KNE.V - Complexity.


Kane Biotech Inc. (KNE.V) is a biotechnology company engaged in the research, development and commercialization of technologies and products that prevent and remove microbial biofilms. KNE.V has a portfolio of biotechnologies, intellectual property (52 patents and patents pending, trade secrets and trademarks) and products developed by the Company's own biofilm research expertise and acquired from leading research institutions.


StrixNB™, DispersinB®, Aledex™, bluestem™, bluestem®, silkstem™, goldstem™, coactiv+™, coactive+®, DermaKB™ and DermaKB Biofilm™ are trademarks of Kane Biotech Inc.


Coverage was initiated March 2021. with an additional note on November 2021..


New Releases


Nov. 16 - Announces Third Quarter 2021 Financial Results


Jan. 20 - Wound Care Commercialization to be a Key Company Focus in 2022: Investors should keep an eye on three major milestones in tracking the success of this business:

  • Commencement of human clinical trials on the Company’s DispersinB® wound gel in Q2 2022. The results of preclinical safety and biocompatibility data are very encouraging, suggesting high efficacy and safety.

  • Launch of the Company’s coactiv+™ Wound Gel. Use of the coactiv+™ technology in wound care products will complement the Company’s disruptive DispersinB® wound care product development efforts whilst enabling the pursuit of the simpler 510(k) regulatory route and potentially quicker market access. Kane estimates the U.S. market for wound care hydrogels to be approximately USD $200M.

  • The signing of a commercial partnership, similar to the one structured in animal health in 2020 but at a significantly higher valuation, is progressing. The expertise, reach and extensive sales force of a large global wound care partner will be transformational for the Company.

Feb. 10 -New Collaboration Agreements for Prosthetic Joint Infection, expanding its DispersinB® applications: Signed collaboration agreements with Dr. James Doub, MD, Assistant Professor of Medicine, University of Maryland School of Medicine’s Institute of Human Virology, and the University of Texas Medical Branch (UTMB) to study the use of DispersinB® with Prosthetic Joint Infection (PJI) patients.


The group is securing funding from the National Institutes of Health (NIH) for pre-clinical work to be done by Josh Wenke, a Professor in the Department of Orthopedic Surgery and Rehabilitation at UTMB.


PJI’s are one of the most serious complications of joint replacement surgery. Conservative estimates are that approximately 1–2% of all prostheses will become infected over the life of the implant [1].


It is estimated that they will cost the US healthcare system $1.62 billion in 2020 [1]. In addition, patients have significant morbidity and mortality as a direct result of our current medical and surgical management to treat these infections [2]. In one study, the five-year mortality for prosthetic joint infections is over 20% [2].


Mar. 15 - Announces Private Placement Offering: 10,000,000 common shares at a price of $0.10 per Share for gross proceeds of up to $1,000,000. The net proceeds of the Offering will be used for general working capital.


Mar. 22 -Successfully Completes Safety and Biocompatibility Studies for DispersinB® Wound Gel: Announced positive results from biocompatibility and in vivo safety studies in preparation for human clinical trials to begin later this year.

DispersinB® wound gel underwent an extensive pre-clinical testing regimen showing it to be safe, non-toxic and non-irritating, as well as passing all biocompatibility testing. In addition, DispersinB® wound gel significantly accelerated the healing of both infected and non-infected dermal wounds compared to controls.


Mar. 24 -Announces Fourth Quarter and Full Year 2021 Financial Results


Apr. 5 - Appoints Dr. Gregory Schultz as Chief Scientific Officer: Dr. Schultz is a Professor Emeritus of Obstetrics and Gynecology in the College of Medicine at the University of Florida where he established the interdisciplinary Institute for Wound Research (IWR), serving as Director for IWR for 32 years.


Apr. 7 - STEM Animal Health Awarded Veterinary Oral Health Council (VOHC) Seal of Acceptance for Pet Oral Care Water Additive: in the "Helps Control Tartar "category for its pet oral care water additive.


VOHC is recognized worldwide as a professional organization that evaluates products that meet pre-set standards of plaque and calculus (tartar) retardation in dogs and cats. Products are awarded the VOHC Seal of Acceptance following a rigorous review of data from trials conducted according to VOHC protocols.


Apr. 29 - Announces Extension of Private Placement Offering: Extended the completion of its previously announced non-brokered private placement offering by 30 days until May 29, 2022. The terms of the Offering remain unchanged.


May 6 - Update on Private Placement: Private placement of $1M previously announced on March 15, 2022 has been fully subscribed and is anticipated to close on May 16, 2022.


Insiders of the Company are participating in the private placement, including Marc Edwards, the CEO of the Company. Mr. Edwards has agreed to purchase 3,1M Shares at $0.10 per share for a total purchase price of $310,000.


May 17 -Announces Closing of Private Placement: Announced previously on March 15, 2022, and has issued 10,000,000 common shares of the Company at a price of $0.10 per Common Share to raise gross proceeds of $1,000,000.


President and Chief Executive Officer, Marc Edwards, participated for a total of $310,000 n the Offering (the “Insider Subscription”). The Insider Subscription is deemed to be a "related party transaction" as defined under Multilateral Instrument 61-101- Protection of Minority Security Holders in Special Transactions ("MI 61-101").


May 18 - Obtains ISO 13485 Certification: for its quality management system specific to its ongoing efforts to design and develop novel medical devices for the wound care market.


May 26 -Announces First Quarter 2022 Financial Results


June 15 - Announces Amended Credit Facility: Kane has further amended its credit agreement with Pivot Financial Inc. (“Pivot”) maturing August 31, 2022. The amendment dated June 13, 2022 extends the maturity to January 31, 2023 and increases the credit facility to $4 million with approximately $1.8 million of new capital having been provided.


The increased credit facility will continue to be used by Kane Biotech for funding research and development relating to eligible government reimbursable expenditures and general working capital purposes.


June 30 -Adoption of Amended and Restated Stock Option Plan and Performance and Restricted Share Unit Plan:


Summary


Financing

March 2022, a $1M private placement at $0.10 cents was initiated. It was extended in April but closed fully subscribed with insider particpation in May. Mark Edwards, CEO of Kane contributed almost a third of the total offering ($0.31M).


June 2022, Kane amended its credit facility with Pivot Financial Inc. by extending the maturity date to January 31, 2023 and increasing the credit facility to $4 million with approximately $1.8 million of new capital having been provided.


Note that this is the second consecutive amendementwith Pivot Financial Inc.. The initial loan was from $1.48M was increased to $2.5M (September 2021). and now has been expanded to $4M which speaks to Kane creditworthiness.


Appointment

Dr. Gregory Schultz was appointed as Chief Scientific Officer (April 2022). He is past president of the Wound Healing Society, and past member of the National Pressure Injury Advisory Panel.


DispersinB®

February 2022, Kane signed a Collaboration Aggrement with University of Maryland School of Medicine's Institute of Virology and University of Texas Medical Branch (UTMB) to study the use of DispersinB® with Prosthetic Joint Infection (PJI) patients. The group is in the process of securing funding from the National Institutes of Health (NIH)


March 2022, Kane Biotech announced positive results from biocompatibility and in vivo safety studies. This was an important achievement as it enables the initiation of human clinical trials. At the time timeline were: "later this year."


STEM Animal Health

Late September 2020, AnimalCare invested 5$ million in KNE.V. Specifically, $3 million to Acquire One-Third Stake in STEM Animal Health (STEM), Kane Biotech’s New Animal Health Subsidiary, and $2 million for Rights to Commercialize Products in Global Veterinary Markets Outside of the Americas (i.e. European and Asian Markets).


April 2022, STEM Animal Health was awarded A Seal of Acceptance by the Veterinary Oral Health Council (VOHC). It received the award for its Pet Oral Care Water Additive in the "Helps Control Tartar "category.


VOHC acceptance triggers roughly $1.3M in milestone payments from STEM’s licensing partners. This certification is also expected to significantly increase royalty revenues from both licensing agreements triggering minimum payments.


Earnings

Overall, FY 2021 revenues exceeded FY2020 but were slightly below FY 2019. However, net loss continues to grow.























FY 2021 MD&A:

Revenue consists of License and Royalty revenue from its licensing agreements with Dechra and Animalcare, product sales from the Company’s bluestemTM brand and contract manufacturing and quality control services revenue from Dechra.

Product's Revenue in the year ended December 31, 2021 was $1,196,209, an increase of 29% compared to $927,791 from December 31, 2020. This increase is due mainly to sales attributable to a new major pet retail customer, overall higher sales to existing pet retail customers and a reclassification of sales discounts to cost of sales and sales expenses in the current period partially offset by the permanent US store closures in Q4 2020 of one of the Company’s major pet retail customers.


Q1 2022 MD&A

Product sales in the three months ended March 31, 2022 were $431,675, an increase of 69% compared to $255,415 in the three months ended March 31, 2021. The increase is due mainly to higher STEM pet retail and online sales as well as higher DermaKBTM sales in the current period.


Overall, products' revenues are off to a strong start in FY 2022; $0.43M was recorded in Q1 2022 vs. $1.19M for FY 2021.,


In short

Despite recent revenue growth, valuation in the last nine months declined from high-teens to roughly $0.085 cents.

Macroeconomics forces weighing on multiples rather than earning performance is at issue.


In early January 2022, Kane Biotech Inc (KNE.V) outline three major milestones:

i) Initiate human clinical trials for Dispersin B wound gel in Q2 2022.

ii) Launch coactiv+ Wound Gel to enable 501(k) regulatory route.

iii) Signing a commercial partnership with a large global partner.


i) Human clinical trials for Dispersin B wound gel have not been initiated in Q2 2022. However, Kane reported positive results from biocompatibility and in vivo safety studies which will enable it to proceed with trials "later this year".


The studies and upcoming clinical trial are funded by a $2.7 million USD grant from the United States Department of Defense (DoD) through the Medical Technology Enterprise Consortium (MTEC). This funding supports the development of DispersinB® as a potential treatment for biofilm-mediated antimicrobial resistance in non-healing chronic wounds.


Otherwise, Kane signed a Collaboration Aggrement with the University of Maryl and the School of Medicine's Institute of Virology and University of Texas Medical Branch (UTMB) to study the use of DispersinB® with Prosthetic Joint Infection (PJI) patients. The group is in the process of securing funding from the National Institutes of Health (NIH).


ii) Launch coactiv+ Wound Gel to enable 501(k) regulatory route.


January 20, 2022 news release

"..Our plan for 2022 is to have met all the regulatory requirements to launch our coactiv+™ wound gel by early 2023, subject to FDA approval, as we believe it will have a significant impact on biofilm impaired wounds.." -Kane's CEO


As per Q1 2022 MD&A (filed May 26, 2022)

Targeted Kane Biotech milestones and objectives for the remainder of 2022 include the following: Submit a 510(k) application to the FDA for coactiv+™ Antimicrobial Hydrogel to demonstrate the product is safe and effective.


Hence, this item is also outstanding.


iii) Signing a commercial partnership with a large global partner.


As per Q1 2022 MD&A

With a growing interest from potential licensing partners, Kane Dermatology is looking to expand its development of coactiv+™ technology-based products in 2022 and is close to reaching that inflection point.


This is also in progress.


Conclusion

The fact that three milestones outlined in January 2022 are incomplete is balanced by Kane's revenue growth, the increase in borrowing limit from Pivot Financial Inc. to $4M and the CEO's participation in the last financing ($0.3M).


Obviously, revenue and financing results suggest a positive outlook. However, two of the three milestones outlined may not be mutually exclusive to a potential commercial partner. For one, more data may be needed or items met.


For each of these milestones to occur, work is required. On one hand, Kane is seeking a FDA a Pre-Market Application (PMA) for a DispersinB® Hydrogel as a medical device. On the other hand, it is petitioning the FDA for regulatory approval for coactiv+™ under the 510(K) pathway as a line of medical devices for a variety of antibiofilm applications.


Both these activities are tedious and time consuming. Completing an application/petition is one thing, getting a favorable response is another. Also remember that coactiv+™ has two streams:


coactiv+™ Antimicrobial Hydrogel: A non-sterile product for chronic wounds that will be designed to maximize reimbursement and be competitive in physician office, hospital, PBD (outpatient hospital) and home care settings. The product can be applied by the patient or caregiver and sourced through a medical product supplier.


• coactiv+™ Antimicrobial Surgical Hydrogel: A sterile product for surgical and acute wounds and provided in a single use container for application in the hospital setting. The product can be applied to all types of surgical wounds and can be used prophylactically on post-surgical incisionsl. The initial target for this application are hospitals, physician offices and PBD settings are also potential markets.


Looking back, the Wound Care milestones set for FY2022 were very ambitious. The strategic partner sought by Kane is to support future commercialization of DispersinB® Hydrogel, coactiv+™ and other product offerings.


This undoubtedly adds to the evaluation process a few layers of complexity.


DISCLAIMER: The work included in this article is based on current events, technical charts, and the author’s opinions. It may contain errors, and you shouldn’t make any investment decision based solely on what you read here. This publication contains forward-looking statements, including but not limited to comments regarding predictions and projections. Forward-looking statements address future events and conditions and therefore involve inherent risks and uncertainties. Actual results may differ materially from those currently anticipated in such statements. The content of rally is provided for informational and entertainment purposes only and is not a recommendation to buy or sell any security. Always thoroughly do your own due diligence and talk to a licensed investment adviser prior to making any investment decisions - rally cannot take responsibility for your investment decisions.

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