Business Context and Reporting Period
Company: Can-Fite BioPharma Ltd.
Filing Type: Form 20-F (Annual Report)
Reporting Period: Fiscal year ended December 31, 2016
Business Overview: Can-Fite is a clinical-stage biopharmaceutical company developing orally bioavailable small molecule therapeutics targeting the A3 adenosine receptor (A3AR). The company's pipeline focuses on autoimmune-inflammatory indications (Rheumatoid Arthritis, Psoriasis), oncology (Hepatocellular Carcinoma), liver diseases (NASH), and sexual dysfunction. The company has not yet commercialized any products and relies on out-licensing agreements and equity financing.
Key Financial Metrics (Year Ended Dec 31, 2016)
| Metric | 2016 (NIS '000s) | 2016 (USD '000s) | 2015 (NIS '000s) |
|---|---|---|---|
| Revenues | 652 | 170 | 643 |
| Research & Development Expenses | 23,380 | 6,081 | 15,052 |
| General & Administrative Expenses | 10,483 | 2,726 | 10,633 |
| Operating Loss | (33,211) | (8,637) | (25,042) |
| Net Loss | (27,009) | (7,024) | (19,770) |
| Cash and Cash Equivalents (Year End) | 31,203 | 8,115 | 66,026 |
| Total Assets | 39,109 | 10,171 | 68,708 |
| Total Liabilities | 24,207 | 6,295 | 27,935 |
| Shareholders' Equity | 14,902 | 3,876 | 40,773 |
Note: USD conversions are based on the exchange rate of NIS 3.845 to $1.00 as of December 31, 2016.
Material Changes vs. Prior Period
- Revenue: Increased slightly by 1.6% (NIS 0.01 million) compared to 2015. Revenue is derived primarily from the recognition of advance payments under distribution agreements with Cipher Pharmaceuticals (Canada) and Chong Kun Dang Pharmaceuticals (CKD, South Korea).
- R&D Expenses: Increased significantly by 55% (NIS 8.33 million) to NIS 23.38 million. This increase is attributed to costs associated with preparations for Phase III studies of Piclidenoson (RA and Psoriasis) and the ongoing Phase II clinical trial of Namodenoson for liver cancer.
- Net Loss: Widened by approximately 36% to NIS 27.0 million, driven primarily by the surge in R&D expenditures.
- Liquidity: Cash and cash equivalents decreased by approximately 53% from NIS 66.0 million in 2015 to NIS 31.2 million in 2016. This reduction reflects the increased cash burn from clinical trials. However, the company received NIS 1.9 million from CKD in Q4 2016 and raised approximately NIS 18.9 million in a registered direct offering in January 2017.
Guidance, Outlook, and Risks
Outlook and Pipeline Status
- Piclidenoson (CF101): Preparatory work for Phase III trials in Rheumatoid Arthritis (RA) and Psoriasis is underway. Enrollment for the RA trial is expected to commence in Q2 2017; Psoriasis IRB submissions are expected in Q4 2017.
- Namodenoson (CF102): A Phase II study for Hepatocellular Carcinoma (HCC) is ongoing, with enrollment expected to complete in H1 2017. Preparatory work for a Phase II trial in NASH is expected to commence in Q2 2017.
- CF602: IND-enabling studies for sexual dysfunction are ongoing, with an FDA IND submission planned for 2017.
- Capital Resources: Management believes existing resources (including the Jan 2017 raise) are sufficient to fund operations for the next twelve months. Future capital requirements will depend on clinical trial progress and regulatory outcomes.
Key Risks and Contingencies
- Class Action Litigation: A lawsuit filed in June 2015 alleges the company misled the public regarding the efficacy of Piclidenoson in psoriasis studies. The plaintiff seeks damages of approximately NIS 125 million for shareholders. A hearing on class certification was held in March 2017, with a final hearing scheduled for April 26, 2017. The company intends to vigorously defend the action.
- Clinical Trial Failure: The company has experienced failures in previous trials (e.g., Piclidenoson for dry-eye syndrome and glaucoma; Namodenoson for HCV). Future trials may fail to meet primary endpoints, which would materially adversely affect the business.
- Need for Additional Financing: As a pre-revenue company with an accumulated deficit of approximately NIS 350 million, the company requires significant additional funding to complete development and commercialization. Failure to secure financing could force delays or termination of programs.
- Regulatory and IP Risks: The company relies on licensed IP (e.g., from Leiden University) and faces risks regarding patent expiration and the ability to obtain regulatory approvals from the FDA and EMA.
Investor Verification Checklist
- Cash Runway: Verify the sufficiency of the NIS 18.9 million raised in January 2017 combined with year-end cash to fund the planned Phase III trials through 2017 and beyond.
- Litigation Status: Monitor the outcome of the class action certification hearing scheduled for April 26, 2017, and any potential settlement or judgment impacts.
- Clinical Milestones: Track the commencement of enrollment for the Piclidenoson RA Phase III trial (expected Q2 2017) and the completion of the Namodenoson HCC Phase II enrollment (expected H1 2017).
- Revenue Recognition: Review the terms of the CKD and Cipher agreements to understand the timing of future milestone payments and royalty triggers.
- Share Dilution: Assess the impact of outstanding warrants and options (approx. 13.6 million warrants and 0.7 million options outstanding as of March 2017) on future equity dilution.