BioCardia, Inc. — Q3 2020 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2020. Financial statements are unaudited. Unless noted, amounts below are in U.S. dollars.
Business context
BioCardia is a clinical-stage regenerative medicine company developing cell therapies for cardiovascular and pulmonary diseases. Its lead CardiAMP program is in Phase III trials for heart failure and chronic myocardial ischemia; it is also advancing allogenic cell therapies. Commercial products include catheter and cell-therapy delivery systems. The company reports one operating segment.
Financial performance and position
| Metric | Q3 2020 | Q3 2019 | Nine months 2020 | Nine months 2019 |
|---|---|---|---|---|
| Total revenue | $34,000 | $194,000 | $99,000 | $495,000 |
| Operating loss | $(3.848) million | $(3.227) million | $(12.031) million | $(10.678) million |
| Net loss | $(3.848) million | $(3.792) million | $(12.015) million | $(11.208) million |
| Net loss per share, basic and diluted | $(0.30) | $(0.63) | $(1.33) | $(2.13) |
- Q3 research and development expense was $2.474 million; selling, general and administrative expense was $1.408 million. Nine-month figures were $7.484 million and $4.642 million, respectively.
- Gross margin is not a meaningful indicator given the very low revenue and reported cost of goods sold. COGS was nil in Q3 2020 and $4,000 for the first nine months.
- Operating cash outflow was $8.940 million for the first nine months, versus $6.189 million in 2019. Investing outflow was $32,000; financing provided $10.779 million. Cash increased $1.807 million to $7.392 million.
- At September 30, cash and cash equivalents were $7.392 million; current assets were $8.590 million and current liabilities $4.320 million. Total liabilities were $5.389 million and stockholders’ equity $4.113 million. Note payable totaled $509,000, including current and noncurrent portions; operating lease liabilities totaled $753,000.
- Accumulated deficit was $113.085 million. The company had 12.429 million common shares outstanding at quarter-end, compared with 6.825 million at December 31, 2019.
Material changes versus prior comparable periods
- Nine-month revenue fell 80% to $99,000, principally because of lower catheter sales during the planned product-family transition and lower collaboration revenue. Q3 revenue fell to $34,000 from $194,000, mainly reflecting weaker partnering activity.
- Nine-month R&D expense rose $1.092 million, primarily from CardiAMP trials, allogenic program development, personnel and related costs, and stock compensation. Operating loss widened by $1.353 million and net loss by $807,000 year over year.
- Nine-month operating cash use increased $2.751 million. June’s public offering raised approximately $10.3 million net, issuing 5.476 million shares; the share count increase reflects this financing and other share issuances.
- Q3 net loss increased modestly from $3.792 million to $3.848 million. The lower loss per share compared with 2019 reflects a substantially higher weighted-average share count.
Outlook, risks and unusual items
- Going concern and financing: Management stated that $7.4 million of cash at September 30 was not sufficient to fund operations beyond Q2 2021 and disclosed substantial doubt about the company’s ability to continue as a going concern within one year after issuance of the financial statements. Additional capital is required; financing may dilute shareholders or impose unfavorable terms. If financing is unavailable, the company may cut or delay development, relinquish rights, or cease operations.
- Management outlook: Net product revenue was expected to remain nominal in Q4 2020, with potential growth in 2021 dependent on customer demand, production capacity, FDA clearances and the resumption of medical procedures. R&D spending was expected to increase moderately year over year in 2020; SG&A was expected to decrease modestly in Q4 and remain relatively consistent year over year.
- Clinical and regulatory execution: At quarter-end, the Phase III CardiAMP Heart Failure Trial was active at 23 sites with 81 patients enrolled; a DSMB review was anticipated December 15, 2020, including a futility analysis. The CardiAMP chronic ischemia trial was preparing for initial enrollment in Q4 2020. FDA acceptance of INDs for allogenic heart-failure and COVID-19-related ARDS programs was targeted for Q4 2020.
- COVID-19: The pandemic delayed development programs and regulatory and commercialization timelines, including clinical enrollment and follow-up. Further effects depend on the duration and severity of restrictions and could affect costs, trial timing and access to capital.
- Subsequent events: The $762,000 related-party receivable under the litigation funding arrangement was collected November 4, 2020. The $506,413 PPP loan was forgiven in full on November 7, 2020; forgiveness was not reflected in September 30 balances.
- Litigation and related party: The company’s patent and trade-secret disputes involving nVision and Boston Scientific remained pending. A board chair-controlled entity funded litigation costs on a non-recourse basis in exchange for specified litigation proceeds; no settlement had occurred by September 30. The company disclosed three related federal court proceedings.
- Controls: Disclosure controls were deemed ineffective at September 30 because a previously identified material weakness involving review of complex, non-routine accounting transactions remained unremediated. Management expected remediation before year-end 2020 but noted it was not yet established.
Important facts for investors to verify
- Whether BioCardia obtained sufficient additional financing to extend its stated runway beyond Q2 2021, and on what terms.
- Enrollment, DSMB findings and timing for both CardiAMP trials, plus FDA decisions on the planned allogenic INDs.
- Whether product-family transition, FDA clearances and pandemic-related procedure disruptions allowed the projected revenue recovery.
- The financial and procedural outcome of the pending litigation and the related-party funding agreement.
- Whether the disclosed control weakness was remediated and controls subsequently tested as effective.