Anixa Biosciences, Inc. — Q1 FY2019 Form 10-Q
Reporting period: Three months ended January 31, 2019. Anixa is developing the Cchek cancer-detection platform and CAR-T-based cancer therapeutics; it also has legacy patent-licensing activities. The company reported no revenue in the quarter.
Financial results and liquidity
- Revenue: $0, unchanged from the prior-year quarter. With no revenue, a profit margin is not meaningful.
- Net loss: $4.967 million, versus $1.865 million in Q1 FY2018. Net loss attributable to common shareholders was $4.882 million, or $0.25 per share, compared with $1.838 million, or $0.11 per share.
- Operating expenses: $4.984 million, up from $1.875 million. This included $2.750 million of non-cash share-based compensation and a $419,000 patent-asset impairment.
- Cash flow: $1.330 million used in operations; $250,000 provided by investing activities; and $2.176 million provided by financing activities. Cash and cash equivalents ended the quarter at $4.153 million.
- Liquidity: Cash, cash equivalents and short-term investments totaled approximately $5.903 million at January 31, 2019, compared with approximately $5.056 million at October 31, 2018.
- Balance sheet: Total assets were $6.470 million and total liabilities were $1.327 million, consisting of accounts payable and accrued expenses. The filing reports no debt.
Material changes versus Q1 FY2018
- Research and development expense increased to $2.247 million from $778,000, largely due to higher employee stock-award and stock-option compensation; the prior-year quarter included an initial Wistar CAR-T license fee.
- General and administrative expense rose to $2.066 million from $990,000, principally reflecting higher share-based compensation and legal and accounting fees associated mainly with shareholder litigation.
- Patent amortization increased to $251,000 from $81,000 following a reduction in estimated useful lives. An additional $419,000 impairment was recorded in the current quarter.
- Operating cash use was broadly similar to the prior-year quarter: $1.330 million versus $1.340 million. The company raised approximately $2.154 million through an at-the-market offering, issuing 551,603 shares.
Outlook, risks and unusual items
- Management stated that, based on information available March 13, 2019, existing cash, short-term investments and expected cash flows were expected to fund activities for the next 12 months. It cautioned that actual cash needs may differ and additional funding may be required; future equity or convertible-debt financing could dilute shareholders.
- The company said Cchek and Certainty Therapeutics’ ovarian-cancer program would be its primary focus over the next several quarters. Certainty was working with Moffitt Cancer Center toward studies needed for an FDA investigational new drug application.
- The company wrote down legacy patent assets based on estimated future cash flows, which depend on its assessment of potential licensees and ongoing negotiations.
- A putative shareholder derivative complaint filed in Delaware in November 2018 alleges breach of fiduciary duty and unjust enrichment. The company is a nominal defendant, is funding legal fees with available D&O insurance and indemnification obligations, and said potential losses could not be reasonably estimated; defendants moved to dismiss.
- Management reported effective disclosure controls and no material change in internal control over financial reporting during the quarter. It reported no material changes to the risk factors in its prior Form 10-K.
Important facts for investors to verify
- Whether cash burn and available liquidity remain consistent with management’s stated 12-month funding expectation.
- Progress, timing and funding needs for Cchek validation and the ovarian-cancer therapeutic’s preclinical work and planned IND submission.
- Future share-based compensation, potential dilution and any additional use of the at-the-market offering program.
- Developments in the shareholder derivative litigation and any resulting legal costs or liabilities.
- Assumptions supporting patent valuations, amortization and any further impairment or licensing income.