Can-Fite BioPharma Ltd. — 2019 Form 20-F
Reporting period: Fiscal year ended December 31, 2019. This is an annual report, not a standalone fourth-quarter filing. Financial statements are prepared under IFRS as issued by the IASB and reported in U.S. dollars. The auditor issued an unqualified opinion.
Business context
Can-Fite is a clinical-stage biopharmaceutical company developing oral small-molecule candidates targeting the A3 adenosine receptor. Its principal candidates are Piclidenoson (autoimmune and inflammatory conditions), Namodenoson (liver cancer and NASH), and CF602 (erectile dysfunction). It has no approved products or product-sales revenue; reported revenue chiefly reflects licensing and collaboration arrangements.
Financial performance and position
| Metric (USD millions, except per-share data) | 2019 | 2018 |
|---|---|---|
| Revenue | 2.032 | 3.820 |
| Research and development expense | 10.976 | 6.075 |
| General and administrative expense | 3.059 | 3.159 |
| Operating loss | (12.003) | (5.414) |
| Net loss | (9.587) | (6.571) |
| Net loss per ordinary share | (0.11) | (0.17) |
| Net cash used in operating activities | (10.800) | (4.155) |
- Revenue fell 47.3%, primarily because the $2.0 million CMS Medical advance recognized in 2018 did not recur. 2019 revenue included $0.75 million from Kyongbo and recognition of portions of earlier partner advances.
- R&D expense rose 81.6%, mainly reflecting clinical-trial costs, including initiation of the Piclidenoson Phase III rheumatoid arthritis study. Management expected R&D spending to increase further.
- Net loss widened despite a $2.416 million net financial gain, including $3.037 million of income from changes in the fair value of warrant liabilities. The gain is non-operating and substantially non-cash; it should not be viewed as recurring operating performance.
- At year-end, cash and cash equivalents were $2.697 million, down from $3.615 million. Total current assets were $7.144 million and current liabilities $3.271 million; current assets include substantial receivables and prepaid expenses, so they are not equivalent to cash. Total assets were $8.175 million, total liabilities $7.298 million, and equity $0.877 million.
- The filing reports no conventional borrowings. Liabilities included $1.566 million of warrant liabilities and $75,000 of lease liabilities. Cash flow from financing was $10.133 million, principally from equity and warrant-related financing.
- Margins are not a meaningful indicator of the business: Can-Fite had no product sales and remained loss-making. The accumulated deficit was $110.210 million.
Material changes and developments
- Ordinary shares outstanding increased to 120,652,683 at December 31, 2019 from 40,399,290 a year earlier, reflecting financings and shares issued in connection with the Univo collaboration. The ADS-to-ordinary-share ratio changed in May 2019 to one ADS for 30 ordinary shares; historical ADS information was adjusted.
- In September 2019, Can-Fite entered a cannabis research collaboration with Univo, agreed to pay $500,000, and issued Univo 19,934,355 ordinary shares (about 16.6% of post-issuance shares). The parties initially share ownership of collaboration IP and generally share related revenues based on contribution.
- During 2019, an activist-shareholder dispute led to litigation and management distraction. The parties reached an October settlement that included advisory fees of 5% of certain future securities financings, capped at $1.3 million, and standstill and voting commitments. The filing says the litigation was to be dismissed.
Outlook, risks and unusual items
- Management stated that available resources, including subsequent financings, were expected to fund operations for at least 12 months from the report’s issuance. The company nevertheless expects continuing losses and says it will need significant additional capital; financing may dilute shareholders or may not be available on acceptable terms.
- After year-end, Can-Fite reported approximately $2.4 million from repriced warrant exercises, a February 2020 public offering, and approximately $1.0 million from partial warrant exercises in March. The filing’s proceeds descriptions are inconsistent: it cites roughly $4.2 million in one account, approximately $5 million elsewhere, while the detailed unit terms imply a different gross amount. Verify the actual gross and net proceeds.
- Pipeline milestones stated in the report included ongoing Phase III trials of Piclidenoson for rheumatoid arthritis and psoriasis; an interim rheumatoid arthritis analysis expected in Q4 2020; preparation for a Phase III Namodenoson HCC trial; and NASH Phase II results expected in April 2020. These are management plans and expectations, not assured outcomes.
- Important clinical caveat: prior trials had mixed or negative results, including failures to meet primary endpoints in Piclidenoson rheumatoid arthritis combination studies and a psoriasis Phase II/III study, and failure of Namodenoson’s HCC Phase II trial to meet its primary endpoint in the full study population. Favorable Namodenoson findings were reported in the CPB7 subgroup, but remain subject to confirmation.
- COVID-19 was identified as a potential risk to clinical trials, staffing, suppliers, regulatory timelines and access to capital. Other key risks include continued operating losses, trial and regulatory failure, dilution, dependence on partners and contract manufacturers, intellectual-property protection, cannabis regulation, and operations in Israel.
- No material legal provision was recorded in the financial statements. The Capital Point dispute and settlement, warrant fair-value movements, and Univo share-based collaboration are notable items for investors to assess.
Most important facts to verify
- Cash runway and the reconciliation of year-end cash, $10.8 million operating cash burn, and subsequent financing proceeds—particularly the inconsistent February offering amounts.
- Warrant terms, potential exercises and dilution, and the assumptions behind the $3.037 million warrant-liability fair-value gain.
- Current status, enrollment, endpoints and results of the Piclidenoson and Namodenoson trials, including whether announced milestones were achieved.
- Revenue-recognition timing and remaining deferred revenue from licensing advances; reported revenue is not product-sales revenue.
- Univo collaboration economics, shared IP, issued shares, related-party considerations and any additional funding commitments.
- Capital Point settlement costs and any remaining obligations, as well as the company’s ability to maintain listing and raise further capital.