Kazia Therapeutics Limited — FY2021 Form 20-F
Reporting period: Year ended June 30, 2021. The request metadata says “2020 Q4,” but this filing is an annual report for FY2021, not a quarterly filing. Financial amounts below are in Australian dollars (A$) unless otherwise noted. The company reports under IFRS.
Business context
Kazia is a clinical-stage oncology biotechnology company with no product sales. Its lead candidate, paxalisib, is being studied across brain cancer indications; its second clinical asset, EVT801, was licensed in April 2021 and was being prepared for a Phase I trial. In FY2021, the company reported licensing revenue from agreements covering Cantrixil and paxalisib in Greater China.
Key financial metrics
| Metric | FY2021 | FY2020 |
|---|---|---|
| Revenue, primarily licensing | A$15.183 million | Nil |
| Research and development expense | A$14.541 million | A$9.494 million |
| General and administrative expense | A$7.022 million | A$3.690 million |
| Loss after tax | A$8.422 million | A$12.467 million |
| Net cash used in operating activities | A$9.111 million | A$8.810 million |
| Cash and cash equivalents at year-end | A$27.587 million | A$8.764 million |
| Total assets / total liabilities | A$58.088 million / A$20.237 million | A$23.063 million / A$8.938 million |
FY2021 basic and diluted loss per share was A$0.0716, compared with A$0.1707 in FY2020. The company had accumulated losses of A$44.204 million. It reported no borrowings or credit facility. Current assets were A$29.391 million and current liabilities A$8.327 million. Cash included A$6.5 million of short-term deposits; year-end deposits earned a weighted average rate of 0.04%. The filing reports no dividends.
Material changes and unusual items
- Licensing revenue of A$15.183 million was recognized at a point in time; there was no licensing revenue in the prior year. Revenue came from two licensees and was concentrated in China (A$10.006 million) and Sweden (A$5.177 million).
- R&D expense rose 53%, primarily as paxalisib entered the GBM AGILE Phase II/III study and the company prepared the EVT801 Phase I program. G&A expense rose 89%, including A$1.5 million of Chinese withholding tax and VAT on the license transaction and increased legal and corporate costs.
- The company raised equity through an October 2020 entitlement offer and an April 2021 placement, issuing 37.4 million ordinary shares during the year. Financing activities provided A$28.109 million net cash. Ordinary shares outstanding increased from 94.6 million to 132.0 million.
- Cantrixil was licensed worldwide to Oasmia for US$4 million upfront, up to US$42 million in contingent milestones and double-digit royalties. Simcere licensed paxalisib in Greater China for US$11 million upfront—US$7 million cash and US$4 million in equity—plus up to US$281 million in contingent milestones and mid-teen royalties. EVT801 was licensed from Evotec for €1 million upfront, with up to €308 million in contingent milestones and single-digit royalties.
- FY2021 included a A$2.570 million loss on revaluation of contingent consideration and A$0.430 million foreign-exchange loss. Contingent consideration liabilities totaled A$12.091 million at year-end; additional EVT801 milestones of approximately A$475.5 million were not recognized as liabilities because management did not consider them probable.
- The financial statements include A$22.003 million in intangible assets for the paxalisib and EVT801 licenses. The auditor identified impairment assessment, EVT801 asset-acquisition accounting and license-revenue accounting as critical audit matters. The auditor issued an unqualified opinion; it did not audit or opine on internal control effectiveness.
Outlook, commentary and risks
- Management estimated existing cash would support R&D activity until approximately the final quarter of calendar 2022. The financial statements also state that cash was sufficient for at least 12 months from the report date, October 7, 2021. The company remains dependent on future equity, licensing, partnering or grant funding and warns that funding may not be available on acceptable terms.
- Management expected FY2022 final results from the company-sponsored paxalisib Phase II glioblastoma study and the St Jude pediatric Phase I study, as well as interim results from several investigator-sponsored paxalisib studies. The report anticipated recruitment starting for EVT801 Phase I and for paxalisib studies combining treatment with a ketogenic diet or ONC-201. These were expectations, not reported outcomes.
- An interim paxalisib Phase II analysis reported median progression-free survival of 8.4 months and median overall survival of 17.5 months; the filing compared these figures with historical standard-of-care figures. The study was in survival follow-up, with final data expected by year-end 2021. These interim findings do not establish efficacy or regulatory approval.
- The company expects continued losses and rising R&D spending and has never generated product-sale revenue. Licensing income is irregular and milestone-dependent. Key risks include clinical efficacy or safety failures, regulatory and trial delays, reliance on third-party research and manufacturing, competition, intellectual-property challenges, dilution from future fundraising, foreign-exchange exposure and possible PFIC tax treatment for U.S. investors.
- Management concluded disclosure controls and internal control over financial reporting were effective at June 30, 2021. Management noted that controls provide reasonable, not absolute, assurance.
Most important facts for investors to verify
- Current cash, cash burn and financing runway, including the distinction between the stated Q4 2022 estimate and the separate 12-month-from-report-date statement.
- Final and subsequent clinical data for paxalisib, especially GBM AGILE and the company-sponsored glioblastoma study, and whether outcomes support the proposed registrational path.
- EVT801 trial initiation, safety and progress, and the assumptions behind its recorded intangible value and contingent consideration.
- Whether licensing partners pay contingent milestones and royalties, and how much of reported licensing revenue was cash versus equity or subject to transaction taxes.
- Potential dilution and future funding needs, given the increase in shares outstanding and continuing operating cash outflows.
- Tax treatment of carried-forward losses and the company’s PFIC status for each relevant U.S. tax year; the filing says PFIC status may apply for 2021.