, based on existing plans. The company expects further losses and negative operating cash flow and says clinical development will require additional financing.
- Clinical trials for hCDR1 are paused pending full funding or a strategic partner. If funded or partnered, the company plans an international study in SLE, a Phase II study in primary SS, and further pipeline expansion. These are conditional plans, not firm guidance.
- The prior PRELUDE Phase II trial in SLE missed its primary SLEDAI endpoint. The company cites encouraging secondary BILAG findings, including at a 0.5 mg weekly dose; future efficacy remains uncertain. No clinical trial of hCDR1 in SS has been conducted.
- The Yeda license has unmet development milestones, including commencement of a Phase II trial, and Yeda may have termination rights. The filing says the parties discussed further changes to payment terms. A $127 liability to Yeda remained outstanding at year-end.
- Key hCDR1 patent protection was nearing expiry: the basic patent expired in most jurisdictions in February 2022 and was due to expire in the U.S. in September 2022; a formulation patent expires in January 2024. The company identifies patent protection and financing as material uncertainties.
- The filing identifies substantial risks from clinical failure, regulatory approval, reliance on licensors and third-party manufacturers, dilution or inability to raise capital, low ADS trading volume, Nasdaq listing compliance, Israeli geopolitical conditions, and foreign-exchange exposure. Management reported no material COVID-19 effect on operations and financial results as of issuance.
- Management stated that the 2020 internal-control material weakness relating to warrant classification had been remediated and that disclosure controls and internal control over financial reporting were effective as of December 31, 2021. KPMG issued an unmodified opinion on the 2021 IFRS financial statements and reported no critical audit matters; it did not audit internal-control effectiveness.
Most important facts for investors to verify
- Whether the stated cash runway remains adequate and whether XTL can secure funding or a partner without material dilution or surrendering asset rights.
- The status of the Yeda license, the missed clinical milestone, the unpaid $127 liability, and any agreed amendment or termination risk.
- Current hCDR1 patent coverage and the practical impact of the 2022 and 2024 patent expirations on development and partnering prospects.
- Whether clinical plans advance, and how management addresses the prior SLE trial’s missed primary endpoint before any new efficacy claims.
- The composition and realizable value of working capital, especially the InterCure investment, and the effects of warrant remeasurement and future exercises on earnings and dilution.
- That the 2020 restatement and warrant-accounting controls are fully resolved, and that the auditor transition from PwC to KPMG did not involve an accounting disagreement, as the filing reports.