Anixa Biosciences, Inc. — Form 10-Q Summary
Reporting period: Fiscal third quarter and nine months ended July 31, 2019. The interim financial statements are unaudited.
Business context
Anixa is developing cancer diagnostics and therapeutics: its Cchek liquid-biopsy platform, a triple-negative breast cancer vaccine, and Certainty Therapeutics’ CER-T program for ovarian cancer. It reported no revenue from these programs; reported revenue came from legacy patent licensing.
Financial performance and position
| Metric | Three months ended July 31, 2019 | Nine months ended July 31, 2019 | Comparable 2018 period |
|---|---|---|---|
| Revenue | $0 | $250,000 | $362,500 quarterly; $1,112,500 nine-month |
| Operating loss | $2.184 million | $9.761 million | $5.606 million quarterly; $8.881 million nine-month |
| Net loss attributable to common shareholders | $2.140 million | $9.560 million | $5.477 million quarterly; $8.694 million nine-month |
| Basic and diluted loss per share | $0.11 | $0.49 | $0.30 quarterly; $0.50 nine-month |
| Cash used in operating activities | $3.404 million for nine months | $3.252 million for nine months |
At July 31, cash and cash equivalents were $4.397 million and short-term investments were $2.100 million, totaling $6.497 million. Current assets were $6.628 million and current liabilities were $1.444 million. Total assets were $6.843 million. The balance sheet reports no debt. Gross margin is not separately presented; with no quarter revenue and only lumpy licensing revenue year to date, operating margins are not a useful measure of the development business.
Material changes and unusual items
- Quarterly loss narrowed substantially year over year, principally alongside lower share-based compensation and operating expenses. Nine-month net loss increased year over year despite lower licensing revenue and lower patent-assertion costs.
- Research and development expense was $4.602 million for nine months, up from $4.380 million. General and administrative expense was $4.405 million, down from $4.603 million.
- The company recorded a $418,750 impairment of legacy patent assets; their carrying value was reduced to zero by July 31. Patent amortization for the nine months was $418,750.
- Noncash share-based compensation totaled $4.903 million for the nine months. The company raised approximately $4.900 million through an at-the-market equity offering, issuing 1,208,808 shares. Common shares outstanding were 20,162,851 at July 31 and 20,207,261 on September 5.
Outlook, liquidity, and risks
- Management said, based on information available September 5, it expected cash, cash equivalents, short-term investments, and expected cash flows to fund activities for the next 12 months. It cautioned that actual cash needs could differ and additional funding might be required.
- Management cited plans to file FDA investigational new drug applications for the breast cancer vaccine and CER-T program by year-end 2019, with CER-T trials anticipated thereafter in 2020. It also expected to launch Cchek Prostate Cancer Confirmation as a laboratory-developed test in the fourth quarter of 2019. These are forward-looking targets, not reported outcomes.
- Funding options included remaining capacity under existing at-the-market offerings, including a separate offering of up to $50 million, or other equity or debt financing. Additional equity or convertible debt could dilute shareholders; funding availability and terms were not assured.
- A shareholder derivative action settlement dated August 21, 2019 called for corporate-governance changes and repricing certain previously repriced options to their pre-repricing exercise price. Legal fees were to be paid from directors’ and officers’ insurance; the claims were expected to be dismissed.
- The filing reported no material changes to risk factors from the fiscal 2018 Form 10-K. The company reported disclosure controls as effective and no material third-quarter change in internal control over financial reporting.
Key facts for investors to verify
- Progress and actual timing of the two anticipated IND filings and the Cchek product launch.
- Cash burn, available ATM capacity, future financing needs, and potential dilution.
- Commercial validation and revenue potential of Cchek and the cancer-therapy programs, which had generated no revenue as of the filing.
- Implementation of the derivative-settlement terms, including option repricing and governance changes.
- Whether legacy patent licensing generates future proceeds after the patent asset write-down.