KNE.V - Undervalued.


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. Here's an update.


New Releases


Mar. 25 - Announces Fourth Quarter and Full Year 2020 Financial Results.


Apr. 13 - Strengthens Board with Biotech Executive: Dr. Allan Mandelzys has been engaged as an advisor to Kane Biotech’s Board of Directors and will be nominated for Board directorship at the Company’s upcoming Annual and Special Meeting of Shareholders to be held on May 26, 2021.


Apr. 29 - Strong Positive Results of DermaKB™ Shampoo Consumer Trial: Overall, results were compelling with an average of 82% of participants seeing an improvement in their symptoms using both the Detoxifier and the Shampoo, with an average 33% reduction in the severity of symptoms after using only a 3 oz. sample of either product.


May 27 - Announces First Quarter 2021 Financial Results: The Company has recently received proceeds of $756,000 related to the exercises of 4.2 million warrants that had an exercise price of $0.18 cents.


June 9 - Adoption of Performance and Restricted Share Unit Plan and Amended and Restated Stock Option Plan: Approved the adoption of the performance, restricted share unit and the amended and restated stock option plan.


June 16 - Launches 2021 business update series: a 5-part “2021 business update” video series. Meant to offer investors and other stakeholders bite-sized explainers that discuss and layout the strategies and differentiators for each of Kane’s three strategic pillars: OTC or consumer products, animal health, and wound care.


July 13 -Announces two key milestones as DispersinB® wound care project advances towards human clinical trials: i) Development of a novel topical hydrogel formulation of DispersinB® with significantly improved stability. ii) New manufacturing partnership with Dow Development Laboratories, LLC for clinical product manufacturing.


July 21 - Announces Cancellation of Options and Issuance of Restricted Share Units: Cancelled 8,470,555 stock options of various directors, officers, employees and consultants of the Company. KNE.V also wishes to announce the issuance of 10,739,488 restricted share units of the Company (“RSUs”) to various directors, officers, employees and consultants of the Company pursuant to the performance and restricted share unit plan of the Company dated April 21, 2021


July 22 - Expands its Wound Care and Surgical Portfolio with a coactiv+TM Antimicrobial Hydrogel: Expand its wound care and surgical portfolio with an antimicrobial hydrogel based on its best-in-class coactiv+™ technology.


July 29 - Receives Decisions to Grant for Two European Patents for coactiv+™ Technology: Claims cover composition of matter of proprietary formulations for use in treating wounds, skin infections, and personal care formulations.


Aug. 26 - Announces Second Quarter 2021 Financial Results: Received proceeds of $1,116,000 in 2021 to date related to the exercise of 6.2M warrants exercised during the year. The remaining 41 million warrants have an exercise price of $0.18 and expire between December 2021 and February 2022, representing a significant potential source of capital.


Aug. 31 - STEM Animal Health completes first shipment of bluestem™ oral care products to PetSmart® Canada: Bluestem™ oral care products will be distributed to all 150 stores and will be available via PetSmart®’s online store.


Sept. 2 -Announces New Credit Facility: Entered into an amended and restated credit agreement with Pivot Financial Inc. (Pivot) dated August 31, 2021. The Amended Credit Facility amends and restates the existing credit agreement with Pivot dated November 5, 2020, increasing the credit facility to $2.5 million from $1.48 million.


Nov. 9 - To Release Third Quarter 2021 Financial Results on November 16 – Conference Call to Follow


Summary


Financing

May 2021 (Q1 2021 Earning Report), the reception of $0.7M through exercising of 4.2M warrants ($0.18 cents) was reported. August 2021, a total $1,116,000 in 2021 (an additional $0.4M from Q1 2021) via exercise of 6.2M warrants.


As of the end of Q2 2021, KNE.V reported still having 41M warrants ($0.18 cents) expiring between December 2021 and February 2022 which represents an additional potential source of capital.


Recently, the term of its credit agreement with Pivot Financial Inc were amended. The original agreement (November 2020) for a non-revolving term loan for $1,48M was increased to $2.5M (September 2021). The Amended Credit Facility shall continue to be used by Kane Biotech for: (i) funding research and development relating to eligible government reimbursable expenditures; (ii) expenses related to STEM Animal Health Inc; and (iii) general working capital purposes.


Options & Warrants

July 2021, KNE.V issued 10,739,488 restricted share units(“RSUs”) after cancelling 8,470,555 stock options.


Appointment

Dr. Allan Mandelzys was nominated (April 2021) and appointed to the board of directors (May 2021).


DispersinB®

In June 2020, U.S. Department of Defense’s Medical Technology Enterprise Consortium Research (MTEC) awarded a $2.7M USD grant to KNE.V to work on the evaluation of DispersinB® to treat biofilm mediated antimicrobial resistance in non-healing chronic wound. The project is expected to take three years and is in cooperation with Charles Rivers Laboratories, Southwest Regional Wound Care Center (SRWCC). Project Objective: The objective of the proposed project is to evaluate the stability, preclinical safety, clinical safety, efficacy and usability of the DispersinB® wound gel prototype.


July 2021, two key milestones were reported toward human critical trials:


i) Development of a novel topical hydrogel formulation of DispersinB®.

Successfully prepared its first batch of DispersinB® wound care hydrogel, intended for use in pre-clinical studies which will begin this quarter. This novel formulation, based on a recently filed patent application, both significantly reduces manufacturing complexities and provides long term stability and shelf-life to the gel.


ii) New manufacturing partnership with Dow Development Laboratories (DDL) for clinical product manufacturing.

Specifically, DDL will be responsible for manufacturing clinical batches of DispersinB® hydrogel for a randomized study planned for 2022 on patients suffering from multiple chronic wound types to establish safety and efficacy.


coactiv+TM

Also in July 2021, an antimicrobial hydrogel was launched to expand KNE.V's wound care and surgical portfolio.

Use of the coactiv+TM 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.


AnimalCare & STEM Animal Health

In 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).


Late August 2021, STEM Animal Health completed its first shipment of Bluestem™ oral care product to PetSmart.

Bluestem’s coactiv+™ technology is a safe and effective approach to affecting plaque and tartar by softening and breaking down the biofilm structure without any harsh chemicals or antimicrobials.


DermaKB

Since December 2019, KNE.V has conducted consumer multi-product tests in Canada and the US which have culminated to the launch of DermaKB product line in December 2020. Late April 2021, trial results were released;


Earnings

Overall, FY 2020 revenues came short from FY 2019. The net loss were significantly higher.

FY 2020's MD&A:

Revenues in 2020 were impacted by the COVID-19 pandemic but are expected to increase in 2021 as the company pursues revenue growth opportunities. The Company is committed to creating revenue growth in all three of its divisions and operating with strict cost controls while developing its new technologies and products.


Thus far, YTD 2021 revenues continue to lag YTD 2020 but Net Loss seems contained.


Q2 2021 MD&A:

Given the nature of its business and the developmental phase that Kane Biotech is currently in, research expenditures are expected to be higher in 2021 than in 2020. General and administrative expenses in 2020 and 2021 to date were tempered by a combination of spending reductions and the Company’s use of Canadian Government economic relief measures associated with the COVID-19 pandemic. Dependent upon the ongoing effects of the COVID-19 pandemic in 2021, general and administrative expenses may start to increase in 2021 relative to 2020. Revenues in 2020 and 2021 to date were impacted by the COVID-19 pandemic but are expected to increase in 2021.


In short

Last ten months were eventful but valuation climbed to $0.23 cents but came back to $0.14 cents (yesterday's close). The recent decline in the the stock price from mid September is pronounced; below S1 ($0.15 cents) and testing S2 (0.14 cents). This downward trend has an impact as it is below the $0.18 cents exercise price of KNE.V's warrants.


However, the current valuation is not believed to be reflective of the progress made to date.


DispersinB®

The creation of a topical hydrogel formulation of DispersinB® along with the manufacturing partnership with Dow Development Laboratories (DDL) is considered a major development toward commercialization. A randomized study is planned for 2022 on patients suffering from multiple chronic wound types to establish safety and efficacy.


While no Strategic Partner Investment has been reported to date and the likelihood for first commercial sale in Q1 2022 are low, if this formulation becomes a success it can have a material impact on the business.


coactiv+TM

Likewise, the creation of a topical hydrogel formulation is an important development. While this is still at an early stage, the intent is to have a Antimicrobial and an Antimicrobial Surgical application.


AnimalCare & STEM Animal Health

The first shipment of Bluestem™ oral care product to PetSmart in late August represents another milestone, including an additional channel of commercialization which can be directly reflected on Kane's bottom line.


DermaKB

This product line continues to progress nicely. As per Q2 2021 MD&A:


Kane OTC will focus on developing and implementing a sales and marketing campaign for existing commercial products and will continue to look at expanding the DermaKB™ line of products, starting with the launch of a DermaKB™ Starter Kit in Q3 2021 that will include 90 ml bottles of the Scalp Detoxifier and Shampoo, plus a single 45 g Shampoo Bar which will allow customers to try each of the products before having to commit to purchasing a full-sized product.


While Kane has made significant effort in communicating the different aspect of its business via a series of videos, there is still no substitute for an updated investor presentation (Last version is December 2020).


Nonetheless, at $0.14 cents Kane Biotech seems undervalued.



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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