Business Context and Reporting Period
Company: Can-Fite BioPharma Ltd.
Filing Type: Form 20-F (Annual Report)
Reporting Period: Fiscal year ended December 31, 2013
Business Overview: Can-Fite is a clinical-stage biopharmaceutical company developing orally bioavailable small molecule therapeutics targeting the A3 adenosine receptor (A3AR) for autoimmune-inflammatory, oncological, and ophthalmic diseases. The company has no commercial products and generates revenue primarily through out-licensing agreements.
Key Financial Metrics
| Metric (in thousands) | 2013 (NIS) | 2013 (USD*) | 2012 (NIS) |
|---|---|---|---|
| Revenues | 0 | 0 | 0 |
| Research & Development Expenses | 15,390 | 4,434 | 13,160 |
| General & Administrative Expenses | 15,922 | 4,587 | 9,272 |
| Operating Loss | (31,312) | (9,021) | (22,432) |
| Net Loss | (30,812) | (8,877) | (21,929) |
| Cash and Cash Equivalents (Year End) | 20,767 | 5,983 | 4,278 |
| Total Assets | 23,105 | 6,656 | 6,109 |
| Total Liabilities | 7,580 | 2,183 | 8,754 |
| Shareholders' Equity | 15,525 | 4,473 | (2,645) |
*USD conversions based on the exchange rate of NIS 3.471 to $1.00 as of December 31, 2013.
Material Changes vs. Prior Period
- Revenue: The company reported zero revenue for 2013, consistent with 2012. Previous revenue (2011) was derived from out-licensing agreements with Seikagaku Corporation (Japan) and Kwang Dong Pharmaceutical (Korea), which have concluded their initial payment phases.
- Operating Expenses: Operating loss increased by approximately 39.6% (NIS 8.88 million) compared to 2012.
- R&D Expenses: Increased by 14.5% (NIS 2.23 million) primarily due to higher clinical trial costs.
- G&A Expenses: Increased significantly by 71.7% (NIS 6.65 million), driven by higher investor relations costs, share-based payments, salaries, and professional services.
- Liquidity: Cash and cash equivalents increased by 385% from NIS 4.28 million in 2012 to NIS 20.77 million in 2013. This increase was funded by two Israeli public offerings in February and October 2013, raising approximately NIS 47.8 million in aggregate proceeds.
- Equity Position: Shareholders' equity turned positive (NIS 15.5 million) from a deficit (NIS 2.6 million) in 2012, largely due to the capital raised through equity offerings.
Guidance, Outlook, Risks, and Unusual Items
Outlook and Capital Requirements
Management expects to continue incurring substantial operating losses for the foreseeable future. As of December 31, 2013, the company had an accumulated deficit of approximately NIS 280.4 million. While cash on hand (plus a subsequent private placement in March 2014 raising ~$5 million) is projected to fund operations for the next twelve months, the company will require significant additional financing to complete clinical trials and commercialize products.
Clinical Development Status
- CF101 (Lead Candidate):
- Dry Eye Syndrome (DES): A Phase III study conducted by subsidiary OphthaliX failed to meet primary and secondary efficacy endpoints in December 2013. OphthaliX is conducting a retrospective analysis to correlate A3AR biomarkers with patient response.
- Psoriasis: A Phase II/III trial is ongoing; top-line results expected in Q4 2014.
- Rheumatoid Arthritis (RA): Preparing for a Phase III study as a standalone therapy (following failures in combination with methotrexate).
- Glaucoma: Phase II trial ongoing via OphthaliX.
- CF102: Preparing for a Phase II study in Hepatocellular Carcinoma (HCC).
- CF602: In preclinical stage for inflammatory diseases and sexual dysfunction.
Key Risks
- Clinical Failure: High risk of attrition in clinical trials; recent Phase III failure in DES highlights this risk.
- Capital Shortage: Inability to raise additional capital could force delays or termination of development programs.
- Intellectual Property: Key composition of matter patents licensed from the NIH expire in 2014 (Europe) and 2015 (US). The company relies on use patents and potential data exclusivity for protection post-expiration.
- Geopolitical: Operations are based in Israel; regional instability or military conflict could disrupt operations or call up key personnel.
Investor Verification Checklist
- Cash Runway: Verify the sufficiency of the ~$6 million cash balance (plus the March 2014 raise) against the projected burn rate for the upcoming 12 months.
- DES Study Analysis: Monitor the results of the retrospective analysis of the failed Phase III DES study to determine if a biomarker-driven approach can salvage the indication.
- Patent Expiration: Assess the strategy for maintaining exclusivity for CF101 and CF102 after the 2014/2015 expiration of core NIH composition of matter patents.
- Upcoming Milestones: Track the timeline for top-line results of the Psoriasis Phase II/III study (expected Q4 2014) and the initiation of the HCC Phase II study.
- Out-Licensing Revenue: Confirm the status of potential future milestone payments from existing licensees (Seikagaku, Kwang Dong) and the likelihood of new out-licensing deals.