Chemomab Therapeutics Ltd. — Q3 2022 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2022. Chemomab is a clinical-stage biotechnology company developing CM-101 for fibrotic and inflammatory diseases. It has not generated revenue.
Financial performance and position
- Q3 2022: Operating expenses were $8.317 million, comprising R&D of $5.423 million and G&A of $2.894 million. Net loss was $8.080 million, compared with $2.968 million in Q3 2021. Basic and diluted loss per ordinary share was $0.035.
- Nine months 2022: Operating expenses were $19.891 million (R&D $11.082 million; G&A $8.809 million). Net loss was $19.374 million, compared with $7.442 million in the prior-year period. Basic and diluted loss per ordinary share was $0.085.
- Revenue and margins: No revenue was reported; profitability and operating margins are therefore not meaningful.
- Cash flow: Net cash used in operations was $14.667 million for the nine months, versus $9.480 million a year earlier. Investing activities provided $10.183 million, mainly reflecting a decrease in short-term deposits. Financing activities provided $0.061 million, compared with $61.155 million in 2021.
- Liquidity and debt: At September 30, cash and cash equivalents were $10.741 million and short-term bank deposits were $35.725 million, or $46.466 million combined. Total liabilities were $5.595 million, including $0.244 million of operating lease liabilities; the filing reports no borrowings. Management estimated existing cash resources would fund projected requirements through the end of 2023.
- Other balance-sheet items: Accumulated deficit was $55.547 million. Total assets were $50.219 million and shareholders’ equity was $44.624 million.
Changes versus comparable periods
- Q3 R&D expense rose 265% and G&A expense rose 106% year over year; management attributed the R&D increase to greater clinical and preclinical activity and the G&A increase mainly to compensation, senior-management additions and share-based compensation.
- For the nine months, R&D expense rose 180% and G&A expense rose 160%. G&A also included a $0.6 million provision related to the Israeli Tax Authority audit.
- Nine-month operating cash use increased by $5.187 million. The prior-year period included substantial equity financing, while no ADSs were sold under the ATM facility from July 2021 through September 2022.
- Cash, cash equivalents and short-term deposits totaled $46.466 million at September 30, 2022, compared with $61.161 million at December 31, 2021.
Outlook, risks and notable items
- The Phase 2 PSC trial is being expanded to an expected 93 patients, with additional 5 mg/kg and 20 mg/kg dose cohorts and an open-label extension. Top-line data are expected in the second half of 2024. An interim safety analysis was expected before year-end 2022.
- The company planned to launch its Phase 2 systemic sclerosis trial around year-end 2022 and begin enrolling patients in early 2023.
- The treatment phase of the CM-101 NASH liver-fibrosis study was complete; a data readout was targeted near year-end 2022.
- Management expects R&D and G&A expenses to increase as development advances. Additional financing will be needed; none was committed as of the report. Equity financing could dilute shareholders, and debt could add obligations and restrictive covenants.
- COVID-19 had delayed PSC trial commencement and affected enrollment; the company cited possible further effects on trial participation and operations.
- The Israeli Tax Authority issued an assessment following a VAT audit of 2017–2020, including disputes over VAT recoverability and the company’s classification. Chemomab rejected a proposed settlement and plans to appeal; the recorded provision is subject to uncertainty.
- A proposed repurchase of up to $2.5 million of ADSs from the co-founders at market price required Israeli court approval, which had not been obtained as of November 10, 2022. The company said it did not expect the arrangement to change its cash runway.
- Management concluded disclosure controls and procedures were effective as of September 30, 2022. The filing reported no material changes to risk factors from the 2021 Form 10-K.
Important facts for investors to verify
- Whether cash use and clinical-development spending remain consistent with management’s stated runway through year-end 2023.
- Progress, enrollment, safety updates and timing for the PSC and systemic sclerosis trials, and the NASH study results.
- The outcome and potential financial impact of the Israeli Tax Authority assessment and appeal.
- Whether court approval is obtained for the co-founder repurchase and whether any ADS sales or other financing are subsequently undertaken.