Can-Fite BioPharma Ltd. — 2017 Form 20-F Summary
Reporting period: Fiscal year ended December 31, 2017. This is an annual report, not a standalone fourth-quarter filing; the filing text does not provide clear standalone Q4 financial results. Financial statements are audited and prepared under IFRS as issued by the IASB, with the NIS as functional and reporting currency. U.S. dollar figures are convenience translations.
Business context
Can-Fite is a clinical-stage biopharmaceutical company developing oral small-molecule candidates that target the A3 adenosine receptor. Its lead programs are Piclidenoson for inflammatory conditions, Namodenoson for liver cancer and NASH, and CF602 for sexual dysfunction. The company had no approved products or product-sale revenue; reported revenue primarily reflects licensing and distribution arrangements.
Financial results and position
| Metric | 2017 | 2016 |
|---|---|---|
| Revenue | NIS 2.936 million (US$0.847 million) | NIS 0.652 million |
| Research and development expense | NIS 18.322 million | NIS 23.380 million |
| General and administrative expense | NIS 10.249 million | NIS 10.483 million |
| Operating loss | NIS 25.635 million | NIS 33.211 million |
| Net loss | NIS 17.311 million (US$4.993 million) | NIS 27.009 million |
| Net loss per ordinary share | NIS 0.53 | NIS 0.96 |
| Net cash used in operating activities | NIS 33.099 million | NIS 34.340 million |
| Cash and cash equivalents at year-end | NIS 12.154 million (US$3.506 million) | NIS 31.203 million |
- Revenue increased 350%, mainly from recognition of deferred payments under the Cipher and CKD agreements, including a CKD milestone. It was not product-sales revenue.
- R&D expense fell 22%, principally because CF602 spending was reduced after postponement of its planned IND submission and Namodenoson liver-cancer trial costs declined. Management expected R&D expense to rise in 2018 and beyond.
- G&A expense decreased about 2%; management expected it to remain broadly at the 2017 level during 2018.
- Net loss narrowed about 36%. Net financial income was NIS 6.575 million, including a NIS 10.148 million gain from changes in the fair value of warrant liabilities; warrant valuation and foreign-exchange movements make reported earnings less indicative of operating performance.
- Cash declined about 61% year over year. Financing activities provided NIS 16.974 million in 2017, largely from the January share-and-warrant offering; operating cash use remained substantial.
- At year-end, total assets were NIS 27.222 million and total liabilities NIS 16.608 million. Current assets were NIS 23.865 million versus current liabilities of NIS 6.247 million. The filing reports no conventional borrowings; liabilities included NIS 7.037 million of warrant liabilities and deferred revenue.
- Operating margins are not meaningfully comparable for a pre-commercial development company with minimal licensing revenue and no product sales.
Material changes and unusual items
- In November 2017, OphthaliX completed its merger with Wize Pharma. Can-Fite’s ownership fell from approximately 82% to approximately 8%; Can-Fite ceased consolidating it and recorded a NIS 1.853 million gain. As part of the transaction, Can-Fite reacquired Eye-Fite and cancelled approximately US$5 million of deferred amounts owed by OphthaliX and Eye-Fite, while assuming certain NIH milestone obligations.
- Can-Fite raised approximately US$5 million gross in a January 2017 registered direct offering, accompanied by warrants. The 2017 year-end ordinary-share count was 33,295,618.
- After year-end, Can-Fite received approximately NIS 7.4 million (about US$2.2 million) from Gebro under a new distribution agreement and raised US$5 million gross in a March 2018 offering, also with warrants. These proceeds were not included in year-end cash and involve potential dilution.
- The filing reports accumulated deficit of NIS 367.222 million (US$105.919 million) in the audited balance sheet. Elsewhere, the narrative gives differing accumulated-deficit figures; the filing text is not fully consistent on this value.
Outlook, development, risks and contingencies
- Management said available resources, including post-year-end Gebro payments and the March 2018 financing, were expected to fund operations for at least the next twelve months. The company nevertheless expects continuing losses and says it will need substantial additional financing for its development plans.
- Key planned milestones included the ongoing Phase III ACRobat Piclidenoson rheumatoid-arthritis trial, preparatory work for a psoriasis Phase III trial, HCC Phase II results expected in the second half of 2018, and NASH Phase II enrollment expected to finish near year-end 2018 with data expected in the first half of 2019. These are management expectations, not assured outcomes.
- Piclidenoson has a mixed clinical record: earlier dry-eye and glaucoma trials failed primary endpoints; two rheumatoid-arthritis Phase IIb studies with methotrexate and the psoriasis Phase II/III study also missed primary endpoints. A selected-patient rheumatoid-arthritis Phase IIb study using A3AR biomarker levels met its primary endpoint. These results do not establish later-stage efficacy.
- Namodenoson’s HCC Phase II trial completed enrollment of 78 patients in Q3 2017; the study remained blinded at filing. The company reported an apparently favorable safety profile to date but had no disclosed final efficacy result. Its NASH program remained in Phase II.
- CF602’s planned IND submission was postponed while the company investigated additional compounds. Clinical trials had not begun for this program.
- Major risks include ongoing operating losses, cash burn and dependence on future capital or licensing proceeds; clinical and regulatory failure or delay; limited product portfolio; competition; reliance on third-party manufacturers, CROs and distribution partners; intellectual-property protection; foreign-exchange exposure; and operations in Israel. No dividends were planned.
- A purported securities class action alleging misleading disclosures about Piclidenoson was denied class-action certification by the Tel Aviv District Court in July 2017, which awarded Can-Fite NIS 50,000 in expenses. The claimant appealed; a Supreme Court hearing was scheduled for December 2018. Management believed reversal unlikely, but the outcome remained uncertain. No IAS 37 provision was identified in the financial statements.
- The independent auditor issued an unmodified opinion on the IFRS financial statements. Management concluded disclosure controls and internal control over financial reporting were effective as of December 31, 2017; the auditor did not provide an ICFR attestation.
Most important facts for investors to verify
- Whether the HCC and NASH trial timelines and results matched management’s stated expectations, and whether the trials showed meaningful efficacy and acceptable safety.
- Actual cash runway and subsequent cash use, including the timing and net proceeds of the 2018 Gebro payments and equity financing, and the potential dilution from warrants and options.
- How much future revenue depends on deferred upfront payments and milestones versus royalties or commercial product sales, and whether licensing milestones are achieved.
- The warrant-liability accounting and fair-value assumptions, given the material contribution of warrant remeasurement to 2017 financial income.
- The Supreme Court appeal outcome and any related financial or disclosure consequences; also reconcile the differing accumulated-deficit figures in the filing.
- Whether the company maintained its NYSE American listing requirements and obtained sufficient additional capital to fund planned trials.