Check-Cap Reports Third Quarter 2018 Financial Results

 

ISFIYA, Israel, Nov. 5, 2018 /PRNewswire/ -- Check-Cap Ltd. (the "Company" or "Check-Cap") (NASDAQ: CHEK) (NASDAQ: CHEKW), (NASDAQ: CHEKZ), a clinical-stage medical diagnostics company engaged in the development of C-Scan®, a preparation free capsule-based screening method for the prevention of colorectal cancer through the detection of precancerous polyps, announced today financial results for the third quarter and nine months ended September 30, 2018.

Check-Cap Logo (PRNewsfoto/Check-Cap Ltd.)

Recent Highlights

  • Submitted an Investigational Device Exemption (IDE) to the U.S. Food and Drug Administration (FDA) that, if approved, would allow the Company to initiate a U.S. pilot study of the C-Scan system by the end of 2018, in collaboration with GE Healthcare as manufacturing partner.
  • Received approval from the Israeli Ministry of Health, the Medical Device Division (AMAR) to initiate commercial sales in Israel of the C-Scan system that received CE Mark approval in January 2018.
  • Announced on September 04, 2018, encouraging interim results from its ongoing post-CE approval study of its C-Scan® System Version 3, demonstrating 76% sensitivity (P=0.0038) and 80% specificity. Final results from the study are expected in 2Q 2019.

Alex Ovadia, Chief Executive Officer of Check-Cap, stated: "Despite strong evidence that screening can decrease the incidence of colorectal cancer, the lack of patient-friendly screening options continues to present an obstacle to adherence. We believe that the C-Scan system addresses all major barriers to standard screening methods, offering a screening option for those unable or unwilling to undergo colonoscopy. During the third quarter, we made significant progress toward our goal of commercializing the C-Scan system Version 3 in Israel, the EU and major markets worldwide. Most notably, we submitted an IDE to the FDA and are preparing to initiate a U.S. pilot study in collaboration with our manufacturing partner, GE Healthcare. We believe that the C-Scan system has the potential to make a meaningful impact on the rates of colorectal cancer screening and precancerous polyp detection, and we look forward to making this novel technology available to patients worldwide."

Financial Results for the Third Quarter Ended Sept. 30, 2018

Net research and development expenses were $1.9 million in the three months ended September 30, 2018, compared to $1.6 million in the same period in 2017. The increase is primarily attributable to a $232,000 increase in other R&D expenses primarily associated with the Company's post CE approval study of the C-Scan system and the IDE submission to the FDA, as well as a $52,000 decrease in grants received from the Israel Innovation Authority (IIA), which was reflected as a credit to research and development expenses.

General and administrative expenses were $937,000 in the three months ended September 30, 2018, compared to $810,000 in the same period in 2017. The increase was primarily due to a $62,000 increase in professional fees and $35,000 of expenses related our annual general meeting of shareholders which was held in September 2018.

Operating loss was $2.8 million for the three months ended September 30, 2018, compared to $2.4 million in the same period in 2017.

Net finance income was $99,000 in the three months ended September 30, 2018, compared to $10,000 in the same period in 2017.

Net loss was $2.7 million in the three months ended September 30, 2018, compared to $2.4 million in the same period in 2017.

Non-GAAP net loss was $2.6 million in the three months ended September 30, 2018, compared to $2.0 million in the same period in 2017.

Cash, cash equivalents and short-term bank deposit totaled $17.6 million at September 30, 2018, compared to $20 million at June 30, 2018. 

Financial Results for the Nine Months Ended September 30, 2018

Net research and development expenses were $5.2 million in the nine months ended September 30, 2018, compared to $5.4 million in the same period in 2017. The decrease is primarily attributable to a $511,000 decrease in salaries and related expenses as a result of a reduction in head count in 2018 and a $66,000 decrease in share-based compensation. The decrease was partially offset by a $325,000 increase in other R&D expenses associated with the Company's post CE approval study of the C–Scan system and the IDE submission to the FDA, as well as a $52,000 decrease in grants received from the IAA, which was credited to research and development expenses.

General and administrative expenses were $2.4 million in the nine months ended September 30, 2018, compared to $2.5 million in the same period in 2017. The decrease was primarily due to a decrease of $861,000 in share-based compensation, of which $502,000 relates to reversal of expenses associated with an equity award to the Company's former CEO which was forfeited as a result of his separation from employment. The decrease was partially offset by a $376,000 increase in salary and related expenses primarily due to a onetime payment to the Company's former CEO as a result of his separation from employment, a $199,000 increase in professional expenses and a $144,000 increase in other general and administrative expenses.

Operating loss was $7.6 million for the nine months ended September 30, 2018, compared to $7.9 million in the same period in 2017.

Net finance income was $108,000 in the nine months ended September 30, 2018, compared to $80,000 in the same period in 2017.

Net loss was $7.5 million in the nine months ended September 30, 2018, compared to $7.9 million in the same period in 2017.

Non-GAAP net loss was $7.7 million in the nine months ended September 30, 2018, compared to $7.1 million in the same period in 2017.

A reconciliation of GAAP results to non-GAAP results is provided below.

Net cash used in operating activities was $7.3 million in the nine months ended September 30, 2018, compared to $7.0 million in the same period in 2017.

The number of outstanding ordinary shares as of September 30, 2018, was 5,329,891.

[Financial Tables to Follow]

About Check-Cap

Check-Cap is a clinical-stage medical diagnostics company developing C-Scan®, an ingestible capsule-based device for preparation-free colorectal cancer screening.

Utilizing innovative ultra-low dose X-ray and wireless communication technologies, the capsule generates information on the contours of the inside of the colon as it passes naturally. This information is used to create a 3D map of the colon, which allows physicians to look for polyps and other abnormalities. Designed to improve the patient experience and increase the willingness of individuals to participate in recommended colorectal cancer screening, C-Scan removes many frequently-cited barriers, such as laxative bowel preparation, invasiveness and sedation.

Use of Non-GAAP Financial Results

In addition to disclosing financial results calculated in accordance with U.S. GAAP, the Company's financial results release contains Non-GAAP financial measures of net loss for the period that exclude the effects of share-based compensation and changes in royalties provision. The Company's management believes the Non-GAAP financial information provided in this release is useful to investors' understanding and assessment of the Company's on-going operations.  Management also uses both GAAP and Non-GAAP information in evaluating and operating business internally and as such deemed it important to provide all this information to investors. The Non-GAAP financial measures disclosed by the Company should not be considered in isolation or as a substitute for, or superior to, financial measures calculated in accordance with GAAP, and the financial results calculated in accordance with GAAP and reconciliations to those financial statements should be carefully evaluated. Reconciliations between GAAP measures and Non-GAAP measures are provided later in this press release.

Legal Notice Regarding Forward-Looking Statements

This press release contains "forward-looking statements." Words such as "may," "should," "could," "would," "predicts," "potential," "continue," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates," and similar expressions, as well as statements in future tense, often signify forward-looking statements. Forward-looking statements should not be read as a guarantee of future performance or results and may not be accurate indications of when such performance or results will be achieved. Forward-looking statements are based on information that the Company has when those statements are made or management's good faith belief as of that time with respect to future events, and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements. For a discussion of these and other risks that could cause such differences and that may affect the realization of forward-looking statements, please refer to the "Special Note On Forward-looking Statements" and "Risk Factors" in the Company's Annual Report on Form 20-F for the year ended December 31, 2017 and other filings with the Securities and Exchange Commission (SEC). Investors and security holders are urged to read these documents free of charge on the SEC's web site at http://www.sec.gov. The Company assumes no obligation to publicly update or revise its forward-looking statements as a result of new information, future events or otherwise.

 

 

 

CHECK CAP LTD

CONSOLIDATED UNAUDITED BALANCE SHEETS

 (U.S. dollars in thousands, except share and per share data)

           
           
   

September 30,

2018

 

December 31,

2017

 

Assets

         

Current assets

         

Cash and cash equivalents

 

8,485

 

6,997

 

Short-term bank deposit

 

9,080

 

-

 

Prepaid expenses and other current assets

 

496

 

406

 

Total current assets

 

18,061

 

7,403

 
           

Non-current assets

         

Property and equipment, net

 

435

 

503

 

Total non-current assets

 

-

 

503

 

Total assets

 

18,496

 

7,906

 
           

Liabilities and shareholders' equity

         

Current liabilities

         

Accounts payable and accruals

         

  Trade

 

813

 

608

 

  Other

 

308

 

347

 

Other current liabilities

 

9

 

5

 

Employees and payroll accruals

 

951

 

602

 

Total current liabilities

 

2,081

 

1,562

 
           

Non-current liabilities

         

Royalties provision

 

479

 

439

 

Total non-current liabilities

 

479

 

439

 
           

Shareholders' equity

         

Share capital

 

3,455

 

974

 

Additional paid-in capital

 

72,678

 

57,643

 

Accumulated deficit

 

(60,197)

 

(52,712)

 

Total shareholders' equity

 

 

15,936

 

5,905

 
           

Total liabilities and shareholders' equity

 

18,496

 

7,906

 

 

 

CHECK CAP LTD

CONSOLIDATED UNAUDITED STATEMENTS OF OPERATIONS

(U.S. dollars in thousands, except share and per share data)

 
         

 

 

Nine months ended

   

 

Three months ended

 

September 30,

September 30,

         

2018

 

2017

   

2018

   

2017

 

Research and development expenses, net

   

5,222

   

5,437

     

1,865

 

 

1,564

 

General and administrative expenses

   

2,372

   

2,506

     

937

 

 

810

 

Operating loss

   

7,594

   

7,943

     

2,802

 

 

2,374

 
                                 

Finance income (expenses), net

   

108

   

80

     

99

 

 

(10)

 

Loss before tax

   

7,486

   

7,863

     

2,703

 

 

2,384

 

Tax expenses (gains) on income

   

(1)

   

6

     

-

 

 

-

 

Net loss for the period

   

7,485

   

7,869

     

2,703

 

 

2,384

 
                                 

Net loss per ordinary share basic and diluted

   

2.07

   

5.25

     

0.50

 

 

1.38

 
                                 

Weighted average number of ordinary shares
outstanding - basic and diluted (in thousands)

   

3,622

   

1,500

     

5,356

 

1,723

 
                               

 

 

 

CHECK-CAP LTD.

 

CONSOLIDATED UNAUDITED STATEMENTS OF CASH FLOWS

 

(U.S. dollars in thousands, except per share data)

 
   
   

Nine months ended

September 30,

 
   

2018

 

2017

 

CASH FLOWS FROM OPERATING ACTIVITIES

       

Net loss for the period

 

(7,485)

 

(7,869)

 

Adjustments required to reconcile net loss to net cash used in operating

activities:

                 

Depreciation and amortization

 

118

 

 

115

 

Share-based compensation

 

(271)

 

 

657

 

Financial expense, net

 

 

(43)

 

(155)

 

Changes in assets and liabilities items:

                 

Decrease in prepaid and other current assets and non-current assets

 

 

(90)

 

 

(73)

 

Increase in trade accounts payable, accruals and other current liabilities

 

60

 

 

64

 

Increase in employees and payroll accruals

 

 

349

 

 

162

 

Increase in royalties provision

 

 

40

 

 

78

 

Net cash used in operating activities

 

 

(7,322)

 

 

(7,021)

 
                   

CASH FLOWS FROM INVESTING ACTIVITIES

                 

Purchase of property and equipment

 

 

(14)

 

 

(221)

 

Short-term investments

 

 

(9,000)

 

 

-

 

Net cash used in investing activities

 

 

(9,014)

 

 

(221)

 
                   

CASH FLOWS FROM FINANCING ACTIVITIES

                 

Exercise of pre-funded warrants into ordinary shares

 

 

4

 

 

82

 

Issuance of ordinary shares in the June 2017 RD Offering, net of issuance

expenses in an amount of $349

 

 

-

 

 

2,308

 

Issuance of ordinary shares in the 2018 Public Offering, net of issuance

expenses in an amount of $2,381

 

 

17,858

 

 

-

 

Net cash provided by financing activities

 

 

17,862

 

 

2,390

 
                   

Effect of exchange rate changes on cash and cash equivalents

 

 

(38)

 

 

153

 

Net increase (decrease) in cash and cash equivalents

 

 

1,488

 

 

(4,699)

 

Cash and cash equivalents at the beginning of the period

 

 

6,997

 

 

11,639

 

Cash and cash equivalents at the end of the period

 

 

8,485

 

 

6,940

 

 

 

 

CHECK-CAP LTD.

SUPPLEMENTAL RECONCILIATION OF GAAP TO NON-GAAP RESULTS

(U.S. dollars in thousands)

 
   

Nine months ended

 

Three months ended

   

 September 30,

 

September 30,

   

2018

 

2017

 

2018

 

2017

                 

GAAP net loss for the period

 

(7,485)

 

(7,869)

 

(2,703)

 

(2,384)

Share-based compensation (1)

 

(271)

 

657

 

122

 

310

Changes in royalties

 

40

 

78

 

15

 

29

Non-GAAP net loss for the period

 

(7,716)

 

(7,134)

 

(2,566)

 

(2,045)

                                 

(1) Share-based compensation:

                               

Research and development expenses, net

 

115

 

182

 

81

 

108

General and administrative expenses:

               

    General and administrative expenses

 

116

 

475

 

41

 

202

    One time reversal of equity award to the

    Company's Former CEO  

 

(502)

 

-

 

-

 

-

   

(271)

 

657

 

122

 

310

 

Investor Contacts         
Jeremy Feffer      
LifeSci Advisors, LLC   
212-915-2568  
jeremy@lifesciadvisors.com 

Meirav Gomeh-Bauer 
LifeSci Advisors, LLC  
+972(0)-54-476-4979    
Meirav@lifesciadvisors.com

 

 

 

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SOURCE Check-Cap Ltd.

 
 
Company Codes: NASDAQ-SMALL:CHEK, Bloomberg:CHEK@US, Frankfurt:7CC, NYSEArca:CHEK.P, RICS:CHEK, Stuttgart:7CC
 

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