Business Context and Reporting Period
Company: BioCancell Ltd. (formerly BioCancell Therapeutics Inc.)
Filing Type: Form 6-K (Translation of Quarterly Report)
Reporting Period: Nine months and three months ended September 30, 2012
Business Overview: A clinical-stage biotechnology company developing targeted cancer therapies. The company completed a restructuring on August 14, 2012, merging with BioCancell USA to become a public company listed on the Tel Aviv Stock Exchange (TASE). The company has no revenue and is focused on the development of drug candidates BC-819 (for bladder, pancreatic, and ovarian cancer) and BC-821 (a next-generation candidate).
Key Financial Metrics
| Metric (NIS Thousands) | 9 Months Ended Sept 30, 2012 | 9 Months Ended Sept 30, 2011 | 3 Months Ended Sept 30, 2012 | 3 Months Ended Sept 30, 2011 |
|---|---|---|---|---|
| Revenue | 0 | 0 | 0 | 0 |
| Net Loss | (18,746) | (11,347) | (3,051) | (2,256) |
| R&D Expenses (Net) | (9,693) | (8,018) | (1,366) | (3,155) |
| Admin & General Expenses | (4,365) | (5,447) | (972) | (1,665) |
| Financing Expenses (Net) | (4,688) | 2,118 (Income) | (713) | 2,564 (Income) |
| Cash & Equivalents (Sept 30, 2012) | 1,772 | - | - | - |
| Working Capital | (46,611) | (13,043) | - | - |
| Current Ratio | 28% | 19% | - | - |
Note: All figures are in NIS thousands. Financing expenses include significant non-cash fair value adjustments on convertible notes and warrants.
Material Changes vs. Prior Period
- Net Loss Increase: Net loss for the nine months increased by approximately 65% compared to the prior year, driven primarily by a shift from financing income to financing expenses due to fair value adjustments on financial instruments.
- R&D Expenses: Net R&D expenses increased 21% year-over-year for the nine-month period due to higher costs for Phase IIb pancreatic cancer trials, partially offset by the completion of bladder and ovarian cancer trials.
- Quarterly R&D Decrease: For the three months ended September 30, 2012, net R&D expenses decreased 57% compared to the prior year quarter, attributed to the completion of patient recruitment for bladder cancer trials and the conclusion of ovarian cancer trials.
- Financing Activity: The company converted or repaid significant convertible loans in July 2012, reducing long-term liabilities but incurring fair value losses in the current period.
Guidance, Outlook, and Risks
Clinical Development Outlook
- Bladder Cancer (Phase IIb): Recruitment completed. Full results expected in Q2 2013. Interim results showed 63% of patients had no recurrence after 3 months.
- Pancreatic Cancer (Phase IIb): Recruitment completed. Full results expected in Q1 2013. Interim results showed 4 of 6 treated patients had tumor shrinkage or stable disease.
- Ovarian Cancer (Phase I/IIa): Trial concluded successfully; full report submitted to regulators. Future development decisions pending.
- BC-821: The company plans to develop production processes for this new candidate to commence pre-clinical trials, aiming to start clinical trials in early 2014.
Liquidity and Capital
- Going Concern: The filing explicitly states significant doubt regarding the company's ability to continue as a "going concern" without additional capital.
- Recent Fundraising: In November 2012 (subsequent to the period end), the company raised NIS 15.7 million via a public offering. Management estimates current resources will suffice until June 2013.
- Loans: The company secured short-term loans from Clal Biotechnology Industries Ltd. (CBI) totaling up to NIS 5 million in August and September 2012.
Risks and Contingencies
- Merger Discussions: Preliminary discussions regarding a potential merger with Proteologics Ltd. are ongoing but are in early stages with no guarantees of consummation.
- Regulatory Risk: Continued development depends on obtaining regulatory approvals and achieving positive clinical trial results.
- Foreign Exchange: The company has significant exposure to USD/ILS exchange rate fluctuations regarding liabilities and grant repayments.
Investor Verification Checklist
- Cash Runway: Verify the sufficiency of the NIS 15.7 million raised in November 2012 to cover operations through June 2013 as projected.
- Clinical Trial Results: Monitor the release of full Phase IIb results for bladder cancer (expected Q2 2013) and pancreatic cancer (expected Q1 2013).
- Merger Status: Track the progress of the potential merger with Proteologics Ltd., noting the involvement of an independent committee due to related-party interests.
- Debt Obligations: Confirm the repayment terms and status of the short-term loans from CBI and any remaining convertible liabilities.
- Going Concern Status: Assess whether the company can secure additional funding before the projected cash depletion date to avoid insolvency risks.