Business Context and Reporting Period
Company: Anchiano Therapeutics Ltd. (formerly BioCancell Ltd.)
Filing Type: Form 20-F (Annual Report)
Reporting Period: Fiscal year ended December 31, 2018
Business Overview: Anchiano is a clinical-stage biotechnology company developing inodiftagene, a gene therapy candidate for non-muscle invasive bladder cancer (NMIBC). The company has no approved products and has not generated any revenue. It operates primarily in Israel with a U.S. subsidiary in Massachusetts. The company completed an Initial Public Offering (IPO) in February 2019, listing American Depositary Shares (ADSs) on the Nasdaq Capital Market under the symbol "ANCN."
Key Financial Metrics (Year Ended Dec 31, 2018)
| Metric | 2018 (USD '000s) | 2017 (USD '000s) |
|---|---|---|
| Revenue | $0 | $0 |
| Operating Expenses | $13,044 | $9,392 |
| Research & Development | $7,559 | $6,229 |
| General & Administrative | $5,485 | $3,163 |
| Net Loss | $(13,279) | $(9,806) |
| Cash and Cash Equivalents | $7,517 | $1,454 |
| Total Assets | $12,574 | $2,087 |
| Total Liabilities | $13,664 | $2,696 |
| Shareholders' Equity (Deficiency) | $(1,090) | $(609) |
Liquidity: Net cash used in operating activities was $14.7 million in 2018. Net cash provided by financing activities was $21.2 million, driven by a private offering in June 2018. The company reported a working capital surplus of $884,000 in 2018, compared to a deficit of $842,000 in 2017.
Material Changes vs. Prior Period
- Operating Loss Increase: Net loss increased by approximately 35% to $13.3 million from $9.8 million in 2017. This was primarily due to a 21% increase in R&D expenses (driven by clinical trial initiation and manufacturing development) and a 73% increase in G&A expenses (driven by share-based compensation for the CEO and increased professional fees).
- Derivative Instruments: The company issued derivative financial instruments (warrants and price protection rights) in June 2018. These are recorded as liabilities and measured at fair value. The fair value of these instruments was approximately $10.6 million as of December 31, 2018, contributing to the liability total.
- Cash Position: Cash and cash equivalents increased significantly from $1.5 million to $7.5 million, bolstered by the June 2018 private placement and the February 2019 IPO (which occurred after the reporting period but is disclosed as a significant event).
Guidance, Outlook, Risks, and Unusual Items
- Going Concern: The auditors have issued a "Going Concern" opinion. The company has incurred recurring losses since inception and has not achieved profitable operations. There is substantial doubt about the company's ability to continue as a going concern without additional financing. Management expects proceeds from the February 2019 IPO to fund operations through the second quarter of 2020.
- Clinical Development: The company is preparing for two pivotal trials: the Phase 2 "Codex" trial (BCG-unresponsive patients) and the Phase 3 "Leo" trial (BCG-refractory patients). The Codex trial was initiated in December 2018. The Leo trial is expected to begin enrollment in the first half of 2020, contingent on funding.
- Intellectual Property: Patents for the original formulation of inodiftagene expired in 2017/2018. The company relies on new patent applications for a new formulation, with potential exclusivity until 2036.
- Regulatory Risks: Success depends entirely on regulatory approval of inodiftagene. The FDA has granted Fast Track designation and a Special Protocol Assessment (SPA) for the Phase 3 trial, but approval is not guaranteed.
- Unusual Items: Financing income/expense fluctuated due to the fair value changes of the derivative instruments issued in 2018. The company recorded a financing income of $1.1 million in 2018 related to the change in fair value of these derivatives.
Key Facts for Investor Verification
- Cash Runway: Verify if the $26.8 million net proceeds from the February 2019 IPO are sufficient to fund the pivotal trials through 2020 as projected, given the high burn rate ($14.7M operating cash burn in 2018).
- Derivative Liability: Monitor the fair value of the $10.6 million derivative liability (warrants and price protection rights), as fluctuations in share price will directly impact the income statement.
- Clinical Trial Progress: Track enrollment and interim data for the "Codex" Phase 2 trial, which is critical for the company's valuation and future funding.
- Patent Status: Confirm the status of the new formulation patents filed in 2015/2017 to ensure product exclusivity post-2018.
- Government Grants: Note the contingent liability of approximately $4.0 million related to royalties owed to the Israel Innovation Authority (IIA) if the product is commercialized, which is not currently recorded as a liability.