Filing summary
Issuer and period: The supplied filing is Fluidigm Corporation’s Form 10-K for the fiscal year ended December 31, 2013—not a filing under the name Standard BioTools Inc. The annual results below are Fluidigm’s standalone 2013 results; DVS Sciences was acquired on February 13, 2014 and is not included in those results. The filing also reports unaudited fourth-quarter results.
Business context and reporting period
Fluidigm developed and sold microfluidic systems, instruments, integrated fluidic circuits, assays and reagents for life-science research, single-cell genomics, genotyping, targeted sequencing preparation and agricultural biotechnology. At year-end it reported approximately 920 systems sold in 35 countries. Its products were labeled for research use only, not approved for clinical diagnostic use.
Key financial metrics
| Metric | FY 2013 | FY 2012 |
|---|---|---|
| Total revenue | $71.2 million | $52.3 million |
| Product revenue | $70.2 million | $51.5 million |
| Product margin | 71% | 70% |
| Operating loss | $18.7 million | $18.1 million |
| Net loss | $16.5 million | $19.0 million |
| Net loss per share | $0.65 | $0.86 |
| Cash used in operating activities | $1.6 million | $17.5 million |
| Cash, cash equivalents and investments at year-end | $86.3 million | $83.7 million |
| Total assets | $116.9 million | $113.7 million |
| Long-term debt at year-end | None | None |
Fourth-quarter 2013 revenue was $20.9 million and net loss was $4.6 million, compared with revenue of $15.7 million and net loss of $3.6 million in fourth-quarter 2012. The annual cash-flow improvement reflected better working-capital movements and collections; operations still used cash.
Material changes versus prior comparable periods
- Full-year revenue rose 36%, led by instrument revenue growth of 41% and consumables growth of 30%. Instrument sales benefited particularly from the C1 Single-Cell Auto Prep System; consumables growth reflected higher IFC volumes.
- Product margin improved by one percentage point. Management cited selling prices and product mix, better capacity utilization and manufacturing yields, partly offset by inventory reserves and service costs.
- Operating expenses rose 26% to $69.6 million, including higher research and development and selling, general and administrative costs, plus a $1.3 million litigation-settlement expense. Operating loss widened slightly despite stronger revenue.
- Net loss narrowed, with results including a $1.8 million gain on the sale of the Verinata investment. The company also reported $0.5 million of other income, primarily including a NanoString settlement gain.
- Revenue remained concentrated in instruments and consumables. Product revenue outside the United States was 48% of product revenue, versus 47% in 2012. No single customer accounted for more than 10% of annual revenue; the five largest customers together represented 18%.
Outlook, risks and unusual items
- Management outlook: The company expected instrument and consumables unit sales to grow over time, while noting that average selling prices could fluctuate. It expected higher research and development and selling, general and administrative expenses, lower 2014 grant revenue as a CIRM grant expired in April, and higher 2014 capital spending for the Singapore facility move. No specific consolidated revenue or earnings guidance is provided in the filing.
- Liquidity and financing after year-end: On February 4, 2014, Fluidigm issued $201.3 million of 2.75% senior convertible notes due 2034, receiving about $194 million net proceeds. On February 13, it acquired DVS for approximately $193.8 million, including $117.2 million cash and 1,759,007 Fluidigm shares. The filing said existing cash and investments were expected to cover working capital and capital spending needs for at least 18 months; that statement must be considered alongside the acquisition, financing and integration costs. The notes will increase future interest expense and may dilute shareholders if converted.
- Acquisition: DVS sells mass-cytometry systems for single-cell protein analysis. Its results were excluded from Fluidigm’s 2013 financial statements; purchase accounting was still in progress when the 10-K was filed. Integration, retention, growth, and realization of expected benefits were uncertain. DVS also depended on third-party intellectual-property licenses, including a key PerkinElmer license, and was negotiating a replacement or definitive Nodality license after an interim license expired.
- Operating and market risks: The company had accumulated losses of $257.3 million and warned it might not become profitable. Other significant risks included emerging-market adoption, long and variable sales cycles, research-budget sensitivity, competition, reliance on limited-source suppliers, manufacturing yields, and the planned Singapore manufacturing relocation.
- Regulatory and legal matters: FDA guidance issued in November 2013 heightened scrutiny of products labeled research-use-only when manufacturers know they are used diagnostically. Fluidigm had no specific plans to seek regulatory approvals. It paid Life Technologies $1.0 million in January 2014 while reserving its rights regarding a disputed license payment; the payment was made to avoid a potential license termination. NanoString litigation was settled in September 2013; terms included removal and destruction of specified comparison-study materials and a $0.6 million payment to Fluidigm.
- Reporting and controls: The independent auditor issued unqualified opinions on the financial statements and internal control over financial reporting; management also concluded controls were effective at year-end.
Important facts for investors to verify
- Confirm the issuer identity and period: this is Fluidigm’s FY 2013 10-K, not a quarterly filing or a filing issued under the Standard BioTools name.
- Assess whether improving product margins and operating cash flow can persist while operating expenses remain high and the company continues to report losses.
- Review post-acquisition cash, debt service, dilution exposure, DVS integration costs and the eventual purchase-price allocation; DVS was not included in 2013 results.
- Monitor the Singapore facility transition, capacity and production yields, as well as continuity of limited-source components and key intellectual-property licenses.
- Track DVS license negotiations, the status of the Life payment dispute, and any further regulatory developments affecting research-use-only products or customer-developed diagnostic tests.