Pluristem Therapeutics Inc. — Form 10-K Summary
Reporting period: Fiscal year ended June 30, 2015. The request metadata says “2014 Q4,” but this filing is an FY2015 annual report; it also provides unaudited quarterly figures, including the quarter ended June 30, 2015. Dollar amounts below are U.S. dollars, generally in millions unless stated otherwise.
Business context and reporting period
Pluristem is a clinical-stage biotechnology company developing off-the-shelf, placenta-derived PLX cell therapies. Its lead programs include PLX-PAD for peripheral arterial disease and PLX-R18 for bone marrow failure and acute radiation syndrome. The company reported one operating segment and had no marketed products.
Financial performance and liquidity
| Metric | FY2015 | FY2014 |
|---|---|---|
| Revenue | $0.379 | $0.379 |
| Gross profit | $0.366 | $0.368 |
| Research and development, net | $19.173 | $19.542 |
| General and administrative expense | $6.460 | $8.676 |
| Operating loss | $(25.267) | $(27.850) |
| Net loss | $(24.677) | $(26.932) |
| Basic and diluted loss per share | $(0.35) | $(0.42) |
| Net cash used in operating activities | $(20.605) | $(19.121) |
| Cash and cash equivalents at year-end | $22.626 | $4.493 |
Revenue in both years came from the United Therapeutics license agreement; it was recognized over the estimated development period, with approximately 7.5 years remaining at June 30, 2015. The reported gross margin was about 97%, but on only $0.379 million of revenue. The company had $56.868 million of current assets, $6.183 million of current liabilities, and $50.685 million of working capital. Cash, deposits, restricted cash and marketable securities totaled $53.119 million. Total liabilities were $10.012 million; the filing does not identify material conventional borrowings in the presented balance sheet.
Cash from investing activities was $21.537 million, principally reflecting withdrawals of deposits and proceeds from securities sales and redemptions. Financing activities provided $17.201 million, largely from equity issuance. The June 2015 offering generated $17 million gross proceeds from 6.8 million shares and warrants for up to 4.08 million additional shares; net issuance costs were $1.2 million. The company also held $5.982 million of CHA shares at year-end.
For the quarter ended June 30, 2015, revenue was $94,000 and net loss was $5.295 million, or $0.07 per share. These quarterly figures are unaudited.
Material changes versus the prior comparable period
- Net loss narrowed by $2.255 million, while operating loss narrowed by $2.583 million, largely reflecting lower G&A expenses and slightly lower net R&D expense.
- Net R&D expense declined about 2%; lower materials use and a stronger U.S. dollar versus the NIS were partly offset by higher subcontractor and consultant costs and lower OCS grant participation.
- G&A expense fell 26%, primarily because of lower stock-based compensation expense. Financial income declined from $0.918 million to $0.590 million, including increased foreign-exchange expense.
- Operating cash use increased by $1.484 million. Year-end cash and cash equivalents increased by $18.133 million, principally due to equity financing and investment/deposit movements.
- Outstanding shares rose from 68.6 million at June 30, 2014 to 78.7 million at June 30, 2015. Warrants issued with the June financing could add further dilution if exercised.
Outlook, management commentary, risks and unusual items
- Management said it expected no product-sales revenue in the next 12 months, anticipated continued operating losses and rising cash needs, and believed existing resources were sufficient to fund operations for at least 12 months. It also said additional funding might be needed; further equity financing could dilute shareholders.
- Management intended to initiate CLI studies in Europe and Japan during calendar 2016, targeting initial approval in 2018. These are plans, not assured outcomes. The EMA selected the CLI program for its Adaptive Pathways pilot, and Japan’s PMDA cleared PLX-PAD for clinical trials after approving proposed manufacturing methods.
- The multinational Phase II intermittent claudication trial was ongoing. United was conducting a Phase I PAH trial in Australia. Pluristem planned a U.S. Phase I/II incomplete-engraftment study and further PLX-R18 development, including NIH-supported work on acute radiation syndrome.
- Clinical and regulatory outcomes remain uncertain. A serious allergic reaction had resulted in an FDA clinical hold on the U.S. Phase II IC study in 2013; the hold was lifted in September 2013, but the episode delayed plans. Early-stage results do not establish later efficacy or approval.
- Other key risks include dependence on grants and external financing, lack of product revenue, manufacturing scale-up and supplier constraints, reimbursement and market acceptance, competition, patent validity or infringement claims, foreign-exchange and securities-price exposure, and political or security disruptions in Israel. OCS grants carry royalty and technology-transfer restrictions; the company disclosed $18.576 million of contingent OCS royalty liability, plus applicable interest, payable from qualifying sales.
- The company reported no legal proceedings and no off-balance-sheet arrangements. The independent auditor issued an unqualified opinion on the financial statements and internal controls; management also concluded internal control over financial reporting was effective.
Important facts for investors to verify
- Whether the reported 12-month liquidity runway remains adequate against operating cash use, contractual commitments and the timing of planned trials; confirm subsequent financing or cash-burn developments.
- Clinical-trial enrollment, safety and efficacy results, including progress in IC, CLI, PAH and PLX-R18 programs, and whether regulatory timelines have changed.
- Whether the EMA and Japanese accelerated pathways lead to defined study requirements or approvals; selection or clearance does not guarantee marketing authorization.
- Terms and progress of the United and CHA collaborations, including milestone payments, partner trial activity, termination rights and any future commercialization economics.
- Potential dilution from outstanding warrants, options and restricted stock units, and collection of the $790,000 share receivable recorded at year-end.
- Valuation and liquidity of the CHA investment and other securities, and exposure to NIS/KRW exchange-rate changes and hedging outcomes.