Pluristem Therapeutics Inc. (PSTI) - 10-Q Summary
Business Context and Reporting Period
This is a Quarterly Report (Form 10-Q) for Pluristem Therapeutics Inc. for the period ended September 30, 2015. Pluristem is a bio-therapeutics company developing off-the-shelf allogeneic cell therapy products (PLX cells) for ischemic and inflammatory conditions. The company operates in one segment focused on research, development, clinical trials, and manufacturing. It is incorporated in Nevada with principal executive offices in Haifa, Israel.
Key Financial Metrics
| Metric | Three Months Ended Sep 30, 2015 | Three Months Ended Sep 30, 2014 |
|---|---|---|
| Revenues | $95,000 | $95,000 |
| Net Loss | $(5,876,000) | $(5,911,000) |
| Loss Per Share (Basic & Diluted) | $(0.07) | $(0.09) |
| Operating Cash Flow | $(3,768,000) | $(3,456,000) |
| Cash and Cash Equivalents (End of Period) | $10,805,000 | $5,662,000 |
| Total Assets | $60,311,000 | $68,155,000 (Jun 30, 2015) |
| Accumulated Deficit | $(144,387,000) | $(138,511,000) (Jun 30, 2015) |
Liquidity: The company reported a working capital surplus of $44,567,000 as of September 30, 2015. Total current assets were $48,810,000 against current liabilities of $4,243,000.
Material Changes vs. Prior Period
- Revenue: Remained flat at $95,000, derived entirely from the United Therapeutics license agreement recognized on a straight-line basis.
- Net Loss: Decreased slightly by 0.6% to $5.876 million, primarily due to a reduction in General and Administrative (G&A) expenses.
- R&D Expenses: Net R&D expenses increased by 2% to $4.128 million. This was driven by a decrease in grants from the Office of the Chief Scientist (OCS) of Israel, partially offset by improved production planning reducing material consumption.
- G&A Expenses: Decreased by 11% to $1.487 million, mainly due to lower stock-based compensation expenses related to directors and officers.
- Financial Expenses: Increased by 22% to $353,000, attributed to net losses on marketable securities sales, exchange rate adjustments, and hedging transaction costs.
- Cash Position: Cash and cash equivalents decreased from $22.6 million at the end of the prior quarter (June 30, 2015) to $10.8 million, largely due to investing activities including $7.9 million invested in short-term deposits and $1.1 million in property and equipment.
Outlook, Risks, and Management Commentary
- Outlook: Management does not expect to generate product sales revenue in the next 12 months. Revenues will likely come from licensing fees and grants. The company believes it has sufficient cash to fund operations for at least the next 12 months but may need to raise additional funds in the future.
- Clinical Progress: The PLX cell program for Critical Limb Ischemia (CLI) was selected for the European Medicines Agency's Adaptive Pathways pilot. Japan's PMDA cleared PLX-PAD cells for clinical trials. The company plans to initiate CLI studies in 2016.
- Capital Resources: The company has an effective shelf registration statement allowing for the sale of up to $200 million in securities. It recently closed an offering in June 2015 raising $17 million.
- Risks: The company has sustained operating losses since inception and expects them to continue. It relies on equity sales, licensing agreements, and government grants for funding. There are risks associated with clinical trial outcomes, regulatory approvals, and the ability to secure future financing.
- Unusual Items: The company recognized $329,000 in share-based payments to a contractor for laboratory construction, recorded as property and equipment.
Investor Verification Checklist
- Cash Runway: Verify the sufficiency of the $10.8 million cash balance against the projected burn rate, noting the significant drop from the previous quarter.
- Grant Dependency: Monitor the status of OCS grants, as a reduction in these grants directly increased net R&D expenses in this quarter.
- Investment Portfolio: Review the unrealized losses on marketable securities ($1.771 million in other comprehensive loss) and the strategy for liquidating these assets to fund operations.
- Construction Milestones: Track the completion of the new laboratory facility to ensure the remaining share-based payments to the contractor are recognized correctly.
- Regulatory Milestones: Confirm the initiation of the CLI studies in 2016 and the status of the Phase I trial with United Therapeutics in Australia.