BIOAF: New Funds and Collaborators

By John Vandermosten, CFA

OTC:BIOAF

READ THE FULL BIOAF RESEARCH REPORT

Fiscal Year 2021 Operational & Financial Results

Bioasis Technologies Inc. (OTC:BIOAF) filed fiscal year 2021 operational and financial results on June 25, 2021 for the twelve month period ending February 28, 2021. During the reporting period, Bioasis secured a licensing and collaboration agreement with Chiesi Group, was granted a number of new patents, sold a royalty stake in partnered assets, and announced its annual general meeting (AGM) results. Since our previous report on February 9th, the company has published multiple journal articles, signed research collaborations with Aposense and Oxyrane and raised additional capital. Other material news included the appointment of Dave Jenkins as Chief Financial Officer and positive results from an efficacy study in a Multiple Sclerosis model.

$4.1 million in revenues were reported in fiscal year 2021 related to upfront amounts from the Chiesi agreement. This compares to revenues of $606,0001 in FY:20. General and administrative expense was $2.6 million, down 19% on lower salaries, consulting fees, share-based compensation and investor relations marketing and travel. These reductions were partially offset by increases in legal, other professional and regulatory fees, and office, insurance and amortization expenses. Research and development expenses were $1.2 million, falling 39% over prior year levels. Lower salaries, consulting fees and benefits and a reduction in staff and decreased research and medical advisory fees were the primary drivers. Other income was $428,000, arising from a $1.6 million gain on the sale of Chiesi program royalty rights to Xoma offset by loss on capital assets, loss on settlement, loss of extinguishment of debentures, foreign exchange loss, interest expense and change in fair value of derivative warrants. Net income was $698,000 or $0.01 per share reversing the prior year net loss of ($4.1) million or ($0.07) per share.

Cash generated from operations (free cash flow) in FY:21 was $1.8 million compared with cash used of ($3.3) million in FY:20. The difference in cash generation was attributable to the Chiesi license arrangement and the XOMA gain on sale of royalty rights combined with a decrease in expenses and reduction in accounts payable balances. Cash and equivalents were $2.7 million on February 28, 2021, near flat with the prior quarter and up from fiscal year end 2020 levels of $576,000. Contributions from operating cash flows, XOMA contributions, warrant exercises, issuance of common shares and funds from the payment protection program (PPP) added to the cash balance. Following the end of the period, Bioasis closed a $3 million convertible security deal with Lind Partners.

xB3 in a Multiple Sclerosis Model

Bioasis announced positive results from an efficacy study of a blood brain barrier (BBB) penetrating inhibitor in a rodent model of multiple sclerosis (MS). The inhibitor, an xB3 interleukin-1 receptor agonist (xB3–IL-1RA), was able to deliver effective concentrations of IL-1RA to the rodent brain. In previous work,2 xB3–IL-1RA delivery was able to elicit analgesia in a neuropathic pain animal model. This was compared to a control using systemic administration of IL-1RA alone, and without the xB3 transporter, which was not able to elicit analgesia.

IL-1 cytokines have been implicated in many autoimmune and neuro-inflammatory diseases, prompting the investigation of xB3–IL-1RA in the rodent experimental allergic encephalomyelitis model of MS. In this study of allergic encephalomyelitis, multiple doses of the drug were administered during the disease induction phase. The effort resulted in both delayed onset and overall reduced clinical symptom score in animals treated with xB3-IL-1RA compared to control animals generating a p-value of <0.016.

The study supports the use of xB3to transport large molecules across the BBB and the use of the platform to treat neuro-inflammatory diseases such as MS. CEO Rathgen noted that xB3–IL-1RA “holds promise for a broad range of neuro-inflammatory diseases.”

Research Collaboration With Oxyrane

On June 30, 2021, Bioasis announced a research collaboration with Oxyrane UK Ltd. Oxyrane is a UK-based developer of enhanced enzyme replacement therapies (ERT) for the treatment of lysosomal storage diseases, with a focus on the diseases of the central nervous system. The company is targeting Gaucher Disease, Parkinson’s Disease and Pompe Disease with plans to use the xB3 platform to deliver an undisclosed enhanced ERT into the brain.

Research Collaboration With Aposense

Aposense Limited joined forces with Bioasis as disclosed in a March 31stpress release. The collaborator is an Israeli biopharmaceutical company specializing in development of novel drugs utilizing membrane electrical forces. Bioasis and Aposense entered into a research collaboration that will focus on delivering siRNA into the brain. Neurological diseases affect a significant population worldwide; however, delivering therapies across the blood-brain barrier into the brain has created a significant hurdle to otherwise effective therapies. News of the collaboration followed the recent publication of research demonstrating xB3’s ability to not only cross the blood-brain barrier, but to facilitate the transcytosis of siRNA across the BBB. This ability supports the use of siRNA, which works by intercepting proteins before they are expressed in the cell.

In the Financial Sphere

Bioasis has conducted a number of financial transactions in the last quarters, entering into a convertible security funding agreement with Lind, executing a $200,000 private placement with a family office, resolving a contractual dispute through the issuance of equity and extending and repricing warrants.

Most recently, on June 22, 2021, the company entered into a convertible security funding agreement with Lind Global Macro Fund where the fund will issue up to $10 million in convertible securities. The initial investment of $3 million was closed on June 29 which included a closing fee of $90,000 and the issuance of 4.8 million 30-month warrants exercisable at $0.41 per share. 180 days after closing, Bioasis will begin repaying the note in $125,000 installments. Prepaid interest will accrue at $20,000 per month and every 90 days Lind retains the option to convert accrued interest into common shares at 90% of the market closing price on the day prior to the conversion. Converted shares will be locked up for four months + 1 day and short selling by Lind is prohibited. Principal value may also be converted to shares at a value of $0.31 per share.

Announced March 22, 2021, Bioasis applied to the TSX Venture Exchange to extend the expiry date and amend pricing of 5,797,795 common share purchase warrants issued in a private placement closed in April 2017. The extension requested to push the expiry date of these warrants from April 11, 2021 to the same date a year later. Two days later, Bioasis informed that the TSXV approved the proposed amendment and extension, and the exercise price was reduced from $1.00 to $0.85.

On February 10, 2021, Bioasis announced that it had entered into an agreement with an arms-length third party pursuant to which Bioasis agreed to issue 300,000 common shares at $0.3975 per share in order to resolve a contractual dispute.

A $200,000 non-brokered private placement was announced January 29, 2021, issuing 400,000 common shares to a Canadian family office at a price of $0.50 per share. On January 29, BIOAF shares traded at $0.33. The raise, albeit limited, was at a >50% premium.

Publications

Over the previous several months Bioasis has published both proof of concept of xB3 delivery of siRNA across the blood-brain barrier and the ability for the xB3 peptide chain to enter organelles within neurons, glia and microglia in the brain.

Announced on March 29, 2021, a document was published validating the ability of Bioasis’ xB3 platform to deliver an siRNA payload across the blood-brain barrier to the CNS in therapeutically relevant doses. Dr. Wilfred A. Jefferies joined Bioasis scientists to evaluate xB3 in siRNA applications to ischemic stroke. The results showed that the platform can translocate a siRNA payload across the blood-brain barrier and the siRNA can execute knockdown therapy, as evidenced by reduced stroke damage in the brain and improved neurological function. The paper, entitled “A Nanomule Peptide Carrier Delivers siRNA Across the Intact Blood-Brain Barrier to Attenuate Ischemic Stroke,” was published in the Frontiers in Molecular Biosciences.

Months later, Bioasis announced a publication in Frontiers in Neuroscience, “Discovery of a Highly Conserved Peptide in the Iron Transporter Melanotransferrin that Traverses an Intact Blood Brain Barrier and Localized in Neural Cells,” on June 3, 2021. Again, Dr. Wilfred Jefferies worked with Bioasis scientists, this time demonstrating that xB3 could not only cross the blood-brain barrier but also enter organelles, including endosomes and lysosomes, within many cell types in the CNS including neurons, glia and microglia in the brain.

Upcoming Milestones

Below is listed the anticipated timeline for events related to portfolio candidates (calendar quarters).

➢ Royalty purchase agreement with XOMA for Chiesi assets – November 2020

➢ Biotech Showcase – January 2021

➢ LSX World Congress – February 2021

➢ BIO CEO & Investor – February 2021

➢ Aposense research collaboration – March 2021

➢ Oxyrane research collaboration – June 2021

➢  xB3-007 glucocerebrosidase enzyme replacement therapy (ERT), BBB data – 3Q:21

➢  xB3-Progranulin BBB data – 3Q:21

➢  xB3-007 disease model read out – 4Q:21

➢  xB3-Progranulin FTD disease model read out – 4Q:21

Summary

Bioasis offers a broad portfolio built on its xB3 technology platform that can be developed both internally and with partners for many therapies demonstrating brain activity. Bioasis has continued its efforts to expand its stable of partners, adding thoroughbreds Aposense and Oxyrane to its string. Continued publications continue to show evidence of xB3’s ability to ferry multiple compounds across the BBB and localize in neural cells. We anticipate parallel development of several xB3 compounds that will enter the clinic over the next several years. Our valuation work assumes median drug revenue for each of the programs underway and applies a discount related to the anticipated 8% weighted probability of success. Please refer to our initiation here for detail on the company and fuller discussion of our thesis.

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1. Financial statement items are denominated in $CAD in contrast to our target price which is in $USD.

2. Thom G, Tian MM, Hatcher JP, et al. A peptide derived from melanotransferrin delivers a protein-based interleukin 1 receptor antagonist across the BBB and ameliorates neuropathic pain in a preclinical model. J Cereb Blood Flow Metab. 2019;39(10):2074-2088. doi:10.1177/0271678X18772998

3. Source: March 2021 Corporate Slide Deck

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