XTL Biopharmaceuticals Ltd. — FY2019 Form 20-F
Reporting period: Fiscal year ended December 31, 2019; filed March 12, 2020. This is an annual report, not a standalone fourth-quarter filing. Financial statements are prepared under IFRS in U.S. dollars.
Business context
XTL is a pre-revenue biopharmaceutical company focused primarily on hCDR1 (edratide), a Phase II-ready candidate for systemic lupus erythematosus (SLE) and Sjogren’s syndrome (SS). It reported no product sales. The company has reduced clinical-trial spending pending adequate financing or a strategic partner. Its rHuEPO program for multiple myeloma is not expected to receive material development activity.
Financial performance and position
| Metric | FY2019 / Dec. 31, 2019 | FY2018 / Dec. 31, 2018 |
|---|---|---|
| Revenue | No product sales reported | No product sales reported |
| Research and development expense | $35,000 | $38,000 |
| General and administrative expense | $807,000 | $755,000 |
| Operating loss | $842,000 | $793,000 |
| Finance income (expense), net | $(505,000) | $3.779 million |
| Net income (loss) | $(1.347) million | $2.986 million |
| Basic and diluted earnings (loss) per share | $(0.003) | $0.006 |
| Cash, cash equivalents and short-term deposits | $4.455 million | $5.275 million |
| Working capital | $6.598 million | $7.942 million |
| Total assets | $7.212 million | $8.575 million |
| Shareholders’ equity | $6.980 million | $8.322 million |
Amounts are U.S. dollars; expense and loss figures are shown as negative where appropriate. Gross and operating margins are not meaningful because the company reported no revenue.
- Net cash used in operating activities was $908,000, versus $816,000 in 2018. Investing activities provided $2.111 million, primarily from repayment of short-term bank deposits; financing activities provided no cash. Cash and cash equivalents rose from $3.255 million to $4.455 million, while the separate $2.020 million short-term deposit held at year-end 2018 was no longer outstanding at year-end 2019.
- Current liabilities were $232,000, consisting of accounts payable and accruals. The company reported no long-term liabilities and no credit facilities.
- The $2.273 million InterCure marketable-securities holding is an investment, not cash. Its fair-value decline generated a $574,000 loss in 2019; in 2018, fair-value gains of $2.753 million contributed to finance income.
Material changes and unusual items
- Net results shifted from 2018 profit to a 2019 loss, primarily because of the reversal in InterCure fair-value effects: a $2.753 million gain in 2018 versus a $574,000 loss in 2019. The 2018 result also included a $974,000 warrant revaluation gain.
- G&A expense increased $52,000, mainly because directors’ and officers’ insurance costs rose. R&D expense decreased $3,000 and remained limited at $35,000.
- At year-end, the company held 1.94% of InterCure, down from 2.56% in 2018. Accumulated deficit was $153.930 million.
- The company had 514,205,799 ordinary shares outstanding at year-end. Outstanding warrants were exercisable for approximately 264.2 million ordinary shares, presenting potential dilution.
Outlook, risks and contingencies
- Management estimated that available cash would fund activities for at least 12 months from the report date, based on existing plans. The company expects further losses and negative operating cash flow and says it will need additional financing to conduct clinical trials. Failure to raise funding on acceptable terms could lead to reduced development, asset sales or sublicensing.
- Planned SLE and SS trials are conditional on funding or collaboration. The prior PRELUDE Phase II SLE trial missed its primary SLEDAI endpoint, though the company cites encouraging secondary BILAG results and plans to focus on the 0.5 mg weekly dose. FDA guidance indicated BILAG could be an acceptable primary endpoint for a future study.
- Major risks include clinical and regulatory failure, reliance on third-party manufacturers and collaborators, limited staffing, dependence on licensed intellectual property, potential dilution, low ADS trading volume and possible Nasdaq noncompliance. The filing says the hCDR1 patent covering formulation expires in 2024; the basic peptide patent expires in 2022.
- The filing discusses potential COVID-19 disruption to clinical development and fundraising; its effects were uncertain as of the report date. It also identifies Israeli security conditions and U.S. dollar/NIS movements as risks.
- The company disclosed that patent expenses under its Yeda license had been incurred but not fully paid and that it was negotiating an amendment to the payment schedule. The filing does not clearly reconcile the amount outstanding at year-end 2019.
- No formal financial guidance was provided. The audited statements received an unqualified opinion under IFRS. Management concluded disclosure controls and internal control over financial reporting were effective as of year-end; the auditor did not express an opinion on internal control effectiveness.
Important facts for investors to verify
- Cash runway, actual operating burn, and financing needs relative to the stated minimum 12-month runway.
- Any subsequent financing, strategic partnership, or concrete timing and budget for hCDR1 trials.
- The current amount and payment terms of Yeda patent-expense obligations, and continued compliance with license milestones.
- InterCure investment value and liquidity, and the impact of future fair-value movements on reported results.
- Warrant terms, exercise or expiry status, and resulting potential dilution; also confirm current share count and listing compliance.
- Whether the company was classified as a PFIC for 2019 and its status in subsequent tax years; the filing says it may have been a PFIC in 2019.