Business context and reporting period
This is Sunshine Heart, Inc.’s unaudited Form 10-Q for the quarter ended March 31, 2013—not a filing under the name Nuwellis, Inc. The company was developing the C-Pulse Heart Assist System for heart failure and had no commercial product sales. It had FDA authorization to conduct a U.S. pivotal trial and CE Mark approval in Europe.
Financial results and liquidity
Amounts are in thousands of U.S. dollars, except per-share data.
| Metric | Q1 2013 | Q1 2012 / comparison |
|---|---|---|
| Revenue | $0 | $0 |
| Research and development expense | $2,426 | $2,166; up 12.0% |
| Selling, general and administrative expense | $1,976 | $1,940; up 1.9% |
| Operating loss | $(4,402) | $(4,106) |
| Net loss | $(4,399) | $(4,081) |
| Basic and diluted loss per share | $(0.47) | $(0.66) |
| Net cash used in operating activities | $(4,114) | $(4,768) |
| Cash and cash equivalents at quarter-end | $10,970 | $14,224 at December 31, 2012 |
| Current assets / current liabilities | $11,474 / $2,019 | $14,557 / $2,087 at December 31, 2012 |
No gross margin is reported because there were no sales. Total liabilities consisted of current liabilities; the balance sheet reported no debt. The accumulated deficit was $83,653 at March 31, 2013.
Material changes and financing
- Operating expenses rose by $296, primarily reflecting increased clinical-trial staffing and infrastructure; management expected R&D and SG&A expenses to remain above prior-year levels.
- Operating cash use improved year over year, while cash declined $3,254 during the quarter. The company raised $874 from common-stock sales, compared with $2,061 in Q1 2012.
- Under a January 2013 agreement, Aspire Capital committed to purchase up to $25 million of shares over two years, subject to the agreement’s terms and a 1,856,616-share issuance limit. By quarter-end, 146,886 purchase shares had been sold; 227,143 shares including commitment shares had been issued.
- After quarter-end, the company sold 2,875,000 shares at $5.25 per share in a public offering, including the underwriters’ over-allotment; net proceeds were approximately $14 million.
Outlook, risks and other notable items
- Management expected U.S. pivotal-trial enrollment and European post-market trial enrollment to begin in Q2 2013. It anticipated minimal revenue until those trials began.
- Management stated that quarter-end cash, the subsequent offering proceeds, potential Aspire Capital proceeds, and expected clinical-trial cash generation were expected to cover anticipated needs for at least 12 months. It also said additional funding would be needed to complete the pivotal trial.
- The filing highlights substantial ongoing losses and operating cash outflows. Continued operations depend on raising capital and successfully developing and commercializing the product; failure to obtain funding could threaten the company’s ability to continue as a going concern.
- Key risks include regulatory and clinical-trial outcomes, future financing availability and potential dilution, and commercialization prospects. The filing reported no off-balance-sheet arrangements and no material impact from the accounting guidance adopted in 2013.
- The company’s common-stock CDIs were delisted from the Australian Securities Exchange effective May 6, 2013.
Investor verification points
- Confirm issuer identity: the supplied filing is for Sunshine Heart, Inc., while the request metadata names Nuwellis, Inc.
- Review the subsequent public offering’s final proceeds and use of funds, and the terms and remaining availability of the Aspire Capital facility.
- Verify whether trial enrollment began as anticipated and assess subsequent regulatory, clinical, and commercialization updates.
- Evaluate cash burn and funding needs against the company’s stated 12-month liquidity expectation and going-concern disclosure.