Business context and reporting period
This is Anchiano Therapeutics Ltd.’s Form 10-K for the fiscal year ended December 31, 2020, filed March 7, 2021—not a Chemomab Therapeutics Ltd. 10-K or a quarterly report. Anchiano was a preclinical oncology company developing pan-RAS and PDE10/β-catenin small-molecule programs. It had discontinued clinical development of inodiftagene in 2019. On December 14, 2020, Anchiano agreed to merge with Chemomab, a clinical-stage fibrosis-focused biotech, subject to closing conditions.
Financial results and liquidity
| Metric (US$ millions, except per-share data) | 2020 | 2019 |
|---|---|---|
| Revenue | None | None |
| Research and development expense | 3.783 | 13.303 |
| General and administrative expense | 7.180 | 6.245 |
| Restructuring expense | 0.749 | 3.350 |
| Total operating expenses | 11.712 | 22.898 |
| Net loss | 11.609 | 27.124 |
| Basic and diluted loss per share | $0.31 | $0.79 |
| Net cash used in operating activities | 12.712 | 16.458 |
At December 31, 2020, cash and cash equivalents were $5.392 million, versus $17.575 million a year earlier; total assets were $6.179 million and shareholders’ equity was $3.577 million. Current assets of $6.116 million exceeded current liabilities of $2.586 million. Total liabilities were $2.602 million, including $0.195 million of operating lease liabilities; the balance sheet does not show conventional borrowings. Cash, cash equivalents and restricted cash declined by $12.313 million during 2020. Investing activities provided $0.102 million and financing activities provided $0.297 million.
Margins are not meaningful because the company reported no revenue. The financial statements were prepared on a going-concern basis, but the auditor and management cited substantial doubt about Anchiano’s ability to continue as a going concern. Management expected available cash to fund needs only through completion of the contemplated merger in the first half of 2021.
Material changes versus the prior comparable period
- Net loss fell by $15.515 million, while R&D expense decreased 72%, primarily after July 2020 cost reductions and a temporary reduction in RAS research activity.
- G&A expense rose approximately 16%, mainly because of professional fees, insurance and personnel costs.
- Restructuring expense declined 78%. The company closed its Israeli office and laboratories, reduced headcount and terminated or curtailed certain external research and clinical-related contracts.
- Financing results improved from a $4.226 million net expense in 2019 to $0.103 million net income in 2020. The 2019 expense was mainly a one-time warrant fair-value remeasurement; 2020 income reflected interest and foreign-exchange gains.
- Anchiano had no material financing proceeds from new share issuance in 2020; 2019 financing cash flow included its $30.5 million IPO.
Outlook, risks and unusual items
- The proposed Chemomab merger required shareholder and Nasdaq approvals and other conditions, including at least $30 million of financing concurrent with closing. Before that financing, the merger terms contemplated former Chemomab holders owning approximately 90% of the combined company on a fully diluted basis, subject to adjustments.
- If the merger failed, Anchiano said it would need further financing or another strategic transaction; its board could consider dissolution and liquidation. The filing cautions that additional capital might not be available on acceptable terms.
- Anchiano’s oncology programs were preclinical, and their future under the combined company was uncertain. The filing describes possible development timelines, including a potential first-in-human pan-RAS trial in 2022, but these plans depended on candidate selection, IND-enabling work, financing and other conditions. PDE10/β-catenin work was lower priority and expected to rely initially on ADT funding.
- The merger agreement and its associated dilution, integration, financing, execution and business-continuity risks are material. Five shareholder complaints filed in 2021 alleged omissions or misrepresentations in merger disclosures; the company said the outcome was too early to assess.
- Former CEO Frank Haluska’s disputed “Good Reason” resignation could create up to $0.4 million in exposure. Anchiano disputed entitlement to severance, intended to contest claims and recorded no provision.
- Anchiano had received approximately $4 million cumulatively in Israel Innovation Authority grants tied to discontinued inodiftagene development. No royalty liability was recorded; the company had asked the IIA to confirm that no royalties were due, and had not received a response by the financial-statement date.
- The company reported accumulated losses of $117.040 million and no product revenue. Other risks include dependence on ADT and third-party research providers, early-stage development and regulatory uncertainty, intellectual-property protection, COVID-19 disruption, Nasdaq listing compliance and potential financing-related dilution.
The auditor issued an unqualified opinion on the financial statements while highlighting the going-concern uncertainty. Management stated internal control over financial reporting was effective at year-end; the auditor was not engaged to audit those controls.
Important facts for investors to verify
- Whether the merger closed, whether the required financing was secured, and the final ownership and dilution terms.
- Actual cash runway and funding needs if the merger or alternative financing did not proceed.
- Which Anchiano programs, if any, the combined company chose to advance and the resources committed to them.
- Developments in the merger-related litigation, the former CEO’s potential claim and the IIA royalty request.
- ADT option and license status, including exercise fees, milestones, royalties and any effect of the merger on those rights.