Fluidigm Corporation (now identified in the request as Standard BioTools Inc.) — Q3 2013 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2013; filed November 7, 2013. The filing names the registrant as Fluidigm Corporation. Amounts below are U.S. dollars unless noted.
Business context and financial results
Fluidigm developed, manufactured, and marketed microfluidic instruments, consumables, and assay products for research and related markets, including single-cell genomics, genotyping, and sample preparation for sequencing.
| Metric | Q3 2013 | Q3 2012 | Nine months 2013 | Nine months 2012 |
|---|---|---|---|---|
| Total revenue | $18.3 million | $12.8 million | $50.3 million | $36.7 million |
| Product revenue | $18.0 million | $12.6 million | $49.6 million | $36.1 million |
| Product margin | 72% | 72% | 71% | 70% |
| Loss from operations | $(5.0) million | $(3.9) million | $(14.0) million | $(14.6) million |
| Net loss | $(4.3) million | $(4.2) million | $(11.9) million | $(15.4) million |
| Net loss per share | $(0.17) | $(0.18) | $(0.47) | $(0.73) |
Q3 revenue increased 43% year over year, driven by instrument revenue growth of 61% and consumables growth of 22%. For the nine months, revenue rose 37%; instruments grew 48% and consumables 24%. Management attributed growth mainly to higher system and IFC sales, including the C1 single-cell system. Q3 operating loss widened despite higher revenue, as operating expenses increased 30% to $17.1 million and included a $1.0 million litigation-related accrual. Nine-month operating loss narrowed modestly. The company remained unprofitable and reported an accumulated deficit of $252.7 million.
Cash flow, debt, and liquidity
- Cash and cash equivalents were $20.1 million at September 30, 2013; short- and long-term investments totaled $62.7 million. Combined cash and investments were $82.8 million, and working capital was $74.4 million.
- Operating cash use for the first nine months was $4.8 million, versus $14.0 million in 2012. Investing activities used $37.2 million, principally reflecting purchases of investments; financing provided $3.5 million, mainly from option exercises. Cash declined $38.6 million over the period.
- No long-term debt was outstanding. The company had repaid its prior long-term debt in 2012 and had no balance drawn on its $10 million asset-backed line of credit; it reported compliance with covenants.
- Management expected existing cash, cash equivalents, and investments to cover working capital and capital expenditure needs for at least 18 months, while noting that lower operating cash generation or higher spending could require additional financing.
Changes, outlook, and notable items
- Q3 selling, general and administrative expense rose 33% year over year, and research and development expense rose 23%. Management expected both continued R&D investment and higher future SG&A as the company expanded commercial and global operations.
- Management expected instrument and consumables unit sales to grow over time, but cautioned that average selling prices could fluctuate with market conditions, product mix, and currency movements. No numerical revenue or earnings guidance was provided.
- On September 30, Fluidigm settled its lawsuits against NanoString. The settlement required NanoString to remove and destroy specified comparison-study materials and pay $0.6 million; the cases were subsequently dismissed or discontinued. The filing attributed a portion of Q3 other income to the settlement gain.
- Fluidigm disputed Life Technologies’ claim for a $1.0 million payment under a patent cross-license agreement but considered payment probable, accrued the amount in Q3, and said payment was intended to avoid potential termination of certain patent rights and related infringement risk.
- Fluidigm received $3.1 million from selling its Verinata investment, recognizing a $1.8 million gain; it could receive up to $3.2 million more if future acquisition milestones are achieved.
- A Singapore facility lease accepted after quarter-end carries aggregate gross rent of approximately US$5.1 million over 99 months, beginning in 2014. Management expected to consolidate manufacturing there in Q3 2014; the move entails setup and qualification costs and could disrupt production.
- Key risks include the uncertain development and adoption of emerging markets, quarterly sales volatility, continuing losses, competition, reliance on single-source suppliers and concentrated manufacturing, facility relocation execution, intellectual-property disputes, and foreign-exchange exposure. Management stated disclosure controls were effective as of September 30, 2013.
Important facts for investors to verify
- Confirm the issuer identity and corporate name: this 2013 filing is for Fluidigm Corporation, notwithstanding the request’s Standard BioTools Inc. label.
- Track whether revenue growth converts into improving operating results and cash generation as expenses and commercial investment rise.
- Monitor cash and investment balances, capital spending, and the assumptions behind management’s 18-month liquidity estimate.
- Check resolution and payment status of the disputed $1.0 million Life obligation and whether the related license remains in force.
- Assess the Singapore manufacturing relocation’s cost, timing, qualification, and effects on supply and customer deliveries.
- Verify any subsequent Verinata milestone proceeds and the actual economics of the new Singapore lease.