BioCardia, Inc. — Q2 2019 Form 10-Q
Business context and reporting period. BioCardia is a clinical-stage regenerative medicine company developing cardiovascular cell therapies, principally CardiAMP and CardiALLO, alongside delivery devices and catheter products. This unaudited report covers the quarter and six months ended June 30, 2019; financial amounts below are in millions unless noted.
Financial performance and position
| Metric | Q2 2019 | Q2 2018 | Six months 2019 | Six months 2018 |
|---|---|---|---|---|
| Revenue | $0.086 | $0.239 | $0.302 | $0.438 |
| Operating loss | $(3.762) | $(3.252) | $(7.450) | $(6.872) |
| Net loss | $(3.750) | $(3.217) | $(7.415) | $(6.801) |
| Net loss per share | $(0.77) | $(0.76) | $(1.53) | $(1.60) |
| Operating cash used | — | — | $(4.717) | $(5.814) |
- Product revenue was $0.062 million and collaboration revenue $0.024 million in Q2; for the six months, they were $0.139 million and $0.163 million, respectively. Revenue declined mainly due to the timing of partner activities.
- Cost of goods sold exceeded revenue: gross loss was $0.105 million in Q2 and $0.158 million for the six months. Inventory write-down and related charges were approximately $0.078 million for Q2 and $0.080 million year to date.
- Q2 R&D expense was $2.219 million (up from $2.031 million); six-month R&D was $4.385 million (up from $3.986 million), principally reflecting CardiAMP trial and CardiALLO development costs. Q2 SG&A was $1.438 million versus $1.325 million; six-month SG&A was $3.070 million versus $3.032 million.
- At June 30, cash and cash equivalents were $0.517 million, total current assets $1.152 million, current liabilities $4.066 million, total liabilities $4.952 million, and stockholders’ deficit $2.236 million. Working capital deficit was $2.914 million. Accumulated deficit was $93.8 million.
- Operating cash use improved year over year, but cash fell $4.841 million during the first half to $0.517 million. Investing cash use was $0.124 million, mainly for lab equipment and clean-room systems. The filing reports no material borrowings outstanding at quarter-end; operating lease liabilities totaled $1.374 million.
Material changes and notable transactions
- After quarter-end, BioCardia issued $0.625 million of convertible notes bearing 14% annual interest; principal and accrued interest converted at the August offering closing into 210,887 units at $3.00 per unit.
- The August 6, 2019 public offering sold 1,666,667 units at $6.00 each, with one common share and one warrant per unit. Net proceeds were approximately $8.76 million; warrants have a $6.30 exercise price and five-year term. An underwriters’ over-allotment option could increase net proceeds to approximately $10.15 million.
- On August 13, the company received a $1.0 million upfront payment under an extended Helix development agreement; part is creditable to delivery systems, support and training. The agreement is exclusive for a specified class of agents and is time-limited.
- A 1-for-9 reverse stock split took effect June 6. The company adopted lease accounting in January, recognizing operating lease right-of-use assets and liabilities; the change did not materially affect operations or cash flows. It began trading on Nasdaq in August.
Outlook, risks and contingencies
- Management expects operating losses and negative operating cash flows for several years and states that substantial doubt exists about the company’s ability to continue as a going concern within one year of issuance. Management says cash at quarter-end plus the July notes and August offering proceeds may still not fund operations for one year. Additional financing may be required; no assurance is given that it will be available on acceptable terms.
- If funding is insufficient, the company may cut costs, delay or reduce development programs, license or relinquish rights, or cease operations. Equity financing may dilute shareholders; debt or partnerships may impose restrictions or require concessions.
- CardiAMP heart-failure trial enrollment was active at 23 sites, with 49 patients enrolled. Management anticipated an interim readout in Q3 2019, completion of enrollment in Q3 2020 and top-line data in Q3 2021. These are forward-looking targets, not results. A separate CardiAMP chronic myocardial ischemia pivotal trial has FDA IDE authorization.
- Management planned to seek FDA acceptance of a CardiALLO Phase I/II trial in the second half of 2019. It expected collaboration revenue to increase in the latter half of 2019 and modestly year over year; product revenue was expected to be flat or modestly lower, and cost of goods sold to rise moderately depending on Morph AVANCE sales and initial production costs. R&D expense was expected to rise modestly.
- Key risks include clinical-trial enrollment, safety and efficacy outcomes, uncertain FDA approval pathways, manufacturing and third-party dependencies, competition, reimbursement, and the need for further capital. The filing notes three Morph product models’ CE certification expired in April 2019 and renewal was not assured. No material legal proceedings were reported. Management judged disclosure controls effective as of June 30, 2019.
Investor verification priorities
- Confirm the offering proceeds, warrant dilution and conversion of the July notes, and assess cash runway after the August financing and Helix payment.
- Track CardiAMP enrollment, the anticipated interim and top-line readouts, and any changes to trial timelines or FDA requirements.
- Verify whether the CardiALLO IND was accepted and whether the company initiated the planned trial.
- Monitor collaboration revenue timing, Morph AVANCE demand and associated inventory reserves, costs and margins.
- Check the status of CE-mark renewals and any subsequent financing, licensing or operating changes relevant to the going-concern warning.