Filing summary
Entity note: The supplied filing is StemCells, Inc.’s Form 10-Q, not a filing under the name Microbot Medical Inc. It covers the quarter ended September 30, 2015, with nine-month comparisons to September 30, 2014.
Business context and reporting period
StemCells was a pre-commercial biopharmaceutical company developing cell-based therapies. Its HuCNS-SC program was in clinical development for chronic spinal cord injury and dry age-related macular degeneration (AMD). The company reported unaudited results and stated that it had incurred significant operating losses since inception.
Key financial metrics
| Metric | Q3 2015 | Q3 2014 | Nine months 2015 | Nine months 2014 |
|---|---|---|---|---|
| Revenue | $37,000 | $82,000 | $88,000 | $129,000 |
| Operating expenses | $10.02 million | $6.46 million | $28.31 million | $21.31 million |
| Operating loss | $9.99 million | $6.38 million | $28.22 million | $21.18 million |
| Net loss | $9.64 million | $2.76 million | $27.46 million | $22.49 million |
| Basic and diluted loss per share | $0.09 | $0.04 | $0.30 | $0.38 |
| Operating cash used | Not presented quarterly | $23.75 million | $20.96 million |
- Gross margin was not meaningful to the ongoing business: reported revenue was limited to licensing agreements, while the company’s principal activity was research and development.
- Cash and cash equivalents were $21.19 million at September 30, 2015, down from $24.99 million at December 31, 2014. Current assets were $22.27 million and current liabilities were $9.64 million.
- Reported loan payable, net of discount, totaled $11.37 million: $2.45 million current and $8.92 million non-current. The filing describes the SVB loan and notes that CIRM loan principal and accrued interest were forgiven, but derecognition remained subject to a legal release.
- Stockholders’ equity was $7.11 million. Shares outstanding rose to 108.59 million from 68.73 million at year-end 2014; the weighted-average share count for the first nine months was 91.11 million versus 59.22 million.
- Nine-month financing cash inflow was $20.80 million, including $24.94 million in net proceeds from an April 2015 stock financing, partly offset by debt and other repayments. Investing cash use was $0.84 million.
Material changes versus the prior comparable period
- Q3 revenue fell 55% and nine-month revenue fell 32%, remaining immaterial relative to expenses.
- R&D expense increased 76% in Q3 and 43% for the first nine months, mainly from added personnel and stock compensation, clinical-study costs, external services, supplies, and manufacturing-related facilities expense.
- Q3 net loss widened substantially, in part because the prior-year quarter included a $4.08 million gain from the change in fair value of warrant liabilities, compared with a $0.43 million gain in Q3 2015. The nine-month 2015 result included a $1.07 million warrant fair-value gain.
- Cash used in operations increased 13% year over year for the first nine months. Cash declined despite equity financing proceeds.
- In August 2015, 9.60 million warrants issued in a 2014 financing expired unexercised. Outstanding shares and potentially dilutive securities were materially higher than in 2014.
Outlook, commentary, risks, and unusual items
- Management expected substantial operating losses to continue and stated that it did not expect profitability in the next several years. It said significant additional capital would be required; financing might not be available on acceptable terms or at all, and failure to obtain funds could force delays, reductions, or cessation of programs and could threaten the company’s ability to meet obligations.
- The company had approximately $27 million remaining under its effective $100 million shelf registration as of October 21, 2015. This was potential financing capacity, not cash on hand.
- Clinical updates: the Phase II cervical spinal cord injury trial had completed its six-patient first cohort and began enrollment of the second cohort in June 2015. The Radiant Phase II dry-AMD study transplanted its first subject in July 2015 and planned to enroll 63 patients.
- Development and regulatory outcomes were uncertain. Management highlighted trial delays and costs, need for further safety and efficacy evidence, financing and partnering uncertainty, manufacturing and cell-bank risks, intellectual-property challenges, competition, and the possibility that candidates would not become marketable or profitable products.
- The company’s 2014 sale of its SC Proven business and wind-down of UK operations were reported as discontinued operations. No discontinued-operation loss was reported in 2015; 2014 included discontinued-operation losses.
- The fair value of warrant liabilities was $616,000 at quarter-end. The liability’s remeasurement affects reported income and depends partly on stock-price and valuation-model assumptions. Series A warrant exercise prices had been reset from $1.40 to approximately $0.70 following the April 2015 financing.
- Contractual cash obligations totaled $17.30 million, primarily operating leases. The filing reported no legal proceedings and no material change to previously disclosed risk factors.
Most important facts for investors to verify
- Confirm the issuer identity: this source is StemCells, Inc., despite the request metadata naming Microbot Medical Inc.
- Review cash burn, financing availability, and the company’s ability to fund clinical programs beyond the reported cash balance; the filing gives no clear cash-runway estimate.
- Verify the status and accounting treatment of the CIRM loan forgiveness and related legal release, including the reported non-current loan balance.
- Track enrollment, safety, efficacy, and timing for the cervical spinal cord injury and Radiant AMD trials, and whether additional capital or partners are required.
- Assess dilution from the April 2015 equity financing, outstanding warrants and equity awards, and the warrant repricing provision.