TriSalus Life Sciences, Inc. — Q3 2023 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2023. Amounts below are in millions of dollars unless otherwise stated. TriSalus sells PEDD drug-delivery devices, principally TriNav, and is developing SD-101, an investigational oncology drug. The August 10, 2023 business combination with MedTech Acquisition Corporation was accounted for as a reverse recapitalization; prior-period financial statements represent Legacy TriSalus.
Financial performance
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Revenue | $5.2 | $3.9 | $12.8 | $9.2 |
| Gross profit / margin | $4.6 / 88.7% | $3.2 / 82.1% | $10.8 / 84.2% | $7.7 / 84.3% |
| Operating loss | $(18.5) | $(8.1) | $(40.0) | $(24.7) |
| Net loss attributable to common stockholders | $(1.7) | $(8.1) | $(27.0) | $(24.6) |
| Net cash used in operating activities | — | — | $(41.2) | $(24.0) |
Revenue rose 32% in Q3 and 39% for the nine-month period, primarily from higher TriNav sales; lower distributor discounts also contributed. Q3 gross margin improved with manufacturing efficiencies, while nine-month margin was essentially flat, reflecting higher labor overhead. Operating expenses increased substantially: nine-month R&D was $21.9, sales and marketing $11.4, and general and administrative $17.5.
Q3 reported net loss was reduced by a $19.9 noncash gain from remeasuring the contingent earnout liability, partly offset by a $2.8 loss from warrant-liability remeasurement. For the nine months, the company recorded a $4.2 loss on equity issuance and a $3.0 deemed dividend from preferred-stock anti-dilution provisions. These items affect reported earnings and are not measures of operating performance.
Financial position and liquidity
- At September 30, cash and cash equivalents were $21.4; total current assets were $29.0 and current liabilities $9.3. Total assets were $33.6 and total liabilities $25.1.
- Operating cash outflow of $41.2 exceeded the prior-year $24.0 outflow. Financing provided $54.6, including $36.9 net proceeds from the business combination and $9.6 from preferred-stock warrant exercises. Cash, cash equivalents and restricted cash increased $12.0 to $21.6.
- Lease liabilities totaled approximately $1.7. The filing does not disclose material conventional borrowing debt at quarter-end; warrant and contingent earnout liabilities are not conventional debt.
- Management says September 30 cash is insufficient for projected needs over the following 12 months and that substantial doubt about the company’s ability to continue as a going concern exists. Management’s plans do not alleviate that doubt.
Material developments, outlook and risks
- Funding: On October 2, 2023, the company entered a standby equity purchase agreement giving it the option to sell up to $30.0 of common stock to Yorkville over 24 months, subject to terms, pricing discounts and ownership limits. No sales had been made as of the filing date. The facility does not ensure that the company can raise funds when needed or on acceptable terms.
- Reimbursement: TriNav’s temporary Medicare pass-through payment authorization was scheduled to expire December 31, 2023. The company applied for a new technology APC code; approval and comparable future reimbursement were not assured. Reduced reimbursement could pressure TriNav sales, pricing and margins.
- Development and spending: SD-101 is in early clinical development, and the company expects R&D costs to increase as it advances development. The filing provides no specific financial guidance or assurance of trial outcomes, regulatory approval or commercialization.
- Dynavax obligations: The company had paid $12.0 under the SD-101 purchase agreement by September 30. It may owe up to a further $158.0 in development and regulatory milestones, up to $80.0 in commercial milestones, and royalties on future product sales.
- Preferred stock and dilution: The company issued 4,015,002 Series A preferred shares for $40.2 in the business combination financing. They accrue cumulative dividends at 8% annually and include conversion-price resets, including a $2.10 floor. The Yorkville facility, outstanding warrants and equity awards may also dilute common stockholders.
- Accounting and controls: Disclosure controls were deemed ineffective, with material weaknesses related to insufficient trained financial staff and controls over warrant and tranche-liability valuations. Two of four planned additional finance hires had been made by September 30; remediation was not yet complete.
- Other notable items: The company approved a public-warrant repurchase program capped at $4.0; it had repurchased 28,502 warrants for about $10,000 through October 31. The filing reports no material pending legal proceedings. It also states that solely owned SD-101 composition-of-matter patents expire in December 2023, while other patent protection may apply.
Key facts investors should verify
- Whether the Yorkville equity facility can provide timely net proceeds, and the resulting share issuance and dilution if used.
- CMS’s decision on TriNav reimbursement after the temporary pass-through authorization expires, and any effect on pricing, sales and gross margin.
- Cash runway and operating cash use relative to management’s plan, including financing or cost-reduction actions needed to address the going-concern warning.
- SD-101 trial progress, funding requirements, Dynavax milestone exposure and the practical significance of the December 2023 patent expiration.
- Progress in remediating financial-reporting control weaknesses and the potential variability in earnings from warrant and earnout fair-value remeasurements.