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CASI Exited Fiscal 2016 with a Strong Balance Sheet

By Grant Zeng, CFA


CASI (CASI) recently reported its financials for the quarter and year ended December 31, 2016.

For the fourth quarter ended December 31, 2016, the company reported a net loss of ($2.7 million), or ($0.05) per share.  This compares with a net loss of ($1.7 million), or ($0.05) per share for the fourth quarter of 2015.  The increase in net loss is due to non-cash stock compensation expense of $0.7 million related to stock option issuances associated with financings completed in the fourth quarter of 2016, as well as increased costs associated with the expansion of the company’s China operations.

For the fiscal year ended December 31, 2016, net loss was ($9.5 million), or ($0.17) per share, compared with a net loss of ($7.2 million) or ($0.22) per share for 2015. The larger net loss for 2016 was mainly due to an increase in non-cash stock compensation expense of $2.1 million related to stock option issuances associated with completed financings and increased costs associated with the company’s Phase II Trial for ENMD-2076 in fibrolamellar carcinoma.

As of December 31, 2016, CASI had cash and cash equivalents of $27.1 million. 

On Sept. 21, 2015, CASI Pharmaceuticals (CASI) announced that it had entered into definitive agreements for a $25.1 million financing led by a China investment fund manager affiliated with the same management team of the company’s current largest shareholder, IDG-Accel China Growth Fund III, L.P.

Pursuant to the agreement, CASI agreed to sell a total of 20,658,434 shares of common stock, at $1.190 per share, based on the closing bid price of the Company's common stock on the Nasdaq Capital Market on September 18, 2015, and a total of 4,131,686 warrants, representing a 20% warrant coverage, with a purchase price of $0.125 per whole warrant share.  The warrants will become exercisable three months after issuance at $1.69 per share exercise price, and will expire three years from the date the warrants become exercisable.  

On July 5, 2016, the Company completed the Third Closing and received $1.0 million.

On October 3, 2016, the Company completed the Final Closing and received $7.8 million.

On October 24, 2016, the Company completed the October Offering and received $3.0 million. 

We welcome this financing and believe it’s necessary in order to accelerate the company’s advancement of its pipeline. 

We understand that investors are concerned about the dilution of the existing shareholder base. But we remind investors that not every financing is bad. In this case, we believe the financing is positive to the company. 

First, this financing boosts the company’s balance sheet immediately.  With proceeds from the new financing, the company’s cash balance should be able to fund the company’s operations into 2019 according to our financial model. Investors do not need to worry about a new dilutive financing in more than two years. 

Second, the deal further validates CASI’s business model and its clinical programs. CASI also received investments from IDG ACCEL and Kleiner Perkins Caufield & Byers China, two major venture capital firms in China.  These firms tend to have long-term investment strategies, have representatives on the company’s Board of Directors and are in line with the company’s mission.  

CASI Import Drug Registration Application For EVOMELA® Accepted For Review By CFDA

In December 2016, China’s Food and Drug Administration (CFDA) has accepted for review the Company’s import drug registration application for Evomela® (melphalan) for Injection.

CASI licensed Evomela from its partner Spectrum Pharmaceuticals along with two other commercial-stage Spectrum drugs, Marqibo® and Zevalin®. Evomela received U.S. FDA approval in March 2016 for multiple myeloma patients as a high-dose conditioning treatment prior to autologous stem cell transplantation (ASCT) and as palliative treatment for patients who are not candidates for oral therapy. 

Melphalan inhibits DNA replication and transcription causing cytotoxicity in dividing and non-dividing cells including multiple myeloma. Evomela is a new propylene glycol (PG)-free IV formulation of melphalan developed for a high-dose conditioning treatment prior to hematopoietic stem cell transplantation (HSCT) in patients suffering from multiple myeloma (MM) and for the palliative treatment of multiple myeloma patients for whom oral therapy is not appropriate. Evomela completely avoids the use of PG, which is used as a co-solvent in the current formulation of melphalan and has been reported to cause renal and cardiac side-effects that limit the ability to deliver higher quantities of intended therapeutic compounds. The use of captisol technology to reformulate melphalan is anticipated to allow for longer administration durations and slower infusion rates, potentially enabling clinicians to avoid reductions and safely achieve a higher dose intensity of pre-transplant chemotherapy. 

We estimate Evomela will be approved in China in 2020.  

IARC estimates that approximately 12,197 new MM patients will be diagnosed with a mortality of 9,038 cases in China in 2015. The five-year prevalence of MM in China is estimated at 14,100 cases. Branded or generic melphalan is currently not available in China. This gives CASI a great opportunity to promote and expand Evomela in China once it is approved by the CFDA.


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