Tiziana Life Sciences plc — FY 2018 Form 20-F
Reporting period: Year ended December 31, 2018. Although the request refers to 2018 Q4, this filing reports annual results; it does not provide a clear standalone Q4 income or cash-flow value. Financial statements are audited and prepared under IFRS, in U.S. dollars, with figures below generally in millions unless stated otherwise.
Business context
Tiziana is a clinical-stage biotechnology company developing treatments in immunology and oncology. It had no approved products and generated no product revenue. Its lead programs were Foralumab, an anti-CD3 antibody being developed for inflammatory and immune diseases, and Milciclib, a kinase inhibitor being developed principally for hepatocellular carcinoma (HCC). TZLS-501, an anti-IL-6R antibody, remained preclinical.
Financial performance and position
| Metric | 2018 | 2017 |
|---|---|---|
| Revenue | $0 | $0 |
| Research and development expense | $5.510 | $6.015 |
| General and administrative expense | $4.417 | $4.601 |
| Total operating expenses / operating loss | $9.927 | $10.616 |
| Net loss | $7.994 | $8.716 |
| Basic and diluted loss per share | $0.06 | $0.09 |
| Net cash used in operating activities | $4.551 | $7.533 |
| Cash and cash equivalents at year-end | $5.304 | $0.064 |
There was no meaningful gross margin because the company had no revenue. A $1.945 million tax credit reduced the reported 2018 net loss; the filing says the credits include adjustments relating to earlier periods. Accumulated losses were $50.630 million.
At year-end, total assets were $6.920 million, current liabilities $6.401 million, and shareholders’ equity $0.519 million, compared with a $2.278 million equity deficit in 2017. Working capital was approximately $0.514 million, versus a $2.302 million deficit in 2017. Current liabilities included $3.641 million of trade payables, $2.310 million of accruals, $0.310 million of convertible-loan liability and $0.140 million of related-party payables. Contractual operating lease payments totaled about $1.114 million.
Financing activities provided $10.041 million in 2018, mainly from share issuance and warrant proceeds, partly offset by fundraising costs. The cash-flow statement reports a $5.490 million net increase before exchange effects; a $0.249 million adverse exchange effect brought the increase in cash to approximately $5.241 million.
Changes versus 2017
- Net loss narrowed by $0.722 million, while operating expenses decreased by $0.689 million. Lower R&D and G&A spending contributed; management said reduced StemPrintER activity allowed more funding for Foralumab development.
- Operating cash use fell by $2.982 million, primarily due to cash received from R&D tax credits.
- Year-end cash rose from $0.064 million to $5.304 million, supported by financing. Despite the improvement, year-end working capital was only modestly positive and equity was $0.519 million.
- Outstanding ordinary shares increased from 125.1 million to 136.5 million during 2018.
Outlook, commentary and key risks
- Going concern and funding: The auditor highlighted a material uncertainty that may cast significant doubt on the company’s ability to continue as a going concern. The company was pre-revenue, had incurred a $7.994 million 2018 loss, and expected further funding to continue trials and meet liabilities. The directors nevertheless prepared the accounts on a going-concern basis, assuming additional investment would be secured. The filing says existing cash was expected to fund operations for the foreseeable future, but warns estimates could prove wrong.
- Development plans: Foralumab’s intranasal Phase 1 trial in healthy volunteers began dosing in November 2018, with topline results expected in Q3 2019. An oral-formulation Phase 1 trial was planned for Q2 2019, with a Phase 2 trial in NASH and/or Crohn’s disease targeted by Q2 2020. Milciclib HCC Phase 2a topline results were expected in July 2019; a Phase 2b study combining it with sorafenib was planned for 2019. These are management expectations, not assured outcomes.
- Clinical and regulatory risk: Neither lead candidate was approved. Trial delay, inadequate efficacy, patient enrollment challenges, safety findings, manufacturing issues or regulatory requirements could delay or prevent development. Milciclib’s reported adverse effects included neurological and gastrointestinal events and liver-enzyme elevations; prior intravenous Foralumab studies reported infusion reactions and cytokine-release-related effects.
- Financing and dilution: The company expected to rely on additional financing. Equity financing could dilute shareholders; debt or licensing arrangements could impose restrictive terms or require surrendering rights. Two 2018 shareholder loans were disclosed at 8% and 20% annual interest, each repayable within 24 months; the filing text does not clearly reconcile these loans with the year-end debt disclosures.
- Other exposures: The company relies on third-party manufacturers and CROs, and on licensed intellectual property, principally from Nerviano and Novimmune. It reported no material legal proceedings, but disclosed pending legal action concerning the SharDNA DNA repository asset; the company said it could not use the asset until the matter was resolved and expected a refund if it could not use it. The company also believed it was a passive foreign investment company (PFIC) for 2018, creating potential U.S. tax consequences for U.S. holders.
Most important facts for investors to verify
- How much additional capital is required, when it is needed, and whether financing after year-end was secured; also confirm the effect on dilution and liquidity.
- The auditor’s going-concern warning and the assumptions underlying management’s cash forecasts and “foreseeable future” funding statement.
- Actual Foralumab and Milciclib trial progress and results against the stated timelines, including safety, efficacy and enrollment.
- The precise year-end status and terms of the 8% and 20% shareholder loans, convertible-loan liability, payables and related-party balances.
- Whether R&D tax-credit receipts and claims are repeatable, including the prior-period adjustments included in the 2018 tax credit.
- The status of the SharDNA legal dispute, and the company’s licensed patent rights, obligations and milestone or royalty commitments.