Chemomab Therapeutics Ltd. — Q1 2021 Form 10-Q
Reporting period: Three months ended March 31, 2021. Financial statements are unaudited and amounts below are in U.S. dollars unless noted. Chemomab completed its merger with Anchiano Therapeutics on March 16, 2021; the transaction was accounted for as a reverse recapitalization, with Chemomab Ltd. treated as the accounting acquirer. Accordingly, the prior-year operating results represent Chemomab Ltd. and do not reflect the combined company’s full post-merger structure.
Business context and results
Chemomab is a clinical-stage biotechnology company developing therapies for inflammatory and fibrotic diseases. Its lead candidate, CM-101, is being advanced for primary sclerosing cholangitis (PSC), systemic sclerosis (SSc), and non-alcoholic steatohepatitis (NASH). The company reported no revenue in the quarter and does not expect revenue unless it obtains regulatory approval and commercializes a product or enters a revenue-generating collaboration.
| Metric | Q1 2021 | Q1 2020 / comparison |
|---|---|---|
| Revenue | None | None |
| Research and development expense | $1.157 million | $1.552 million; down 25% |
| General and administrative expense | $542,000 | $152,000; up $390,000 |
| Total operating expenses | $1.699 million | $1.704 million |
| Net loss | $1.704 million | $1.695 million |
| Basic and diluted loss per ordinary share | $0.011 | $0.013 |
| Net cash used in operating activities | $1.293 million | $1.913 million |
Financial position, liquidity and cash flow
- At March 31, 2021, cash and cash equivalents were $58.180 million; current assets totaled $59.523 million and total assets were $60.123 million.
- Total liabilities were $4.959 million, including $397,000 of operating lease liabilities ($69,000 current and $328,000 long-term). The filing does not report borrowings or other financial debt.
- Shareholders’ equity was $55.164 million and accumulated deficit was $25.399 million. The company has incurred losses and negative operating cash flows since inception.
- Operating cash outflow was $1.293 million; investing cash outflow was $2,000; financing cash inflow was $47.799 million. Financing included approximately $45.4 million net proceeds from an ADS and warrant private placement and $2.427 million of cash acquired in the merger.
- Cash, cash equivalents and restricted cash at quarter-end totaled $58.231 million. Contractual commitments were $2.908 million, including $2.478 million for the remainder of 2021.
Material changes and unusual items
- The March merger changed the company’s name from Anchiano Therapeutics Ltd. to Chemomab Therapeutics Ltd. and made Chemomab’s clinical-stage business the principal business. Former Chemomab shareholders held approximately 90% of the combined company immediately following the merger, on a fully diluted basis.
- The company completed a private placement that closed March 22, 2021, issuing 2,619,270 ADSs and warrants for approximately $45.5 million gross proceeds. Warrants have a $17.35 exercise price, expire in five years, and could provide approximately $4.5 million more if fully exercised.
- A 4-for-1 reverse share split took effect in connection with the merger; share figures and per-share results were retroactively adjusted as described in the filing.
- Research and development expense fell mainly because of lower third-party manufacturing costs. General and administrative expense rose mainly due to merger and fundraising costs. Net financing expense reflected foreign-exchange losses, versus foreign-exchange gains in Q1 2020.
- As of March 31, the balance sheet included a $1.0 million asset held for sale. Under an agreement with Kestrel Therapeutics, the company transferred rights and obligations for its pan-RAS and PDE10/β-catenin programs for total consideration of $1.0 million; $125,000 had been received by quarter-end. The filing describes this transaction in subsequent events.
Outlook, risks and controls
- Management planned a Phase 2 study of CM-101 in SSc during 2021 and described an ongoing Phase 2a PSC study in the U.K. and Israel and an initiated Phase 2a NASH study. Management expects research and development costs to rise as programs advance and anticipates higher general and administrative costs to support growth and public-company requirements.
- COVID-19 had affected clinical trial sites and delayed commencement of enrollment in the CM-101 PSC Phase 2 trial; further enrollment delays and patient dropouts were possible. The company said the pandemic’s future operational effects were uncertain.
- On April 30, 2021, after quarter-end, the company filed a shelf registration statement for up to $200 million of securities and entered into an at-the-market agreement under which it may sell up to approximately $75 million of ADSs. These are potential financing capacity, not proceeds reported for Q1.
- Management stated disclosure controls were effective as of March 31, 2021. It was strengthening internal-control processes following the merger and planned to complete its assessment for the 2021 annual report. Management said the work was not prompted by a material weakness or deficiency.
- The company reported no pending legal claims it believed could have a material adverse effect and no material changes to previously disclosed risk factors. The filing cautions that forward-looking statements are subject to risks and actual outcomes may differ.
Important facts for investors to verify
- Reconcile the MD&A cash-flow narrative, which says operating cash used “increased” by $0.6 million, with the comparative cash-flow table showing cash used declined from $1.913 million to $1.293 million.
- Verify the stated year-over-year G&A increase percentage: the table reports an increase of $390,000, or 257%, while nearby narrative text states 357%.
- Confirm the timing and accounting for the $1.0 million Kestrel asset sale, including the $125,000 received by March 31 and the remaining consideration.
- Assess whether cash and available financing are sufficient for planned clinical development, given the company’s losses, expected expense increases, and the filing’s lack of a specific cash-runway estimate.
- Track PSC enrollment and potential COVID-19-related delays, as well as progress and costs for the planned SSc and NASH studies.